fed day.ally, it is a global rally as the big decision looms. we have all the bases covered head of what could be the first rate hike in almost a decade. >> it falls with highest after a it deals with america's 40-year-old ban on crude exports. maker makey goods these early forecasts on sales. ♪ anna: welcome to the program, it is fed day.

give all the bases covered as far as this conversation goes. interesting to remark just how much we are seeing some conviction and markets ahead of fed day. real strong game in the u.s. yesterday up around 1%. stronger here in europe, should say by around 3%. some of those asian stocks went up as well. the big markets up there around 2%. australia had its best day sent august. manus: if we look at the dollar, these things -- the markets have been carry themselves i think. 70% is where we are at the moment attempt of the probability of a hike this evening for the federal reserve. my question is what is next for the dollar. rising for the fifth day, it is above its five-year average. aw lessons from the past. what up in last time the fed hiked the dollar?

in five of the following six months in 2004 before rallied back in 1999. where were you in 1999? a rate increase, followed by a 3% drop. oil prices rallied strongly back in 2004. not a prediction, just a statement. let's get to the first word. >> asian stocks are trading higher after the crucial rate decision, downplaying concerns. shares rallied for the lowest level since the start of october. matched its longest losing treats in 1984. oil had fallen from its highest level over a week after congressional leaders agreed on a fiscal plan that would lift the 40-year-old born -- ban on crude exports. they also avoided a u.s. government shutdown at a closed-door meeting of fellow

republicans last time. donald trump has reiterated his to stand as an independent if he fails to win the republican nomination for the bat came as the party's presidential hopefuls took personal shots at each other during a televised debate last time. supporters are discussing a potential british exit from the eurozone. david cameron's referendum over european membership is an extension crisis for europe. the band to sean australian mining stocks says the work it did to the industry as china's economy decelerates. they now recommend buying firms of profits closely tied to an such asin the economy, property developers and retailers. a mansion outside paris has fetched a world record price of more than $300 million according

to people with knowledge of the matter. it was ultimately eastern buyer. that is your first world news, for more on more -- had to bloomberg.com. markets are rallying ahead of the fed decision. let's go on to asia with juliette standing by. the yen is declining. absolutely not, this day is finally here. you see investors in your part of the world liking up a lot of green coming through. a very solid day in australia, closing higher by 2.4%. obviously, investors coming back with a vengeance today. ae nikkei as you mentioned weaker yen really helping along the nikkei there.

adding 2.6% on the close there. september,etty rough but reports of there could be some easier moves coming through from the wireless carrier. korea as well, the jobless rate of 3.4%, and in later the shanghai market also higher by around .5%. check out the hang seng, it is up by over 2%. a lot of the oil producers really leading the rally there. of the a look at some big movers in the region today. it was really commodity players -- noble group in singapore surging by almost 8%. on advanced talks to sell its agricultural state. they closed higher by 10.5%, it biggest jump since february. that is on reports james packard will take some of those assets private.

then we have those big rebounding commodity players which is at 10 year lows of australia up 5.5% to be a good sign for its shares in london and also all of this energy producers having a very solid -- china, wally parsons in australia as well. most of the commodities higher as well. the aussie dollar at 72 ahead of an expected lift off from the fed later on thursday. anna: the big day is here, we hours from a potential fed left off. it was from the big names we have been speaking to in the u.s. >> the fed is put itself in position where it has to raise rates or it would lose all credibility. >> it is almost impossible enough for the fed not to hike unless we get some major catastrophe. >> we think it will start to

raise rates, it is high time that cycle started. we have an economy that is still slower than it typically has been, but strong enough of the policy rate should not be zero. manus: let's bring in our big name, andrew stanton a former member of the bank of england's monetary policy committee. he joins us for the first interview of the day. look, the offensive voices from america. the estimate is 70% probability of a hike, that would make you quite happy. but it is all about the guidance they give after the hike. 100-145 basis at points, should they stick to that or lower the guidance? there was a case for gradual rising in interest rates. even if guidance is given, the fed is going to be very data dependent. they will have to see how the

economy responds assuming that they do raise rates. that will determine how quickly interest rates go up. by historical standards it is looking to be more gradual rise than in 2004 when they were up a quarter point every evening. anna: the doesn't be some difference between what the fed is actually saying in with the market is expecting. there could be for increases in 2016 and the other market think of just two increases. do you think either of those approved to be right? i think there is uncertainty about it because we're just going into this cycle. i do find it a bit odd that interest rate are going up at an extremely low level by the will talk about the word hike. it is not one, it is the start of a gradual process.

