anna: japan's stocks soar as the central bank announces changes to the asset program, holding stimulus down. ministere u.k. prime says he is making progress in brussels, as he attends the meeting. it was pushed to february. anna: the warning of a disturbing deterioration in china is sounded, even as property prices spread. manus: good morning. anna: welcome to the program. we have a lot to get through this morning.

manus: we turn to this on quite a frequent basis, but it is worth mentioning -- we are below $35 on oil. stock crude is the highest since the 1930's. commodities are getting crunched. highan sachs is warning risk that the prices may even sink further, before we see a contraction in supply. and we are reaching our storage limit, according to the story this morning. if you are wondering about 6% aboveti is about the 100-day average. anna: that is interesting, tying into what the fed this week to what they did with bond markets -- the recession with the commodity sector. what that is doing to inflation, the prices coming down. and inflation expectations are therefore coming down. that means we are seeing some of the long bonds on the long and end of the curve going up.

an interesting grasp of connections all coming back to the commodity story grad. manus: post fed hangover or euphoria. nejra: the bank of japan has operational changes for the purchase of real estate investment trusts. it will establish a new $2.5 billion program for buying exchange funds. the announcement came as the boj cap the monetary stimulus project unchanged, at $650 billion trade david cameron said the big change of relationship with the eu is gathering momentum. they came after fellow eu leaders said they will sign compromises for the demand on welfare. they will strike a deal next february. today, leaders well shift the fight to terrorism.

issued a smog alert. it may hit severe levels in the capital, as well as parts of neighboring provinces. they issued a first ever red alert two weeks ago. china's economy shows disturbing deterioration across the board in the fourth order. outputhe book shows volumes, prices, borrowing, and x managers were all week. the report is based on interviews with more than 2000 firms across the country. china's home price recovery spread to smaller cities in november, after measures that targeted regions with unsold homes. new home prices increased in 30 cities, compared with 27 in october. the government says reducing will be one of the key tasks next year. and expectations that christine

lagarde was short to win a second term. she is set to be tried for negligence in relation to a settlement france reached during her time as finance minister. she has repeatedly denied wrongdoing, and her lawyer said she will repeal the decision to part her on trial. for more on these berries and others, head to the bloomberg terminal and bloomberg.com. manus: thank you very much. the bank of japan kept may monetary stimulus target unchanged today. that was expected. but the governor did surprise the market with changes to the program operational fund. anna: what did the boj say, then? give us the significance of all of this. >> first of all, we will hear from governor kuroda later this afternoon. we will be able to determine the why behind this. but basically, the target for the asset purchase does not

change -- the overall target. the operational changes are what is interesting. and analysts told us they were meant to basically show that the boj is not tapering. that is still -- it has an unprecedented amount of monetary stimulus. and it is still doing that, even within the changes. and that it was adopting basically a wait and see attitude to decide whether to do more. recent data since the last meeting in november has been pretty positive about the japanese economy, with several pieces of data showing strength -- for supplies on economies.

+++ to the edges of quantitative program. what does it mean, and more substantial move made in january? jodi: i think we will hear more from governor kuroda, and analysts will be able to make better guesses after that. but one analyst already told us they are not predicting january anymore. and they had been previously. i think this argues for more of a wait and see, to see what these changes -- what this means, whether the economy will respond. whether the stimulus will continue to work. but analysts are split. in our bloomberg survey, half of the economists surveyed said they do not expect changes for the foreseeable future. that was before today. they expect further easing from january to april. we are seeing a split there. anna: thank you. we will see what the governor has to say later this morning. jodi joining us in tokyo. let's check in with asia, what is the picture? the japan story is a big one for markets today. >> absolutely. good morning to you. what a difference a day makes.

wide region,wing a apart from china. with that said rate hike euphoria, really dissipating r two sessions. almost 2% after very solid sessions of games. when the bank of japan may be se byncement, it ro 2.4%. when they looked closer, we did start to see the sellers moving again. so the japanese market has moved closer. the yen has risen. 10th of ahird of a percent, we saw mining and energy players offset some of the good games from consumer stocks trade that indexes closing flat. but it is china and hong kong, limiting the losses we are seeing around the region. particularly, those property

developments -- of over 2% on those reports that china's government -- that we have seen home prices rise in november. this is an interesting chart of the day. that is essentially what the market has done over the course of the day. of course, really having that big rally when the bank of japan's purchasing program was announced, the selling coming through in the afternoon. pretty much and inverse to what we had seen, weaker in the early session. but actually stronger in the latter part of trade. manus: thank you very much bring in our guest, erik birttoritton. it is fascinating, isn't it? the bank of japan -- no one thought they would do stimulus. you said they would do it. what do you make of this? they're saying the majority of the bonds month more the market they will own.

the scale of what they are doing is really at the margins, and terms of equities? erik: tinkering is the right word, the way the markets have a just do, too. equities have rallied and sold off, they ended up lower than they started. that is because underneath this tinkering is a structural problem in japan that remains untouched by qe so far. and by what is now expected to come -- to become a structural problem. underperforming assets in the banking sector and more widely across the economy as a whole, context is 25 years of zero interest policy. low yields inry the bank of japan, which means the hurdle for investment is very, very low. the rate that they have to achieve on return is very low.

you keep that inflation for 25 years, what you get is zero growth. and that is exactly what japan is had. at the moment, there is no way out. --fact, there is a conundrum in the environment of very low yield an expectation down the line. anna: are there intellectually or conceptually any limits that the central bank can buy these days? erik: how much is there? once you have bought all of the government debt that exist, you cannot find anymore of it. but they're not running into that anytime soon the japan, because they are having to issue more and more as the years go by. manus: they own 42% of the bond market when they started. is above14%, that market. erik: it is a colossal share, a colossal share of the market. in the start of this process, 25

years ago, the japanese government debt to gdp was 30%. now it is over and th ballooning. there is no way out. manus: the numbers you just used, 25 years of near 0% rates and no growth. we are more than one third of the way here in europe and the u.k., are we doing better? u.k. ise, growth in the the best since the g7, are we doing better with our programs? erik: nope. i was a there is a general distinction -- the u.s. on the one hand, everybody else, including u.k., europe, china, japan. the distinction is that the u.s. uniquely, after the financial size oflooked at the

the nonperforming loans in the banking sector and wrote them off in one fell swoop at the cost of the taxpayer. else is done that, no one is at the current street japan. china, theysingly are progressing down in japan. they will deliver 25 years of zero growth on low yields. that is where we are going. unless you have encouraged to accept that that asset has been built up. anna: is the problem in japan around bad assets or structural changes that need to happen in the economy? getting more women in the workforce, the other arrows? erik: that is part of it, i would say. getting more women in the economy is a laudable goal. summing up will help of the margin, but it does not cut to the structural problem. the structural problem is the resources in the japanese economy is tied up.

