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tv   On the Move  Bloomberg  January 14, 2015 3:00am-4:01am EST

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maker beats analyst estimates and retail revenue jumps. it is better than the median estimate. this hour, the adviser to the court of justice will deliver a nonbinding opinion on whether the emergency bond buying plan oversteps the law. we will bring you the news and tell you what it means for the ambitions. this is what the future markets are doing. they are lower by 1% and the futures are down by almost 100 points. manus cranny has the open. >> there is hesitancy in the equity markets and they may be disappointed. anything that may stall or stymie the quantitative easing in the markets will cause this. they'll meet today and if you want to get visual, there you go. goldman sachs is never content
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with slashing oil estimates. copper drops to lowest since 2009. trying to find an equilibrium. the dollar strength has china trying to read normalize. i will try you this is the most oversold since 1986. the relative strength index is 12. it is the lowest since 1986. overdone and oversold. let's have a look at the equity markets. they are set to open lower will stop copper and oil is lower. for the lower commodity prices, it has yet to be seen. the yen is rising and copper is falling. volatility. protecting yourself on equity markets so far this year.
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we have only had two days where it moved and that is protecting yourself. that was january 5 and january 13. you are seeing -- not january 13. january 7. you have copper under pressure and oil under pressure. you have the big copper and mining producers. they have their view on coal and iron ore. we're going to find the right piece of paper. 58 dollars for iron ore. i remember it. the king of luxury performs. burberry bucks the trend. the burberry stock is up. the retail sales are banging along. a beautiful job. trench coats and ponchos. take a look.
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the past six months, it gives you the sense of where it was going. caroline hyde take you through the story later. i will give you a quick look. do we have time? i think we have time. up for the fourth day. that is where the dollar yen is. it is behaving beautifully, for once. it is a risk on and risk off. you put your money into the yen. >> i was have time for a little bit of dollar yen. let's keep it on the move. down at a low. we are seeing the story play out across the commodity sector and that feeds across into the bond market. the record low yields in japan and dropping to a 2013 low.
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it adds to concerns over night and slashes forecasts to 3% for global growth. here is how the chief economist puts it. the economy is growing on an outlook. let's take the investment take. we are joined by the chief investment officer. you were a little more optimistic. but did not sound very optimistic. >> i am optimistic. there is a world of difference between global growth and what companies are able to make for shareholders. >> i look at the commodities market and it is a flashing red life. i see the slide edit predates the oil. >> i have had a couple of disasters. >> the flashing red light. what is going on? >> we need to distinguish
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between lower oil delivering on lower key metrics and the headline numbers. we had the fall in the oil price and core sales will be effective. i expect a hike in the sales and that would be consistent with the u.s. economy continuing to measure ahead. the lower oil prices is good news for the global economy and a great source of optimism. >> i look at the bond market and i'm talking about the long and. -- the long end. what does it to you about the world. >> it actually says that deflation remains the key risk and growth remains powerful. it is not an issue of seeing
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vibrant economic growth. clearly we are not. good quality companies can make decent returns. you have to be selective. >> let's get back to the commodity markets. is this a demand story? a supply story? what is this? ask a demand story. it is bad news and i think you will go into the mining sector and i would not want to be holding it right now. >> i look a copper and i look to china. should we be concerned? >> china is a huge risk. when one considers the overvaluation and the fragility of the chinese economy, the saving rates of the central bank
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and government have the capacity because of the depth of their resources to avert the crisis. >> i want to get a quote from you. the highest in any country. the share of gdp is as large as it was in ireland at its peak. >> this is the risk that is china. the euro economy has limited resources to address the challenge and china has very many. the key risk for the economy is the probability that china lend up exporting more deflation in the complex. >> china can hold up. 10 europe? >> we have a single currency. we do not have a united fiscal system. against the background, it will be extremely hard with the lack of competition that is the underpinning of the problem in
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europe. this lack of wages do not move down to reach the clearing level and leads to the periphery at risk. >> we will talk about the monetary policy and we will touch on the monetary policy. the big question that is being asked a lot is, should the central bank respond to lower commodity prices feeding into a lower cpi? >> it will become embedded in the psychology of the economy. the flipside is that i do think the people are taking it for granted. the bank of england will not be looking to raise rates for at least another 12-18 months and that ignores the possibility of wage inflation later this year. look at the indicators and what is going on. i think there is a reasonable chance that we begin to see the
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uptake. i think he could raise the rates faster than the market anticipates. >> in theory, delaying purchases. in practice, will they really behave like that? >> they will use the cash that they have to rebuild the balance sheets and this is obviously one half. >> we will talk about burberry after the break. stay with us. >> that story and how it feeds into the luxury sector. we talk about beating the sales forecasts. of course later this hour, we await the nonbinding opinion from the court of justice on the program. we'll have full analysis and tell you what it means for the ambitions.
