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tv   Countdown  Bloomberg  January 7, 2015 1:00am-3:01am EST

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>> a day of reckonning for draghi on deflation. euro-zone figures are expected to show the first decline in consumer prices in five years. they brace for the next move by the e.c.b.. >> merkel's offer to cameron. a compromise on immigration to appease britain's euro skeptics. >> we'll be speaking live to the c.e.o. of supermarkets sainsburies on trade figures.
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hello. welcome to "countdown." i'm mark barton. >> i'm anne aedwards. the euro has been hitting new lows. the reason, the threat of deflation in the euro-zone amid speculation that the european central bank president path draghi will begin quantitative easing as early as this month. >> his attention will be focused on some very important data. inflation figures. those figures might edge the european central bank closer to a program of large scale government bond purchases. >> it is expected to show the first annual decline in consumer prices in five years. with oil prices staying low, it could show a slump in growth. the e.c.b. moving towards full blown quantitative easing. >> for more, let's go to hans nichols. he is live in berlin for us
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this morning. could draghi's case of quantitative easing be bolstered this morning by inflation or deflation numbers? >> technically yes. what we expect to get from this headline number is 0.1%. that would make his case easier that the e.c.b. needs to step in and fulfill its mandate to bring inflation up to 2%. this is the last bit of data we had before that january 22nd meeting. friday we have consumer confidence. what we may get on that reading is just an effect on how much richer consumers feel because of the plunging oil prices. do we feel like we have more money to spend and shop? when you take a look at some of the other data out there, that is another one we're looking for. then we have elections and a big meeting. we're looking at whether or not
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draghi's case is going to be bolstered. when you look at the declining oil prices, what that really means is we have a knock on stimulative effect and we should not be focus ond the headline number but on core inflation and that is expected to come in as 0.7% when you strip out energy food crucially, it is alcohol, when you strip those things out of headline inflation you get a more accurate reading. the argument is because of oil prices going down, we'll actually have more money to spend. in some ways we're at the same impasse we have been at for several months. guys? >> we'll be having conversation about how much you should look through movement in the oil prices. what does draghi need to go ahead with sovereign bond purchases? talk to me about how the voting works at the e.c.b.. how much he needs german support in this? >> he has been very clear he
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doesn't need unanimity. here is the issue. the question is not just when and if on quantitative easing but also the size. if draghi wants to get a big number, close to 1 trillion have, big monthly purchases, that is where this number starts to have some kind of influence. if draghi wants to continue to bolster his case, it needs to be a bazooka. if you want to have something like that, that is where the numbers, the effect of deflation really start to matter. that is why these numbers today are so important. anna? >> thank you very much. hans nichols in berlin. >> now the german chancellor angela merkel won't be in berlin when those figures are released. she will be in london in a meeting with david cameron. ryan chilcote is on downing street.
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what do we expect her to say to cameron about the topic of e.u. immigration? >> well, the members of the german dell great nation have -- delegation have led us to believe she will compromise on the position of freedom of movement. that is not up for negotiation but she will offer some qualified support for the idea of cracking down on migrant access to welfare. i say qualified because it will appear the germans are prepared to change some laws, maybe allow for some changes in domestic laws when it comes to welfare and access to welfare for migrants. it is not up for treaty change, particularly treaty change that would require ratification of all of the 28 e.u. member states. remember that the prime minister recently has indicated that he thinks that the kindor reform he would like to see would require treaty change.
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one member of the german delegation said we have laid out our red lines on the should've immigration long ago. they are well understood in britain. we look forward to britain doing that in this meeting. and perhaps that is how we should look at this. this is the beginning of a dance between germans, between european union and the governments here in britain. the timing of course is important. it has been exactly 11 months since the german chancellor last visited 10 downing street and perhaps more importantly we are exactly four months from the general election if this country and the issue of the u.k.'s participation in the european union is a core campaign issue. >> she has not been -- the labor party lead as miliband. why is that? >> first off, the the germans
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say she is here as the chairwoman of the g-7. germany will hold the g-7 summit in the bavarian alps in june. the nominal purpose of this meeting is to set up the agenda for that g-7 meeting. she is not here to discuss germany's own politics, at least officially. so there would be no need for a meeting with the opposition. the opposition said they only learned about the meeting until it was too late to ask for a meeting with the german chancellor. just shows you exactly how much this issue of the european union and britain's role in the european union is a campaign issue as the acrimony if you will between the opposition and government power in this country only increases in the runup to it. >> thank you. ryan chilcote at 10 downing street.
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we'll be speaking with one of merkel's closest political allies. don't miss the interview with michael fuchs at 9:00 on "the pulse." >> the christmas tree and the trimmings are long gone. sainsbury's is releasing third quarter sales figures after losing market share and market value last year. can the supermarket regain investor confidence? here with more is caroline hyde. just looking at some of the retailers, it's coast was down. sanes brie sainsbury's was down. >> a bad year. their worst result since 1989. it is worth reminding ourselves this time last year sainsbury's was the golden boy. how things have changed.
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we have started to see first half sales fall. they said second half would fall as well. the c.e.o. justin king retired in july and seemed to hand over a poison chalette to his successor. it is not always going to be winning markets share. the evidence is clear. we're seeing 16.5% market in terms of best share in the u.k. for groceries. that is down from 17% this time last year. so they lost that. equally, we're starting to see michael realizing this. he should know better than anyone what he was inheriting. he has been there the same amount of time as justin king. a decade. they stood side by side for much of the last few years. he warned the markets he anticipated years of negative sales growth.