there is no need to perform when interest rates are so long. that is the environment -- be careful how long you leave that policy in place. it is really important now that the u.s. is just leaving. they have had it for another three or four or five years, it would be japan gradually -- anna: erik stays with us. a.m.: it is 7:45 we have french producer prices, as nine eu leaders start a meeting in brussels focused on the refugee crisis. anna: and the european economy, of course, at 2:45 we get composite pmi from the united states. --us: the reform momentum u.k. prime minister david cameron said he is making progress in brussels him as he attempts to avoid a brexit.

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anna: welcome back. 16 minutes past 6:00 in london. let us get the bloomberg business flash. denied is security fraud charges. he ran a ponzi scheme. he is been released on a $5 million bond, following his arrest yesterday. to cut asnley plans much as 5% of equity trading staff in an annual performance-based cull. the wall street journal cited the people familiar with the matter. and they will replenish the ranks over the course of the year. it is unrelated to a larger plan to cut 1200 jobs worldwide. morgan stanley declined to comment. and u.s. trade in oil has fallen low $35 a barrel, headed for a third weekly decline. futures held losses in new york am a in the fed's first interest

rate hike in 2016. for more on these stories and others, head to the bloomberg terminal and bloomberg.com. manus: thank you very much. david cameron said he wants to change britain's relationship with the european union. his comments came after fellow eu leaders signaled they are willing to find compromises on his demand to curb welfare. anna: hans nichols joins us from brussels. not sure how late into the night is kept you up. but what was accomplished late into the night? hans: there wasn't necessarily an agreement to disagree. there was an agreement to disagree later, in two months, when you have another summit. in the meantime, with a positive good well, try to finesse this diplomatic sort of challenge -- how do you get over britain's insistence that you will have a four-year weight limit on benefits? there was no real progress. during the meeting and after,

there was a lot of optimism -- even david cameron talked about there being more than just a single obstacle. but still, he coming out of it was very optimistic. david cameron: i would say the good news is that there is a pathway to an agreement. i am confident of that after the discussion we had. but the truth is this -- it will be very hard work. not that hard work on welfare, but hard work on all of the issues we put forward, because they are substantial. they involve real change. they will need real decisions by all 28 members of the european union. hans: in the wee hours of brussels, the meeting ended at midnight, they cannot see the pathway forward. but it does not mean it is not there. i am somewhat taken aback by all the positive sort of ides coming out of the meeting, even though it is hard to point to any actual, tangible progress. listen to what donald had to say about the challenges, and his

expectations heading into the meeting. before the meeting, i do not expect drama. but i did believe that tonight was a make or break moment. hans: a lot of them suggesting that it is possible to inch towards a progress. angela merkel seem to roll out a change before the referendum. she did hit there could be changes after that. and going into it, you might have some side bar agreement read not sure how that will work out. that will be for the lawyers. but in general, everyone marshaling forces. they have another day of the summit today. and they will potentially have a bigger fight in february. manus: it is that fight in february people focus on. when i was driving in, i had a --k, they had a headline cameron rebuffed. saying it was too difficult in terms of welfare. and you read our story, it is

very different. talking about the optimism, and upbeat message. what about the timing of all of this? francois hollande seems to think 2016 could be referendum year? hans: i hope you weren't reading the fc and driving at the same time. that would be dangerous, even for someone of your skills. francois hollande seem to suggest in the meeting that david cameron will call this in the middle of 2016. mr. cameron himself rejected that, saying he said nothing about timing. one thing we do know that took place in the meeting, according to people familiar with it, mr. cameron is pointing to the polls. that british say people want to leave the union so they should cut him a softer, easier deal. manusi can confirm that was not behind the wheel. he relies on a driver on many occasions. what else is on the agenda, it is a busy one? have some, we still

conversation on extending sanctions on russia. there will be a great deal of talk on syria. the general migration challenge, all of these are on the agenda today. in some ways, they really have a lot of the heavy lifting to do outside of britain today. and we will get readouts as the meetings progress, as the sun comes up. the good news my guys some the first time i have been in brussels and it is not raining. i am not complaining. manus: they knew that you were coming, hans. covering the latest in the negotiations on brexit and the eu. ritton.ith us is erik bir you cover the election substantially here. the polls, how much credence -- they are taking center stage in this argument, aren't they? the telegraph from lord ashcroft and another one say that we have

a vote on whether we stay or go. and they're quite evenly split. erik: indeed. there is a sense that is convenient for david cameron, right? polls are 70-30. we want to stay in. he is in that negotiation with no cards to play. any three be 50-50, or a small majority to go out on the current arrangement. anna: a lot of undecideds, that will be a factor. people want more information, don't think? it is not clear that will be available, because there will be things that nobody can promise. processst think that through, what he needs for the negotiations is uncertainty in the mind of the british public to whether we will vote in or out. that is how he plays his cards, how big is the deal he wants to get. the uncertainty, though, matters. andatters for business economic outcomes in britain, before the referendum.

there is an enormous amount of uncertainty generated as to whether we would vote in or out, whatever that means read and that is bad for investment, the price of sterling assets. in supposing we were to vote out, there is another year or two or three of enormous uncertainty as to what exactly that means. did we get the settlement? are we something else? making an example of the u.k. in europe or not? we don't know any of those him and we will not know until sometime after a no vote, if that would transpire. there is thisong, uncertainty that is playing for the markets, through investment decisions by multinational companies. anna: you say this will do stuff to investments, that this could weigh on investments and businesses will go to germany, for example.

