Unemployment figures. From germany. Much better than expected. [inaudible] francine i think we are having a couple of difficulties, technical difficulties but mark was saying in terms of what we are seeing on the ftse, the cac. 3 afterx gaining china intervened. It still remains to be seen if analysts are convinced china can do enough. Gold is up. Copper up a little bit. A little bit more optimistic than yesterday. Lets get to the Bloomberg Business flash. French Telecom Companies have confirmed they are in talks on a deal. Not definedons are by any timeline. They signed a confidentiality agreement. The u. S. Justice department is suing volkswagen. In to chartt filed is the first case against the company by the justice department. Strong contender to buy a swiss travel company. It received winner approaches from third parties. There is no certainty and offer will be made. Its Restructuring Plan remains unchanged. Francine thank you. 7 slump in equities triggered a halted trading, chinas shanghai composite has ended the day down. 25 . Meanwhile, China Central bank has moved to ease borrowing billionth a 20 cash injection. We were talking yesterday about the rout and the sell off. Today, china seems to have restored some kind of stability. What price have they paid for it . Tom i think you are to imagine a couple of the measures they have introduced. I think it is fairly clear that once again a semis of stability has been restored but at a price. The biggest liquidity injection since september. Reports that state own funds ding into thed market. The Chinese Security regulator has extended the ban on major investors selling their stocks. All of that together seems to have been sufficient to stabilize the market on tuesday. The question stepping back from the daytoday market fluctuations is what kind of market are we left with in the wake of so much substantial Government Intervention . Francine yesterday you really it the nail on the head, brought the message home to me that although we had a massive rout, it did not mean there was something fundamentally problematic with the chinese economy. It was market movement. What can you tell us today about the outlook for growth . Nothing has really changed. i think that story remains pretty much intact. Chinas government has introduced massive stimulus over the course of 2015. The stimulus has now gained traction. It has not boosted growth but it has prevented growth from falling any further. Whats happening on the stock market is really being driven by some idiosyncratic market specific factors in 2015. It was very much a story about margin finance on the way up and the unwinding of those margin trades on the way down. 2016, it is a story about fears about the expiry of some of the measures that government introduced. Is what happened it is happening on the market is generating a lot of headlines, but is not telling us much about the fundamental growth picture in china, which remains a story of stabilization. Francine thank you so much. Our chief asia economist. Lets get more on this with our next guest. He is a chief Investment Officer of rng wealth management. Great to have you on the program. Give us a sense of how worried are not you are about china. It seems that 2016 will be a year of many uncertainties and ofna will play a big part stabilizing or exacerbating those uncertainties. The of the recent put in place a number of measures in the last year to try and improve the situation. Over that same time, we saw a in equity up markets. From august last year, a more accelerated declining currencies. There are two different stories. The deterioration in the economy which they parted to stabilize. They let the market become a more free force. Francine but they are intervening. Year always told 2016, the of reform. Does it comfort you as an investor, because alisa p at least the pboc is taking it seriously . Or are you worried it is a step back from market liberalization. Stewart there are two or three big moving parts. The economy trying to stabilize of will of with a lot intervention. To increase bad debts in the banking system. We are seeing that come to the surface now. The authorities are doing their best to try to swap some debt around. Thirdly, we have got the big push against fraud. On the having its impact state sector and the private sector were certain highprofile ceos have been detained for questioning. Factors are all starting to coalesce in terms of what is going to happen in 2016. Of growth, official number will be somewhere near where the 30s want. The number will be a lot lower. The markets. On something similar to last summer. The biggest worry should be what is happening with the currency. If we see consistent weakening in the renminbi, that will have to flay shery impulses spreading around the world and that is bad news in terms of Economic Growth that will have inflationary impulses. The longerterm concern will be what happens with monetary policy. The currency is the bigger thing for us to watch. Francine thank you for that analysis. He stays with us and we will talk about the u. S. Next because could we see a recession in the u. S. In 2016 . Stuart richardson warns it is a possibility as fed officials shrug off yesterdays u. S. Stock rout. Francine welcome back to the pulse live on bloomberg tv and radio and streaming on your tablet and bloomberg. Com. Federal reserve bank presents have shrugged off yesterdays stock sell off. Saysleveland fed underlying fundamentals of the u. S. Economy remains sound. We will bring in our chief economic correspondent. Guys, thank you for joining us. When you look at the fed, and it seems like when he to start with the market sees it. Ofy actually see less tightening or Interest Rate rises that what we were led to believe by janet yellen. Simon if you look at the dot plot the fed is thinking for hikes this year in the market is thinking about two. We are more right than the fed is. The fed officials are trying to play down a bit of those market jitters. Contrariane