i think without with this process is going to be is a matter of judgment. we will see how the economy responds. manus: there was a wonderful piece favorite in which talks llen's power of persuasion which is about getting consensus. back in 2004 they all started off with a unanimous decision. heal,8, others came to how important is it for the fed that they are unanimous on this occasion? we will find that out a little bit later. how important is that in terms of this fed? andrew: i think if there are some dissidents, thinkable read into that. perhaps the rise may be more gradual, some people are arguing to hold back. that will reinforce the view that perhaps the rate will not move up so quickly. am not sure, we will see

unanimous that because a few members have said they still think that we should be waiting to see more obvious signs of inflation. i personally think that is wrong. if we wait until inflation is really flashing, we will have to raise rates much more sharply. that is what i think the fed wants to avoid. the best chance of getting a gradual rate rise is doing it in the sort of conditions when the economy seems to be growing ok and inflation is reasonably under control. anna: back in december the second janet yellen was talking about looking for signs of actual inflation being attuned to side of actual inflation is a go through the great hiking cycle. that made things change after losing the first hike? do we have to look for evidence that there actual inflation rather than just expectation? there has been, if you look at the latest cpi figures, there has been more evidence that inflation is beginning to

pick up a bit. it is not a worrying situation. i think if you wait until inflation becomes generally worrying you have left it too late. anna: one of the key issues for all of the central banks other does mark carney, mario draghi, or janet yellen, the ability to withstand deflation pressures coming from elsewhere. oil is on its knees, iron ore we had that in here talking about miners hanging on by their fingernails. is there a deflation pressure that could soften the blow but terms of where we go with global rates? you have to distinguish between different types of deflation. if you have a deflation pressure coming from the labor market and internal factors, that is a very different situation to when it is coming from external factors like the price of oil or iron ore. when it is coming externally, it is a different effect on the

of theand inflation economy. it pushes inflation down for a while, but is quite good for consumers. it is quite good for growth. it is not clearly a signal necessarily to hold off in terms of raising rates. anna: market expectation might be there will be a rate hike today. 78% that is the market expectation. the market is waiting for this. there been some big voices like larry summers just in the last 24 hours suggesting that there should not be a rate hike, that the conditions are not there. you disagree, though. andrew: i think central banks have to get to the point that the default position is to gradually raise interest rates. i think this is the shift that is perhaps taking place over the last few months in their thinking. in september, the default position was we will just keep rates the same of losing a

reason to move them. i think you will see the fed is shifting into default position of wanting -- anna: why should you do that? andrew: the reason is that you have to find some form of exit from these very low interest rates. i think we saw that back in 2004 , that actually the fed left it a bit to allow then ended up pushing interest rates up to over 5% in quite a short space of time. that is the trap they're trying to avoid. manus: is that the risk that if we do end up with this the markets become even more natural and uprising in these rate hikes. anna: andrew, they give her a much. he will stay as a little more with the program. it is pmi day here in europe. years of figures and 9:00 london time. manus: 9:30 be at the u.k. jobless claims. it is the pivotal fed rate decision at 7:00 p.m. london

time and fed watches i expect in a generation since 2006. special coverage all across bloomberg. anna: that is a very short a generation. manus: up next, emerging markets had from their to the biggest advance in three weeks ahead of that fed announcement. we look at what these diseased will mean up next.

anna: welcome back. let's get the bloomberg business flash. a record low after they missed estimates. market was thes weakest in six years. it will increase prices in europe to compensate for slumping sales in asia and the u.s.. aerospaceo of the

group joins. duties with the government eric scholz who runs the firm's large engine business. in sydney after they told bloomberg that james packer, australia's third richest man will take some of the casino assets to private ownership. noble group shares lessons singapore after asia's largest commodity traders said it was in advanced talks over the agriculture units. that would bolster the company tried to raise cash and avoid a credit rates cut. that is the business flash, for more these others had to bloomberg.com. manus: we are here with andrew well and richard

jones was a vitamin, good to have you together. to you -- let's go first, richard. everyone is focused in terms of volatility interacting across the asset classes. is there a bit of a release in the dollar market? we could be in for a little bit of a volatile reaction if we go by the previous rate hiking cycle of 2004 and 1994. richard: i think it could be a noisy day for us here in europe. realistically, the big reaction for me is probably the 2016 story, once market participants at that time to digest what this means. between now and the end of the year, equity markets will have a window dressing effect going on. i think we will get some volatility between now and the end of the year, but that will be more german by liquidity and holiday markets. 2016 a think will be very

interesting for markets. anna: what will be crucial for you today? obviously, we get the press conference or janet yellen and anything just to say about how dovish she is about 2016. also, a detail of how they get this to actually work in the market. it is but a long time since the fed has had to enact a rate increase. what will be crucial for you to watch? richard: those last two points of the most interesting ones. i will be interesting to see what the dots are impaired to market estimates. interesting to see if they migrate more towards where market pricing is or whether they are still sort of very much higher and a bit sticky as they happen. manus: the monetary policy committee and the federal reserve job is not the kind to worry but volatility in markets. when you start+++