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he anticipated doubling their market share some 15 pnth. it is not doing it. >> the structural change in the u.k. grocery market as you suggest, caroline. what is sainsbury's promising to do to tackle the competition? i know they have a joint venture. what is their general strategy -- >> slashing prices more. sainsbury's said we'll cut them 150 million pounds in the next year. i'm sorry, 150 million pounds when another company is cut them by a billion pounds. we're going to slash the prices on 700 good. now on 1,000. asta is plowing 100 million pounds in one quarter.
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double the amount sainsbury's is spending in an entire year to cut their prices. they are looking at for the investor base cutting capital spending. they are going to be cutting costs. they may cut their dividend. this is a concern. they are having concession stores within sainsbury's. more all about food. what is the rest of their offering like? many feel this is not enough. >> what is the sales figure we're watching for today? >> down. 3.2%. clearly it is not going to be a good third quarter for sainsbury. stores open more than a year -- will it hit their full-year target? that is what we're going to be assessing. we get tesco numbers tomorrow.
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they will be telling us what their plan is. tesco wakes up the sleeping giant as many call it. >> it can only benefit all of us around this table. caroline hyde, our business correspondent. those figures are due at 11:00. caroline will of course be breaking that. we will be crunching the numbers with john rogers of sainsbury. >> tell us what you're following today. tell us where you prefer to shop. are you a discount person? a tesco person? a sainsbury person? >> prices at the pump this morning. we talked about when the fall in oil prices is going to be really reflected at the pump. part of that story is already happening. we're going to go through on the bloomberg website. r- >> annaedwardsnews. >> speculation about quantitative easing in the euro-zone. what about the other big
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markets theme? the decline in crude oil prices in the u.s.? it has been trading at the lowest in more than five years in the u.s. it comes amid rising stockpiles in the u.s. on speculation that extra inventories will add to the global glut. our next guest thinks greek people don't want to exit the euro-zone sand predicting a lot of market noise and oonks prior to polling day. ♪
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>> time for company news. the worst performer is in the s&p 500 offshore drilling contractor transocean. 1.9 billion. lowered to junk according to moody's which cites a slump in oil prices and market conditions. "the interview," the comedy that may have prompted a cyberattack on sony pictures has generated more than $31 million in sales. it is a record online for the studio which temporarily pulled the film from theaters.
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is search giant engine said advertisers will be able to tell whether clips delivered bits double click service are skipped or ignored allowing marketers to fine tune their campaign. barclays head will retire. he washinged at the bank for more than 17 years. 70 of barbour's warehouse staff started a month of continuous morning strikes triggering fears of missed deliveries.
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>> the good times are over. that is the verdict on 2015 from bill gross, the former manager over the world's largest bond fund. when the year is done -- he wrote in his january investment outlook for more on what tariff holds for investors, we're joined now by kevyn adams. thanks for coming in. let's talk a little bit about bill gross' vement outlook and how that might tie in with your outlook. >> i think we're optimistic about growth in the u.k. and u.s. and less in europe and japan. for capital markets, it is difficult to see government bonds doing particularly well given how well they did in 2014 and the low level of yields. it is not my expert's. we have seen some -- expertise.
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>> give us a sense, kevin, of why global bond yields are reaching new record lows whether it is yields in japan, the u.s., europe global sovereign yields give us a sense of why we keep hitting new lows. >> there is multiple factors there. there is the deflationary -- coming from oil prices. we have seen that with a weakness in crude prices and we'll see this today with european inflation coming through probably negative on a year-on-year basis. the growth in the u.s. and the u.k. is fine as i was describing a moment ago, but we're also seeing a flight to quality and safety. investors concerned about the impact of low oil prices and slower growth on equity markets. in the u.s. on the face of it,
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u.s. yields are much higher than europe and jan and are pairing higher and interest rates will probably go up. >> since we're focusing on european inflation and the global view, investors -- global consumer prices, call it 1% for cash according to bank of america, the figures come down 1.25% are we at the bottom of this deflation cycle or do we have further to go, quid pro quo, more bonds? >> i think we will see more disinflation come through in ther in term that is kind of as a matter of fact. not just a u.k. phenomenon on its own. we will see near term inflation coming down further. but that pretty much is priced into bond markets already. if we look at five-year german
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bond yields, negative now and have been for a few weeks. we look at the very low yields elsewhere. >> you say things might be exhausted. is that the point? >> i think so. it is just so much is already priced in this terms of deflation and low growth. for us it is hard to see yields may fall a little further in the very near term deflecting those short-term -- inflation. core inflation is still 1.5%. it is just the impact of oil prices. again, that will correct itself in due course. >> you said earlier on you think interest rates in the u.s. probably will go up this year. many people still think that despite the fact that inflation is so weak. do you think they will still have the courage or the the nerve to put interest rates up? >> i think in due course. we're not talking about the first half of this year. we're talking about the second half of this year. in due course, the u.s. federal reserve will be prepared to look through the inflation, the
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short-term inflation impact. they are seeing there is reasonable growth. some of the federal governors are suggesting there may be some improvement in wages. some of the early indicators we're seeing, u.s. wage growth suggests it is becoming more positive. from that point of view, once get through this period of deflation and move more into looking at decent growth yes, we think that the u.s. in particular will be raising rates. >> why then are 30-year treasuries having their best start to year ever, kevin? the yield on the 30th fall bin 25 basis points in three trading days. why when the long end of the curve reflects on inflation, why are yields falling close to record lows? >> because at the moment, the inflationary pressures are -- we think we're getting close to the end of that cycle. there are the markets -- >> you don't buy five-year bonds at this level?