have a in the student appeared you believe the u. S. Economy is not as strong as people are led to believe. Stewart that has been the case at for a number of years in terms of the economy undershooting the optimistic feds forecast. As we look at what happened towards the end of last year, the second half of last year was disappointed for most economists. Yesterday. Coming in the economy is not doing as well as most people thought. Privately, fed governors would admit that. The Manufacturing Sector probably in recession. The Services Sector doing ok, boosted by increases in health care costs. If you look at one side, there is bound to be a recession. The other, we can still muddle through. Francine muddle through does not lead to Interest Rate rises. Stewart we also have the fed, theyve done a lot of work on their communication policies. But we have seen from the two fed governors as they are trying to build a narrative around the proposed policy of four rate rises. They have to be optimistic on the economy and go out and say the u. S. Economy is doing fine. Any problems that come from aerseas, not too much of concern. Europe is doing well. So, they are going to try and paint and optimistic u. S. To mastic economy scenario but theres a long way to go. 1 wehe data comes in for q. Will see more in thef market assumption as opposed to the the feds assumption. The biggest indicator will be what happens with the u. S. Stock market. Losses, risk of recession. Francine we need to look at what china does. We have to look at stock markets but i also the fed is now contrary to maybe what they the monetaryet policy for the world. Has been a great deal of talk about how much the fed cares about the rest of the world. Wobbles last summer and the fed said we are going to hold off for a little bit. And now you see china wobbling again. U. S. Putting on a report saying that china is in for a hard landing. Hike much less than expected. All eyes on china get is the new year starts. Francine and on commodities. We are in the second trading day of 2016 and we have been writing pieces on predictions and the black swans and concerns we should be looking out for. Simon on commodity, you look at Oil Yesterday , it bounced. The glut ofuns into supply. Francine we still have notes. Are you concerned that that filters through to what the ecb uses as Inflation Expectations . Stewart i heard your earlier commentary saying the ecb wants to look through the headline numbers and look at the core numbers. No one forecast these massive declines in the second half at one of 14. There has been a price shock, and they are still feeding through no one forecast these massive declines in the second half of 2014. Central banks remain extraordinarily loose around the world. Towardsas we look 2016, there is a better chance now well see the market looking to get into some sort of supply and demand balance. That assumes the u. S. Economy remains in the growth phase. T goes into recession, that will be a global recession and that means demand will not be sufficient to meet supply. Maybe we try to base any optimistic scenario in this current area of 30 to 40, which is a big decline from the 100 we saw 18 months ago. Francine but it is amazing that actually a standup between saudi arabia and iran isnt giving oil a leg up. If you look at Central Banks around the world, lets take the pboc, the fed, the ecb and boj, who has the toughest job . Simon crikey. Pboc, a lot of this instance are blondes. It is using a variety of instruments to manage its economy, which again pboc is not as necessarily independent. Grindj and the ecb its a there. Talking about tweaks to their ratios. Ecb, they kind of know the playbook. You just do more. And the question now we are starting to see for both of them and they are both alert to this, is doing more does doing more have an effect . The feeling was mario draghi did not do enough. They know the playbooks. For them, it is an easier job. Draghi a year ago, was only just entering this q. E. Period. Now you know you can push rates more negative and you can buy more assets. The pboc has a harder job. Francine a lot of this is actually priced in . So, what does it mean from an investment point of view . Terms of fixed income markets, the core is in our opinion insanity. O curtail whate t they are doing now because they see better growth coming through, you could see another rout in the bunds. Cpihey dont do enough, the undershoot, we could see a problem there. We look at european government bonds as being almost a nowin situation. They stick with positive return some european bonds because they are already in negative territory. That is all price in. Of equities, we have seen in the last two or three quarters, this belief that ecb e. E. Or japanese q. E. Will b equity markets changing, moving slightly away from european and Japanese Equities because of that. Because european and Japanese Equities are beginning to dance to the same tune. Francine what about the boe . If you look upon movement sluggish onound is the fact and investors are starting to doubt what the boe will do next. Simon a lot of people have been expecting the boe to shadow the fed. Blown outkind of got of the water late last year when mark carney came out and said maybe we do not raise rates until 2017. The chief andy economist has been dovish as well. Year. D for most of this day, growthf the has been muddled through. There may be no need for the bank of england to be in a hurry to raise rates. I think they would enjoy a bit of currency weakness. Francine we had a little bit of manufacturing being subdued in the u. K. , but the main unknown is brexit. So, the boe needs to make sure they cannot raise rates to quickly. Simon if they want to raise rates they should do so more quickly before entering the political period. Of economistse voice wouldously is that brexit be bad for the u. K. Economy, and therefore, by assumption, if the bank of england does not hike, they dont want to hike around the vote. By davidis