London. This is what we are talking about today and tomorrow, when the fed decision comes. How are the markets starting the week . Lets get straight to mark barton. Mark not as bad as they were on friday. Slidll country world index on friday, 1 trillion of value disappeared on friday. Its looking better today, look at the index. This is the msci, it has risen for the first day i ann nine. We had some better than forecast data from china over the weekend, industrial output retail sales, all beating forecast, signaling the worldss secondbiggest economy is stabilizing. Emergingmarket stocks are rebounding, crude is falling for a second consecutive day. In that period, as you can see, oil is down by 14 , iran pledging to boost crude exports despite the global glut. Speculators have increased bets on Falling Oil Prices to an alltime high after opec essentially scrapped production quotas. This is the big currency move of the day, just a oneday chart coming close. The rand has risen the most since 2008 against the dollar after a massive uturn from the countrys president , jacob zuma, naming a second finance minister in four days. On wednesday he replaced him with a littleknown lawmaker. That provokes outrage within markets, within the business community, and now we have an old hand at the steering wheel. He held the position in 20092014. Stocks are rising in the bond market yields, the bench market yields rose to the highest level in seven years on friday, falling today. What a turnaround in the fortunes of South African assets after the mother of all uturns from president zuma. Francine aftermarket pressure he had to reset. It was a little too violent. Thank you so much, mark barton. Lets bring in our guest for the next half hour, the former imf economist and our chief eurozone economist. Great to have you on the program. We are expecting the fed to hike on wednesday, and we have been talking about divergence between the fed and the European Central bank for so long. Has that ship sailed . I think it is right. I think the market is clearlys expecting no surprises. At the end of the day, the fed dictate Interest Rates for all global assets, all geographies. Much, you is not could see some moves. We expect the divergence to continue. Francine are you expecting unexpected moves . I think probably not. Maybe a bit of flattening in the curve, maybe a bit of correlation with the bund. But this time around with Monetary Policy it should be less, but nonetheless with the bund, they could move a little bit in terms of repricing. Francine you dont think there is complacence in the market. When you look at risk appetite, the Financial Stability of the imf, these companies and Energy Companies having borrowed so much in dollars sure. Those are clearly the issues. That is one of the corporate side. Obviously they want the fed to initiate the hike, but this time they will lack current account deficits with political weakness, fiscal weakness will suffer the most. You are seeing countries like brazil. Not everything will be priced in. Francine at the moment there is a 74 chance, or we expect a 74 hike. What about the other 26 . Are they concerned about the price of oil dampening Inflation Expectations . At the european side, Central Banks are focusing on inflation. The reality is that inflation is very weak. Because of oil prices. Just looking at that, you would think, lets wait and see, there is no rush, there are no risks of inflation getting out of control. You can look at how the Central Banks will have a strong case to make. At the other end, with the labor market already fully recovered without slack, with financial the bond for International Settlements makes a very strong case for hikes. The more unproductive investments take place, that tends to selffeed too low for too long. 7525 soundsnk reasonable. Francine so you are expecting a hike. If we dont get hike, doesnt mean they missed the boat . They mayikely that actually be without a high for exactly. The yuan has been weak traditionally. Then you get too close to the political cycle on the fed, like any other central bank. Hard pressed do anything to dramatic before the elections. It would be perceived as a political move. A gradual approach, everything in the wording, everything in terms of Market Reaction would be the statement, the movement, the change in the forecast. That will set the pace of future hikes. Francine what are you expecting for next year . Very gradual hikes, one or two in the Second Quarter . First of all, what does gradual mean in terms of chair yellen . Interpret. Left to we believe about three hikes would be it for next year. For those markets that are resilient, it shouldnt be any type of shock. Francine not the ones we are worried about. Thats right. Andill discuss the yen, certainly every single asset class will be in some way affected. But we should see some unexpected moves. Its. Such a key rate that it has to be francine we havent seen it for a while. Thank you so much. He stays with us. We will be talking about commodities next. Here is a look at what else is on our radar. Frances far right National Front has filled the regional assemblies despite the strong performance. Pen has tried to build on an historic first round vote. Corporate credit markets sold off and it concerns that investors may face more losses after management rose at a highyield fund. Help thenues decision junk bond market on friday in the biggest oneday selloff since august, 2011. Plunged the most in five months after resumed trading in hong kong today. Shares were suspended on friday after a report that the chairman had gone missing. He is said to be back at work today. The companys president confirmed over the weekend that he had been assisting with the investigation of the shanghai vice mayor. Up next, a bloomberg exclusive. Rbf ceo says they will return to profit within four years. We bring you that interview