watching for the open, 20 seconds away. the dollar retreats. the euro is stronger. the pound is a little bit stronger. we are five seconds away. we will get you the market opened very quickly. reporter: the site european stocks rally for -- we thought european stocks rally. globally, it looks like investors are seeing the positive side of the data out of china. let's see if the european stocks are opening on the positive. the 5100 is up for tenths of 1%. the dax is not open yet, but you know the equities have ended with gains on all but five occasions. back to you. jonathan: thank you very much. mark carney is just beginning a

news conference. let's listen in. mark carney: we are publishing results of the 2015 stress test. view onublishing the risks and vulnerabilities to u.k. financial stability. starting with the stress test and the overall level of resilience in the system, u.k. banks are significantly more resilient now then they were before the financial crisis. capital requirements for the largest banks have increased tenfold. they are holding liquid assets that have increased. 2015results of the banks' stress test underscores these improvements. this year's stress test complements last year's efforts. it prompts a reassessment of asset prospects and

prices. it considers the implications of deflation, not inflation, which was considered last year. it includes an unrelated, but important stress of cost for no misconduct risk. the stress test results taken together with the capital plans indicates the bank system has the capacity to continue to lend to the real economy, even under a severe scenario. the stress test results testify to the value of the reforms that have rebuilt capital and confidence in the u.k. banking system. the benefits of increased resilience are clear, but higher capital costs have ultimately passed on to borrowers. the uncertainty for the final resting place for capital can prevent banks from taking the types of prudent risks the economy needs to create jobs and grow incomes. expectlic are right to

transparent standards. the bank of england had an open forum last month and we are concerns about the seemingly endless wave of regulatory change. all should be clear. there is no new wave of capital regulation coming. our objective has never been to raise capital without limits or to raise it by stealth. given the progress that we have seen in recent years, the spc has assessed the capital needs of the system and is now providing clarity on first, the amount of capital that the banking system needs given the secondly, how and that capital should be allocated across different firms and risks. the sbc has concluded that the appropriate tier want equity requirement for the banking oftem in aggregate is 11%

risk-weighted assets. of this, 9.5 percentage points should be in the highest quality equity and roughly half should toolsfers, which are available for use in stress. this assessment is a little above the basic international standards set for most major global banks, but it is lower than some might have expected. analysis five years ago concluded the optimal equity ratio was around 18%. the figures commission settled on similar numbers. the announcement today is a result of two years of work on the optimal capital framework for u.k. banks. in reaching this judgment, we have stepped back and taken stocks of the cost of financial crises and the benefits of the cumulative reforms that have been made since the financial

crisis. we have been informed by two years of severe, but plausible, stress tests. three factors have been particularly decisive. the first is the progress that has been made on bank resolution. with the endorsement of g20 leaders, the biggest global banks have greater total loss absorbing capacities, about twice the systemwide level of capital. this insures that there are sufficient liabilities to result a failing institution without recourse to public funds. this allows a more efficient and cost-effective capital structure with a lower baseline amount of equities that banks need to hold. we intend to consult by the end of this year on how to implement these measures. the second factor comprises more effective supervision and a structural reform. pra helps ensure that

individual banks don't take excessive risks, but do carry additional capital for idiosyncratic exposures. structural reform will further increase the resilience so that if they can continue to provide the services that we all use on the high street or online, regardless of the volatility in the global financial system. the third factor is the active use of countercyclical tools. is today making clear its intention to use the countercyclical buffer to ensure capital in the system is commensurate with risks that will inevitably bury over time. like other offers, the countercyclical buffers is there to absorb losses and stresses. this enables banks to avoid amplifying any shocks. buffers, the countercyclical buffer is explicitly time varying. it will be flexed up and down as

risks >> and wayne. by moving early -- it will be flexed up and down as risks wax and wayne. active use of this buffer will mean a more efficient capital structure as the system won't be capitalized to withstand high risk conditions at all times. this is something that the sbc already explicitly recognized when we set the basic leverage 3%.o requirement at a lower requirement then would have been the case without the active use of the countercyclical capital buffer. today's announcement, the basic amount of capital that our system requires is settled. u.k. banks are already most of the way there, even though -- jonathan: that was mark carney.

