is the estimate for the u.s. economy in december. the unemployment rate is set to drop to a post crisis low. we are keeping a close eye on the most recent developments in france after the week's fatal shooting. more on that story throughout the hour. it is time to bring you the market open. >> it is fascinating that jobs day has been trumped trumped by inflation. inflation day in china, down for the 34th month in a row. lowflation in the united kingdom. disinflation in europe. declining rates of inflation in the united states. look beyond those inflation numbers. look to the core. that was the message from the federal reserve. jobs being trumped by inflation. that's my take on where we are. $1.7 trillion has been wiped off equities. it has been a bumpy start to the year.

industrial production in germany declining by 0.6%. that is what picked the post in terms of sentiment. what happens in this country, germany, defines absolutely defines what happens in the periphery. what happens in terms of growth for the entire euro zone. can they survive if the greek sleeve? what would they lose by a breakup of the eurozone? great piece written this morning. i will tweeted this later. most of the money goes back to daddy. that is germany. next, london. a few other stocks for you to watch. barrett's down 4.6%. this goes down 1.9%. i'm not going to spoil my picture of three.

other big trending theme, look at this. dollar down. this is on the day. dollar is reversing down ever so slightly. it had the trend. look at that. there's nobody else up there in that upper quadrant of the trend of the past year. there's very few in that upper quadrant in the past quarter. the dollar is ascending over the past year and the past quarter. could it relinquish that crown? can they continue the view that they will raise rates this year? morgan stanley said it won't be until next year. we had a conversation this mornign. -- morning. tesco is down 1.6%. santander down 9.9%. changes direction. slightly technical here. they used to hand you eases of paper every year, called a

script dividend. they are now going to cut back on the dividend. that is obviously a bit of an issue here. they had 7.5 billion in terms of the capital raising. down 10%. that is a fairly dramatic move. roche ubs downgraded it to neutral. >> great work. we will talk about santander later. the other story, tesco. the stock rose dramatically yesterday after revealing an update to a trading strategy. you saw the move in the stock. shareholders might have liked the news. check out the performance of tesco debt yesterday, falling off a cliff dropping like a stone. the debt market saw it coming. tesco was about to get downgraded to junk and it did. here with more is caroline hyde. what do you think was the final thing that made the credit rating agencies say, it is time to cut?

>> i think it was almost what gave euphoria to the stock market the fact that they were going to get even more competitive. the fact that they were going to be cutting prices was what moody's seems to have focused on. moody's is the one that has moved here. 9:00 p.m. last night, they cut their rating to junk. one step below investment grade. they say the issue was the fact that margins and profitability were under pressure. tesco is adding fuel to that fire. yesterday, we heard dave lewis drastic dave, it was them that reduced prices across branded goods. the likes of coca-cola and the like cut on average by about 25%. that is going to hurt profitability. that is a keyword he from moody's, as is the slow burn to improve their finances.

even though the cfo got up in front of the credit rating agencies on wednesday, giving them his case am i saying why he felt the company deserved to the investment grade, the actions they were taking, the fact that they were going to be no longer giving the final dividend -- not quite enough. done hyundai, that is the club card. that is not going to sell overnight. they are still analyzing that. it is going to take time. this is what is worrying moody's and fitch as well. as it stands, tesco doesn't deserve an investment grade, but they are making moves to improve that. >> i was watching the headlines yesterday. they said at the bottom of the list of options is the right issue. do you think that issue has come further up the list?