but you talk to others, they say we will not pullout of the u.k. is because there are all these customers here. way, absolutely, along the while we do not know what the situation is, if i were -- and i do, i run a firm that is very small. but it is a question of delaying. not saying we will stop what we are doing, but why not wait and see until we know something? manus: the world will not wait and see on every subject. the bank of england, they are just creeping into the marketplace. and we have the fed lifting off ines, mark carney sitting sort of nowhere land in terms of wages not rising. and our growth is set to slow down next to. yes a lot to contend with in 2016. erik: and for us, the over arching problem in the room, his mortgage debt. it has always been our problem. government's

obsessive focus on bringing down debt -- manus: we can all cope with a 2% rise. that is progressively getting better? erik: i was strongly disagree. the debt ratios in the household sector in this country are colossally huge -- at zero interest rate. that is pretty bad. 200 basis points, that is a large proportion of households who moved back to a level of stress that we would've only experienced at the peak of the housing bubble, head of the recession. there are only 200 bits that would do that. i think that is where it gets really interesting in the u.k. that is right in the crosshairs now. anna: we will see how they use macro financial tolls on that. thank you, erik.

will he come back, a tale of two china's. world'sation in the second-largest economy. we will get details, when we come back. ♪

manus: 6:30 in london. time for bloomberg's first word. nejra: the bank of japan has outlined operational changes for his purchase of government o bonds. it will establish a new ¥300 billion program. as the becement came a the main target unchanged, at an annual pace of ¥80 trillion. prime minister david cameron said his head to change the relationship with the european union is gathering momentum. his comments came after leaders said they will find, remittances on welfare.

they will try to deal with the next summit in february. today, they would shift the focus to the fight against terrorism. beijing has issued its second red alert for air pollution. it says smog will worsen over the weekend, and make it to severe in the capital -- as well as parts of neighboring provinces. beijing issued its first ever red alert two weeks ago. expectations that christine lagarde was sure to win a second term has been clouded, as she is said to be tried for negligence in relation to a settlement that france reached the businessman during her time as finance minister. she has repeatedly denied wrongdoing and will appeal the decision to put her on trial. that is your bloomberg first word. anna: stay where you are, you have been keeping an eye on the market. what else have you been watching? nejra: we have seen japanese stocks rip forward. i'm looking at the index across asia, i see down 1.7%.

others down 1.9%. the hang seng down. the shanghai composite coming in pretty flat there. basically, china's stocks are headed for their biggest weekly gain in more than a month. this is led by property development, after data shows that property prices increase. that happened in china. japanese stocks soared. if you look at emerging markets, the index has actually fallen -- posting its biggest three-day gain since october. we've also seen the asian pacific index falling today, as well. this is after we had initial game, following that fed decision to raise rates for the first time since 2006. that of course has led to a stronger dollar. the bloomberg dollar index, by the way, is heading for its best week since the start of

november. but of course, that is weighed on some other asset classes, not least commodities. i have commodities up. wti crude down 3/10 of 1%, coming in below $35 a barrel. now you can see there on the chart, the gold is actually rebounding. copper, as well. but we have seen weakness in gold, too, because the stronger dollar. gold is headed for the second weekly decline. even though we are seeing that rebounded a, it is trading near its lowest level in more than five years. back to you. mannus: thank you very much. breaking news coming across the terminal from governor corona and the bank of japan create exports and recovery, some weakness remaining. oof that the cycle is working in japan. we saw no additional easing, to the extent of maturity. they have added ¥300 billion to

buy. anna: they already have a project, this is about 1/10 of the size adding to it. once the markets realize that, we saw some rebounding on the program. and then we saw them realize the size of this, and we saw the markets come back a bit. anyway, that is the latest coming out of japan. governor kuroda giving his press conference at the meeting. manus: let's talk about china. theside, the side of housing market showing changes, after authorities rolled out the measures to a variety of regions. but the news is overshadowed by the china beige book. anna: they deteriorated across the board in the last order. ggreg is our bureau chief in shanghai. thanks for joining us. this looks like the start of a real estate market recovery, or

would that be too strong? how does that data fit with the overall picture we are seeing coming through in china? beige book was very negative. but it did flag real estate as one of the factors that was holding up. and i think we saw that in today's data which showed an expansion in terms of home price rising. that said, there -- i would not say that this marks the start of a real estate recovery. have ator in the market great deal of problems, in terms of inventory oversupply. and you can see from the data today that the property prices is stilltier cities declining. and second-tier cities are still fairly mixed. manus: what has the central

government done, or what can it do, to boost the market? they keep taking these measures to boost the market. and that is exactly what is giving this thing gravity. greg: well, yes. they are pushing, particularly smaller cities. they are trying to ease up lending, down payment requirements, as well as subsidies and filtering those into smaller cities, trying to boost the markets there. while the larger cities are still flying high. home prices are still rising every month. and so you kind of have this scenario.arbell the tier-one cities could be facing a bubble, overheating. in the small cities, nobody wants to buy property.

anna: greg, thank you for joining us there in shanghai. let us stay with china. we sat down with larry fink of black hawk. here is what he had to say about u.s. investment. he does talk about china here. larry: the only chance of real recession is if china's leaders miscalculate their needs. and china slows down more rapidly. there needs of reinforcing the economy, the value of their currency -- more rapidly than we expected that would cause disinflation worldwide. and that would cause a higher probability of some form of recession. manus: erik is still with us. , we of the question get this report on house prices. they are up. but they have a huge overhang in housing.

it is a colossal overhang and housing. until that gets swept away, does this matter? erik: as you are indicating or alluding to, the more you get a bounce in house prices, the more overhang you will create as a consequence. there is a similar situation in the u.k. in some respects . in china, the overarching price is capacity that particularly focused in real estate. much more widely and infrastructure and construction generally, and right across the manufacturing industry, too. and the issues they are facing are the same issues that come from overcapacity in all other economies over the world. whether it be china in the 1980's or other economy subsequent to that. how it plays out is either you accept and acknowledge the size of those nonperforming assets and write them off, or you have permanently lower and substantially lower growth for

the next 10-20 years? that is a choice that china is facing now, one the japan faced 25 years ago, one we are facing right now in the u.k. and in europe. anna: they might try to generate by devaluing the currency, not necessarily considered dollar. but how likely is that? erik: extremely likely. a good kind of rebalancing in china would be supporting consumer demand there. supporting the service sector, the easiest way to do that is to have it go up against the dollar and other currencies. that is not what they are going to do, though. because of the pain that would cause the export business. what they will do instead is chased the ria'n be down. and that will hurt the domestic consumer, doubling down on the same debt they are placed on the left 10-15 years. they will double down on that.