we will continue to bring you the headlines as they come in. let's cross over to caroline hyde at the breaking news desk. passed, noteryone all the flying colors. high, as wellng as rbs. done theemed to have best over the seven banks. then came the likes of barclays. the seven wonders being under the microscope where our quiz, lloyd, hsbc, rbs. they all passed. aey all managed to weather storm of a slump in the emerging markets. slowdown and.k. the significant drop in the euro, they all managed to keep enough capital around 4.5%. the standard chartered did not do quite as well as they would

have like to hope. liked toy would have hope. rbs failed an individual capital guidance. as i say, all seven banks passed the stress test, but not all with flying colors. it seems no more work is needed to be done in terms of raising more capital. both have done enough in terms of capital raising and selling certain debt instruments that turned into equities. interestingly though, is the countercyclical buffer as the financial stability report outlines. maybe the u.k. is getting back to normal now. risks are in alleviating. maybe it is time for banks to start building up their buffers. back to you. jonathan: caroline hyde, thank you very much. let's bring in the senior analysis from bloomberg

analysis. , great to have you with us this morning. passed thethat they stress test, probably not? >> it is not a surprise that they did pass. ifwould be a huge surprise they turned around and said, in need to raise more capital. note supplies here really. jonathan: knows a prize, but if you look at what the stress test was, do you think this was actually a stress test? >> i have learned nothing and when you see all the banks together, we don't know if it is enough capital still. rbs was talking about capsule return. they don't belong in the same camp. then you have got the swiss talking about 5%.

i have learned nothing. we knew they would pass. the sbc said before hand. we need to have a proper look at the trading book stress scenario. $38 on crude is not a stress. some of the other stresses don't look particularly harsh, considering what we have seen over the summer. where does the bar need to go to? we are talking about buffers. jonathan: we've had a couple things this morning. the big major u.k. banks passed the stress test. can you to me why we have had forward guidance -- can you explain to me why they have had forward guidance? >> they need to show that they are using it.

they are going to go back and have a look at how they have provisioned against bad debt and recognize that some of it is wrong. we are also looking at the risks. they will come back and tell us that a lot of this is moot. we will discover that a lot of these approaches are considered old. meaningless. lloyds and rbs's a reasonably close to the wire. jonathan: final question to you. we go into march. they introduce the countercyclical buffer. people will start talking about this rate hike by the sbc.

you mention something similar in the news conference. is that what it is? >> i think you could argue that you could make a strong case for that. >> it should be, but it is not. jonathan: great to have you with us this morning. edward evans, from bloomberg gadfly. up next on this program and coming up through the rest of the day, china's slow down. manufacturing is at a three year low. we speak to the ceo of vedanta. i will be joined by david bloom. then, we will break back through the bank of england stress test results and this prospect of credit tightening in the new year. ♪

jonathan: good morning and welcome back to bloomberg tv. let's get to the top stories. morgan stanley is planning to cut as much as a quarter of its staff. the cuts will be across all regions and are set to take place before the end of the year. ceoch insurance groups leaves the company at the end of this year.

a shipment has been appointed as the interim ceo. a permanent replacement is on the way. extending airstrikes in to syria is being discussed by david cameron. china has been named the latest addition to the ims. we have been up on light digging through the reporting. -- we have been up all night digging through the reporting. is it what we were expecting, or is it less than what people anticipated? i think: good morning, it was broadly in line with what people expected. it is a final confirmation of the yuan that arrived on the world stage. it is a long way from becoming a world currency in line with the

dollar and the euro, but it is a big step for china. 10 years ago and five years ago, they were turned down. currency is ever increasing its use in global trade. it does not single the arrival tothe yuan as a total rival the dollar, it is a important step forward for the dollar. jonathan: the manufacturing pmi is at a three year low. the nonmanufacturing pmi is doing ok. what does this tell you about the chinese economy? >> it does not single that anygs are getting bett better, but things are not getting any worse either. there is some stabilization going on in the economy. manufacturing continues to