>> this is what so many analysts have been worrying about. i don't think a rights issue is on the cards yet. that's because i sat in front of dave lewis and the cfo yesterday at the press conference and they can't reiterating the fact, they have got liquidity. they've got a 5 billion pound credit facility. they've got an overdraft for the next few years. their debt load is not that difficult. this year, about half a billion pounds. a billion the year after. it is not suddenly that they are going to be overwhelmed with the financing needs. i don't think they need any urgency. that is the word from dave lewis. there is no urgency. they are not suddenly going to be selling off assets in some desperate attempt to boost finances. they want to get the price right. they feel they've got the flexibility at the moment. if it means a just below investment grade rating they

feel eventually that shouldn't need to foster any great concern. that was what was interesting. you mentioned how the debt did respond yesterday. yields did rise ever so slightly. they are only up about 0.25%. they moved less than that if you are looking at 2019. i don't think the debt market fell out of bed. some of the longer-term debt is trading below par, but overall they can handle this downgrade by moody's. >> caroline hyde, thank you very much. let's bring in our guest, global chief investment strategist at lack rock. great to have you with us. we want to talk about tesco. what i want to talk about is companies getting downgraded to junk. when someone says, we will continue behave like an investment great company, what do they mean? >> when you are downgraded to junk, a number of it next

investors have to sell those bonds. in general terms, with greatest respect to moody's and the others, the rating agencies have tended to react rather than pro-act if i can scramble the words that way. if you are operating as an investment great company, you are operating with no particular urgency to raise capital. you are saying, we will cut back the amount we are spending. that is what dave lewis said yesterday. selling off assets that are surplus to a shrunken strategic plan. starting to look at the land value in her and in a large supermarket chain. there's quite a lot of in action. instead of pressing on with

heavy investment, we are going to pull our horns. we've got plenty of exits. >> when you look at the debt profile of a company like tesco and others a debt profile that is bigger than the market cap of the company, how much of a hindrance is that? >> i think it depends on the business. you would expect a mining company with looking forward to leverage up. you would expect a business which is in decline to deleverage. it depends on the business profile. >> i want to talk about a fixed income market. this reach for yield, sometimes you end upholding junk. if you reach for tesco, you now hold junk. there was a story today on the flip side of this. negative yield in government debt in the eurozone. 1.2 trillion euros. it was 500 billion back in october. what are the consequences of this?

>> we did a survey of investors in europe last autumn. 65% of the assets held by those we surveyed are in cash. that is earning no yield at all. of course, a negative real yield. the consequences are they are trying to force people out of holding safe assets and into riskier assets through substitution of one asset for another. >> what is also happening is it is going into treasuries as well. it is pushing yields around the 2% mark on the 10-year. the wall street journal asking the question, but judgment call to make, either we believe the treasury yields are going low based on info expectations or a ton of money going into dollar-denominated debt. the fed needs to act aggressively. what is your view on this? >> the money that is going in, the spread between 10-year

treasuries is close to a 25-year high. 150 basis points, that is a big spread. that goes to the strength of the dollar, the weakness of the euro. i think what we see when you look at the treasury markets is a surplus of demand oversupply for the assets. it is a surplus of demand oversupply. if you think in the long term, a long-term bond yield should be around the nominal growth of the country in question. the reason for that is simple. you pay a long bond out of future taxation. if u.s. nominal growth is 5% which is a reasonable assumption, you can only explain the current price through excesses demand oversupply. >> as we had to break, here is a

check in on the equity markets in europe. a bit of a lower open for the ftse 100. solid gains yesterday. biggest jump on the euro stoxx since 2012. a letter from a lawmaker saying exactly what he said before. one stock on the move this morning, santander, down over 10%. the bank raising 7.5 billion euros in a share sale. investors reacting. clearly not liking the news. stay with us. ♪

>> welcome back. i'm jonathan ferro live from the city of london. santander, spain's largest bank plans a capital increase of up to 7.5 billion euros. it will cut it dividend. shares sinking on the news. joining us from our is our spanish bureau chief. charles, why santander chair and about 10 -- chair ana botin? doesn't it fit her against her father when he ran this company? >> that's right. ana botin announced two big steps percent and her, this big capital increase of 7.5 billion euros and a cut to the dividend. it was a dividend of $.60 per share that her father put in place back in 2007.