next. Francine welcome back to the pulse, live on bloomberg. The royal bank of scotlands new ceo says the restructuring of the Investment Bank is very well advanced, and it will return to profit within four years. Manus cranny spoke to the ceo. Of 2016,e another year mainly for the countries we said we would come out of. Back to somewhere around 13 or 14 countries, that is the shape we think will be right for our customers but it could be in the u. K. With a source and we think we have strategic strengths. ,he three primary product areas including capital markets, is where our strategic strengths are and that is the area we are staying in. The rest we have moved away from. Manus the natural question and we have touched on this you cant to give me fullservice, i have to go to hsbc, i have got to go to another institution to get the full gamut. Where are we on that . The likes of the oil producers. The thing that is important to understand is that they have a panel of banks. Manus are you losing more . If you take some of the large companies, the fact that we come out of Global Transactions means that we are losing that share of the market, but are we losing that share in the three core areas i talked about . The answer is no. We can work at a Corporate Institutional Bank and will be finished by the end of this year on the structuring. We will be done by the end of the year, which is a very good outcome given the amount. Manus over at Deutsche Bank i love this i hear what you say about it but many in the sector still believe they should be paid entrepreneurial wages were turning up to work with the salary and pension and playing with other peoples money. Do we and banking, does the industry need to really look deeply at itself . I think that is rather sanctimonious. I think what you have to realize is changing. You see all of these countries changing, downsizing, and that will have an impact in the longterm. Think it will become very pragmatic quite quickly. You need the right people in the enough. Bs, to pay them the thing that has been important for our business is a culture of organization, it is not about money it is about doing the right thing. N but that is about manus but you need to retain enough to get you through this. You have to pay. That is that we have to pay but the structure for us is down dramatically from where it was five years ago, dramatically down. It is a much smaller part overall. I think we are in pretty good shape now. The question is how do you remunerate people for doing the right job in getting the right results, getting the results of the overall business. One has to be somewhat pragmatic. Cranny joins us now for more on that great exclusive chat, and we are still joined by antonio. Manus, you had quite a lot of time. It was a very rare interview. He said he could turn it around and he talked about bonuses. Manus he sees a turnaround in profitability in three to four years. What i heard was that the longterm immune or ration trend is changing. That is the critical part. Willyou will be left with be for the customers within his bank. That is what the Investment Bank will be. That is what the longterm is and it is certainly not on an upward swing. We ran a number we ran a story on the number of jobs lost over the last few months in banking as a whole. Francine what about real estate . Manus there was a story that said the real threat was a commercial real estate exposure. They had about 11 exposure. You go to do a stress text next year, one of the stress tests his property exposure and that could put at risk the dividends of 2017. He said we have 11 of the u. K. Market and we would like to see a couple percent lower. The one message that i took away is this, that they are so far ahead in terms of their asset disposal scheme and their plan that they can afford to take their foot off the gas going into 2016. All the world is trying to reduce their outlook exposure. Francine overall and i want to bring in Antonio Banks have a very tough time when Interest Rates are very low. When Interest Rates are rising they need to start making money. Manus exactly. And they all base their models off a much steeper yield, that rates will be higher now than where they were. It will be interesting to see how the morning goes on as you go into surveillance. Are going to have to delay our return on equity. They dont see a rate hike next year in the united kingdom. It would be nice is the term he but het would be nice does not make business predicated on that. Its not all pr, because it makes huge difference of the bottom line, but we are going to see an Interest Rate hike this year before at least the Second Quarter in the u. K. We are expecting it for may, but clearly there is risk that has to be postponed. Francine the lack of inflation. Exactly. The balance of risk is there, likelearly they do environments with the steve kerr. To hike tooafford quickly, because they will come back to credit risk, fixing the balance sheet. Francine they would have to reverse if they hike too quickly . That is the risk, and that is why they will go slowly. Is the credit risk of going too quickly and how they will manage that. Conversatione that and we talk about the Energy Component and commodities and looking at commodity risk, what happens in terms of their ability to lend to the commodities sector . You are seeing highyield sector r back to 2009 levels. You are seeing real concern that 12 of the highyield market is made up of energy and commodity lending and bonds, and that is the critical issue for these banks. Francine manus, thank you so much. Manus cranny with that great interview. You can check it out on bloomberg. Com. We have more later on in the program. We will bring you his thoughts on a brexit later. You can watch the exclusive conversation in full on thursday night. Antonio, also here. We will be talking about china next. Coming up, the best retail Sales Numbers this year. Chinas economic rebalancing and what it means for the rest of the world. Francine welcome back to the pulse. Streaming on your tablet, your phone, and bloomberg. Com. Lets get more on the positive data we have had out of china, including the reading of retail sales. The u. N. Fell the one fell. Joining us is malcom scott. What does the latest data tell us . Those newll us that drivers are still popping up in the worlds secondbiggest economy. Retail sales are growing 11. 