struggle in the inflation. people are hoping there will be some sort of growth and the next year. jonathan: great to have you this morning on the program. there are very few people who get the opportunity to run two multibillion-dollar companies in their career, but tom companies is one of them. good morning, tom. we will begin with china. years, it was almost the only thing that mattered. think it is still part of the only thing that matters. what you see happening in china, extraordinary growth. the growth you saw over a 10 year period took the u.s. 40 years and took europe 50-60 years. in my view, you have a double structural shift taking place. you have a slowdown in gdp.

move down to the 6% or 5%. that is what is happening, i think. is, the chinese leadership said, we need to shift away from injury intensive -- from an energy intensive structure. i am amazed at the rapid everyonen i see, how is using the internet. how they are changing the retail systems so people can shop at home. china is ineve that a soft landing mode. there is less demand growth taking place. there is demand growth, but it is not an the double digits. from a metals perspective, we are still sitting with supply coming into the market from of the strong days that has yet to be absorbed in a slower demand

growth. the third thing out there is the fact that you have everyone expecting u.s. interest rates to go up. is strong.llar the chinese slowdown, oversupply, and the uncertainty about when the rates will go up and what that will need to the u.s. dollar and, is the u.s. dollar a better investment vehicle than the other metal choices. that is a leading to better prices. jonathan: you have your finger on the button that can ship supply up and down. we see an opec-like strategy. is that the right strategy? ore production is up. you see the logic that the big producers and oil, iron, or copper would be using to look after the interest of their own companies, their own production.

that is logical economics. it creates a prisoners dilemma. it is logical, it is in the best interest of those companies. you have to allow the markets to work. work out aly will system. less capital will be spent and the rupee less supply surplus. the longer the supply surplus is the supplyhe tougher deficit will be. you saw the same thing happening in the 1980's. you had the oil industry jumping into the sector. they were all building and buying copper mines. then we had 10-15 years of low copper prices and nobody was investing. and003 prices tripled quadrupled. jonathan: you mentioned high-priced producers would be to exit the market. tom: i think it is about people

working themselves out of the market. perspective, we say let's keep our cost in the second and third quarter. let's not be there in the third and fourth quarter. -- we, what we can do can't tell you where the u.s. interest rates will go. we can tell you what will happen to the chinese consumer or the communist party. we can focus on producing our cost or pruning our capital. all of my mining peers are doing the same thing, focusing on maximizing cash flow. , we hadat vedanta record cash flows. we are doing what we need to do and i think our second half will have even lower cost. in this environment if you trim the cost, with every reporting period you find something else that seemed i can was required a

year ago and now it seems like a luxury to them. jonathan: how much space do have left to cancel the dividends? as an investor, how much space do you have left? we: i am comfortable to say will see a lower-cost profile in the second half than we had in the first half. that'll give us the running room we need not only to ensure our businesses are running well. there will be a point at times that we do want to grow. again, from a balance sheet perspective, talents the sheet through this point in time and do it easily. you tell me what the prices are and i will tell you what the capital is. jonathan: let's talk about the prices then. are we at the bottom? tom: i think the markets are still searching for the bottom. the supplies will take some time to work out. china will take some time before

we see what actually happens with that chinese economy. is it a soft landing or is it something more disruptive? we have a market-making event in the next 30 days. what does this mean for the u.s. dollar and other trading currencies? this will be the immediate telling me,terms of of all the drivers out there, what is driving us in terms of commodities? jonathan: i am interested in your perspective about copper. what is the overshoot? 75% copper at these prices, of the copper miners are keeping their head above water and one quarter of them are not, or are struggling. with aluminum right now, you have half of the aluminum producers underwater. 70% or it heore, percent of the producers are

keeping their head above water. of the producers are keeping their head above water. 75%, youget above start to see opportunities for supply to begin tightening. that is essentially what has happened over the past 40 years. jonathan: we literally have 60 seconds before a break. threshold, we are close to the pain threshold with some of these commodities still. tom: we thought we were one year ago, but then the prices continue to fall. jonathan: thank you for joining us this morning, the ceo of vedanta. i meet a lot of people that talk about a week oaker euro. bloom andlk to david what he thinks the single currency for fries against the dollar. stay with us. ♪ sure, tv has evolved over the years.