her father died suddenly in september. starting to reshape the bank, to reshape her own vision for the future of the bank, and making very clear that she's is now in charge and it is a new team. she made that clear on her conference call. it is a big step. it does make a big break from the past which had been associated with her father. >> you know this company well. when we talk about a stock sinking 10% it is easy to say who the losers are. who are the winners here? >> analysts have been broadly positive about this move. they saw it as a sign that santander under ana botin is seizing the nettle being realistic. their capital ratios looked weak or thin.

dividend policy was seen by many as being unrealistic. we also have a new regulator in charge. the ecb is now in charge of spain and all european banks. the rules of the game have changed for santander. cracks charles, we've got to leave it there. some breaking news. monte paschi falling 5%. a rumor that they could have been raising money to buy the italian bank. you saw italian bank stocks surge yesterday. maybe the reality striking that that is not what the money is for. you see stock dropping in italian trade this morning. those shares have been halted in milan. we continue this conversation now. what i see is a bank raising more capital. but i also see is the european central bank trying to get these banks to lend. still five years after a crisis,

here we are. how do you get them to lend? >> the last 13 months in a row the european credit has shrunk. there isn't a demand for credit out there. however much you cut rates or increase liquidity there isn't a demand for credit. credit growth is not going to come about. it comes about when people are more confident about the future, when real wages start to rise and profits haven't been rising for the last two to three years. i think this is the phase of the game where you are building the defenses. what santander are doing is they are building the defenses for a long, cold winter, rather than raising money that they are about to lend out actively. there's no shortage of funding for banks in europe. >> what does this say about january 22? everybody says, he's got to do it. there is a bias there.

the conversation we just had qe is not going to help banks lend. is it a confidence trick? >> from the markets point of view, if we think the european central bank will pay attention to the markets in terms of making the decision, they are now all in. look at where the bund is, look at where the currency is. no action on the markets will reverse quite significantly. i think where the european central bank is, is really trying to figure out exactly how -- [indiscernible] clearly, there is very considerable division in the government counsel between those who think it should happen those who wonder whether it would have impact on the economy at all, and those who feel it must be done. >> let's say it does happen january 22. how big does this need to be?

how much risk would that create? >> i think the most likely outcome is a slow start. it is clear that even now with the deflation numbers that a consensus -- mr. draghi has not got everybody on board. i don't think he ever will get the bundesbank fully on board. there are some brighter sparks in europe. retail sales in the last couple months have risen month on month. the currency clearly has a tail wind. it is not all despair. >> if i look at the date of this morning, french data, german data, that wasn't pretty. i look across the euro and i see it at 1.18. this lovely chart takes me back to the 1990's. we are heading back to the birth of the euro. talk to me about the lag effect here.

we talked about qe, monetary policy, the ecb. we know it smashes the euro to pieces. when does that start to bear fruit? >> if you look at the history of the euro, it did start at 1.18. it was nearly 1.60 at the high. the impact of the currency on europe's trade has been pretty minimal. it has helped when it is very low, but it is a minor help. it is not that price-sensitive a region. >> is in a cheap way of buying inflation? >> there's no inflation anywhere in the world when the oil price has fallen to $50. that is why central banks are looking beyond that. that is why janet yellen is saying, we need to look beyond that. there is a year or six months where there is a very low reading. what you hope is that it stimulates more demand because the fall in the oil price, let's be clear, is a significant

transfer from savers to borrowers. from the savers in the middle east to the borrowers who use the product. >> we obsess over inflation in europe. let's talk about it in asia after the break. we will take the conversation eased. weaker data out of china stoking expectations that the government may ease more. black rocks big question, will they move to devalue that currency? ♪