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10-year bonds? >> five-year bonds perhaps in the u.s. markets are not pricing it in correctly. there is this overall flight to quality. it is driving bond markets to pretty much unsustainable levels. >> thank you. stay with us. we'll continue our conversation with him when we come back. 6:23 here in london. ♪
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>> given everything you said, kevin, in the remaining minutes, just give us a sense of how we should structure our bond portfolio for 2015. >> i think we're generally cautious about assets as i was saying before. we favor bank loans. decent -- where the liquidity might be challenged but getting yields. >> german government bonds negative. is that fear or disinflation? >> it is a bit of both. it is the effect of likely q.e. and the impact it will have on german bond yields. >> ken thanks a lot. good to see you. happy new year. kevyn adams. >> oil has been trading near $48 a barrel in the u.s. at a time when crude prices keep falling, who are the winners and the losers?
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beal checking that scorecard next on "countdown." ♪
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ah, got it. these wifi hotspots we get with our xfinity internet service are all over the place. hey you can stop looking. i found one. see? what do you think a wifi hotspot smells like? i'm thinking roast beef.
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want to get lunch? get the fastest wifi hotspots and more coverage on the go than any other provider. xfinity, the future of awesome. >> you are watching councel. let's get straight to our foreign exchange check this morning. the euro/dollar is trading at a level you haven't seen since 2006. falling for four straight days. it is a double edged story. tonight you quiet get the federal reserve in terms of their thinking on the minutes. the fom everyone c minutes and you get draghi's push for quantitative easing and the consumer price index expected to show the first decline in five years.
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global reserves, people who hold the euro fell by 8% in the third quarter. more than the currency dropped against the dollar and indeed reserves of the euro are at the lowest level since 2002. even a cheap euro can't bring them in to buy. that is the story of the euro. coming off a five-day retreat in the u.s. the yen is behaving itself as it were. that is the dollar index. dollar/yen at 119.01. the dollar is at a 10-year high. the yen will remain in the grip of risk aversion. lovely line from ocbc but the dollar bullishness will stay in the very near term. >> these are the bloomberg top headlines. the euro has been trading at a nine-year low versus the dollar. on speculation draghi will begin quantitative easing as
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early as this month to combat the risk of deflation. euro-zone inflation data will be released at 10:00 london time. e.u. immigration policies will be high on the agenda when the german chancellor merkel meets the prime minister in london later today. merkel is said to be prepared to offer cameron a compromise on immigration. germany would support welfare curves if freedom of movement rights are not called into question. divers searches for -- diverse searching for debris a step closer to finding the black box and data recorders that will help determine what caused the crash. the bank of england has released minutes of meetings held by its directors at the
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height to have 2008 financial crisis. the documents reveal how officials found themselves stumbling through unchartered territory at a time there was no regime set up to deal with the failing banks and show concerns about a lack of experienced staff to deal with the crisis. banks were given code names to heighten secrecy at the meetings. it is part of mark carney's efforts to improve transparency. in the u.s., oil has been trading near $48 a barrel. the lowest in more than five years. speculation oil in the u.s. will add to the glut that already is in existence. >> who are the winners and losers on chiper oil? -- cheaper oil? >> a man on the street may well
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be looking at petrol at a pound a liter. we haven't seen those levels since 2008. that will mean more money and profit. from voter u.k. perspective and those that are net importers of fuel, i think we'll see some g.d.p. growth uplift. i think our expectation of about $of a barrel could mean 2% due to u.k. g.d.p. companies will be expected to see not necessarily immediately but hedging, they will see lower fuel costs as we look forward. they will be winners. i think the investor community will will pick that up. cheaper fuel costs should mean airline costs come down and i think there is an expectation the holidays may well be cheaper. clearly the energy stocks have
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been badly hit also around expectation of dividend yields that they are going to be able to pay out as clearly cash flows are constrained through a lower oil price. there are many companies who through boom particularly a shale boom redefined themselves on supporting fu technology and supporting services into those energy companies. they will be potentially losing out. with economies that are highly dependent on oil and gas and with those prices continuing to slide south, there is not much help for economies which are in a fragile situation. take venezuela for instance. it need to be over $110 a barrel to balance the budget. russia iran, similar levels. the saudis on a long-term basis
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can't sustain it at $45 a barrel if that is where it ends up bottoming out. >> some views from the e.w.c. demand for tankers has taken off. we're joined by the chief executive at ardmore shipping. great to have you with us this morning. look. there are winners and losers in this. your business, i read the notes this morning. you are literally cranking on gas. >> unrefined products. >> it is good for you. >> absolutely. since the -- tankers are actually benefiting hugely from this drop in oil price and that has been the case for the past few months. charter rates for oil tankers
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are at levels we have not seen since the last boom 2008. that is thanks to the demand that is being created by the drop in oil prices. >> how sustainable is that situation? who are the customers? who is it has the paying these high levels in current environment when oil prices are dropping, is that going to be sustainable? >> it is a pure market driven by supply and demand. when demand exceeds supply, rate goes vertical. when the opposite happens, they drop rapidly. because of this layer of demand placed on the tanker market rates have gone vertical. at levels we have not seen in seven years. >> the companies that extract the stuff that pay to move it around the world. >> in our business it is oil traders for the most part. they are looking to make a spread on their buy and sell. so what's happening in particular in the product tanker sector, which we're engaged in is that regional
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price differentials have emerged from this dramatic drop in the price of oil has resulted? very long haul trade opportunities and more trading activity. that has spurred a lot of demand. >> we have a steep futures curve. is it to encourage floating storage? will we see more and more tankers floating out there? explain to our viewer why that is important. >> i think it is important to use super tankers because those ships could soon enter directly into contracts to store oil for that specific reason. you can basically put the oil on a ship, pay the freight, pay the interest to carry the cost of the oil and still make money on the basis of covering with tuches. floating storage takes place in our business but it is less direct.