and that will be disinflation very for the rest of the world. but he is wrong. it will matter so much for governor corona. kuroda. anna: erik stays with us a bit longer. manus: have a look at the dollar-yen trading. you saw the initial selloff in dollar-yen, or the dollar rose in the yen fell. that was a back of the bank of japan. they will continue to watch the effect of the fed rate hike. he declined to comment on the policy specifically. but they will adjust policy as necessary, and inflationary trends are improving. anna: it seems like you declined to comment, but then he did say a strong economy -- talking about japan again -- some gaps in the end of the inflationary mindset. how it can be difficult to get

rid of, we were talking about that with erik earlier on. there he is, governor k urdoa. manus: it is just two days until spanish voters go to polls. with a generation of politicians demanding power, maria has been out in madrid getting a taste of voter intentions. : i have come to madrid's most iconic market to find out whether voters are working up an appetite for change. this election is a big deal. and this is why. 1978,emocracy arrived in it has been a two-party system -- alternating power for more

than 30 years. but this time, it is different. sunday's election could make history, with a vote split between the parties. party and aterity pro-market party are about to lead a political seachange. and all of them could have a major say in who become the next prime minister. who are you going to vote for? -- they wille grow. and the other parties will negotiate with them. friends,particular they are more excited. that there are new political parties arriving from the bottom. we need growth from a financial and social perspective.

>> [speaking foreign language] >> [speaking foreign language] maria: 20 of opinions here, but

it does seem like buyers are hungry for change. that is really good. maria there, so very hungry for breakfast now. thomas mckenzie is in madrid. bring us up to speed. thomas: as maria was pointing out that package, the old two-party system that is effectively ruled spain since 1978 is no longer. that is because of the the-austerity party sealed inroads on sunday. and the polls suggest this will lead to the most divided parliament in spain and more than 30 years. a key number to look for is undecided voters. more than 40% of people here say they still have not decided who they are going to vote for. so that is adding, of course, to the uncertainty. top of the list for priorities of voters? jobs and corruption. has managednister

to chip away at the unemployment rate in spain. but it is still at 21%. growth is looking healthy, expected to top percent by the end of the year. and theparliament austerity measures from the the problemsnd with unemployment and corruption allegations circling around the party and mariana, are tarnishing the images of the party. that is giving more support to the upstarts. of course, she is looking to cut red tape. they are calling for a cleaner government. they want to pull back on the liberalization that the prime minister has pushed through. but what we do know is that the popular party, according to the polls, will still win on sunday. but they will lose the majority -- about a third of the vote. then it goes to what kind of alliance will be formed in the spanish government? who the popular party can form an alliance with. and it will be a mixed bag,

growth is expected. and theployment education system remains feeling here in spain. and major reforms are needed. back to you. manus: tom, thank you. let us see how things go. anna: up next, the new star wars film opens. intoast for the film goes overdrive, as does manus. and the purchase of lucasfilm. ♪

anna: welcome back, 6:49 in london. here is nejra. has deniedin shoul security fraud charges. it is suggested he ran a ponzi scheme. he is released on $5 million bond yesterday. morgan stanley will cut as much

as 5% of equity trading staff in an annual performance-based cull. that is coming from the wall street journal, citing people familiar with the matter. they will illuminate 100 jobs in early 2016, punishing the ranks over the course of the year. it is unrelated to a larger plan to cut 12,000 jobs -- 1200 jobs worldwide. $35, headeden below for a third weekly decline. futures held losses in new york, worsening the supply glut and the first interest rate since 2006 for more on these and others, head to the bloomberg terminal and bloomberg.com. manus: let us return to one of our top stories of the week, all the talk is that around high yields. we saw the closure of a number u.s. funds linked. falling by 45% in the portfolio. after 3rd avenue froze the

redemption. david newman joins us now for more. great to have you. have we seen something of a high-yield crisis? and if we have, how far through that are we? david: i think the definition of crisis is quite a hard read that means we actually know what is going on. what has been happening has been massive bifurcation of the have and have-nots. markets,ok at the utilities and energy, they have given you positive returns. and it has outperformed investment. anna: high-yield? david: think in european terms, it is under 2%. looking at energy, it is -20%. so the signals and energy were from september of last year. we're just seeing the relation of that. and we really have not seen as much as we would expect.

but having in your head where oil is, you will see a few more games going through. next year. manus: we have covered this each day. bond look at the junk lost, nearly $4 billion. it is a bit like everybody trying to get out of the market. suddenly the light switch went on, let us get out of the room. positionseculative gone from the high risk areas in the market? or is there more momentum to come? david: let us think about the number -- $3.8 billion. mutual funds are estimated at about 10%. and the whole global market yield is about 200 billion. let's give perspective read it is a big number, yes. but it is not a massive number. i think what we saw was that at the beginning of this year, people started thinking that oil was not going to go any further down.

and the so-called smart money came in and let the oil players -- it looked very clever. suddenly, they returned 25%. so what is going on in energy positions generically? if you are tied against an index, probably people earning the best of the best. but every time your definition of best is getting revised. we first of all cannot sell anything at $70. then we could break even at $50. clearly, that was not good enough right now. and that leads to pricing. anna: slightly hard to say, but sometimes people talk about high yields being a red flag for the global economy, maybe does the u.s. economy. is that too overstated? what is the relationship between a spike in high yield rates and the path of global growth? david: i looked at the breakdown

of the global high-yield market. and roughly 50% is commodity or cyclical dismisses. so if you compare that to the breakdown of the u.s. economy, which is about 17 or 18% of manufacturing, or the european economy which is in the 20%, there is a mismatch between the composition of the high-yield market and everything else. moreyield, they are centered to what is going on in the economy. clearly, we have already seen numbers from manufacturing pmi. manufacturing is weaker in the service sector. it is not representative of what is going on. but i would say that typically, it could be a precursor of a very early stage -- where you really need to go and see banks cutting back lending to the private sector. the consumers stop spending. exactly. manus: david, thank you for

joining us. --had a number of houses u.s. or europe? anna: a few people have said that. david newman. part, starfavorite wars awakens stateside. it is already made its debut here in the u.k. it is expected to do big business. but what is the money about? nejra: it really looks like this will be a blockbuster, in terms of revenue for star wars. and of course, for disney. it is on track to make $229 million at the u.s. domestic box office alone this week in. that puts it's on track to crash avatar and jurassic world. it is not just the box office that is big money. analysts are also expecting disney to bring in $5 billion in merchandise sales -- more than $1 billion from video games and

about $1 billion from dvds, streaming, licensing deal. you could be looking at revenue in the first year of this film at more than $9 billion. anna: sticking with this, and looks like disney could recoup the money from 2012? nejra: it paid for billion dollars for lucasfilm. but this has been sort of a trend for disney over the past decade. as a history of making big purchases. he paid for billion dollars for marvel back in 2009. disney bought pixar for $3 billion back in 2006. and since then, you have really seen the shares perform well there. and they have been performing well in the week leading up to the release. they are up 21% this year, one of the best performance on the s&p 500 media index. back to you.