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jonathan: good morning. welcome back to "on the move." i am jonathan ferro. 30 minutes into the trading day. let see how the market is shed -- let's see how the market is shaping up. .4%.tse 100 up by the bank leading the gains. dax lower.the nejra: bank's are leading the gains, both on the ftse 100 and european stocks. i highlighted lloyds in barclays. -- lloyds and barclays. rbs, standard chartered,

all rallying. all seven of uk's major banks past the stress tests. standard chartered and rbs fell short in some parts of the assessment. those banks are rallying today. it is theto linde, worst performer on the stoxx 600 this morning. job the most in seven years. -- dropped the most in the seven years. this is less about that and more about the ceo reducing the earnings target for the third time in just one year. this company has been facing challenges because of lower oil prices, a slowdown in industrial output. a lot of that down to china. a lot of that because of cuts in medicare spending in u.s. which means less demand for some of its products.

the worst performer on the stoxx 600. jonathan: nejra cehic, thank you very much. said of fx strategist across from me and talk about a weaker euro. joining me at the moment is the most bullish euro trading strategist in the whole of the city of london. hsbc's david bloom. 1.20.ollar david: i've got to change my forecast. jonathan: let's start there. the monetary policy differential between the u.s. and u.s. -- and eurozone. it really? a few months ago? we have been preparing for this for years. up andrnanke he stood talk about tapering, the u.s. dollar rates were going up. jonathan: march 2015, you, after

the federal reserve meeting and say it is over, the bull market is done. we are retesting that. dollar index back through. that is a painful squeeze for you. dollar hass say the gone sideway practically since that time. is going to test again. you don't want to touch those costs. this is the tail end of the dollar bull market. the fed is going to raise rates. we have had three years to prepare. markets are efficient. i don't know why people in the markets have lost their mojo. they have lost the ability to think. we can price things in. jonathan: the pricing in rate differential is almost -- talk to me about the framework you

are thinking right now. the importance of rate differentials. why does that mean a weaker dollar? david: rates matter more. is if rates are going up much more than the market thanks, why are you treating the dollar? don't tell me rates are going up more? rates going up more, you know what is going to happen. don't worry about the dollar. the fed is going to capitulate at some point. you can't believe in a completely normal u.s. situation. did you listen to the last person you interviewed? oil prices, problems. you saw the china pma -- china pmi. japan is not hitting inflation. yet the u.s. is going to normalize. really? they are the biggest salesman in the world.

jonathan: the divergent story has developed. the ecb is going so far the other way. the push back you'll get from a lot of viewer is that rate differential story. mario draghi, the consensus to keep it very wide. david: of course they're going to get wider. you know what is good happened in the rates rates mark -- in the rates market. more qe. 1.14 to 1.0me from 550. that is why we have come here. they have talked about cutting rates. if one is saying you are going to overdeliver on thursday. i'm going what? you are telling me he is going to overdeliver. he has driven the euro back down. that said, it is done. we have try to push parity.

the story keeps morphing. then it was greece leaving. to keep changing your story target parity. it is not happening. jonathan: i want to speak to the traitor in you. coming into this week, a lot of they traders will be watching this program. , you areguys in london telling me this is the wrong position to going to thursday with echo david: you wake up on friday morning, the sun comes up. the sun goes down. we coming to kristin -- you come into christmas. you'll scamper out of your positions. the way you scamper out of position isn't to sell euros, is it? the best emerging-market , if the scenario is right. if you're talking about traders, they never give up. they never choose one thing and then underbid.