of is a sense in terms of the kind of conversations -- did it come up? did you consider ramifications for liquidity, for guilds? andrew: you are looking at markets, you're looking at that in terms of how they will really have a bearing on the real economy ultimately. i think that is going to be the issue. we will not find every much about that over the next few days. we will find a much more 2016. that is going to be probably the thing that will decide the pace of rate rises. whatever is said today by janet yellen, it is going to be very much dependent upon how the economy performs. we will get some idea what the fed's expectation is. a managing expectations. this will not be a shock for the markets. a majority of imprisonment expect them to raise rates. i think it is going to be the performance of the economy next year that will really guide how markets perform. 2016, stay with us we are

just beginning this conversation. we will delve into the world of emerging markets. because those stocks are headed for the biggest two-day advance in three weeks ahead of the rate decision. what impact could a high cap on the developing economy? manus: let's head over to justin kerrigan. how big a risk is the decision to the emerging markets in general? we have seen some flight in the currency side. just give us your perspective as we go into fed today. in and of itself, the rate decision is perhaps going do not have a huge immediate impact. it has been well flagged we have see considerable risk in markets leading up to this. today's again, perhaps the wider concern for the markets have nothing to do the fed. of course, the fed is of huge significance, particularly how

frequently the interest rates increase in the u.s.. the other consideration of course is china, and a big prospect in the depreciation of the yuan. there are also other factors out there. anna: what are the biggest risks for investors is a work our way up to the announcement? with a be about currency markets and whether we see any reaction there? course,currencies of stocks likewise, the per -- per but perhaps the sheer amount of dollar debt and currency, the huge leverage in emerging markets on a sovereign basis and the corporate sector as well. in the strong dollar environment, that will be of considerable significance for investors. of course, there is china, the

fact that i mentioned a while ago and the prospect of the yuan depreciation which we sigh little bit of earlier in the year. it was a shock announcement by the chinese central bank" of course, domestic politics continued the rumblings in south africa over the past week or so. the turmoil you might say in brazil shows no sign of letting up. these are all the larger risks. those countries of big account deficits, talking about turkey and south africa and malaysia, those will be big factors going forward. particularly, in 2016 in the backdrop of rising u.s. interest rates. anna: thank you very much. richard jones is still with us and andrew sentance. high-yield credit, it has raised its head over the last few weeks is something with some very big

waters. whether they see it is summoned to worry about or they see value in it. is that somewhere we need to watch for a market low? richard: i think we have seen a little bit of turbulence already. i think it could get very interesting into 2016. it is certainly something we've all kind of known about, but until we actually saw the volatility, i think it was a bit of a wake-up call. it will not deter the fed from what they're going to do tonight, what it will be a big thing in 2016. manus: let's just get a roundup here. we have a little bit less than the global market had assumed, qb of the fed going up to 25 basis points. of the emerging markets and in terms of central banks be on the fed, does this give a bit of a reprieve? if they just get on with it. richard

andrew: at some point, we probably reach that point that central banks have to get on with it. they have to be and a mindset where they're not going to be swayed by financial market developments was we should remember we also have these european pmi's today. thatther interesting story is emerging as the european economy doing a bit better. the question is, is that going to perhaps be a story 2016? we are already seeing some northern european economies performing better -- spain turning around, we have seen some indicators from italy. is another thing that will be influencing markets. anna: we will return to that theme. manus: we will talk about saudi arabia.

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manus: 6:30 here in london. let's head to bloomberg's first news. stocks are trading higher ahead of the crucial rate decision with trade downplaying concerns over oil and high-yield bonds. shares rallied after their lowest level since october. 70% odds --g and 78% odds the federal raise rates today. it is agreed to u.s. fiscal portable if the 40-year-old ban on crude exports. speaker paul ryan unveiled the

a u.s.at will also avert government shutdown. donald trump has reiterated his pledge not to stand as an independent for the presidency if he fails to win the republican nomination. that came as the parties opals to personal shots at each other during a televised debate last night. i am totally committed to the republican party. i feel honored to be the front runner. i would do very well if i'm chosen if i'm so fortunate to be chosen. polls have said recently i will beat hillary. i will do everything in my power to beat hillary clinton. merkel's colleagues are expressing growing dismay at the prospect of a british exit from the eu. this comes as european leaders discuss burdens copper reform at a summit in brussels tomorrow. one german lawmakers said david cameron's referendum of the eu membership is a risk for europe. to correctly told investors

shun australian mining stocks 2015'tis the worst is yet to come for the industry as china's economy -- decelerates. and i recommend buying from the profits formally tied to an upswing in the economy. a mansion outside paris has fetched a world record price of more than $300 million according to people with the knowledge of the matter. they say the chateau was sold to a middle eastern buyer through a international real estate firm. for more on the stories, head to bloomberg.com. you have been taking if to many trips to paris. caroline hyde is here with a look at the markets. what is moving? caroline: things are moving a lot -- some are positive. we're on an upward trajectory. more warm wind loading from the

united states. if strong rallies across the board. check this out, hong kong, hang seng, and the longest losing streak since 1984 in more than 30 years. nine straight days of losses and we get a pick up this morning just as we enter the fed rate decision day. much anticipation that we will see a rate hike later today. hong kong trading higher as our australian stocks. much the how probability has picked up sent october of this year. view you will 78% see a rate hike later today. the rate increases will be aadual, therefore not significant selloff in the volatility we have had leading up to today has shown some of the nervousness in the markets running high risk of debt. that selloff to get bit of a breather yesterday. much worry about a return to normalization and what does that mean.