manus: will you give me a light saber? anna: a christmas present. looking at the bank of japan's asset program. ♪

manus: japan stocks soar. tokyo shares climbed, then slide. promisesal bank changes to the purchase program as a whole stimulus at ¥80 trillion per year. anna: reform momentum. david cameron says he is making progress in brussels as he attempts to avert a brexit. decisions are pushed to february. manus: a tale of two chinas. the morning of the disturbing deterioration in the world's second-largest economy. welcome, it's friday. i'm manus cranny.

edwards.e annm anna it looks like a different day, positive momentum in sentiment, the confidence transmitting to the global market. talkingverybody was about what an amazing job janet yellen had done, raising rates, projecting confidence. the reality is that the dollar is storming. commodities are coming down. oil is $35. nolan is convinced that the world is -- and no one is convinced that the world is a robust place. rest of europe is down by three quarters of 1%. the asset class is down, the dollar is up, global equities have rallied by 1.27%. anna: as long as commodity rout

continues it can make challenges harder. let's get the bloomberg first word with nejra cehic. nejra: the bank of japan has outlined operational changes for government bonds and real estate investment. as part of the planet will establish a new, $2.5 billion program. kept his main monetary stimulus target unchanged. toid cameron says his bid change relations with the eu is gathering momentum. his comments came after eu leaders signaled the willingness to find compromises on welfare. they seek to strike a deal at the next summit in february. today they will shift their attention to the fight against terrorism. disturbing deterioration across the board in the fourth quarter. show volume output and prices hiring, all

weaker. the report is based on interviews across the country. china's home price recovery cities with are surplus of unsold homes. it increased in 33 cities compared to the 20 in october. that's your bloomberg first word news. furthermore, head to the bloomberg terminal and bloomberg.com. manus: thank you. let's get into the markets. juliette saly is standing by. morning. good look at the reality. the nikkei 225 closed lower by 1.9 purse as investors started to digest what the bank of japan was saying. we heard from kuroda, saying

that as investors worked out, there hasn't been any new, additional evening being announced. investors got a little too excited. we saw the nikkei bounce, but then it moved and again. kuroda also said he doesn't think commodity price will make the 2% target in possible. looking elsewhere, we saw shanghai a flat, and we have seen the hang seng fall back into negative territory. certainly that euphoria we saw in the region yesterday in the anticipation and wake of the fed rate hike has dissipated. asian stocks close in the red for the last trading day. anna: juliette, we also have an update on china's housing market. we have had a tale of two chinas. juliette: absolutely.

we had that beige book from the new york think tank saying it is quite a disturbing deterioration, what we are seeing in china. then we also saw those official home prices coming through a lot stronger than what anyone had expected. the number of oil prices increased in november than were expected. this had a real impact coming through in the hong kong hang seng property index. eight out of nine stocks in this index are in the black in late trade. -- it'she standouts investors have bought into the reports, that china is showing signs of stabilization. a very different picture from what we heard from the beige book. manus: thank you very much, have a great weekend. let's bring in our guest for the next 30 minutes, a member of the

investment committee. great to have you with us. the story from china, house prices trying to find reality, but there are underlying concerns. the big question is what happens next with china and their currency. is that the bottom line? >> i think it is absolutely not, because you have to put things into perspective. when you look at the behavior of the renminbi versus other currencies, or even versus its ast trends, you can very quickly notice that the move last august was tiny. we see further weakness on the renminbi, absolutely. anna: a lot of people coming onto the set talking about how the next move from the chinese will be weakening of the currency. sense?at make it is supposed to be pegged

against the dollar but you see some substantial moves away from the current peg. >> what they want to have is to regain a form of monetary policy. obviously, the fed will enter into a tightening cycle, meeting that the chinese have to implemented tighter monetary policy. this is absolutely not what they need. so i think we will see further measures taken in order for the -- and theregain outcome may be further weakness of the renminbi. manus: one of the lines coming from governor kuroda, the bank of japan didn't do any more quantitive easing, but they did extend maturities. extra cash for buying stocks. mr. kuroda is on the tape, saying he doesn't think there andlimits to quantitive quality of expansion.

road,inese could go this the japanese don't look as if they are done. inre's a lot to consider terms of what comes next from the japanese, isn't there? is there no lower, lower, lower? >> i think it is a very interesting market reaction, if you want, after the move the bank of japan. the timing was very acute, coming in just after the announcement of fed. we saw a stronger yen and weaker shares, which i think is showing investors about the omnipotence of central banks, probably one of our pet topics. people are starting to realize that central banks are not that central banks are losing some form of credibility. so going forward, we think that we will see some continuing

support, but we will a lot more on structural -- we will rely a lot more on structural forms to support economic momentum. when you look at japan, it is clear that the heavy lifting will come from government spending and additional budgetary measures rather than from more aggressive quantitive easing. anna: do you see them move toward more fiscal stimulus coming through elsewhere? central bankers have said for many years, we can't do all this on our own, don't expect too much. they called on governments to do reforms. where else do we see governments picking up on tough reforms? >> i think it is a lot more obvious when we talk about some policyion of fiscal

rather than reforms, because reforms are always a lot tougher to implement in the political cycle, but it is clear when you that we havee already seen the form of relaxation, and that we have more support from the fiscal part. in the u k, the stronger predictions found alternative cost-cutting to fill some of the holes in the primary engine policies. definitely, we see a lot more support from fiscal policies. is it sustainable? that is the big question mark. in order for additional spending to be supported, we need additional growth for the books to be balanced longer-term. manus: translate all of that. stimulus, thescal