you really believe the story is you like athen -- if little more cautious, then euro-dollar. rates, something happens. that is possible. if it doesn't, it passes like a ship in the night, you will see this is the tail end of the dollar bull run. jonathan: we are going to discuss mobile currency wars and what you call policy wars and differences and consequent is. we go into thursday, what is the best case scenario for david david:t the ecb meeting? we get payrolls on friday. christmas day coming early. this is a tough time. the question is one of liquidity. authors thursday, ecb is going to try their best. a thursday, ecb is going to try their best. jonathan: what would it take for you to capitulate? never mind mario draghi.

david: they are going to change the t when the germans come in come in andrmans say that is great. we need more qe. i'm going to say i'm going with them. jonathan: david bloom, he is going to stay with us. do not miss the met desk do not miss the next -- do not miss the next segment of this program. u.k. bank's trading higher this morning after they passed the u.k. stress test. not all banks passed with flying colors. deep green. rbs up 2.5%. hsbc up 1.42%. the budget trading -- the ftse trading higher. good morning. ♪

jonathan: good morning. welcome back to bloomberg tv. i am jonathan ferro. ftse 100 trading higher. bank stocks trading higher. your bloomberg top stories. china's manufacturing pmi has dropped to the lowest level in three years. hasn't been enough to spur a recovery in manufacturing. the servicing sector has shown more strength. a historic move, the imf -- alongside the dollar, euro and yen. 1999, the euro replaced the deutsche mark.

the -- uk'sank past major banks had the stress test. rbs failed to meet this standard chartered failed to meet its -- bank stocks are trading higher. caroline hyde has been digging through that financial stability report. they are going to -- she is going to bring us highlights. caroline: all of them past but not all with flying colors. some of the stress tests have to be put into question. how stressful are they? oil -- $38 aper barrel for oil. that equals 100 billion pound reduction in u.k. inc. profit. -- u.k. bank rocket. standard

chartered missed one of the hurdles. they failed to meet the miss some -- the minimum ratio. number action is required. just think of the link standard chartered has been going to in terms of capital raising, exiting restructuring. it has already the plans in place. you also have rbs failing on one of the hurdles, on their individual capital guidance. that specific threshold for them. these two are the laggards. all seven when out. out.even -- all seven win swift second.n a these seem to be the standup performers. the second year of stress tests. jonathan: going to march, can they expect to raise more capital? are they flirting with

the idea? what is the story? caroline: this is a big story. 10 billion pounds more in capital is what could be necessary because of what the countercyclical capital buffer. this is the way the bank of want to ensure that when times are good and money is rolling income of the economy is getting strong, banks are squaring away money to make sure in the bad times if we have another financial crisis, there is enough money to lend to the real economy. they say come march, we are good to analyze this countercyclical capital buffer and raise it to 1%. poundsd add 10 billion in capital for the banks. mark carney said this will be passed on to you and i, the consumer, because we will be

charged more when we are borrowing. it will hit demand, it will hit output and deflation. this is basically a rate rise as if the monetary policy was doing it itself. there is a warning shot here it a red flag come march. --re can jonathan: david bloom is still with me. if you're wondering why we did the fpc, i'm about to ask david bloom about currencies. they are good to use the ftc to avoid raising rates? is not what we think is going to happen. they are raising the possibility. if the are, why are they doing a? because they don't want the associated rise in the currency. they are sending a signal that they don't want the currency higher. that is why sterling is trading off. we have to see if they can live up to it.

we're -- we think the bank of england will go. if they go, sterling will go. if they decide to go some thing different, sterling is not going to rally. sterling, weve on have this referendum. it is met with uncertainty. it takes the ratio out of the picture which is bullish. by the end of next year, we still got sterling at 150. jonathan: what is across the plane? -- david: euro sterling. which you've got to believe my euro story which i know a lot of viewers don't. about a: talking currency war, you characterize it as a policy war. what is the difference? david: it is not just currency. in canada, will they use fiscal policy now? in the way -- anyway they're using any tool they can

to get the currency lower. the currency is just the end result. which policy they use to manipulate the currency. here we are talking about the possibility here in the u.k. two what is the consequence of all of this? -- jonathan: what is the consequence of all of ?his tackl you've got a federal reserve very sensitive. sensitive an ecb around the euro-dollar. david: nobody is happy. that is the problem. what people are doing is trying to push one problem on to somebody else. that is the problem with currency. you are taking your problem and you want a much weaker currency, why? so you can import deflation and export desk so you can import inflation and export your deflation on to somebody else.

