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Speaker 1: This is Bloomberg Surveillance. It feels like the FED believes

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Speaker 1: that they're going to keep rates down here to stimulate

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Speaker 1: more business investment. What we'll see is a much longer

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Speaker 1: workout process of this excess at debt and a much

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Speaker 1: slower growth cycle. In emerging market countries, the most influential

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Speaker 1: factor in a purchase is still the store. There's a

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Speaker 1: myth that stores are dying. It's not stores that are dying,

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Speaker 1: it's the middle class. Bloomberg Surveillance your link to the

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Speaker 1: world of economics, finance and investment on Bloomberg Radio. Good morning,

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Speaker 1: and I might come McKee along with Tom Keene. It

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Speaker 1: is seven am on Wall Street. It is noon in London,

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Speaker 1: where Her Majesty is celebrating her ninetieth birthday. We have

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Speaker 1: the surveillance kettle on the boil and we'll be having

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Speaker 1: a spot of t shortly and some crumpets in her honor.

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Speaker 1: It's one pm in Frankfurt, where the ECB is meeting

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Speaker 1: their latest decision. In about forty five minutes. We will

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Speaker 1: of course carry Mario Dragg news conference for you eight

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Speaker 1: thirty Wall Street Times. See the hints at any additional

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Speaker 1: action ahead of the meeting. Europe is lower, the US

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Speaker 1: marginally higher. The stock six hundred right now down by

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Speaker 1: half a percent, that's two points, The docks is off

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Speaker 1: by thirty three three tenths of a percent, the CAC

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Speaker 1: forty twenty one points lower half a percent. Here in

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Speaker 1: the U s as I mentioned, SMP features are up

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Speaker 1: by two points right now, a tenth of a percent,

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Speaker 1: a tenth game for Dow futures up fifteen points, and

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Speaker 1: the NASDAC one mines are up two points. That is

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Speaker 1: less than a tenth of a percent at the moment.

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Speaker 1: Tenure no yell one point six percent in the US

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Speaker 1: one point three three four your five year eighty basis

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Speaker 1: points for the two year US yield curve decidedly higher.

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Speaker 1: German two year notes though also rising. Whether or not

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Speaker 1: we see any reaction from UH the ECB meaning to

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Speaker 1: be determined, but right now forty negative forty nine basis

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Speaker 1: points for the German two year with central banks. Of course,

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Speaker 1: the first proof is in the currency markets right now

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Speaker 1: that Europe is trading weeker one thirteen thirteen, the pound

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Speaker 1: one seventy seven, a yen one oh nine seventy four,

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Speaker 1: the Dollar index ninety four nineteen, oil a big influence

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Speaker 1: on trading. Earlier today, prices hovered near four month highs

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Speaker 1: West Texas and Brent crude forty five eight seven. Let's

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Speaker 1: ask what the biggest impact on the markets is going

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Speaker 1: to be, because we seem to have gotten back into

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Speaker 1: some sort of correlation between oil, energy and equities. Anastasia

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Speaker 1: Amarrosso is a global market strategist for JP Morgan. She's

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Speaker 1: with us here in studio this morning. Are people more

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Speaker 1: interested in the ECB this morning or in oil prices?

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Speaker 1: To me, the standout is definitely the oil prices. I

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Speaker 1: mean this is occurring. Oil is rising to forty four

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Speaker 1: for w t I, forty five for Brent crude on

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Speaker 1: the back of a failed opaque non open coordination. So

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Speaker 1: I think that's deaf only catching investor's eyes. We are,

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Speaker 1: of course paying attention to the e c B, but

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Speaker 1: as you might suspect, we're not going to see any

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Speaker 1: new action from the e c B. So a lot

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Speaker 1: of it is going to be confirming that the measures

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Speaker 1: that were put in place last month were in fact

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Speaker 1: quite powerful. I think that's, you know, an underlying story.

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Speaker 1: I think that's an undercurrent that will affect the markets actually,

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Speaker 1: but more so probably on the bond side than on

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Speaker 1: the stock side. So one thing that we might get

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Speaker 1: out of the ECB today is just exactly how much

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Speaker 1: do they expect to scale up their corporate bond purchase program?

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Speaker 1: And according to our estimates, it could be they might

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Speaker 1: purchase anywhere between four billion dollars to ten billion dollars

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Speaker 1: a month. If that's the case, that's a big chunk.