we did see a bit of a relief and high-yield bonds. have a look at copper and metals. we're thinking of buying commodities, we of copper 6%,ding higher up by some 0. so some appetite to get into the commodities market as -- afterward is bent a phenomenal selloff this year. finally, fed they arrived. not a reprieve for oil. up, we have the likes of down richard agree for brent crude as well. why, because congressional over tofeel the manager government shutdown again but the fiscal plan lifts the 40-year-old ban on crude oil exports. more supply risk but we just had opec and their own production limits. it seems for everyone going for market share now. thank him or much. it reprieve for the equity

markets. let's focus back on europe now where it is pmi day. purchasing managers index was doubly gets of december data from france and the euro zone as a whole. for more, let's go to our international correspondent hans nichols standing by in berlin. what are we expecting? s: at least for france we look at those numbers first that about 85 minutes. 50.6,pectation is for just a little bit north of 50. they expect that to be a little bit stronger on the services side and for the composite figure right at 51. that is in line with what we had the last couple of months. when you look at the french number has been bouncing around between 50 and 51, not a great deal of expansion. then we will get the germany numbers, that could be more expansion of the manufacturing side. even the services number has 55.5, thate way at is the estimate. the composite shows why you hear

from the bundesbank and the german economy they're not concerned about the slowdown that maybe we saw in some of the data a couple of weeks ago -- a couple of months ago rather. the meat of the overall euros on composite figure i believe that will come in at 52.8 for manufacturing services. for the composite, 54.2. the number i most excited about and excited may be a bit of a stretch, is indeed that french manufacturing number. of 51.5.e north it has a bit north of that for quite some time. will be see more gallic strength this morning? anna: i admire your enthusiasm. he has had an extra hour on us. it revealed what do you expect for the pmi data.

interesting research erik from deutsche bank, said that in the past 20 years the bank of england has tended to follow the fed with a three-month lag. the economies are increasingly intertwined. this time, that is certainly not present in the markets. the market suggest we won't get in increase from the bank of england until 2017. andrew: the markets have become a bit too relaxed about interest rates. perhaps when we see an actual move from the fed they may do a reassessment. the u.k. economy has been growing pretty well and unemployment has gone down. we have -- wage growth has been picking up over the last three months. you have employers reported the bank of england the highest level of recruitment difficulties that they have had for over 10 years. i think the u.k. economy is in a position where you really should be thinking about rates. what is called the markets to become more relaxed is only one

member of the actual mpc has voted and i have been surprised about that. if you look at the shadow monetary policy committee it is a much tighter vote. manus: i saw this great noted terms of sterling, are you surprised by the lack of percentage? we do get the wages numbers today. 2.3% is what we're looking at, the lowest since the start of the year. one ofes in with part of the mpc member saying she would like to see a more wage inflation before a hike. andrew: i saw those comments, we have actually seen a pickup if you look at the three-month moving average from 3.4% and % to now figures move around but. that is a indication the labor market is tired. if you wait until all of the indicators are saying you have

to raise rates, you don't have the room to maneuver you might have. manus: you are going to say that, you were the one -- you are calling for higher rates. l, the economy was growing in 2010 and a slowdown in 2011. perhaps if i stayed on the committee i might've change my judgment. over sixe have perhaps years of recovery now. unemployment has come down, and i think 2016 i would think has to be a better time for the fed to move rather than waiting the 2017. anna: you said you thought that central banks looking at the u.k. and u.s. their default position should be to hike. you hav e often spoken out

comics but not a bit further. when you consider the lack of inflation, what is wrong with just having interest rates low for longer? andrew: the reason is that we took interest rates down to some extraordinary low levels. if you compare our current level with where they were in the 1930's which was a much deeper depression, the only went down 2%. we took them down to half a percent. the trick in terms of getting up to some sort of more normal itel is to be able to do gradually and not to leave it to the last minute. anna: wide do you have to get back to that? andrew: a healthy economy has to the right balance between savings and borrowing. if you have interest rates that are set to give the best isantage to borrowers, that not actually going to be a very healthy economy in terms of savings and investment. manus: careny, of course, warned that the sharper relief is just

not there. what is -- if we see the fed hiking, where could our new normal await? and that the go lower for next year in terms of the hope to achieve. andrew: over a. of time, mark carney has said this that getting up towards 2.5 % would be the initial objective for stub we should not go rates to go all the backup to the 4% we had before the financial crisis. we will have some short of halfway house in a sense. i think the trouble is when the markets have been interpreting what mark carney has been saying, he is shifted his ground quite a bit. in the summer, he was talking much more as if we might already be looking at a rate decision in the u.k.. now it is being pushed back. maybe he will come forward 2016. anna: thank you. turning us there from pwc senior economic adviser. manus: let's shifted gears and