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>> welcome back. live from the city of london. the big story as burberry. eight b for burberry. better than expected sales. the european business correspondent joins us now for more. what is the takeaway? they beat expectations. many investors are not jumping off of the back of it will stop >> there is something upbeat about sales and they are still
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cautious about the probability. we dig into the sales up ahead of the analyst estimates and the most robust growth was coming from europe and africa. also investors got robust growth in china and korea. it is not double-digit anymore. it is single digit growth there. perhaps a little bit of relief. we saw the negative sales coming from hong kong. the chinese golden week had a big spending era and that was a high profit area for burberry. some caution there. i am optimistic and the sales target was slightly nuanced.
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it was a little bit higher, and terms of the new space. now contributing an increase to the retail sales. it will be the low growth and 5% is a good thing. the rest of it is similar. the profits are not looking optimistic. in the first half of the year, the concerns were all about currency and there was one with emerging markets that meant that profits were going to be last. the currency environment gets it better and it is offset by the problems in hong kong and the changes. >> the digital performance of the company was always a darling of the sector. >> interestingly, there are a few warning signals coming from analysts in the area who say that burberry talks the talk and do not always walk the walk.
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if you look into them. they really advocate the strength of digital presence and how important it is for luxury brands. they say internet sales are four times the pace of personal luxury markets. they say, according to the research, it comes out number one and they have the deepest styles available online to purchase. interestingly, they are not topping the charts. another research area says they are have studied 19 brands. it is not burberry ranked number one. it is now gucci and coach. they have the best websites and the best e-commerce division. burberry comes out number six. there is starting to be a catch up by the other brand and they
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go as far as to say that there is a fantastic job talking about digital innovation. if you look at the service, they will provide you service the same day in store. they may have something more. they still continue to outperform and have really led the charge when it comes to innovating. they are able to take pictures of the models and lipstick to immediately purchase it. that has been innovative for the younger generation who cannot spend a couple grand on a trenchcoat and they can spend 20 or 30 pounds on makeup or fragrance. >> thank you. we will bring in james. we start with burberry and it is easy to paint a picture of the luxury good section.
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still a well-run company. >> fantastically well-run. you are right to identify the issue and from russia. what worries me is the share price is up and we will seep that are today. the short closing. you look at the fundamental evaluations and it is very high this year and next year. no real room for material upgrade or margins. this is the moment to lighten the load and there is an overall reducer. >> what does the middle east story mean? oil collapses and it comes under pressure. >> retail may be interesting. i blame the weakness on the oil price and the benefits are
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companies that absolutely benefit from the margins in the consumer wallet. >> burberry and where else? >> i will look to reduce exposure because the valuations are rich. i am looking for lower tickets in anticipation of the valuations lower. >> after the break, stay with us and we will talk about the ecb with breaking headlines. he says the germans should understand the ecb have a european mandate will stop the monetary policy -- mandate. the monetary policy requires him to continue his job. he may become the president of italy at some point will stop he says there are different views to fulfill the mandate and they are determined to.
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the target is inflation and close to 2%. how do they respond and what does the nonbinding opinion on the emergency unlimited mod buying plan mean for the ambitions? it is a mouthful. we will break it down.