2 ism a year earlier, and that going to offset some of the weakness we have seen in the old growth drivers. But even those old drivers snapped back a little bit. We saw better than expected figures on surgical output in investment. Thank you so much. Malcom scott, our China Economy team leader. Lets bring back antonio pascual. , it seemsook at china that we have to get used to quite a lot of volatility, but even if they grow at 5 it will still be a problem. No doubt. Much like the yen. We do see that structural weakness to continue through that. It is good to see that domestic demand is sustained by private consumption but if you look at Industrial Production you can see some weakness coming up. We do believe that it will continue with pressure on the currency so we will see some further weakness going forward. Francine what does that mean for Commodity Prices . We are expecting them to go lower but when you look at oil will ago to 30 . There is an issue in all of this and when you look at commodities, it is critical for oil. It is not such a huge percentage of the market. On oil we need to look at oil and how it is doing, but that is very hard, almost an equal chance to be honest. There does seem to be a bit of a cohesive view on what we will do next and downward pressures. Francine thank you so much. Antonio pascual. Up next, we talk south africa and south africas second finance minister in just four days. Jacob zuma changes his mind and we look at what the future holds for south africas economy. This is jacob zuma vowing to invest into market pressure, but if you look at some of the top moves today, there is confidence around the world that is surging with stocks, bonds are also arriving. The rand strengthened so much it was as much a 6. 5 , the most since october, 2008. Follow me on twitter. Francine what elected post. Im francine lacqua. Lets get to bloomberg first word news. The latest data out of china stabilization causing a clearing hurdle for the Federal Reserve this week. Bloombergs gdp tracker in china rose to 6. 5 estimated growth rate for november, the best reading since june. Meanwhile, investable all figures exceeded forecast. Meanwhile, the yuan has fallen to a fouryear low after the peoples bank of china sets the said the currency shouldnt be set against the dollar alone. That move is being interpreted as a movie federal bank will allow. Among large manufacturers unexpectedly held up. Record corporate profits are compensating for uncertainty u. S. The expectation of it rate increase and slowdowns in china. Oil sinks to its lowest in almost seven years as iran vows to increase supply in the biggest jump in iran since 2008. That is bloomberg first word. Thank you so much. Lets chart the markets. We are two days away from the fed. We also have breaking news on commodities. Ark a trillion dollars was white up the value of global equities. Look at the emerging markets index which is finish at the moment it is losing nine days of the clients. Earlier, it fell for the ninth day. This is the nine day chart. Weak china data. Data over the weekend was stronger than expected. Two factors are slumping Commodity Prices over that period. The emerging market index is down by 6. 24 . Crude oil falling, natural gas in the u. S. Fell to the lowest level since 2002. Crude, this is the sevenday chart. Down for the second seventh consecutive day. Worst run since july last year. In this period, oil has suffered by 14 . Iran is threatening to boost oil exports despite the global glut. Opec has scrapped production scotus quotas. Reiterate, u. S. Natural gas, you can see it there, according to the lowest intradata, 2002. The Commodity Index which is a measure 22 measures is down to its lowest. All sorts of lows for the commodity space, all sorts of for the rent. Rising the most since 2008. What a day, what a weekend it has been for the african currency after the president named his second finance minister in four days. He replaced them with the , promotingn lawmaker a massive selloff in stocks and stocks for it outrage among Business Leaders and amc leadership. He did what many say was a great job in 2009 to 2014. He held the entry together for its first recession in 17 years. That is why government bonds have risen for the First Time Since the vendor 24th after yields rose to the highest level since seven years on friday. Rising for the most since you and i could what a day for south africa. Francine lets get more on that story. South africas second finance minister in four days. As mark was saying, the biggest jump in the rand since 2008. Early on, the former Central Bank Governors didnt hold back. The president has handled the situation badly. Whoever advised him needs to be fired immediately. Inneed to restore confidence the african economy, and the african market. To president has moved reappointing gordon as the Prime Minister of finance. Francine lets bring in our guest. Great have you on the program. He was not holding back. Do we need a reset . Courts in a sense of what is happening internally in the anc bety, for markets, this will the key question. The statement that was released on sunday night from the presidency basically said that andh africa is a democracy the opinions of many are taken on board. What is unclear is exactly what role the party itself may have played. It emerged by friday, the decision to replace the minister as finance minister was perhaps a decision take