It is the last day of the trading week. Lets check in on markets with caroline hyde. It has been quite a week. Caroline the hangover seems to have hit. A few heavy heads amid the christmas festivities. It looks as though the hangover has set in stocks as well. We have euphoria after we saw at last the Federal Reserve increase their rates, and actually, the markets seem to abide by the fact that janet yellen is saying the economy strong enough. Now we have a deterioration. On the stoxxing 600 after all the gains of the Federal Reserve rate hike in the u. S. Have been wiped out. Significant declines and the United States yesterday. If you dig into the Industry Groups, have a look at this. Across the board, nearly every single Industry Group is falling on the stoxx 600. Miners are up. Up 1 , leading the charge after we saw that china copper looks like they might be a building stockpiles. That is helping metals this morning. Miners overall managing to weather the storm today. Look at it in terms of the year. This is why we are seeing a selloff, because after the euphoria comes the reality. That commodities continue to decline, that Global Growth continues to be a concern. Just look at what things are set by the beige book in china saying about the overall deterioration they are seeing. But the past year. The bloomberg commodity index. We are close to a 1999 low. We have wiped out 30 of the value of the bloomberg commodity index. The commodity route is front and center in terms of stock trading. The Dollar Strength continues to even to commodities, hurt oil. Hurt someially might of the big exporters in the United States when you look from a stock respecter. This is a great chart. This show to your today who are the winners, the losers on a currency perspective. Check this out. Every single currency is down versus the dollar. The dollar has been the absolute winter of 2015. Look who has been the loser brazilian real. There. K the no shock its a commodity rout but a Corruption Scandal that is hurt the overall economy. And South African rand off by 23 versus the u. S. Dollar. Hit by the commodities rout. Along with electricity that has been a key concern there. Not to mention some of the economic and political stability, economic polities of jacob zuma. Overall, Dollar Strength, commodity rout they are the themes of the year. Francine thank you. Your extensive look. At the market check. David cameron says his bid to change writtens relationship with the European Union is gathering momentum. Fellow e. U. Leaders signaled they are willing to find compromises on his demands for welfare. Hans, was anything really accomplished . David cameron is trying to spin it positively and then you have someone saying were far away from agreement. Think when you take this general positive mood, the only real thing i can see that was accomplished as they set expectations extraordinarily high for february. They need to come up with some sort of diplomatic language, some finesse to bridge some far differences because it was clear last night there was not any movement from other european leaders on one of the key demands from David Cameron and that is a four year wait period before e. U. Migrants get benefits inside the u. K. Coming out of the meeting, mr. Meron mentioned other things here looking for will be difficult but he did strike and optimistic note. Good minister cameron the news is that there is a pathway to an agreement. And im confident of that after the discussion we had, but the truth is this it will be very hard work. Not just hard work on welfare but hard work on all of the issues we have put forward because they are substantial, they involve real change and they will need real decisions by all 28 members of the European Union. One quick note on treaty changes. Angela merkel to not roll them out. She did roll them out before a shortterm treaty change. Anything would like to have hap pen after the vote in the united kingdom. Francine what about the timing of all of this . So, coming out of meeting last night, it ended about midnight, hollande said that cameron indicated inside the meeting they would have a vote in the middle of 2016. That may day, that october date. However, cameron himself denied saying that. At least he left the impression among some of his leaders that you could have a vote in the summer or midway through 2016. He is denying that. One thing he is doing he is playing to u. K. Public polling saying, look at how difficult my position is. This is a very close vote. If im not given any new concessions, i will have a difficult time persuading my public to stay in. At the same time, he has not said where he is. Cameron using the polls to his advantage. Francine of course, the leaders are meeting in the building behind you to discuss terrorism. Lets bring in our guest host for the hour. At ubs. Great to have been the program. Markets were little bit euphoric yesterday. They were up 2. 5 . We can now move on. There are so much uncertainty out there. Weve been talking about this for over a year. I think it hardly left a ripple in markets. Hardlyyear rate, effective. We have some Dollar Strengthening but on the back of that, i think there are much better trends in play. I think it is much more important what happens with china, with the Property Market in particular. I think u. S. Highyield credit market is very worrisome. There could have consequences for the equity markets. There are other things that are much more important for markets. The ford guidance made it the Forward Guidance made it past very smoothly. Francine what you expecting next year . Ramin our u. S. Economist is saying four hikes. The key thing is when the first hike after this one happens because you need to points. That will be the key thing. In 1994 it was the second hike which caused the jitter and markets it is that is the one that told you how quickly there are going to hike. This time out will see it will be fairly shallow. The end point is much lower now. Francine one percent . Four hikes . Ramin so that will put us at around 1 higher than we are currently. Francine overall, we had the news from bank of japan and that is sending it higher. In 2015, it was really Dollar Strength. It was the year of the currencies. What is 2016 . Ramin also currencies. 