u.s. is in hiking mode, the ecb could do better. is japan going to outperform this year? where do i put my money in terms of my return? >> i think you first avoid to make big allocations this year. you probably want to spread your risk and you probably want to focus a lot more on asset strategies rather than picking relative value strategies and making big allocation calls. at this juncture, the re-rating of the market is over. there is a kind of negative collision, if you want, between a weaker economic cycle and a tighter monetary policy. manus: is that a re-rating of the commodity elements of the market or the oil, or a re-rating of global equity markets? it is a re-rating of

global equity markets. we had a lot of acceleration of the economic cycle and earnings cycle. we never had earnings growth so not onlyen -- have we had some kind of multiple extension, but also we had a lot of financial generating which propped up equity markets. thatou going forward is you need to be a lot more specific, and you can't just rely on the overall index if you want to make money for the coming year. anna: thank you. i'm giving you one line on ireland -- irish gdp down by 6.7% this year, 4.8% in 2016. come backland, and ge to life. up next, what will cameron managed to get for britain? we take a look at all the

details from brussels. ♪

anna: welcome back. quarter past 7:00 in london. let's get the bloomberg business flash. nejra: criticized for price gouging and now denied security fraud charges. the case against him suggests he ran upon the scheme. plans to cut as much as 5% of its equity trading in an annual performance-based cull. unit was eliminate about 100 jobs in early 2016 and then replenish its ranks over the course of the year. it is unrelated to a larger plan to cut 1200 jobs worldwide. morgan stanley declined to comment. u.s. traded oil has fallen below $35 per barrel, headed for a third weekly decline. futures held losses in new york

amid a worsening supply glut. that your bloomberg business flash. for moore, head to bloomberg.com. -- for more, head to bloomberg.com. hiss: david cameron says bid to change relations is gathering momentum. areeaders signaled they willing to find compromises on his demand for cuts on welfare. anna: we are joined by hans nichols from brussels who has been monitoring overnight development. good to see you. what, if anything, was accomplished in the meeting last night? hans: well, they happen agreement to come back in february and really fight through this. in the meantime, trying to finesse the diplomatic differences. they had serious conversations last night, they had substantial conversations, but they also had in consequence ones. while every -- but they also had inconsequential ones.

while everyone was optimistic, david cameron said there were still multiple areas to focus on, not just the benefits one. he perhaps struck the most optimistic note. isi would say the good news that there is a pathway to an agreement, and i am confident of that after the discussion we had. but the truth is this, it will be hard work. not just hard work on welfare, but hard work on all of the issues we put forward, because they are substantial. they involve real change, and they will need real decisions by all 28 members of the european union. having sorted through this throughout the morning after a late-night here, i am struggling to find just why everyone is so optimistic. they didn't make any real progress on this idea of cutting off benefits or not providing benefits for the first four years of eu migrants to the u.k.

what they have is this general positive move, this good feeling. said they could inch toward compromise. >> i don't want to sound too dramatic, but i do believe that tonight was a make or break moment. hans: i guess one hard fact on why you can be optimistic on this is that angela merkel didn't entirely rule out tree changes. she did rule it out before, but she seemed open to the idea, mentioned it would be difficult because everyone would have to go back to their national parliaments. that could be something for 2017, 2018. it means i will likely be back here in february. at least the sun may be up by 8:00. february, it gets a little lighter a little earlier. anna: thanks very much. hans nichols in brussels.

let's get the thoughts of our guest. jean, it seems that for everything we have heard this week, there is a lot of talk from many corners of europe about the brexit situation. it seems britain has been talked lking about the narrowness of the polls. it could be on a knife's edge. >> people may be surprised because there was a lot of complacency in europe as far as brexit is concerned. we think that brexit is a major risk for europe next year. obviously, brexit is a possibility. yeah,k at the polls, and this is a real issue for next year. manus: i sent this a couple times. it hasn't manifested itself materially in our equity, and ouin our bond.

it is being dominated by the machinations of the fed and the ecb. from an investment perspective, sterling is weakening, holding its own against the euro. from that perspective, is it through that channel that i have to look at sterling risk? >> yes, absolutely. and when we look at the brexit issue, you should be prepared for a lot of volatility. nevertheless, the question lying behind brexit will be the new relationships should the brexit happen that the u.k. will have with the rest of the eu. it is absolutely unclear what should be struck. let's remember that the u.k. is the main trading partner of many european countries, in particular germany. the u.k. has a much stronger he ad.

there will be a lot of volatility and probably some form of weakness, because markets do hate that. but at the end, the outcome is far from clear. anna: when you talk about the rest of the euro zone economy, a lot has been made of the relationship between germany and china, and what the sloping in china does to the german export engine. we spoke to erik earlier, and their view is that the slowdown in china hasn't taken anything off the german gdp number to date. is it something you see germans being resilient to? >> i think it is important not to look in the rearview mirror. we have seen a redundancy in the eurozone, where many areas have shrunk. a new route ofnd growth with the u.k., with the u.s., with china. german exports have

increased to china, so it is absolutely significant. weakening the chinese industrial momentum, and more importantly the chinese going up the value chain and being a more formidable competitor to german iss or capital goods, it good for germany going forward, and therefore there will be some headwind for the eurozone to keep accelerating. our view is that it will be very difficult in 2016 for the euro zone economy to grow faster. anna: jean, thank you. just to bring you up-to-date with the u.k. energy season, a company will pay 26 million pounds following the regulator. manus: let's keep an eye on that story as it develops. extensions to government

spending has energized the wind and solar power stocks. solar is one of the big winners, gaining almost 20%. theseg a deal are measures? we are constantly trying to put numbers around cop21. >> the u.s. one is a huge deal. this is the solar story of 2015. it probably means the next are 22 gigawatts between now and 2022. good forst scarily manufacturers in the u.s., if it is finalized, which it hasn't been yet. the u.k. deal is a bit more muted. we expected to be terrible and it is only quite bad. anna: the u.k. energy minister said a business model should rely on this. should the industry be receiving this kind of support at the