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there is a lot less oil floating around in terms of refined products which has not been bought yet. it is heading in the direction where it will be bought. >> there are just loadsor tankers floating around the world. offshore -- >> broadly speaking, if you look at the bigger ship sizes, they are on fairly established routes, but if you look at ours, they are like yellow cabs in new york city. they are just everywhere. if you have a break downtown or congestion somewhere it gets messed up. we like cabs can raise our rates. >> you have 14 tankers in use at the moment. you have another 10 they are called ecodesign vessels on stand by. what is the possibility, that we're in this peak situation that the oil recovers.
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do you see a recovery? are you overly ambitious of this growth plan? >> very good question. this plan was put into place when we did our i.p.o. 18 months ago. at that point we ordered 10 ships. the first one delivered yesterday. these ships are coming on rapidly. i think our timing turned out to be perfect. i don't think we foresaw this 18 months ago but our fleet has grown by 70% over the next nine months. will the demand still be there? i think if you believe the oil glut will be around for a while and we're entering into a new phase of the oil market geio political events which is also good for shipping particularly an oil cartel pricing, then we should be in a phase where the surplus oil, a lot of price volatility, generally low price oil, that is going to create demand for tankers.
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>> when you look at what's happening in the u.s. in the shale industry and opec is doing and the levels that we're seeing being pumped at the moment, how far forward can you look and say that is going to continue? >> i don't have any greater sense of that than anyone else. i think common sense would dictate that the markets is going to have an impact on shale production. most of the marblingts are unable to cut and the big players said they are not going to save the world at this time. and so we could be in a phase like we were in 1986 when saudi arabia opened and collapsed the price of oil and in 1986, that ended up in a very strong run for the tanker business for five years where it grew an average of 5% for that five years. >> i know it is a tough one, tony, crude below $50 a barrel. u.s. oil already below that. where do you think equilibrium
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is? >> i'm not sure. that is a very good question. again, i don't have any more information than anyone else. but are we really in a phase with equilibrium or l will there be continued volatility in the price for oil? it might be $75 or $80. that creates a tremendous amount of oil trading activity and demand for our ships. in terms of what it means for us, even if it is relatively low, it will be bounsing around quite a bit in percent terms and create a lot of opportunity. >> we wish you well. come back and speak to us. we'll see how oil trades the rest of the year and how the new ships come onboard. >> you can join in the conversation with us on twitter. let us know what you think of the show. where do you see oil prices going?
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>> coming up, we'll take you to las vegas. we'll hear reports of three top chief executives sharing their plans for the future. that is after the break. ♪
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>> >> a collection of chief
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executives talking about their plans for the future. las vegas. the annual consumer electronics show. we put together three top chief executives starting with the c.e.o. of daimler. >> in there, you can get anything. you can work. you can have video conferences. you're in the middle of the internet. moving from toonch b. >> it is worth building a chip that is customized. we're starting to see device now. we're seeing h.p. recently announced a surfer -- a with all the software coming into play i think we're in a good position. >> there is the first version that delivers what we call presence. presence is the holy grail.
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you put it on. you look around and within seconds you're there and you have forgoten where you are in real world and you are immersed in the virtual world. >> the c.e.o. of oculus in las vegas. now to the markets. have i to get my notes. hang on. they are never in the right in the right place. >> ill prepared. >> might things look a little bit different during the asian trading session? things were a little bit rosier at the start at least. could we see a more positive day in u.s. equity markets? it was the longest losing streak in a while. the s&p was down 0.9% yesterday. capped the longest losing streak in 13 months. small cap and energy companies the worst hit. no surprise on the energy story that we have been talking
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about. it has not all been about oil. interesting story emerging. we have more details on the website about it. the japanese stock market of course really getting a boost over the last year, well couple of years because of what it might deliver the topix up in 2013. up 8% last year. compared to 51%, not so impressive. interesting story today, bearish bets on the japanese market the combination of the route in equities is all about bond price and deflation. actually there is this japanese story that might come back and that is seems to be reflected
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in what foreign investors are betting the japanese stock market might go. >> buy the dollar and japanese stocks. those are the two consensual trades aren't they? >> american investors saying shock and awe is not going to work anymore. >> the g-3 bond index. essentially, it is the index which gauges the u.s. to european and the japanese bond market the world's three biggest bond markets. yesterday, the average 10-year yield index fell to a record low. throw into the mix the bank of america, merrill lynch, global sovereign bond index which is also at a record low. global bonds are hitting new lows on a daily basis. specifics, france, germany japan. what happened in the u.k. was interesting yesterday. the debt management office sold 2.75 billion pounds of 10-year gilts.
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the market price is not quite at a record low, but the price that the d.m.o. solte sold gilts at an auction reached an all-time high. oil -- >> 2009 is going to ring a bell. west texas intermediate the u.s. and brent, volatility in the oil market is back at levels you have not seen since 2012. u.s. crude 60% volatility. in the european contract, brent is up 50%. stockpiles. we're going to get data today that is going to talk about the stockpiles in the united states of america. 700 barrels stockpiled last year. china is not going to save the oil market. they will not import as much as they did last year.