>> welcome back. i'm jonathan ferro live in the city of london. china inflation extended a record drop of decline. is this another sign that the chinese government may be ready to do more on the easing side? big question for you, will they devalue this year? will they have to devalue the currency? >> the dollar is important part of the equation. i think the calculus is this, if you let the currency move down which is what they would do rather than actively devalue it, what impact does that have on capital flow into the country? a lot of the growth in the funding of the banking system has been on hedged dollars. i think there is a trade-off there. ultimately, they will come to the view -- it has had a 40%

appreciation in real terms. they will come to the conclusion that letting it drift down is the right thing. >> before we go to break, we talk about europe in deflation. how much deflation is china exporting? >> that deflation is where you decide to not to purchase or where asset prices fall. good deflation is things like your laptop costing you less or driving your -- >> why would i want it more expensive? >> exactly. remember, central banks have got inflation mandates. they do feel the credibility need to hold to those mandates. >> before we go to break there is some breaking news to do with paris. gunfire heard near charles de gaulle airport. that is occluding to -- [indiscernible] we haven't confirmed that at bloomberg just yet.

we will bring you the news as it develops. coming up, we are speaking to the ceo of ramstad. ♪

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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. >> welcome back to "on the move ." here is how the market is shaping up. the gains we saw yesterday are strong. it is a moving market the euro stocks up the most in two years but today we are down a bit. let's go to caroline when the big movers. it is all about the 7.5 billion euros are raising since yesterday. it is dragging the stock lower

because those shares are priced at a discount. trading just a little bit lower than where the shares have been priced. clearly already trading down at a discount. the new shares will start trading on monday. that money they are raising is taking over as chairman as her father tragically died in september, changing things over at santander. they want to seek out organic growth, they want to lend more. it is not about m&a. that had been the speculation. no, seems to be the answer. they say we are not eyeing up the company falls by some 5% as m&a seems off the agenda when it comes to santander. the big leader on the stoxx 600

is societe television francaise. tf one as we know it. >> caroline am a thank you very much. -- caroline thank you very much. at the u.s. it is jobs day. the estimate for 240,000 jobs added in the month of december. joining us now is the man who knows a thing or two about jobs. he is jack van den brook. >> i look at the unemployment rate drops today that could drop to 5.7% we look at that number on its own and it tells me the job rate is very good but someone might say look at the other nuances. you are on the front line, you tell me. >> it is pretty good, you

mentioned the unemployment rate which is 10 years ago they were at that level. it is pretty broad-based. all the geographies. there is already one in three jobs. not just your usual suspects like i.t. technology but also blue collar manufacturing. >> this is the one everybody talks about, the participation rate at multi-decade lows. iran or janet yellen said a lot of this is typical and i am more in about it. what are the kinds of things you see? >> cyclical and structural depends on the time frame that you use but what you see is we also put out an employee confidence index and people are looking at the job market and deciding -- do i want to change? do i have confidence in finding a new job?

overtime if this continues, people will decide to enter the job market again. maybe on the road but also because we ask them to. we have databases and are looking for people to say there is a job for you out there. >> europe versus the u.s. i went through some of your research and one of the charts we pulled out was the aging population and some of these countries, you look at the u.s., i 2030, 33%. the eu 39%. 54% in the likes of japan and china, inks could get pretty bad. -- things could get pretty bad. how much of a positive is that for the u.s.? >> the u.s. has a vibrant labor force, an open economy and a lot of people coming in. in europe, that is less the case

and what you also see is a lot of low-level jobs disappearing. we have a sluggish economy and that puts a damper on the development. we are more worried about japan than both of those. >> help me out because the oil price has gone -- not pretty at all. how much exposure have you got there, any kind of firings? >> there were close to 30,000 new jobs in texas and maybe they haven't noticed -- texas is oil but not just oil. on the one hand, if you're in oil or adjacent to it that is an issue but there is more consumer spending. >> here in europe, i what to look at the eurozone economy

two different worlds with the german unemployment at 6.5% at a record high 12.4% -- tell me, what are the kinds of things these politicians need to do. >> all our research shows the less flexible your labor market the more hemorrhaged your economy is. even in the good old days in europe there was structural unemployment of 10% and now it is 15. there is something wrong there and it is difficult for people to anticipate the labor market and difficult to fire people. although protection is important it hampers traffic and that needs to change. these marks need to be opened up and it needs to be qualified immigration. you need to take the people you need, get them in and make it easy to enter the market and

make it easy for start up companies to have a business. >> are you concerned about the direction of this conversation about immigration. in the u.k. how much of the situation could this become to be detrimental to the labor market? >> the populist movement is detrimental, we see people of turkish descent leaving because of the negative sense and they are well-qualified. we need to make it very clear what we want and what we don't want. it is not immigration no but also not immigration yes. >> the netherlands we don't talk about much but how much of a slowdown are you seeing. >> actually, no slowdown. we see our own business which is