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>> welcome back. market checks. the ftse 100 is down by over 1%. 100 points lower. it is up 1.45% and the loss and copper accelerates. you see and down and it comes back a little bit since then. there it is over the last couple of days. the lows have not been seen since 2009. the euro is dropping a little bit off of the back of comments this morning. we have went through and come back. where are we? the big event is the european court of justice offering an opinion on the unlimited bond buying program that they introduced in 2012 that is not active. it could be when they try to launch later this month. let's bring in hans nichols from berlin.
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how important is this? it is new wants to understand what this is all about. give it a go. >> what we will get from europe is an advisory opinion on the official 2012 "whatever it takes." it will give guidance to the ecb on how they might do easing and the restrictions. it is interesting that he is speaking here and merkel is there. he is having clear comments and saying yes, he has a mandate and monetary policy is more than just what happens in germany. he says the ecb is ready to buy government bonds and that it sounds like he is announcing quantitative easing, which we all expected on thursday. we will see if this is the
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attempt to prepare the germans for the inevitable. in some ways, he may take a look at the advisory opinion. it's not the full opinion from the court of justice. he may look at this as more guidance that is not binding and proceed as planned for preparing politically and the financial structure of what they are going to do, if and when they announce quantitative easing. >> we will talk to you again in about six minutes, when the nonbinding opinion is going to do out. it is strange to you that mario is meeting with merkel on a day -- the important day for the potential of getting she we? how much does the opinion matter? >> although he is a central banker, he is a consummate politician and the premise that
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he will get support for what is done, he still has the capacity to do it directly or indirectly. if you have the same effect. it is about what i want to buy in europe. new technology companies are incredibly cheap and really benefit the weakness. >> i look at the european telecoms and see lots of consolidation. even bt is a good value. >> we have heard so much about the story. is he going to find his hands tied for what he can do? the non-binding opinion could put limitations on how much she could do. >> we know it is not a central
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bank in the guidance of the federal reserve england. it is inherently limited. you can undertake qe. there is nothing that will undertake the capacity to do so if he wishes. >> he has already bought bonds. >> they are no longer stabilized. >> is it fair to say it has been done? >> yes and no. it does not have the impact with the cash flows for the economy that they need and that is why there is more. >> thank you for joining us this morning. we had to the break and keep the conversation going on the nonbinding court opinion on the unlimited bond buying plan that is minutes away. we had to the break with a market check. the ftse 100 is up and the tax is up. the big headline is copper.
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lows not seen since july. the selloff in the commodity space continues and we will talk monetary policy after the break.
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>> welcome back. 30 minutes into the trading day. this is how it is shaping up. the stoxx 600 is down. you see the selloff across europe and the dax is up 138 point. let's get the movers out there with caroline hyde. >> they all about that particular stock this morning and the worst performer is down almost 10% the cousin of copper mines in chile and copper is under pressure.
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it is the most in almost six years and down. there is concern about the world economy and the viewer growth. all eyes on china. the biggest is the appetite for copper slowing. the lowest performance and the bottom of that particular pile. you are looking at smaller stocks and digital. up 42% and it is all about discounting throughout christmas. video games and consoles are what they sell and they have to do every promotional activity to issue a profit warning. it will likely be about the same as last year. analysts want above 60 million pound and say it will be 51
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million pounds because of the lower profitability that are having a tough time on the streets. let's end on the high note of geronimo martin. this is a retail doing well. it owns supermarkets and cash and carry in portugal and columbia. it has a good season. it is unexpected and both and portugal and poland. there seems to be a slowing in deflation and it actually worked. it is 4% higher on the stoxx 600. >> it is a winter. >> the european court of justice will offer a nonbinding opinion and our international correspondent joins us from berlin. i cannot get it just yet. what kind of opinion are we
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expecting from the advisor? >> we are going to get the advisory opinion and it could offer some guidance and conditions with restrictions on what he can do. he will formally porches -- purchase bonds from the eurozone. the big question is the extent the advisory opinion prevents mario draghi from doing full quantitative easing. he will wait for the final decision and we are expecting the decision any second now. it seems to me that the german newspaper has all but announced quantitative easing and his comments were that they were ready to buy government bonds. he says they will fulfill the mandate and he recognizes that he has a pan-european mandate.
