,onathan: welcome to davos switzerland. it is day two of the world economic forum. asian stocks tumble. the rubles lies below 84 to the dollar as brent continues its fall. draghi's dilemma. how will the oil price play into this afternoon's rate decision? christine lagarde weighs in on the recent news. that is next right here on bloomberg tv. ♪ " live from"the pulse the world economic forum in davos. francine lacqua has been moderating a panel. she will join us very soon and

bring an interview with the head of the imf, christine lagarde, very shortly. day two of davos. i don't know what day it is of the selloff. guy: feels like a long one and is not as if we are getting much of a bounce in europe. we earlier did see a little bit of green on the screen. we are hanging on by our fingertips. the stoxx 600 is only up by .1%. the dax now dipping back into negative territory. hanging on as well. the selloff is beginning to gather more pace right now. we're off our earlier highs and done in the week. today a similar theme indeed. the shanghai composite,the day down over 3%. tokyo suffering as well. one factor, we continue to see weakness in oil contracts. brent down by 2%.

a criticale, move. weakness in the ruble, damage being done to the russian economy by this oil story. as we head into the draghi announcement and press conference that is where euro -dollar is trading -- 1.0896. let's get you up to date. nejra: european equities have stabilize this morning as most major indices trading higher, despite shares in asia continuing to sell off overnight. shares in japanese electronics -- has jumped in tokyo trade. for sharp confirmed it has spoken to several companies about its lcd business. the yen has advanced after policymakers quelled speculation

the bank of japan is preparing to boost the stimulus. prime minister abe said it was "too early to make a decision on the boj's reaction -- to foreign-exchange moves." back to davos. jonathan: of course it is ecb decision day, the first since merrier draghi disappointed markets last month. joining me is bloomberg's senior correspondent, jeff black. december, a disappointed for the markets. the ecb all lined up afterwards as of the markets got it wrong. did the ecb get it right? jeff: they got it wrong in the sense they played the markets -- blamed the markets. the communication in december was a bit of a mess. they have tried to be careful since then what they say to be avoiding raising expectations this time. today, there's no action expected.

navigate how did he today given what is happening in markets in the real economy? can he reconcile the two things and how does he look ahead to the rest of the year? do they keep the ammunition there? jeff: the problem is that the ecb target's headline inflation and inflation is going the wrong way for the ecb. so, they cannot afford to give the impression they are pushing it embassy out into the future and that we will attain their target sometime maybe end of 2017, maybe 2018. that is simply a credibility disaster for them. so, they have to really make it look like they are ready to go. then it's a judgment call about how serious this oil slip is. jonathan: i've asked the question of guess a couple of times -- if you target headline inflation, you'd knowledge it is a problem because of what is happening with the commodity

markets, is it really bonds you should be buying? should you go to the commodity markets. if you think that is ridiculous, then why targeted to begin with? jeff: there is a debate. other central banks are doing this as well. earlier this week, the ri was presented as i suggested they need to think about more flexibility in which measure of inflation they target. so, there's something going on in this area. ecb views we cannot simpl, drop our mandate. ourthan: jeff black, senior bloomberg economics correspondent. let's head over to francine lacqua who's standing by with a special guest. over to you. francine: thank you so much. i'm very pleased to say i am joined by christine lagarde,

managing director of the imf. we have to talk about volatility in china but the last towo hours, you have been nominated for a second term as imf head. will you go for a second term? let me think the countries who nominated me. i'm very honored and flattered. i said it was up for two membership to decide. -- to the membership to decide. i have to wait for other members. members in the institution. the jury is out. pleased toly t see china, france, u.k. and germany coming in. francine: we also have a great discussion on china and volatility. are you expecting more volatility in 2016? there will be:

volatility in 2016. we have three major downside risks on the horizon, one of which is the massive chinese transition to a new economy, which isl be bumpy welcome. moving from a high low growth rate to a lower growth rate, from being industry driven to service driven. all of that will entail a degree of volatility necessarily. commodity prices is also going to entail a degree of volatilities, and the acer can's monetary policies around the world and changes coming up in 2016 will entail volatility, yes. francine: the risk of deflation and how central banks deal with that. madame lagarde: the biggest concern is to make sure that the global economy actually is on track to provide enough growth to respond to the needs of those people who are looking for jobs, those people expecting more sustainable growth. that is the big concern. francine: and you think we will

achieve that? madame lagarde: everybody has to to their job -- do their job. we think policymakers have to cooperate more and they have to really focus on the right set of policies that will improve the global situation as well as their own domestic positions. francine: thank you so much for your time and congratulations on the nomination. jon, we headed back to you and i will run to the studio. madame lagarde has a lot of appointments to get to. jonathan: great to hear from you and madame lagarde. stay with "the pulse." we are live from the world economic forum. first up, chinese markets. three days after it announced the slowest growth since 1990 we speak to -- ceo in a couple minutes time. coming up at 9:30 it is renault's turn.