we are seeing a lot of countries try a lot of currencies. where is the recovery? it doesn't work. we are at the end of the road on this currency war. jonathan: some viewers reaching out to me. , if your view of the dollar proves correct. you have a contrary in view on the holy? space?he holy m rate, why employment is the central bank raising rates? somebody has told them the fed is raising rates and the dollar is going up, and that will cause inflation. what if the currency doesn't settle from here? what if the right price isn't dollar positive? the currency doesn't fill up.

the currency is rally, that is good. -- both of them are raising rates, not for domestic reasons. ae markets will go down into dovish tightening scenario. jonathan: what is the upside? david: my problem there, they are full of people like me. jonathan: where can we go? the cone the levels are beautiful for some of these countries. -- david: the levels are beautiful for some of these countries. talking about brazil. we have seen massive selloff in those currencies. we have seen a big selloff and a lot of emerging-market currencies. that is what happened. sterling is threatening the 150 level. we have not had all of the benefits. we are at the end of this

massive will run we have seen for the dollar. -- this massive bull run we have seen for the dollar. that can behow controversial. jonathan: it is did you call the euro-dollar 1.20. money to people some what is the number one called? -- your number one call? david: i believe in that call. the tail end of the dollar bull run. some of the e.m.'s are going to look interesting. random ask those are the two i like. jonathan: david bloom, always good to have you with us.

up next, all about manufacturing pmi. french manufacturing crossing my screen. german unemployment data coming up after this very short break. stay with us. we will wrap up the trading day ahead. that is next. ♪

jonathan: good morning. welcome back to "on the move."

a lot coming up ahead after china delivered its worst pmi data in three years. the next hour, we'll hear from the eurozone. a half hour later we get the data from the u.k. we get u.s. manufacturing pmi. at this time of mourning, i am joined by the bloomberg team. richard jones, manus cranny. gentleman, great to have you with us. awaiting german unemployment data. they did ok. geopolitical tension is rising. i'm seeing it on my screen. you wrap this all up, richard jones. we are going to talk about it until it happens. to beenough for the ecb concerned for over delivering on thursday? richard: is unemployment numbers going to be ok? they seem pretty determined

to do something pretty aggressive on thursday. i've said it before, i think they will be aggressive, i don't think they will behind progressive. i think they will save something in their back pocket for january. using determined to do something , despite the fact that numbers appeared to be stabilizing. jonathan: a record low of three to 6% in november. german unemployment, and record low of 6.3%. i was speaking to david bloom. i would said to him how would you capitulate? he said if the germans capitulated and said we need lower rates. with data like that, they are not going to be calling for those lower rates. manus: it was very animated. what was interesting is you said attended to break euro parity. it just hasn't happened. you have had the market priced

in. the next move from the european central bank. we are at 1.04. up with ae standing placard above his head saying lower the rates, mario. jonathan: can they still move the dial? they want 70, 80 every signal month. can they move the dial? quickly. manus: at the end of the day, the germans don't want to be responsible for an extended period of growth, they want to see a recovery as well. manus cranny and richard jones, thank you very much. manus cranny coming up with the pulse very shortly. markets, gyrations. the dollar retreating for the first time in five days. if you want to talk market, you know where i am. i am on twitter. equities in london, they are a bit higher. the bank of england stress tests

plenty to discuss. and the bluebird team, best of luck for the rest of your day. -- bloomberg team, best of luck for the rest of your day. ♪

manus: another chinese low, dropping to the weakest in three years. the old engines of growth spotter in the mining sector suffers. pass the u.k. banks 2015 test, but the bank of england may begin forcing lenders to set aside more capital next year. erdogan after he sends warplanes to syria.