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they almost announced something pretty close to formal quantitative easing. before we get the decision from the european court of justice on the program that was never used. >> hans nichols, thank you very much. i'm what to bring in more on this. there seems to be -- the news comes down -- there seems to be confusion as to if this really matters today. does it matter? >> if he says it is fine, which is likely, we wait for someone to say it is not. if he puts into many it is a case of what they can put in the way of monetary easing and my shoulders slouch and it is --
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are we ever going to get unified bankers to do something to really generate some life into the moribund economic area with disinflation and growth? it is another drop of negativity into the mix. >> we get the first bond market that the bond buying program may be legal. when we get more, i will bring it to you. the suspicion that we may get a comment on it and how you may not be able to have an unlimited bond buying program. it may well be cap. is that what we are expecting? >> it was looking at whether it would have to be calibrated and there would have to be limits on
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what could be bought. the worry was that it would be extended and it would limit the european court and room for the ecb to move. the ecb was looking at a series of proposals that was limited. he disappointed the markets in some ways. they said that whatever should be deployed to the economy and the signs are from last week that that would not be the case. >> what will be disappointment for you? >> from today or overall? >> i suppose that a package of less than 500 billion is now a disappointment. it is probably what euros mean.
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i think it is almost inevitable that we are skeptical for growth. i am measured it will turn up quickly and it is not obvious to me how this revise bank lending and gets economic activity going. the euro has fallen. anything less than 500 billion look very small, compared to what the fed has done and what the bank of england has done. anything that anybody has done is small, compared to the bank of japan. >> there is a principal in line with the treaty. what strikes me -- and i would like the opinion of both of you -- is that we are still debating and how much this mario draghi need to push this through? >> it was by a very tight margin
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they voted on that. does he need political reasons? >> politics plays a huge role and the noble laureate said no economist would be wobbling on seaweed. you have the germans who are against it and the greeks. do you help them out and limit pressure to take structural reforms? you have governments and one that was floated was that, if he comes out with more money, is it really going to relax the pressure on the european government to take the structural reforms? probably yes is the evidence. they started with bonds and silvio berlusconi backed off on some of the proposals.
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politics is really integral. they talked about united approach. you have that. there was a plan that had the central bank and the government coalescing around it. you do not have that with equities after the crisis. >> you are conducting monetary policy and not getting involved and fiscal issues. you have the opinion on fiscal issues and shape fiscal issues. that is the argument. if i do monetary policy, they come with reforms. should they be looking? >> you have to look at economic policy. we have a fashion over the last 20 years. they need to work together and you need to work out what you are trying to do to get out of the meyer we are in with the lack of demand infrastructure
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and investment in europe. the bottom line is, we are all looking at each other and time passes. the returns go down from here and these levels. from these levels of the currency. the boost you can expect is marginal and if they want to come back with more, the last little drop is squeezed out in a week. >> a question for you both. should a central bank respond to the inflation print that has been driven lower by commodity prices? it is getting traction. what is your view? what have you done that has set up the debate? >> you have comments from george
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osborne and mark carney and, if the oil prices are supplied driven and it is a good thing that boosts spending power and does not last long. it is a little bit of a boost and that is what they will argue. this is external factors driving down inflation and the problem is if it lingers. if it is demand driven and there has been a taste of that in europe. it is because demand is weak and that it spreads and becomes generalized. it is not just oil related products that are following. it drags down other prices. >> where do you see the debate? >> you do not react to lower headline inflation with lower rates unless it is wages and
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other things. i do not think the problem is the cost of central-bank money. it is the wider availability. the effect of falling oil prices and commodity prices is one of the biggest drivers of capital spending. you have seen it on your screens. you have a dump truck developing resources all over the world. it is not just in our countries. it is the big negative. the big hole we need to fill is investment. why don't we get capital spending up? does quantitative easing help? do lower rates help? we need to see how we are going to tackle this. on the straight debate, do not cut rates. >> thank you. we want to head out to berlin. hans nichols is standing by.