20% of total sales at high single-digit growth. doing well economic growth is close to 1% but it is one of our better markets. >> want to go back to your point about labor market flexibility. is that a benefit for the labor market, do you see stronger labor markets when you pitch these companies together? >> we can paint the right mix between what we call flexibility and security. because easy to fire is easy to hire. we are advocating the right level security for people and at the same time taking them up actively if they will lose their job and then there is nothing wrong. what we have seen in spain is you have an aging labor force

and it is difficult for young people to enter because they cannot fire these people and the become expensive and the competitiveness goes down. >> your company is pulling back somewhat in terms of safety what you have a target of 70 million euros in the next three years how close are we to achieving that? >> in the netherlands we have already done it right away that is all back-office. what we see on the client sheet is a lot of possibility of automating the process in hr and a financing. we take an analytical look at this and we benchmark internationally and cut that down to size because we also need to survive in a market where prices are tough and for the people concerned it is tough. the good news is we drink or eat our own medicine. the last time we did this in

2012 and 80% of the people we fired found a job through us in the months afterwards. >> the ecb can do a great job making me want to sell the euro or purchase specific debt but it cannot make me invest as a company. the demand is not there. if you could see one thing implemented, would you see more done to monetary policy or fiscal policy? >> this sounds a bit soft and you know i am not an analyst but it is about confidence. for me it is about politicians sending out a message -- what is europe 500 million relatively informed consumers getting going and creating a place in the labor market. everything is good and all the other choices are relatively easy to make. if there is nothing to divide

you have a problem. >> it has been a privilege and a pleasure to have you win today. up next, we are following the latest out of france after the deadly shooting. there are reports hostages have been taken northeast of paris.

>> >> welcome back to "on the move."

we have a situation developing and paris, there have been reports of gunfire near charles de gaulle airport. hans, what is the latest, i am seeing a headline that the french interior minister says enter operation is underway. >> that is the latest from the french interior ministry, there are reports on local radio that three helicopters are involved in a chase to secure and figure out where these two suspects are. it is believed they are the two suspects who have been pursued by french authorities. we also know the hostages have been taken and as you mentioned shots have been fired, this is a small town northeast of paris and it is about eight miles away from charles de gaulle airport. many who work and live in the

areas are involved in the aviation industry. it is in general close to the vicinity of where police have been overnight but not precisely where they are. we will be monitoring all the latest from french police sources to give you more of an update but what we have right now are helicopters in the air and a potential car chase, shots fired and they beat hostages taken. >> stay with me, the pulse coming up in 15 minutes. it looks like it is coming to a conclusion. >> that will have a huge impact on the wider story as well. we will continue to go to more information from this area near charles de gaulle but then we will take a step back and look what is happening with the french economy and try to fit the pieces together. we are also going to take a look

how this plays from a political point of view looking how hollande is going to react to this. you can see the narrative developing, this law and order theme getting some run through in the story and the political story developing, maybe not quite as quickly but nevertheless a fairly dramatic pace at the moment. from an economic point of view political point of view and of course front and center. >> our paris correspondent has family in the areas and has spoken to one of her relatives but her uncle says six helicopters flying over and hostages apparently in a publishing house. we will wait for that to be confirmed but it is hard to get a hold of what is going on here. from the reports you're getting does it feel like we are close

to the conclusion? >> john, we did just hear some confidence from the french interior minister talking about important new developments and important advances in that is perhaps the most optimism we have officially seen from french authorities in 46 hours. i would focus on what is officially coming out from the french government and we have some local eyewitness reports trickling in but also what we are hearing in terms of where these hostages are and are their lives in peril and what was the intention of the suspects going to an area that was so crucial to the aviation industry and close to charles de gaulle which is the france gateway to the world. guy i would to bring you back here, let me tell you what the situation developing here in the u.k..