2016 is not going to be great nominal growth. Inflation is fairly muted in developed economy. We will see the bank of japan, the ecb very accommodated. It will have an important effect on credit markets in europe. Forming performing relatively well. The volatility will be low. There is good credit quality. Little Commodity Exposure in the european credit markets. That is a good safety play. Francine how do you played a versions . Play diversions . Is fed, ecb that play has been priced in. Do you look at ecb and dboj . Eurodollar, if you look at the pricing at the moment, we think there is too much diversions priced in. The u. S. Is topped out. We think that is why there will be strengthening of the euro over this year. Our forecast is 1. 12 for one mo nth, 1. 14 for t three months. Yields will rise and treasury will stay confident. There will be a compression of 10year yield spread. Francine thank you so much. He stays with us and we will talk about commodities in china next. Here is a look at what else is on our radar. Morgan stanley plans to cut 5 of his Equities Trading staff. That is according to the wall street journal. It said they would eliminate 100 jobs in early 2016 and replenish its ranks over the course of the year. Morgan stanley declined to comment. Chile raises Interest Rates for the second time this year. Tells us central bankers continue to see inflations running above 4 target for 2015. Apple is entering the chinese mobile payment market. Will introduce the competing systems next year. Ae deal offers an entry to market in which transactions were worth 3. 5 trillion last year. Deterioration. China paints a bleak picture of the countrys economy. We breakdown the latest data out of asia next. Francine welcome back. Authorities say its Housing Market shows signs of recovery after they rolled out easing measures but the news is overshadowed by researchers in new york who say the latest china , the countrys Economic Conditions are deteriorating. Bureau chief in shanghai joins us with the latest. From chinas perspective and we have been trying to figure it out, this china beige book is looked at from new york. How credible is it . Do we take it with a pinch of salt or does it tell us things are much more worrying than we think . Greg hi, fran. The beige book is an independent report. One of the things that people are often concerned about in china is the reliability of the data. And you have very few of these types of independent reports that attempt to analyze the chinese economy. In that respect, the beige book is something that we should definitely take seriously, because it may be one of the few independent reports that we have available to us. How do you put that compared to the Housing Markets, saying that it is stabilizing . We have had quite a year for china volatility concerns. To 2016 moreng worried than six months ago or less worried . Not well, were definitely out of the woods in terms of the Property Market. Although the beige book did flag this was one of the sectors that was holding up and we got positive data today. The data really is on two sides of the market. You have the tier one large, major city market, beijing, shanghai. Then you have all of the other cities in china. And, well, demand is very strong in the tier one cities, it is hard to turn over a property in the other areas. That is why the government has taken measures, focused on the smaller cities to try to bolster the market. Providinge, subsidies. There has been migrant reform, allowing rural residents to move to urban areas more easily, as well as the cutting of down payments. Re, trying to bolster this mo the less populated cities. Francine thank you so much. Shanghai. In lets continue the conversation with our gas. With our guest. You are a regular on the program we talk about your thoughts on china. Chinabased book, does a point to the fact that we need to be conscious cautious . Aftermathll see the of the Housing Market slowdown in china affect every market. Is that growthng is revised down significantly. This year we art 7 growth. We will go to 6. 2 next year. Knock ongnificant effect and that is due to the knock on effect of the housing slowdown. We will have this excess property work its way through the system. In tier one cities we have a year of inventory on the books. That we can move fairly quickly. 3, 4 citieser 2, which is the majority of cities. If you look at the ones with the housing prices are falling. Its red. A few months ago everything was red. Although we are out of the woods, i think we still have to way throughits the system. But also, the impact on growth will be significant. It seems to be consensus that actually you will see more bad loans coming in from china. That is the worrying part. We do not know how the financing will be ongoing. I guess the question is whether policymakers have a good handle on it. Ramin i think they have a very good handle on it. They are aware. The key thing to look at is liquidity between the banks. If you look at chibor it has been close to 3 . Maintaining that liquidity will be at the forefront. Also, we are expecting rrr cuts, basis points. Currently it is around 17 . That will bring it down to 14 . And also an early cut in the base rate next year. Francine no credit crunch . Ramin we think they will manage liquidity well because you have the sedgwick organized economy so they can make sure the liquidity stays in place. Francine thank you so much. We will be talking emerging markets next. Follow. Next, the fed we breakout Market Reaction