talk middle east. saudi arabia will cut spending when it unveils the budget this month. the world's largest crude exporter has seen its cash -- as you cand by see, cheap oil. expecting? vivian: one of the main things we are expecting to see is spending cuts and a reevaluation in the with the government is spending its oil wealth. past years have been difficult for saudi arabia because oil is its main source of revenue. there has been a total reevaluation of administrative costs and the cost of things like cars and discretionary items like travel. we will also see a 10% cut to capital spending. grown really

extensively because oil prices government hadhe the money to expand and spend lavishly on infrastructure projects. that is not expected to be seen anymore. most economists are looking for a change in direction from this budget. it also comes from a new government this year. there was a new king, a new economic council, they're seen as steering the country's policy in new directions. people are expecting to see change. the deficitecting to narrow as well. the deficit this year is expected to reach or be higher than even 20% of gdp. next you to listen to come down to about 14% of gdp as the government looks for savings wherever it can find it. anna: talking about what it will find a, why are economists suggesting capital spending will be cut rather than current spending? an easier item for

the government to cut. ofrent spending is the bulk the budget in half the current spending is on wages and salaries for government employees. the government is still the main employer for saudi citizens. the idea of cutting wages or just a political risk that the government is unlikely to take. they want to keep their citizens happy. cutting current spending is difficult and would risk upsetting its people. it is a lot easier for the government to take down capital spending especially because they -- a lot of different places they can do that. it is easier for them to do that. they have thealso luxury of some time, and very low debt to gdp ratio that they could be selling bonds to raise funds. they also have they also have reserves that are a high level. the davone else have the

luxury of those debt to gdp ratios that saudi arabia has, thank you so much. coming up, it is still all about the fed. we will take you through some of the stocks that could be affected. mark is joining us from zurich. ♪

welcome back, this is countdown. it's get to the business flash. anna: rolls-royce's division will leave as they restructure the company. tony woods duties will be taken over by eric schultz who runs the firm's large commercial business. shares have sold their sword in ,ydney after james packer australia's third richest man is in talks to return some of the company's casino assets to

private ownership. he kong capital is shut in the hedge fund. that is your bloomberg business flash. you very much, let's look to caroline she has the stocks you need to watch around the interest rate decision. this is a fess anyone, i actually think we could see a bit of a rebound in european stocks on the back of the federal reserve rate hike because amid the turbulence the downene -- the stoxx 600 6.9% since the end of october. we actually could be on track for about -- a bounce back. they're currently the highest and 14 weeks to visit the bank

of america. $3.5 billion footing and at the weeks and. compare that to the outflow we have seen in u.s. stocks. the passer decades -- past few decades, we have seen a rebound in european stocks after a rate hike in the following three months. about 3.5% of overall. then we see a rebound. valuation seem to be talking about a willingness to buy at the moment. european stocks actually much cheaper in terms of valuations. trading a 14 times of learning. much more of an appetizing discount if you're looking at european stocks will the question is -- or the winners? ?hose you be picking out> have a little bit of a look at

exporters. the expected continue to do well particularly the ecb is likely to keep on adding to stimulus. morgan stanley, they traded record low rates. meanwhile, other companies will farewell like manufacturing picking up and unemployment dropping. give economic confidence being buoyed. they could be domestic reviewed well as well. if we see volatility over there, companies exposed revenues in emerging markets put be a key issue. of course, to put $5 billion have been showing in in terms of funds. back to you. manus: thank you very much. caroline hyde there with all that you need to watch a head of the fed's decision. guestxt against -- oversees $2 trillion. he is the global cio at ubs

wealth management. mark, great to have you. we just heard caroline talk about this rush to cash -- that is where money is going into. there is this preparedness in some way by the marketplace. tokenism?ke really mark: caroline many great point which was that typically after a rate rise like this, you see and you equities higher see u.s. equities higher. historically, the market that is of the best are the em equities, emerging-market equities. in this case, while we are going into 2016, we are less saying what the emerging-market equities, and are neutral there. in good evaluation, but we think

there are problems around interest rate hikes they could come out in the emerging markets. bea: global equity seem to on a down slide on a daily basis at the moment. is that something that is going to be critical to your longer-term view? are you investing around the commodity market at this point? commodities market story has caused a lot of volatility. we saw the particularly last week because much of the problems in said the u.s. high-yield market are stemming from these energy concerns. another way to look at it, if you look at the u.s. markets, where energy and commodity started in 2015 as a proportion of the s&p 500, it is half that or less. so, it is just harder for those sectors to have such an