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can you give us the top line write-down of what we have learned? >> well omt, in principle, is legal. they say there needs to be conditions. if you think it is a weathervane , what we have is potentially legal and there may be conditions. this is a loophole to dump the dump truck in and unload quantitative easing. the questions remain how big and what restrictions. it looks like the court of justice has given the green light. >> thank you. the green light is something that looks like we got to stop the big headline is that the plan is in line with the treaty according to the court. it is a little bit higher. we are drifting lower.
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we'll talk more about the euro and the bond markets. we are back.
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>> welcome back. let's get back to the big market moves. we have been watching the commodity plunge. it was the biggest collapse for the metal in six years at one
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point earlier on. across to the bond markets, lower yields and treasury yields are lower. in japan, we have all-time lows. i'm going to bring back kit juckes will stop let's start with the bond markets. not just the traditional way. 30 years and near record lows in japan. what does that tell you? >> it tells you that the bond bears are being forced into hibernation and investors are forced to buy because they wait for high yields. they have given up. it tells you the expectations of inflation are being pummeled and there is unhealthy correlation between oil prices that affects the view. people said, it will come up
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later and it may. i cannot afford to wait. i went to retire and put more money into long data and safe assets to have any kind of retirement. the pressure of saving is pushing yields. >> the yield curve. we have all been taught it is a signaling process. it signals something not pretty about the world. there are those kinds of signals. >> traditionally, the inverted yield curve is in fashion and it correlates with the peak of rates. we have a new yield curve that is one of steady and remorseless capitulation of ideas. remember, we have had positive yield curves for seven years and six years.
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gradually, the rates have not gone up and they have come down. the yield curve was dragged. what it tells us is the secular stagnation has prospects of return to the inflation rates we grew up with and it is not clear where that comes from. more than anything else, people no longer are willing to bet that quantitative easing kwok -- causes inflation on a timescale that can be understood. >> the german 30 year has a yield of 1.2%. if i believe the ecb can reinflate the economy, that should be higher. >> you have a problem and if you phone up the bank it is not anything at all.
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you are being forced to say, what do i want to do with my savings. you have the concern that this is inflationary. it is as good of a credit as there is for people. you start off thinking, i do not want to invest in more than one year and everything at five years is at zero. weeks pass and here we are. you cannot believe it. >> we get into the mess and the central bank says they need to do more. if the bond buying purchases are not working, are we working monetary policy and the wrong way? >> the biggest test case is what happens if it does not work. it is much more aggressive monetary policy than anyone else is engaging and and it is joined up in the sense that the government is working and they
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get all three arrows working together. and that does not work, people are looking at that and saying that you have to find ways to do more. they will be saying it does not make any difference in growth and that there will have to be adjustment somehow. >> thank you very much. >> a quick look at the markets. equities are trading lower. we have come back a little bit and the dax is just down 0.6 percent. we are a few minutes away from an important interview with bill. stay tuned for that. that is on the move. we are back.
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>> welcome back to on the move. on the move is almost over and the polls is coming next. you do not want to miss it. looking forward to some big market moves. >> the backdrop of what is happening has my sense of the conversation focusing on europe and talking about what activism means in the united states. it is well documented. we do not know about the view on europe. he talked to money managers and
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they are like, forget it and go away. if you want to influence what i'm invested in give me money and you will be able to have an influence over here. you center on different pages a little bit with the activist playbook. i want to get a take of where the opportunities are. is your want to become a great hunting ground? is continental europe and impossible place to be? i want to know about oil prices and what is happening with commodities. at some point, he has to think about that and he is furious specific and targeted. this will have a real effect on the global economy. it will be interesting to see what his take is. >> the best-performing hedge fund of the last year.
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phenomenal performance. >> it is pretty volatile. the story
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>> green light for draghi. the european court of justice says the lmt bond buying program is in principle in line with the eu treaty. this clearing the way for qe. >> dr. copper gets a cold. the commodity follows oil. >> and, activism in europe area does it work weston mark we are going to ask bill ackman. good morning, everybody. you are watching "the pulse."


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