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Speaker 1: I should quantify that that's between four percent and eleven

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Speaker 1: percent of the eligible ECB collateral in the corporate space

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Speaker 1: out there. So if that's the case, of course it

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Speaker 1: should support credits for level to level. Yeah, and that's

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Speaker 1: the question I failed. I've asked, is there a trade

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Speaker 1: out of the ECB today or if they do give

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Speaker 1: us more details, has that already been front run by

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Speaker 1: by a lot of people to an extent. But I

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Speaker 1: do still think that the ECB action, or the confirmation

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Speaker 1: of the action, and perhaps some talk from Mari drag

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Speaker 1: you will continue to push down those credit spreads. If

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Speaker 1: you look at the Bank of Japan experience, once they

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Speaker 1: started to purchase corporate debt, the credit spress did not

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Speaker 1: stop there. They did continue to tighten as the CB

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Speaker 1: actually implemented that as the b o J implemented that program.

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Speaker 1: So I do think there's still a trade specifically in

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Speaker 1: the corporate bond market in Europe. Good morning at m

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Speaker 1: russo UH with us giving us wonderful perspective on emerging markets.

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Speaker 1: It's linkage into the developed economies. In course of back

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Speaker 1: drop are terrific moves in commodities and equities higher as well.

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Speaker 1: Bloomberg Surveillance this morning brought you by invest Goo. Markets

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Speaker 1: Slash Interactive, Anna Stage. I talked to invest goo um

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Speaker 1: dividend buyers a couple of weeks ago there. Frankly, their

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Speaker 1: track record is everybody with divodend growth is extraordinary. Those

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Speaker 1: stocks are priced to perfection. Is there dividend growing in

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Speaker 1: emerging markets? Is there a way to buy yield growth

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Speaker 1: or divodend growth in e M. Absolutely, there's a way

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Speaker 1: to buy dividend growth around the world. And one thing

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Speaker 1: to point out is the divoting yields. For example, for

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Speaker 1: oil stocks in the US or potentially in jeopardy because

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Speaker 1: oil companies in the US have to conserve their cash

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Speaker 1: flows to meet their debt interest payments. That's not necessarily

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Speaker 1: the case in some of the other emerging market countries

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Speaker 1: like Russia. For example. If you look at the oil

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Speaker 1: companies in Russia, their cash flow coverage of the interest

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Speaker 1: payments is actually quite good. And by the way, there's

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Speaker 1: some talk about mandating higher dividend pay our ratios. So

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Speaker 1: absolutely I would look to dividend payments out of emerging markets.

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Speaker 1: But like with everything else, you can just look at

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Speaker 1: the level. Because if you looked at the level of

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Speaker 1: the dividend yield, um, you would have bought Seedrill back

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Speaker 1: in two thousand and fourteen. I'm not I'm just using

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Speaker 1: this as one stock example, but the dividend yield was

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Speaker 1: of course, you know what happened next the stock price collapse.

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Speaker 1: So dividend matters, but fundamentals driving dividend growth matter even

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Speaker 1: more given the political and energy situation energy economic situation

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Speaker 1: in Russia. Though, our dividend payments enough that you're compensated

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Speaker 1: for additional risk that you might be taking up right, Um, No,

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Speaker 1: probably not, that's exactly the point, right, You can't look

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Speaker 1: at that level. Um, there's always going to be geopolitical

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Speaker 1: risk embedded into emerging market asset prices, and that one

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Speaker 1: is really tough to figure out. I mean, look at

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Speaker 1: Brazil for example, in local in US dollar terms, the

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Speaker 1: Brazilian market is Upbovespa is up about thirty seven percent

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Speaker 1: year today, once you account for the currency appreciation as well,

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Speaker 1: and look at the geopolitical headlines, the political headlines that

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Speaker 1: are coming out of that country. So sometimes politics in

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Speaker 1: emerging market countries works to your advantage, but it could

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Speaker 1: just as easily go the other way. To that point,

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Speaker 1: and of course I'll put out on Bloomberg Radio Plus

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Speaker 1: our iPhone app, wonderful iPhone app. Is it Valley v

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Speaker 1: A La Valley zillion commodity the A d R. It's

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Speaker 1: had a fat bounce. I'll go with that. But come on,

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Speaker 1: it's a one way ticket to zero, and now it's

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Speaker 1: had a bounce. Does JP Morgan by the commodity bounce?