influence on equity markets. what we are watching, i'm particularly watching is the slowdown in china. if it continues to be managed in doesn't get out of control. so far, that is what we see. manus: we will get back to china just a second, but you mentioned high-yield. there is a wonderful article this morning that does the math behind the high-yield market makes junk bonds the cheapest of five years. you it's a default ratios will be around 5% next year, jpmorgan is saying this is a raging buy. give the ubs view in terms of where i look at high-yield? why avoid all commodity companies of the want to be safer? yieldfor us, high globally, and in the u.s., was

one of our largest overweights going into 2015 as the situation unfolded, we on the wound that position and went neutral on u.s. high-yield. we do not think of the defaults were priced in. now we're getting closer to that. for us, what we like and what we switched into biz european high-yield. because we, broadly speaking, want to be in those assets with the central banks are still buying. europe is the center of that. for us, the european high-yield space is the want to be in right now. anna: do you think -- were focusing for a much on the fed and what the fed does today. do you think the ecb will do more? market a little bit disappointed perhaps? have they kept their powder dry? is there more to come from mario draghi? mariowe absolutely think draghi could end up doing more

here. he has worked hard to do more. i think one of the things we should point out is that there are a lot more elements at play in this cycle than in the past. they're looking very close it currencies. we at me tremendous moves and currency. how much the fed it does or how much mario draghi does in large part is tied to the currency moves. we think mario draghi keeps a relative on the euro to the dollar and other currencies, and that may end up altering the dose of medicine in the united states and in europe. manus: let's just see with the next couple of hours print for the market and of course all the investors that you look after. have a great christmas season. julia slavin's your, up next to bring you more special coverage ahead of the crucial rate decision. it could be the end the

unprecedented era of easy monetary policy. we will manus: break down what it means. manus:of course, we bring you the analysis of the fed. ♪

manus: finally its third day. asian stocks join the global rally as the big decision live. we have all the bases covered ahead of what could be the first u.s. hike in almost a decade. anna: oil holds losses after a deal to end america's forty-year ban on crude exports. manus: luxury goods makers miss earnings. welcome to "countdown." anna: 7:00 here in london. let's take a moment to think about where the markets are. it's said day.

what does the positioning look like? we had strong gains in the global equity markets. we have european stocks of more than 3%, asian stocks catching up more than 2%, australian trading day beating every day since august. strong positioning coming through despite the fact that it is saifed day. manus: we are seeing prices rise on the open, and i think the question for markets -- and caroline touched on this -- has there been a big flight to cash? we have seen a little bit of movement, money going into markets over the past four weeks. it has been worth anything that went into equity and some people around in 1994 should remember, the dollar dropped, five of the six consecutive months after they started hiking.

was a threee there percentage drop. what happens next to the dollar? anna: let's get to caroline hyde with the first word. good morning. caroline: thank you. asian stocks are trading higher ahead of this crucial rate decision, downplaying concerns over oil and high-yield bonds. shares rallied from their lowest level since october, with hang seng snapping its longest losing streak. after lifting a 40-year-old ban on exports. donald trump has reiterated his pledge not to stand as an independent for the presidency if he fails to win the nomination, as the party nominees took shots at him during the debate last night.

>> i am totally convinced, and i feel very honored to be the front runner. well, if will do very i am so fortunate to be chosen, i would beat hillary, i will do everything in my power to beat hillary clinton. caroline: angela merkel's party is calling for expressing growing dismay at the prospect of a british exit from the eu as leaders repaired to discuss it at a summit in brussels. one later says david cameron's referendum is a "existential risk" to europe. the man who called it to his shun australian mining stocks is the worst is yet to come. he now recommends eyeing firms with profits that are close to an upswing. mansion outside parents has

set a world re p than $300 million. xiv was chateau louis sold to a brokerage. anna: stop spending money on chateaus. [laughter] anna: very nice holiday home. julia sally is standing by -- juliette saly is standing by. juliette: good morning. we may be playing catch-up to equities on wednesday's trade, certainly wednesday has been a very solid session ahead of the fed decision. incredible gains coming through australia, which yesterday hit a 2013 low, up by 2.5% today, a big rebound. 2.6%,is closing higher by

helping out a lot of the stoxx there, and korea having a boost. the shanghai market is just closing and only slightly higher. it didn't see some earlier gains in the session as we start to see those shipbuilders come under quite a lot of pressure. the hong kong market certainly has been a standout. it had eight sessions of losses before today, the longest losing streak since 1984. today the likes of petro china and sinopec are on the rebound, still trading, but higher by over 2%. we are looking at some of the other stocks moving in the region. we had prada coming through with failing numbers in hong kong, missing analyst estimates and seeing a pullback in north american stores. share price down by almost 9% in late trade. credit resorts is

heading its highest search since february, 2009. they may be willing to upload some of the casino assets. noble group in singapore, a solid session on reports it is willing to sell its agricultural stake. here are some commodity prices coming for -- a very solid session in asia, testing the shanghai market. you can see it is an inverse graph here of where we saw the gains coming from the early session. anna.and manus: the big day has arrived. t-13 hours away from a potential fed liftoff, the first in almost a decade. here are a few big names is speaking about it with their say on the matter. >> at this point, the fed has put itself in a position where