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there is an iranian news service saying there is consensus building monk opec that they should stop the drop in prices. the chief equity strategist at goldman sachs said a global glut sending these stock prices to evaluations that are quite appealing, their energy prices are trading at 13 times their earnings. down from 17. with a market looking for pockets of opportunities. he is looking for pockets of opportunity. you have copper and aluminum. copper at a four-year low. aluminum at a seven-month low. that is according to socgen. the fed, you a strong dollar at a 10-year high. >> after the break -- great stories from bloomberg. who is feeling the pain at the pump? oil prices as you know have fallen. who is still paying top dollar
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when they fill up, though? that is after the break. ♪
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>> >> 8:54 in london. let's start with a story about oil. this is a data visualizeation that we have on our website that is brilliant really illustrating who is feeling the pain at the pump.
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where people go to fill up their car, where is it most important? you can cry or cheefer depending on how -- cheer depending on how poor or rich you feel. how does it compare to incomes? norway, you the highest oil prices to fill up. $9.26 a gallon. that is relatively affordable when you consider where salaries are. what is interesting to me is number two on the gas prices chart is turkey. really expensive gas prices. they rank fifth in unaffordability. the gas prices are very much more expensive there compared to incomes in the country. the most unaffordable place to fill up your car. pakistan. the only country on this ranking where you would have to do more than a full day's work to pay for one gallon of gas. >> i'm going to talk about going out on a limb. actually it is a gentleman
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could bill gross. the question is this. if you read a story on labling his predictions, do you give it creedance? credibility? 2014 was a tough year for this man, leaving pimco. he will be at the negative end of most numbers and markets at the end of this year. wall street is expected to end about 8% higher this year. bill gross says you will possibly have a negative number. when the year is done there will be a minus sign for many asset classes. the timing of the market is very, very hard. he doesn't like to stand with the herd. six years suggests that actually economies are lacking confidence. >> sticking with the bond theme, i have a great story by our colleague, a columnist for bloomberg. bond yields are down in japan germany, the u.k. and france. he is saying the lower price is
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not a good thing because when investors are pushing 10-year bond yields to record lows, that is telling us they have no faith in the outlook for growth and it is probably a harbinger of deflation. "countdown" continues in the next hour. ♪
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>> a day of reckoning for mario draghi on deflation. figures are expected to show the first decline in consumer prices in i've years at the markets brace for the next move. >> the german chancellor -- >> christmas sales, speaking live to the more chief marketing officer. >> welcome to "countdown."
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>> it is 7:00 here in london on wednesday january 7. caroline hyde is here to break down the numbers. >> much better than expected. not nearly as bad as had been thought. the third quarter down 1.7% and that is excluding fuel. analysts expecting a drop of 3.2% so this is ahead of expectations, good sales performance in a tough market. you have price wars of brewing promising one billion pounds of rice cuts in the last -- next five years. sainsbury itself. they say they had 29.5 million
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customer transactions in the days before christmas and over 400,000 product prices reduced. >> deflation likely to continue to you expect the rice is to continue -- those prices to continue? >> 57 million, go on sainsbury. >> they said people tend to trade up during christmas. and sainsbury has always been known for a little bit better quality when compared to tesco and its three big rivals. remember last year, it was the only one of the top four gross is to hold onto market share. but we have seen that turn around and they have lost market share to the discounters. fourth quarter they say will be
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similar to the first half so likely to see like cells declining. they are not changing their overall focus. they are managing to hold onto their full-year target. >> when you look at the fourth quarter versus the recent history, they did see an improvement in terms of the second. improving that is a trend in an industry searching around for them. >> they are able to improve quarter on quarter and they say christmas, online trading was the biggest to date. they have their online presence working well, i have used it myself. whereas other companies, morrison comes to mind, or slow to the online party. indeed the people who use morrison overall.
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there seems to be a big story. we will leave you as well with one concern, the most -- sainsbury is the most shorted on the 5100. is that enough to convince investors it is not a downhill spiral? >> can sainsbury keep up? >> we're saying here as well their local shopping continues to grow 16% in the quarter, 6 million customer transactions in the week before christmas and i know i had a few missed ties and i can vouch for the quality -- mintz ties -- mince pies and i can vouch for the quality. >> we will be talking to the cfo at sainsbury a little bit later. 7:30 u.k. time. >> the euro has been hitting new
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lows, dropping to its weakest level in almost nine years. the reason is the threat of deflation in the eurozone. amid speculation that mario draghi will begin quantitative easing as early as this month. >> in under three hours time mario draghi's attention will be focused on very important data and it might edge closer to a large-scale government bond purchase. >> with oil prices staying low, the figures could heighten fears of a slump in growth and that would increase the chances of the ecb moving toward full-blown quantitative easing. >> let's go to hans nichols who is on the ground in berlin. good mario draghi's case for
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quantitative easing be bolstered by a week reading on inflation? >> my impression is champagne sales has to do with core inflation. we get the headline inflation and the expectation is zero point -1%. -- 0.1%. he has been warning about inflation. we get consumer confidence and this is a counter argument because what we're seeing with inflation numbers coming down low, it is mostly about the price of oil and that has a knock on effect of being stimulative for the economy and consumers feel richer. that's what we will find out on friday, do they find they have more purchasing power because they are spending less on gasoline? we have the headline number
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-0.1% is the expectation and the headline which has been at 0.7% -- that is what we are getting at. will mario draghi and more of an argument and will he convinced the germans to back quantitative easing? >> that could be the question does mario draghi need the germans on board if he was to go ahead with sovereign bond purchases? >> the mario draghi view is that he does not and does not need unanimity. what he may want is more unanimity for the size of the purchases. it seems like most of the conversation around quantitative easing is not an if but a when conversation. we'll see what he does. >> thank you very much, hans nichols in berlin.