moment? >> philosophically, i don't know. but if you want people to build solar in the u.k. it does need some support for the next three to five years. it won't absolutely die. there will be u.k. developers who can figure out how to make the economics work with these new low subsidies. but it is going to be muted. manus: we spent a great deal of time, the owner of this company was in paris with boris johnson, a great deal of anticipation in terms of climate change in the result for business. if we talk about it in terms of the best stories you have heard, or the biggest relief, or the biggest news from the ceos he spoke to, what are they? u.s. terms of the extension? i think very simply the fact that a they rekey subsidy has

been extended for not just one year but five years. now means they can really figure out what they are doing and plan all the way out. that is a lot horizon for a solar company. you don't necessarily need all that time to plan, but it was really helpful and it will help them cut costs and develop their business. anna: thank you for joining us. away: we are 30 minutes from the start of european equity trading. i think there is a reality coming in. here are european equity futures, down in london, down in paris. is doing with the ecb couldn't do. taking the euro lower. anna: yesterday the markets were gripped by confidence, and today it's a different state of mind coming through. below $35.il

to you want to buy bonds in the virtually nonexistent environment? anna: commodity prices getting weaker doesn't help. we will leave you with the "on the move" team. ♪

guy: good morning and welcome to "on the move." 7:30 in london. we are counting your down to the european market open. i'm jonathan ferro. guy: acuity facelift. the bank of japan calls for longer maturity bonds and etf. corona stops short of an increase. china decay. as chinese prices steadily rise, they warned of disturbing deterioration. and crew to smack down. every time oil creeps higher it gets struck down again. we leave the week with sub $35 wti. 30 minutes ahead of the open, a bit of a rally. futures are a little bit lower,

ftse down by 26 points. let's get to nejra cehic for your first word. nejra: thanks, jon. the bank of japan capped its main monetary stimulus target unchanged and expanded the program to include longer maturity bond and real estate investment trusts. the other stronger against the dollar this morning. a private survey of the chinese economy shows disturbing deterioration across the board. shows outputk prices, hiring, borrowing in capital expenditure were all weaker. toid cameron says his bid change britain's relationship with the eu is gathering momentum. eu leaders are signaling they are willing to find compromises on his demands for welfare. they will seek to strike a deal at the next summit in february. that is your bloomberg first word news. for moore, head to bloomberg.com. juliette: thanks. let's check in on futures inkets -- interest an

london are a little bit lower. it has been quite a rally so far this week. brent crude at $37, the major headline of wti, south of $35 per barrel. that is february, 2009 low. 121.r-yen the headline drops. unchanged monetary stimulus. that headline that they will tweak things. 123, andlessed up to people realize a focus on quality and not quantity. it slides again back toward 121. now head out to our stocks

editor, richard frost. great to have you with us. we talked about the tweak to be qe program. it's a facelift, it's not a chef on quantity or quality. talk to me about it. >> that's right. fairly arduous day with that initial jubilation, spurred by the idea that they would expand their buying of etf. they rebounded 10%, but that turned to disappointmen as it would hardly offset the stoxx. -- the stocks. it's a drop in the ocean compared to the amount people were hoping they might be spending. there are some overall tweaks they made, but it's clear that investors had expected the government to do more.

originally they thought that would happen and then it turned out it wasn't a shift they had hoped. juliette it's a little bit different in japan because it is the quality of the stocks that are underneath that etf. talk to me about that. this has been a program they have been doing for some time, and it is certainly help to buy the stock market, and this is alongside the drop in the yen. we have the stock market set for a third year of gains, and significantly outperformed. the rest of the market but they are really hitting the limit of what they can buy at this point. some ofnt they bought,

them hit almost half the amount available. when you have the central bank becoming the largest shareholder, that becomes more difficult in terms of what else they can find. jonathan: richard frost, great to have you with us this morning. i will welcome my guest for the next 60 minutes, tim hayward. he helps manage about 125 billion swiss francs and assets. great to have you. here's a central bank with a third of the market making .ubtle tweaks >> most brackets are owned 35% by foreigners. the japanese market is owned 95% by the japanese. whatever happens is driven by japanese policy. i think it is pushing to the

upper limits of what is possible. market, that is definitely more foreign interest. it still remains a key pick for 2016. to what extent those are driven by a weaker yen, the weaker yen has been proving a struggle. jonathan: extending maturities for the bond buyer program -- have a look at it on my screen. yields are already so low in points.7 basis these are ridiculously low yields. what kind of transmission mechanism is there for you to push against him try and drive any inflation out of that bond curve, as it already is so flat? >> flat and low. most investors who can have a choice have moved away from japanese markets quite a long time ago. you see that in the choice of bond indices. ex-japan has become an

increasingly popular feature, and that was tenures ago. the japanese bond market was a very local phenomenon. people have negative yields, so where else to go? where else has high-yield and possible capital appreciation? clearly not japan. jonathan: corroded is building -- kuroda is building of quite a sizable balance sheet. half of japan's etf market. what is the endgame? he might not be the man that has to deal with it. it could be the one after that, but there is an endgame here and i wonder what the final chapter looks like. >> the real problem for japan seems to be a lack of growth. growth is important because governments must earn more money than they spend in order to pay their interest bill, and that is not were japan is. growth is important, tax revenue is important, otherwise the debt mounting continues and continues.

but i believe that the japanese market and problem is not an international problem, so it will be solved within japan. promises will be broken, either on tension benefits or on interest payments. eventually something has to be broken, unless strong growth, strong government revenues sufficient to pay the interest rate and stop this ever-increasing debt to gdp. jonathan: what does it take to stop? >> good point. unique andy are so so disconnected from the rest of the bond markets, they do have a role to play. jonathan: what is that role? >> a diversification role. they have not moved in the same s and treasuriesasur have moved. how can you expect to make 6% from the market year after year? it is not mathematically

possible. jonathan: tim hayward, great to have you with us. up next, we talk pervasive weakness in china. a particularly disturbing morning must-read, according to the china beige book. 22 minutes away from the open. ftse futures could have a lower open. ♪

jonathan: good morning, welcome back. 7:42 in london. 18 minutes away from the open. a three-day winning streak on the ftse 100. we will with you for the market stories in a moment. let's get to nejra cehic for your bloomberg business flash. nejra: thanks. morgan stanley plans to cut up to 5% of its equity trading in an annual performance-based cull. it said the unit would eliminate about 100 jobs in early 2016 and

then replenish ranks over the course of the year. morgan stanley declined to comment. a pharmaceutical executive who was criticized for price gouging drugs has denied security fraud charges. the case against him suggests he ran a ponzi scheme. he was released on a $5 million bond yesterday. u.s. traded oil has fallen below $35 per barrel and is headed for its third weekly decline. futures help losses in new york and that a worsening supply glut in the fed's first interest rate increase since 2006. for more on these stories and others had to the bloomberg terminal into bloomberg.com. jonathan: seemingly no bottom to the crude story. $37 per barrel, wti $35. that slow grind lower in the commodity market -- we will talk about that later. for now, your morning must-read.