it has to raise rates. >> it is almost impossible now for the fed not to hike, unless we get some major capacity. >> we think it will start to raise rates. it is high time that the cycle started. we have an economy that is still slower than it typically has been, but is strong enough that a policy rate should not be zero. anna: let's get more with our chief market strategist at zurich insurance. that is what you call market expectation, isn't it? people saying the fed is going to do this, the markets in futures suggesting a 78% chance that the fed goes today. what they once are you looking for, in terms of where 2016 takes us? >> the fair thing to say is that they are painting themselves into a corner. --re is so much expectation may, june, september. but they will make it harder for themselves.

they have been speaking so much about it and expectation is so high. the trouble is they need to get their communications right. thes: it's almost as if equity market that we have had across the globe is predicated more on oil and iron ore rather than the perplexities or machinations of what the fed does. much of the banks coming through to europe from the asian stock market. my question to you is this. what can the markets tolerate in terms of rate hikes in the u.s.? the bank of england set their quarterly, and they said they could tolerate a hike, but talk to me that the u.s. hundred 25 basis points is what the dots say. dots has been another mistake in terms of communication. everybody speculates about what it means.

they have lost credibility. while we have seen over the last 12 months is the fed has to ratchet down the dots toward market level. the market is protecting two to three interest rate hikes in 2016, and i think that is probably realistic that is . we see this as a soft tightening, you have to be very careful. when you think about the number of central banks over the last year who had to reverse that these and cut rates again,2016, last thing the fed wants to do was lose credibility i cutting rates before the end of 2016. anna: we have an interesting chart that shows just how peaked the high-yield credit is compared to yields on equity. it's a point that bill gross was and we spoke to jpmorgan

and they say they are interested in high-yield. is talking about european high-yield. where is the tension around the high-yield story finding its feet over the last week or so? >> i think that this is important that we don't see the credit cycle abandoned. a lot of people are speculating about the demise of the credit cycle. we don't think it is over. we think that broadly credit spreads can tighten further in 2016, and the high-yield space in particular we inc. asked dhink has to etracted. anna anna: so you think the premiums for high-yield credit will come down compared to the rest of the market. >> yeah. the market generally should do well in 2016. manus: let's talk about the dollar. it's easing slightly into this hike moment. 10% of opinion out there,

higher on the dollar, the market is shaping positions going into 2004,ike, but -- june, the dollar declined in five of the six months when they went into hike. the rate increase was followed by a 3% drop in the dollar. are we fully priced? >> lesson, the last 18 months -- listen, the last 18 months the dollar has appreciated. i think that's something the fed has to bear in mind. of of course this is largely taking place with a lot of investors on trade at the start of this year and it continues to be a high-yield trade. on market supplies we see the dollar open, as history suggests, that the ecb is still in easing mode. we aren't likely to see further

easing from the bank of japan or bank of china. perhaps it stabilizes at -- i think the directional shift. anna: as we see janet yellen explain, the thinking behind the rate decision, probably a rate will what do you think be the thing she falls back on to give her the nuance? will she be concerned about emerging market growth, high-yield markets? what will be the thing she worries about to justify slowly increasing interest rates? >> all of the above. we are in a world where aggregate global growth is too low. is a realmies -- that concern. those levels are also too high. the imbalances in the global economy are quite significant. the u.s. economy is looking better but we are only seeing

mild wage growth coming through. the consumer is still relatively vulnerable. i think all the things she has to bear in mind. we need to see sustained growth. remember, there is still a second target, which is -- li kely, we think the coming year but it is still a long way to go. manus: thank you very much. in europe.pmi day that's in just over 45 minutes. german data out of 8:30. -- out at 8:30. manus: but of course what really matters today. it is all about the fed. we get the pivotal fomc rate decision. fed watches are expecting the first hike since 2006. special coverage across bloomberg. anna: next, stocks head for their biggest advance in three

weeks ahead of that announcement. decision will mean for emerging markets, up next. ♪

anna: welcome back. 17 minutes past 7:00 in london. let's get the bloomberg business flash. here's caroline. caroline: krohn a record low in hong kong after quarter profit missed estimates. the company says it will increase prices in europe to compensate for slumping sales in asia and the u.s.. rolls-royce's president will leave next year as the new chief executive restructures the company. his duties will be taken over by eric short, who runs the engine business. shares in crown resorts have soared in sydney after talks that australia's third richest man is in talks to return the

casino assets to private ownership. noble group shares leapt in singapore after the largest commodity trader says it is an advanced talks to sell its agricultural unit, which would bolster its drive to raise cash. that is your bloomberg business flash. manus: thank you very much, caroline. market stocks are headed for their biggest two-day advance in three weeks ahead of the fed's rate decision later today, but what impact could that have on developing countries? for more, let's head to justin. two days' reprieve does not make an overall relief rally, does it? >> absolutely not, manus. there are so many other factors that there. we are probably seeing here that someneral sense