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Speaker 1: We do buy the commodity bounce, not necessarily in Brazil though,

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Speaker 1: I think to Mike's point, there's so much risk embedded there,

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Speaker 1: but we do buy the commodity, specifically oil price bounce

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Speaker 1: because one thing has shifted fundamentally, and that is the

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Speaker 1: rick count in the United States as it drops to

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Speaker 1: new and new loads every single week. That absolutely means

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Speaker 1: lower US production going forward. So forget OPEC for a minute.

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Speaker 1: The decline in the US production is actually more meaningful

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Speaker 1: at this point. What's that going to add to profits? Though?

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Speaker 1: Is it just or did it just stop losses? It

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Speaker 1: eventually adds to profitability. And if you do if you

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Speaker 1: look at the Arnie season, if you look at the

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Speaker 1: energy Earnie's expectations, I mean right now they're down a

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Speaker 1: hundred percent or so year over year for Q one.

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Speaker 1: But you this is the inflection point you actually do

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Speaker 1: start to see those profits inch back into positive territory.

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Speaker 1: But later on this Mike, you just asked exceptionally sophisticated

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Speaker 1: mathematical question, is it about making money or stopping losses?

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Speaker 1: That's like the all time great securities analysis type two construct.

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Speaker 1: It's a double negative stopped having paid the losses. People

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Speaker 1: have learned something today about chunks and no, it's like really,

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Speaker 1: I mean, it's a whole different thing from stopping losses

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Speaker 1: to making money. That's like level six c f A.

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Speaker 1: It wasn't It was a Harry Potter. It was an

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Speaker 1: Harry Potter like movie seven or something Anastasia amar Rosa

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Speaker 1: with this, uh this morning futures up one Anna stag

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Speaker 1: to thank you so much greatly appreciate it for your

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Speaker 1: wisdom and particularly your comments on the Queen of England

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Speaker 1: and the unique My only cons My only comment bear

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Speaker 1: Tom's bow tie. Folks on the radio could see it

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Speaker 1: is absolutely phenomenal this morning. They can see it worldwide

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Speaker 1: on radio. Maybe scene I have not seen you're wearing

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Speaker 1: the Union Jack. This was a gift from our London team.

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Speaker 1: They wanted me to wear it. I'm British Air going

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Speaker 1: home and I said, I don't think I'll get my

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Speaker 1: usual free drinks if I wear it. Looks like Austin Powers.

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Speaker 1: Oh baby, oh, I could get in trouble. John Tucker

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Speaker 1: helping out here with the movie Lincolns. Just let me

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Speaker 1: do a dated check here right now. Let's start with Sterling.

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Speaker 1: Why not one on cable Stronger Sterling in the last

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Speaker 1: couple of days of Queen no doubt, hoping for one

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Speaker 1: sixty and the next two three and four years Yen

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Speaker 1: one oh nine seventy six dollar strength earlier. That's given

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Speaker 1: back to a flat dollar as well. Austin Power is

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Speaker 1: looking at Brazilian Real three point five three on the

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Speaker 1: Real seven ten on Wall Street. This hour surveillance brought

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Speaker 1: to you by Westchester suber Uve is at west Chester

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Speaker 1: subar dot com. Here's Michael Barr with world and national headlines.

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Speaker 1: Night toime, Thank you very much. President Obama is holding

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Speaker 1: a summit meeting in Saudi Arabia with top officials from

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Speaker 1: six Arab nations. The meeting about the ramp up and

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Speaker 1: read is meant to build on a similar summit convene

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Speaker 1: last year at Camp David. Topics included regional stability, countering terrorism,

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Speaker 1: and i RN. Donald Trump and chief rival Ted Cruz

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Speaker 1: will be courting Republican Party leaders at the luxury Sea

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Speaker 1: Signed Resort in South Florida. Cruise admits that he does

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Speaker 1: not have enough support to claim the nomination before the convention,

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Speaker 1: but he's vowing to deny Trump the necessary one thousand,

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Speaker 1: two hundred thirty seven delegates as well. Britain is wishing

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Speaker 1: Queen Elizabeth a happy ninety birthday today. The country's oldest

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Speaker 1: and the longest serving monarch is celebrating with a day

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Speaker 1: at Windsor Castle Global News twenty four hours a day,

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Speaker 1: powered by our twenty four hundred journalists on Michael Barr

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Speaker 1: to Michael, thanks so much. Futures, I'm gonna call it

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Speaker 1: flat right now, very importantly Michael McKee with ECB analysis.

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Speaker 1: All that in this hour and then the Druggy press

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Speaker 1: conference later this morning. This is Bloomberg surveillance. Bloomberg Surveillance

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Speaker 1: is brought to you by your try State BMW centers.

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