it is across almost every single paper about threats to the u.k. and how that has escalated and how they are preparing for the worst as well. >> it is very clear they cannot be pieced apart, the u.k. in many ways has so many similarities for what is happening in france, a large population of young muslim men and women who have gone to training camps or gone to syria or whatever who have returned home and is potentially posing a huge threat. i know it was a dramatic surprise yesterday for many people, this was an event that was prearranged and it happens to have coincided with the event in france, but nevertheless security forces have been warning for quite some time about the threat these people pose and maybe the security services do need a greater ability to monitor and hack the networks which have been used

for communication purposes by these men and women but i think -- it does not come as a huge surprise that security forces are warning that this is a significant threat. we have many similarities with the french story. >> we are talking about the u.k. situation and the policy response from officials, talk to me about the response and the people trying to look after the situation, the public are they behind policy makers in paris? our people accusing them of making mistakes? >> there have been a few accusations and in particular the widow of want of the gentleman -- one of the gentleman who was murdered here. she said the security apparatus was not doing an accurate job -- adequate job. we know the elder brother had to

travel to yemen and received training that overall with those few operations, the view here is that the french security service is doing a remarkably good job and there is a great deal of confidence. also, there is this idea of being 100% certain and 0% risk. you heard this yesterday and you can never have 0% risk, look at the numbers if 1200 citizens and residents have gone to fight in syria and 380 is a number they believe have come back, that is a lot of radicalized individuals to keep track of. because of this era, it is a high risk environment and minimizing that risk or the democracy that you need to protect liberties is close to impossible and that has been the line from the french government.

we will see there will be a unity rally on sunday with all political leaders. she will meet later with president aligned and we will see -- president hollande and we will see if this becomes a moment to unite france or be divided. >> we have reports that the french interior minister says operations are under way and several hostages have been taken. we will discuss this more after the break. ♪

>> >> welcome back to "on the move." i am jonathan ferro, the french interior minister on the way and we will bring you hans nichols from paris. it is developing rapidly as we speak what is the latest? >> the latest headline that caught my eye is that charles de gaulle airport is not affected. that came from adp, an official line. we know from the french interior minister that an operation is going on right now, we don't have a great deal of official confirmation about what that

operation involves. as you mentioned anecdotally, we have several helicopters overhead and three helicopters, hostages taken and numerous reports of shots fired. we will update you more as we find out more. >> talk to me about where this actually is, people are not familiar with the geography around degaulle airport, where is it exactly? >> this area is about eight miles from the airport. you figure the airport is 10 miles out so this is 20 miles northeast of paris. most of this was taken 44 miles northeast of paris, so this is a halfway point. i don't know if you can bring up a map on your screen that i

believe we may have something prepared. it is about halfway from here to where the initial support -- search outside of those woods was happening last night. >> you are there in the center of things, have you noticed people or police moving away from their? is there a noticeable difference? >> not at all. this is very much a city under lockdown and on alert. that has not changed and there are still 850 police officers guarding official and important cultural and news organizations. i don't think that will discontinue until it is entirely wrapped up. they don't have any accomplices. >> we have to leave it there but of course you will be following

the story, that is it for "on the move" ""the pulse" is up next. ♪

>> 9:00 in london, 10:00 in paris. you are watching "the pulse." i'm guy johnson. >> i'm francine lacqua. we have a developing story in paris. rt radio reporting that shots were fired in a city outside charles de gaulle airport. hostages were taken at a local business. we may have two people dead and around 20 wounded after an exchange of fire. you are looking at pictures coming from the scene helicopters circling overhea