we have a particularly disturbing morning must-read. play linda miller says the survey conducted by his research group shows pervasive weakness in china. thanites, "more concerning overall growth weakness was degradation to two components of the economy that were previously overlooked as sources of strength: the labor market and the impact of inflation." i want to bring in tim hayward. sales revenue, volumes, prices, borrowing, capital expenditures -- all weaker than the past three months. what is your read of china? is it similar to that? >> it's interesting that the concern came out of the u.s. and not china. that has in the future of the year. china has its long-term policy, annual aims.

i think the time for us to be concerned is when the chinese authorities are concerned, and that doesn't seem to be the case at the moment. clearly things are slowing down, but it does seem to be part of a greater plan. jonathan: the concerned point -- i take about that and i think about policy mistakes. they seem very confident on the surface of things. investors, the consensus seems to be confidence in the view that china can make this pivot. what is the risk of a policy mistake, if they are overconfident? >> there is clearly going to be a significant shift as part of the grander plan. it's a big risk. the cost of chinese labor has but it is really -- it really needs to occur. perhaps we should rejoice in that potential change.

jonathan: the currency. clearly a very big difference between the sudden drop like the one in august and this low, continuous depreciation we have witnessed over the last 10 days. that will have just us and impact in the coming months, isn't it? over the next 12 months in several years as well. i wonder how that plays out in the market. >> it's not the only country that's doing that. the euro has been weaker. it has been since april. the yen has been on a weekly path for several years now. there are very few currencies on the other side of the equation that seem to be appreciating. it's not unusual, but we do think the yuan is going to weaken. jonathan: people are saying -- whatever they are doing, cutting rates for 12 months now, that's andgained much traction, all that is happening is that they are exporting more and more deflation. your world, does that mean lower

yields for government bonds? >> i think the export of deflation means headline inflation is not going to spike up anytime soon, even though they have weakening currencies. the supply, the short-term supply of certain commodities means that there is no headline shock coming through at the moment. it doesn't mean that underlying inflation couldn't pick up, but obviously we will see a big spike in headlines. jonathan: we will talk about crude later, get your thoughts on that. but does it make sense that this slow grind lower in the commodity market has such a big impact at the long end of the yield curve? does that make sense to you, given that is just a headline? boost to thel income of people. at a personal level, you are seeing better situations. in europe, all the oil

consumers, eastern europe, turkey, they should all do ostensibly better because of this low cost. that as you say, yields have come down. this is a boost to most of the world. not to norway, not the saudi arabia, where those bond markets could be quite stretched. you're right, it seems strange that a boost to one's income should cause lower bond yields at the long end, but there are other factors there that dominate that oil move. jonathan: we will talk about them later on. tim will stay with us. 12 minutes away from the open, ftse futures a little bit lower. the big question after the fed hike, is america's economy strong enough to hold up to a hike? we get the opinion of our guest, next. ♪

>> i don't see a cause for recession yet, and i think that consumer is certainly benefiting from this. we are going to say rising wages, and we are going to see -- that is one of the reasons the federal reserve started beginning their process of tightening. of men 3.4% unemployment and women who have a college degree. we will see the beginning of wage inflation. i don't see a recession unless there are more problems in china and in the world. we will not cause the recession. we may have a recession from other problems, but i don't see it emanating from the united states. jonathan: let's welcome back in tim hayward. tim, listening to larry fi nk. the ecb and the fed may make a move in december, but they might have to reverse. talk to me about that and let's

start with the u.s. specifically. >> the very latest data, particularly for manufacturing and competence, shows that the u.s. is not quite as strong as they like. it's a short-term debt. if you take out the unemployment factors, one question is whether the fed would have hiked at this point as opposed to, say, when the economy is stronger in september. the reverse is true and the ecb. is strong economic data yet again, easing policy. they may just regret but they did -- jonathan: what is the risk they will cut? >> now is the chance, but i think it is slim. 15%. is how theresting u.s. economy is proving to be quite isolated and robust in its overall performance.

this 2% growth is difficult to get much lower. it really does seem to be a study -- jonathan: the point on the robustness of the economy is manufacturing. you talked about the isn. global manufacturing, screaming recession. does thatg is ok -- difference get resolved or does it just stay there? that, for those economies dominated by services, that will stay wid. manufacturing -- how many cars have been in america? that is not a cessation of manufacturing, but you are right. jonathan: there is a lot on credit. >> there are a lot on credit. but there has been a disappointing replacement of machinery which means that manufacturers are suffering somewhat, but most people are

looking for new experiences. jonathan: the sharp divergence in monetary policy -- we aren't going to get it, are we? >> what's interesting is if you were to look at the economic growth and inflation in u.s. and europe, people argue that the economies are very different. but if they were different they wouldn't be showing up. that would eventually drive divergence in the long and. jonathan: we will talk about that later. tim heyward will stay with us. coming up, the market opens. futures a little bit lower, coming off a three-day winning streak. 50 futures down by 45 -- 50 ftse futures down. ♪

jonathan: good morning. welcome back to on the move. moments away from the start of european trading. etiquette to your morning brief -- let's get straight to your morning reef. the bank of japan broadened stimulus. kuroda stopped short when all of that increase. china decay as chinese prophecy prices. warned of disturbing deterioration. crew to back down. it gets slapped back down desk crude back down -- crude back down. 20 seconds away from the opening here in london. crude, rent, $37 a barrel.

by 4100 futures down points. let's cross over to caroline hyde for your market open. caroline: it might be a few heavy heads. a hangover-ish on the stock market. euphoria that we saw in the stock market after the finally federal reserve did hike, we are now seeing a downturn. -- theted states report united states now erasing all of their post hike gains. at the moment. where expecting germany to turn in. clearly risk aversion coming into the stock market at the moment. we fail to get festive cheer coming out of japan. not enough to drive up hikes. we saw volatile trading in japan.