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eu immigration policies will be high on the agenda when angela merkel meets the british prime minister in london later. merkel is said to be offering cameron a compromise on immigration. germany would support welfare curbs if the freedom rights are not called into question. >> that is an interesting story in terms of where they go. join us on twitter with a whole host on the date. currency as a reserve, with the lowest price since 2002. >> sainsbury selling over 57 million mince pies, and manus 856.5 million. >> yes. >> caught thomas -- talk to us on twitter.
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>> our next guest says it feels a bit irrelevant as he describes easing as a kind of last chance saloon for europe. ♪
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>> the eurozone inflation data
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due out this morning and expectations pointing for the first annual decline in the last five years. it could be a tipping point for full-scale qe. is it too little, too late? hello george. how big a deal will it the if and when inflation falls for the first time in five years in the euro area? >> it is quite important obviously what happened in the great financial crisis and the recession and happened in a lot of places but it has obviously been coming and we can track it and declining oil prices has been a catalyst but what it tells us or corroborates for us is the chronic weakness of demand in europe and that is really what demand is about.
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from a professional point of view only it's like this is what it has all been leading up to, evidence of headline inflation dropping into negative territory and it tells us all it is really about is the failure to address the demand side of the eurozone economy. >> are all of these created equal? is there an argument for looking through periods of deflation in the same way central banks look through -- look through periods of higher inflation. just thinking about some of the other argument. >> this time of the morning i don't want to talk to you about the paradox of aggregation. [laughter] >> go on. >> the good news about falling
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prices for you and me is weakened by things cheaper than we did six months ago. the problem is if we have to whether the promise of declining prices, by definition that means business decisions are being put off and investment decisions are being put off and consumer spending is being held back by something and that is why -- the kind of inflation you get when demand is weak is different than the falling some -- falling prices with a demand shock. there have been periods in history, i counted four or five with shortish periods of time where they were accompanied by accelerating levels of output. but the ones that capture the headlines and this is what we have here -- >> with all that in mind, how do
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you kickstart demand? everybody is banging for quantitative easing and you actually say the ecb is compromise in effectiveness will qe not help? what would it do? the world is breaking for it. >> -- begging for it. >> if you look at the ecb and the bank of england, it would have to do around 2 trillion euros of qe. it would have to be an open-ended row graham that we extend over a number of years, -- open-ended program that we extend over a number of years. why i'm skeptical -- i have been h or leader, but why i am skeptical is i think although
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you said -- i have been a cheerleader but why i am skeptical as i think -- although you said, the problem is what does that package look like? is it going to be a compromise? whose bonds are they going to buy? half the bonds would probably be french and german will it be 500 million or 750 billion? >> would they buy greek bonds, taking place three days after the ecb beating, how does the election play into the decision making? >> i don't know how they will get around this, given the uncertainty they may take a big
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sort of gamble. i don't think they can do that really because we don't know whether they will bluff or not. to be it tips the scale of the lit and instead of january 22 it might be a march meeting -- tip the scale a little bit, and instead of a january 22 meeting and might be a march meeting. the risk is that it won't be big or not as big as people would like to see and that it also does not work that well. the way you might get bang for your buck, so to speak is through the depreciation of the euro. the idea that qe on a limited scale will revive the european economy -- not going to happen. >> the ubs group senior economic adviser.
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we will be sifting are the minutes later. we will ask george what he expects and what it means for u.s. policy.
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>> still with us, that ubs senior independent economic adviser, george magnus.
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before the break we looked over all the nuances of the federal market committee. we have moved from considerable time, we are now waiting for patients in terms of the language from the fed. >> of all the major central banks, the federal reserve is the only one in my view that actually comes closest to having resolved some of the contradictions between trying to use monetary policy not alone because the federal reserve has not been fighting the recapitalization of banks. the revival of lending has been important in the united states and distinguishes itself from europe and japan.
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i think the fed is the closest to resolve some of the contradictions that resulted of a consequence -- as a consequence of the national crisis. they could say, we have pretty much full employment, and there are tentative signs that demand is solid and they may even site a bottoming out of decline in real wages but it is still a very close call. i think april would still be too early for the fed to raise rates. it might be more of a token increase later in the day -- year. whether we start to see the fed need to come down. >> that will help, we should not
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be equivocal about the impact of oil prices other than venezuela and nigeria. it is a positive for the creation of real income and spending but it is positive in the sense that it acts as sort of a tailwind and other facts which are dragging down the road. in the united states you would expect the impact of the oil price decline to be fractionally larger than other places. >> you told us about deflation and the eurozone, global deflationary fears are the bond markets smashing a red light some to do with fears overgrowth, how worried are you about global deflation right now? what are the bond markets signaling? >> it is a big deal and it is a problem that national banks in
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western countries -- the things that we used to look at that determined he inflation rate are now not reliable or not working as effectively because there is this ubiquitous global problem to do with a downward trend in prices. a lot of it is to do with demand weakness and emerging-market growth that is slowing down and one of the biggest sources of deflation in the world is china. and obviously as the investment side of the chinese economy slows down a bit, which is part of the rebalancing exercise that will add to downward pressure on chinese selling prices in a growing range of products. whiteboard conclusion -- by my alkylation, -- by my calcul
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ation, it affects a wide range of industries. this is a big problem and it is difficult to know if you are a national central bank, how do you stop it? >> what is the guest risk -- biggest risk, we talked about oil prices and abenomics, and disinflation, what are the things present on your mind? >> as the year starts, the thing that spooks me again, like deja vu is the eurozone. obviously, the imminence of greek elections and what happens if soroza comes the power and can form a government where it can stop driving a hard bargain
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about debt relief. i think greece will get debt relief, the question is the process in which it gets it. i am not necessarily say this is a bad thing, maybe nontraditional governments are just what the eurozone needs to jolt it out of this stupor. this traditional, hard money economic policymaking. >> it will be a departure of greece from the eurozone? >> that will be managed, it feels like we have been through this -- [laughter] >> thank you a lot, george magnus. >> now, we have the trading update the fourth consecutive
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quarter of declining sales for this supermarket giant. we will be speaking to the chief financial officer of sainsbury. ♪
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>> you are watching countdown a quick check on the foreign exchange market as we head toward the cpi day. the vested inflation number expected for the first time in five years. euro-dollar is down. falling for four straight days. as the federal bank and central reserve managers, they were not tempted by the third quarter reserves, more than the currency dropped. global reserves of the
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euro are at the lowest its 2002. -- since 2002. equity markets are getting a bit of a bump and the europe should open the market a little bit higher. people are behaving normally for once. the dollar at 91.77 which is a 10 year high. where the dollar-yen coming off a three-week high and it is one of 16 major currencies and what you are seeing here is a mark which is already very long for the dollar. the next thing on the yen, ocv says it remains amid the grips of urgency. >> these are the bloomberg top headlines. the euro has been trading at a nine-year low.