of the assets have reached cheaper levels, but they could pick up bargains ahead of what is a flag to decision from the fed. people were expecting janet yellen to stand. that is a decision of more significance, which is what the fed does going into 2016, and how that impact on risk appetite and emerging markets. there are other factors, of course. china, the slowdown, the oil price which is in the doldrums, and political concerns. there is a rate increase for emerging markets at the moment. anna: everybody remembers the temper tantrum of a couple years ago. seems like a world away. what are the biggest risks going into this expected fed hike? >> it is interesting if you look back to 2004, when the fed

embarked on its last pricing cycle. at that time, emerging markets got a big boost as the u.s. economy picked up and rates kept creeping out to reflect that growth. emerging markets recovered very well. i don't think anyone has seen that repeating this time. the simple reason are the factors i mentioned. china was blooming but now we don't see a recovery in china before 2018, which was pretty sobering when you think about it. the other factors are the political concerns, the turmoil attempts, impeachment the rumblings in south africa with the dismissal of the finance minister, and the reappointment of a former finance minister and how that has impacted markets. there are a lot of other concerns that emerging market investors will be looking at

beyond and outside the u.s. interest rate cycle. anna: thanks very much for joining us. justin kerrigan. let's bring back guy miller. weigh in on the emerging markets and how they are to respond in the face of this tightening from the fed. >> so much of that has been continuous in the dreadful underperformance of the emerging markets. is awe need to see destabilization and commodity pricing. we need to see the china data improve, as we suspected well, to encourage investors to move back in. manus: i am opening up one of our news stories on the terminal. hasa's economic growth rate been falling to at least 2018. we surveyed a 12 economists, and it will them said take until 2019 for growth to re-accelerate, and it underscores the challenges for xi.

put it in context for us. what is achievable? the more important question is what happens to the yuan going into 2016 >> question mark hard landing, soft landing, we don't know. this is a huge economy that is growing at a very rapid rate. china does it need to grow the rate of the past. the fact that it is slowing is to be expected. it needs to reposition its economy toward a more consumer driven, investment let economy. anna: so you don't see an acceleration. see the't also precipitous fall. i think it will be a headline number, but the underlying dynamics of the economy will beginning better. we are already seeing a pickup in industrial production. let's not forget that the service economy is doing really well.

this is exactly what the administration wants. anna: so to manus's point about the currency, less need for the chinese to devalue their currency to boost the economy. it seems last week as if they were positioning the market for some devaluation against a basket of currencies instead of just the dollar. >> they need to open up the currencies, those markets. the movely think toward a basket makes sense. these are the countries that they trade with, and why not? i don't think much of the dollar versus the renminbi. bit,e to weaken a little it certainly plays into what they are trying to do at the margins. manus: let's switch tack and talk about draghi. it all comes back to the decoupling. draghi, andio

everything he does -- 60% of economists say that he won't announce further measures of easing. back to thell bring 2% target before his term ends in 2019. market wasthe clearly disappointed by the move that he announced a week ago. broadly i think it was pretty good. people forget that it was bad expectations. this as something that he needed to extend the duration of quantitive easing, but if the economy continues as we expect it will, we hope that he doesn't have to. much of it is strong cyclical pickup in the eurozone, and to a large extent, we still don't know the structural forms.

we still don't have the sustainability of that growth in the eurozone for the longer-term, and we need the political environment to improve around the eurozone as well. anna: talking about the eurozone economy, there are interesting details on the results from dixon's car from today. in the southern european business, it talks about how sales in southern europe rose by 7%. do you see plenty more scope for the eurozone economy around the periphery to supply investors on the positive side in 2016? is that going to be the thing that stops mario draghi from doing more qe? >> you have to be careful because the starting point is often very low. currency overall is looking very low. there is a strong cyclical pickup with a bit of pent-up demand. let's not forget that a lot of

them were in a depression for the last five or six years. some of the reforms are coming through which leads to more productive economy, letting them feel more secure. let's not forget that in italy it is quite slow but reforms are underway and that should improve their competitive position in the longer-term. manus: thank you very much for joining us on this day ahead of fed. google is going to be able to translate -- tap to translate on your google phone. targets are set to open higher in london. hikeuestion is will she and how dovish will she be? anna: a live shot of washington. the fed meats and 11 hours. liberations

culminate on a 78% chance that they hike interest rates. european markets are looking fairly solid. ♪ the only way to get better is to challenge yourself,

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manus: welcome to "on the move." we are counting it down to the european open. i'm guy johnson alongside jonathan ferro. jonathan: i am reliably informed that now it is the federal reserve's turn. global rebound. stocks climb in the dollar rallies ahead of what could be the first rate hike since 2006. lift.s. congress is set to a 40-year-old ban on crude exports as oil trades and 87 year low. guy: it's a big day. wve