dictated cameron. Whether we look towards a june referendum or one at the end of the year. Regardless it is boiling way under the surface. Francine 2016, an interesting year. Guys, thanks so much. Another bump in the row for volkswagen. The german carmaker is being sued by the u. S. Over the emissions scandal. Francine welcome back to the pulse live from bloomberg tv and radio and streaming on your phone and tablet and bloomberg. Com. Are down. Shares the carmaker is facing further problems with the u. S. Justice department filing a lawsuit, accusing it of installing illegal devices to cheat emission tests. Hans nichols joins us now from berlin. Is this just the beginning or could this lawsuit snowball . Hans in some ways, we have a because whenlanche you add up all the different claims, the department of justice at the behest of the epa is filing for, it can get to 80 billion u. S. Dollars. Earlier the estimates were billion on the highend. Volkswagen has only set aside 6. 7 billiones to cover this. Was the department of justice nepa doing together, they are hitting each vehicle with four different fines. It is very clear they want to send a message not just a volkswagen but the entire Auto Industry about the cost of deceiving the epa. Heres what the department of justice said. Car manufacturers failed to properly certify their cars and systems inns control danger health and disadvantage competitors. What you have when you break down the case, for some of the 580,0007,500, you have cars the department of justice going after. That number is important because before volkswagen admitted to installing defeat devices in 482,000, the difference is what the epa says is that three liter engine, one other important note, the epa and volkswagen have not reached an agreement on how our what they are going to do to fix those cars that are going to need to be recalled. In germany, they are awfully close to a technical solution. They seem quite far away in the states. Francine now, china state the government is said to have intervened to help it sinking stock market. We will bring you the details coming up next. You can follow me on twitter. Ill see you in just a couple minutes. Welcome to the pulse live in london. Im francine lacqua. Lets get the first word with caroline hyde. Joblessnessrman fell more than economists anticipated in december and assign the economic momentum will continue to be underpinned by household spending. The number of people out of work declined by 14,000. A survey predicted a drop of 8000. State controlled funds of intervened to support chinese stocks. After yesterdays market slide caused a massive Circuit Breaker to halt trading. The shanghai composite closed down. Chinas central bank has conducted its biggest reverse repo. The pboc has suspended operations at the end of 2015 and ending a sixmonth run of cash injections. Francine now, it is the first time the chinese authorities have taken steps to calm markets but do their interventions work . Lets get more from our guest. Our chief china strategist from hong kong. First of all, lets take a step back and give us a sense of how worried you are about the fallout yesterday we had and the subsequent intervention . Is this a sign that the chinese have a firm handle or that to a year of volatility . I think are trading in the first two days of the year, clearly the introduction of the Circuit Breaker has increased market volatility. Yesterday, the Chinese Market actually experienced a trading halt after a half day of trading. And after the introduction of Circuit Breaker. The magnitude of the lunch in the Chinese Market is more than double of the other major markets. So, i would just say that with yesterday in todays action, it is basically a confirmation that we are not getting a good read of what the market and where the market is heading. Francine what do you mean by that . We are not getting an idea of where the market is heading or you think there will be a correction . Hao yeah, well, i think to know today, they try to use National Money to prop up the market. Then we have a very volatile session was again today. Simply by introducing the Circuit Breaker, they are increasing the market volatility. And i think they can just say we got it wrong and we can basically abandon the Circuit Breaker and go back to a normal state. Abandon, a boston the plan to buy more shares. Francine what is the formal a normal state . Where the Chinese Markets are cap stable by intervening intervening but keeps it as level which means they take the pressure off, or does it mean freefloating . Hao i think at the moment, and is clearly not normal. At the moment we have the Circuit Breaker on top of the limits of trading. We have a limitation on futures limitation on market lending and Program Trading as well. We are actually with all these policies in place, we are experiencing more volatility, not less. More volatility than what we experienced in the past and we just had one of the worst the worst opening day for the year. So, i would say that now we are actually not normal. And i think for things to get back to normal, probably we would need to let the marketplace more Important Role here. Francine we made a chart for you. This shows some of chinas intervention in the last 12 months. We had an Interest Rate hike at the end of june. Then a series of support measures at july. A crackdown on a trading violation was announced in august. Did any of these have the desired effect . Think, you know with where we are right now with the markets is where it is right now ill i would say many of these measures have failed to prop up the market. These interventions, what happened is we have a iceket that failed to rprce in negativities. The market valuation is being elevated at a high level. The shanghai median p. E. Is st ill 40 plus times. And chinex is 100 plus times. It is still very expensive. We have a market that failed to price in and becomes more unpredictable. And i would say many of these measures have failed. Francine