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amid speculation that mario draghi will begin quantitative easing as early as this month to combat the risk of deflation. eurozone inflation data will be released today. the first annual decline in consumer prices in the eurozone in five years. eu immigration policies will be higher the agenda and handling merkel will meet the british prime minister later today merkel is said to be prepared to offer david cameron a compromise on immigration. germany would support welfare curbs if the freedom of movement was called into question. a diver was searching for debris from the crashed air asia line and found a part of the tale. the discovery puts searchers a step closer to finding the black box and data recorder that will help determine what caused the crash. more than 90 ships and aircraft
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are involved in the search for the plane which crashed december 28. the documents reveal how officials found themselves stumbling through uncharted territory. banks were given codenames to heighten secrecy such as fox for hsbc and felix or rbs. >> sainsbury just posted their third quarter, the third-largest supermarket chain had a lot to cheer about over christmas total retail sales were still down. for more on the plan, to turn around the picture, let's turn to john rogers who joins us now. great to have you on the program. third quarter showed an
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improving trend against the previous quarter. the numbers, although negative a little bit better than the market was anticipating. can you give us any insight into what might be working or getting better? >> we delivered a fantastic christmas to our customers. the reality at the moment is we are seeing price deflation in the market and we are seeing fuel prices coming down and this is a great story for the customers and that gives a little bit more money in the purses and wallets. we saw them splash out a little bit over christmas. so we saw growth i over 5%. i think -- by over 5%. i think as a business you can be pleased with the third quarter performance and i think we are doing the right rings for customers, we are investing in
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price. yesterday we announced further price cuts on over 1000 products and so our author is even keying up. price is one of the factors that customers use to decide where they shop, there are others the quality and service level and we pride ourselves on having a great overall offer for customers. >> john, this week you have given us more details on the prices being cut from the supermarket and the amount of money investing in price cuts what you spend more as the year goes on investing in cutting rices to retain customers? -- prices to retain customers? >> we will compete toe to toe with our competitors. we announced in november price
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indexes of 150 million but, if we need to step up to the plate again and invest for a price we are prepared to do that to make sure we will remain in what is very much a cutthroat market. >> how is tesco affecting your business? how are things changing out there? >> we don't focus too much on what tesco is up to. we want to make sure we have the right strategy and offer for our customers. the results we announced today but not just them the results from the last five years demonstrate we have absolutely got it right and there is great opportunity for convenience in the bank and parts of our is this seeing double-digit growth. we are optimistic for the future
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because the u.k. is a tough market. >> you are optimistic but you say you see the rest of the year as challenging, what assumptions are you making about consumer spending because you could look at the oil price and suggest consumers will spend more on other things, what do you make of that? >> i think the optimistic view is with fuel prices coming down and deflation, customers have more money in their wallets to spend. the optimistic view is they start to spend that within the supermarket sector. unfortunately we have not seen that to date. we have seen other sectors like auto and holidays or anything else. the optimistic view would suggest that we hope customers will spend more on the food shop but that remains to be seen.
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in the meantime will be planning for a challenging fourth quarter of the year and this last quarter is typically were customers tend to tighten their belt but we are ready for that. >> not so much flying off the shelves in january, perhaps. what about the discounters, you have a joint venture, you are playing in that arena what does that teach you about the way they are performing and their potential and how you will perform? >> the great lesson we have learned from the joint venture is taking some of the learnings in terms of how the discounter operates. that is very helpful for us and we have ambition to cut costs significantly across our business and we are very much learning from our joint venture from netflix. as a standalone opportunity it is a great opportunity to grow the business.