from the first rate hike and a decade. Francine welcome back to the pulse live on bloomberg tv and radio and streaming on your tablet and phone and boomer. Com on bloomberg. Com. It has been quite a week. But we tend to forget what is happened in the summer months about the volatility in china. We talked about the fed, china in a little bit about the currencies for 2016. What is volatility like in 2016 . I will bring you a chart we made especially for you. The last volatility in seven months. Are we going to see more of it, deeper next year . Have a lot of our clients been interested in the disconnect between highyield spreads in the u. S. And vix. Highyield spreads has been blown out by energy and vix is tight. Trading below 15. If you strip out the liquidity premium, it looks fairly priced. Yes, we are definitely expecting more volatility. And volatility in 2016 because when you go through macro change, that is typically when you see the highest volatility and rates and fx. Definitely that is what we expect in 2016. Timing is everything for vix. While you wait you pay carry. Francine centralbank action. The fed hikes. I know you are expecting four hikes next year. What happens if the market start this was a mistake but she has to cut the next six months . Ramin we would see a very large pickup and volatility, because markets are pricing in a slow grind up in the economy. Any surprise would be worrying. That is the worry that we will see the recession hit in the u. S. Before we have reached the end of this hiking cycle because the fed ammunition the next time around. We are not forecasting a recession in 2016 but if you look at credit indicators, the probability of recession has gone up to 20 looking at credit indicators over the next year. Still not worrying but i would say that is a concern. In terms of policy shocks, yeah, that would be a definitely driver of volatility. Francine taiwan cut yesterday. Chile, mexico raising rates. Does it mean the because we got the fed hike out of the way, Central Banks are more free, they are not countering the fed anymore. Ramin a lot of e. M. Is breathing a sigh of relief. A lot of them have said that they wanted to cut because it would take away the uncertainty. I think that is definitely going to be a breather for them. But overall, we think the disinflationary trend we see globally emerging from china is going to be a problem for some of the small, open economies. You mentioned taiwan. That is one of the places where we see the impact of chinas slowing exports. But we also see them having to potentially protects their growth by devaluing their currencies. So, i think that will be a concern in 2016. Francine they do so much for all your thoughts. Thank you so much for your thoughts. Bank of japan kept its main monetary stamens target unchanged but adjusted the program to include longer maturity bonds and Real Estate Investment trust. Against thetronger dollar. A private survey of chinas economy shows disturbing deterioration across the board in the fourth quarter. The chinabased book Shows National sales revenue, volumes, output, prices, hiring and Capital Expenditure were all weaker. U. K. Prime minister David Cameron says his bid to change britains relationship with the eu is gathering momentum. E. U. Leaders have signaled they are willing to find compromises on his demand for curbs on welfare. They will seek to strike a deal at the next summit in february. For more on the stories and others, head to the bloomberg terminal and bloomberg. Com. Francine the e. U. Summit starting as we speak. Hans nichols is on the ground and will bring us the latest. I think a lot of the leaders have gone in. They are inside, ready to talk about terrorism. A lot of the working dinner was on the upcoming british referendum on whether they want to stay with any e. U. And how th ey negotiate. David cameron saying he thinks he can get this done and renegotiate in a satisfactory manner so the people in britain vote to stay within the e. U. Coming up next, the new Star Wars Film opens and forecast for its profits to go in hyperdrive. We talked the business of the force awakens. One of europes largest cinema chains will be talking about disney and talking about the battle of the princesses when it comes later to merchandising. And disneys efforts to get that allimportant childrens market. Now, coming up we will also be looking at more emerging markets and oil. You can follow me on twitter. Ill just see you and a couple of minutes. The ftse, 6101 down from 1. 1 . Francine welcome to the pulse. Live from europeans headquarters. Im francine lacqua. Star wars the force Awakens Opens a stateside today. Is did you hear in the u k in the u. K. How much money is it expected to make . Nejra i think i must be the only person in the city of london who has never seen a Star Wars Film. I am not planning on seeing this one either did it cannot have escaped anyones notice how this film is going to be a force to be reckoned with for disney when it comes to revenue. In the u. S. The Mystic Box Office alone, star wars is on million. Make 229 that puts it on track to smash box office records. It is not just the box office that is make money, because analysts expected to rake in 5 billion from merchandise sales. Over 1 billion from video games and dvds and tv licensing. Bringing the total revenue in the first year to more than 9 billion. When talking about we are talking about big money. Francine im still in a little bit of shock that you have never seen a Star Wars Film. I didnt think there was anyone that had never seen a star wars movie. The 4uld recoup billion. Nejra that 9 billion revenue tag it looks like disney could money fromecoup the buying lucasfilms. The company has been on an acquisition spree in the last decade. In it bought marvel back in 2009. It bought pixar for a higher that in 2006. They want for 6. 3 billion. Look at how the share