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we have been very successful in investing in the right areas. >> the u.k. election looms on the horizon the immigration debate seems to be at the center. for a business the size of sainsbury, what difference does it make for the conversation around the free movement of people around europe? >> we have been very successful at creating jobs over the last two years. we welcome those people into our business and that is something we hope to continue to be able to do going forward. we have a fantastic colleague base and it has really helped to deliver great christmas for customers. we saw peak transactions in the week before christmas and so to
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deal with all those transactions we need a fantastic colleague base and we are pleased to say that is something we possess in our business. >> finally, i saw you to set your christmas ever -- advert was the most viewed, but attracted controversy, was it the right gamble? >> it was a very successful advert, we worked with the british legion for many years and we work closely with them we think the advert told a poignant story and we think it landed very well with the vast majority of our customers. >> thank you for joining us john rogers, the sainsbury chief financial officer. it is dark outside. >> it is a bleak midwinter, but we tweeted throughout the interview. the message out there, we will
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go toe to toe with the other grocers. >> we don't focus too much on what tesco is up to, do we believe that? ♪
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>> right, time for today's bar chart. this is the chart showing the g3 10 year yield. otherwise known as the average yield for benchmark securities issued by the u.s. to an end europe which are the three biggest bond markets. on tuesday, go to the right hand corner of the chart, a closed at the least ever going back to 1989 and this chart goes back that far as you can see from 1989 -- it demonstrates very clearly the sliding g3 yield
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since 1990. the 30 year bond market rally that investors -- the yield the was september 28, 1990 when the average yield was 8.6%. record lows as plunging oil prices keep inflation in check. investors are estimating global consumer prices will rise an average pace of .99% per year. that figure has dropped from 1.74% almost two years ago and this isn't the only global bond indicator to show a record yield yesterday. that is a gauge of global sovereign bonds that also has an all-time low effective yield yesterday on data going back to
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1996. the key question, what are they telling us? what are record bond yield governments telling us? he is telling us that lower yields are telling us about the economic outlook and the risk of deflation and it is not good? it is part of the central bank keeping rates at next to nothing but this is important. it also suggests that bondholders are willing to suggest a negligible interest rate to invest for a decade because they have no fear that growth will be strong enough to erode their returns by stoking inflation. investors essentially are worried about a lack of growth which is why you have these 10 year yields at all-time record lows. something to consider as these yields languish, lower than when
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the series began in 1989. the german chancellor, angela merkel, will be in london today to meet with david cameron. ryan, we will come to you in a second, ryan will be there but let's have a little chat about the market "countdown it is -- market. it is been a very exciting few days. last year we did not have four consecutive days of declines but already we have beaten it. >> five days of losses in u.s. equity, the s&p down by 5% which caps the longest losing streak in 13 months. >> are we getting a bit over anxious? >> that is basically saying it
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was a great year, if the s&p did not decline, that was a fantastic year. >> despite the wobbles. >> and there were quite a few. >> just like the futures, you see something a little bit stronger at the start of trade sainsbury could be the talk of moving even higher because the improving trend from the second quarter into the third quarter does look as if it will boost the share prices. >> and they will keep investing in price. >> roger said they would go toe to toe and i was setting up a little chart comparing tesco's and sainsbury. sainsbury is the third worst performing grocer in europe last year. >> more on sainsbury, here in london on "countdown." ♪
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>> the german chancellor, angela merkel, will be in london today. she goes down the street for a meeting with david cameron. ryan chilcote is there and has been since early this morning. ryan, what do we think that chancellor merkel will say to cameron? is it going to be immigration? will she offer an paula branch
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-- all live branch -- olive branch? >> everything we've been hearing in the run up to the meeting suggests she will offer a compromise while the principle of the freedom of movement in european union is off the table she will express qualified support for the idea of curtailing migrant access to welfare benefits. the question is is she willing to go as far as the conservatives? they suggested they would like to restrict access for benefits to migrants in eu countries until they have then in the country for four years. we don't know what the german chancellor thinks about that. most recently as recently as sunday, she was talking about how employment is also an issue and how britain has been providing a lot of jobs.
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is she willing to discuss the concept of employment as well? there is another problem, the issue of treaties. she suggested she will do for any major changes to eu treaties, she said that would open a pandora's box. any kind of referendums in the 28 member states whereas quite recently, the british prime minister said the reforms would require a treaty change. perhaps we should think of the meeting as the beginning of a long dance. they have said a laid out there red lines and they are looking forward to britain doing the same so they can identify the very specific issues that britain would like to see addressed. >> sterling work there let's
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see what happens throughout the day. we will be speaking to one of her closest political colleagues in germany. don't miss that interview at 9:00 this morning. >> brent crude falling below $50 a barrel for the first time since may 2009 in the last few minutes. interesting that we spoke to john rogers and he says people are saving at the hobbs but not necessarily spending on their groceries. -- at the pumps, but not necessarily spending on their groceries. >> they've had their worst year since 1989 and shares up 3.5% us morning, down in terms of sales but not as bad as expected. four straight borders of declining sales but down in the fiscal third quarter and many thought they would be down or than 3%.
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>> people are trading up, that is what he said. >> they said christmas will be better because the distance ranges known for quality. apparently -- my stat of the day, 57 million mince pies were eaten which means 89% of the u.k. population could have eaten one pie each. >> i didn't have one, he had mine. >> they say it is still a challenging environment and price deflation will continue. >> boo-hoo quickly? >> could fall as much as 15% that an increase in sales but not nearly as much as expected because competition was so fierce. in autumn it was too warm. >> not too warm out there today.
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>> "on the move" is up next. we will be talking to hsbc's david bloom.
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>> good morning and welcome to "on the move." i'm jonathan ferro in the city of london. moments away from the start of european trading. oil south of $50 a barrel. the brent contract since the first time in 2009. plenty to discuss in the equity markets. inflation dilemma for the european central bank. the euro trades at a two thousand six low ahead of data released later this morning which is expected to show consumer prices with the first tech line since october of 2009. angela merkel flies into london
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to meet with david cameron. cameron faces rising anti-european sentiment with just four months to go until this year's general election. sainsbury beats estimates. they post a fourth consecutive quarter of declining sales. the outlook for the rest of the year is germane challenging. equity market futures pointing higher. dax futures up almost 20 points. let's get the market open with manus cranny. >> you are right. equity markets have been under pressure. they seem to have turned the corner for now. the question you have to ask yourself is if you get a negative number on cpi, is that mario draghi's fly in the ointment? if you don't act nice, it will be too late. unemployment at the eurozone


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