down 20% after it announced recalls and changes to its emissions systems amidst concerns of a vw scandal. we bring you a live interview with the governor of the reserve bank of india following the yuan's depreciation. is he worried about the stability of the rupee? all of that coming from davos, switzerland. good morning. ♪

jonathan: good morning. this is bloomberg tv's "the pulse." day two of the world economic forum. let's get your business flash. nejra: barclays is said to have launched a fresh round of job cuts. sources tell bloomberg that 1000 positions will go around the world as it quits, australia, korea, malaysia and taiwan. been seeking way to restore investor confidence. china's biggest growth -- has overtaken hsbc as the world's top arranger for emerging market debt securities. equivalent of $53 billion of offerings with

maturities of 18 months or more compared to hsbc's $46.2 billion. the chairman of north america's biggest pipeline operator has said this is the toughest market he has ever seen. cited chicken little the sky jon.lling -- back to you, jonathan: i'm pleased to say we are going to talk china now. they published slowing growth for its lowest rate for at least 25 years. how will the world adjust? fangwith me in davos is xin.ang the markets are pricing in a really bad scenario for china. the guests in davos, switzerland, have a cautious optimism. what is the reality is far issue or concert? reality is that the

stock market is extremely volatile from the summer to now, before the summer to the summer to know. the media and investors and the public are very focused on the volatilities of the markets. so, see that as something inevitable and the volatility seems to be really grappling the hetention rather than t fundamentals of the economy. and that is what i think and hoping at davos when the dialogues are longer than we can talk about more about the fundamentals. jonathan: you talked about the stock market are you said it had decoupled from the real economy. i looked at your stock price this year. your down about 20%. ms. xin: you are good. jonathan: i want to ask whether your stock prices decoupled from the performance of your company? ms. xin: yes. you think about it, and the realistic economy when we are anning -- we are in

high-growth economy, the stock price goes up. why is it when interest rates are coming down in china, monetary easing is there. that the stock price is not performing. ad i sit in chinas as developer, i see that when the banks' interest rate goes down, when the debt market is rising there's plenty of money out there and real estate, the building asset price actually is going up. but is not translating to the stock price. the stock price is having a huge discount to the asset price which means the stock price is reflecting the market segment, ublic sentiment. in that is negative on china. and it is lot to do with volatility. jonathan: what is your message to investors? you see the stock price lower. do you buy back the start?

ms. xin: i have been buying back the start. i continue to buy back the stocks. i continue to believe in the story, i continue to believe in the company and i continue to think that in the next couple of years as long as the monetary easing, the credit easing continue, that the asset price -- no other way but to go up. i continue to tell investors teh sam -- the same story. but i think what the market is expected is that the with aakers to come out much clearer communication on exactly what is going through the discussions, the strategies. which i just finished a panel bebloomberg that is seem to crying out on the communication. i would agree that markets -- have come down when the policymakers communicate. commercialhe property sector.

talk to me about the performance of it. i was looking at first half net income, lasher, it was slightly lower. has the second half improved? ms. xin: we have gone through a transition just like the chinese economy. so, what happened is we were a very typical investment driven company, which is we buy the piece of land and build the buildings as an investment. then sell it. three years ago we made a transition that we will no longer be doing the investment driven model, which is to sell property. rather we would hold property and lease it, transitioning into the consumption economy. seeing in terms of profit is that we need to sell property, the profit is much higher than you leave the property just taking the rent. most investors understand the transition of the business model. but, of course, if you just read the headline news, it seems to

be scary and say, why aren't companies -- but the assets are going so much faster. jonathan: there are a lot of scary stories around overcapacity. issues of dnon't see overcapacity in beijing and shanghai. i rent office space every day. we have buildings coming on the market almost every other month. there has not been a single building that came on the market that is sitting there empty. all the new space has been taken up. the new demand comes from internet companies, mobile companies, you know, very much technology companies. while we see that the traditional economy is keeping the pace, not increasing hugely, but by and large, these buildings are very quickly taken up. scary scenario being

painted by a lot of people in the market, a lot of investors. do you see that demand for commercial property continuing into 2016? ms. xin: i think this year should be relatively good. just like last year, we had a good technology driven growth in andes like beijing shanghai. we continue to see that. i have not seen much of a change in demand composition. if anything, i think the asset price will continue to go up because interest rates continue to come down. so much money, so much liquidity in the system. mentionedyou have outside of china. i wonder whether the opportunities for your company are outside of china. ms. xin: i don't know. what do you think? we are very focused in china. anyave not really done projects outside of china. i think for the for seeable future we still see ourselves. much focused in china. jonathan: china, by or so? -- buy o r sell?

ms. xin: i'm buying. jonathan: thank you for joining us on bloomberg tv. earlier, we set out to answer the question of the year -- where was china heading? francine lacqua brings us the take away after the short break. ♪

let me think the countries that have nominated me. i am very honored, very flattered. and so i was prepared to consider running for a second term but that is up to the membership to decide. christine lagarde, managing director of the imf. we had a great conversation. we were talking about china. as we are talking about china, there is all this breaking news on france and england and china supporting lagarde for a second term. i asked her and she said i want to talk about china. then she came back on air and told us she would be prepared to consider running if she had enough support. manyhan: you and i had so conversations in the last 44 hours about this detachment of financial markets.

and this is what you called cautious optimism. you wonder whether the truth is somewhere in between. francine: this year, if i had to optimistic, i'm less than that cautious optimism we are talking about. if you look at what we talked about on china, gary cohn put it very well. yeah, china has issues. we will get through them but it will be a challenge. we were talking with regulators and the fact that there may be a difference between the real economy and the markets. but that is because a lot of policymakers, including the pboc, aren't talking that transparent message as much as the markets would like to hea. r. do you thinksays, chinese regulators are scary? have you been looking at western regulators? misplace that confidence is. we have seen some badly miscommunicated issue over the

last several months, particularly in august. if the market and very educated people do not understand where they are going with the currency, the we have got a problem. francine: there was one regulator, he was very funny. very charming. he said, i'm here because i want to show we are much more transparent. i also asked the question that when you look at the stock market regulator and china, we are hearing the exodus. they cannot find the staff. people are struggling to contain this comp looks market. it's time. i think they are confident but -- let's listen to what madame lagarde said on volatility. madame lagarde: in a way, having a certain degree of volatility is all right and it is compatible with this market driven principles that china is veering to. government can manage volatility, if volatility becomes excessive, yes, intervening is legitimate.

francine: actually we talked a lot about the yuan and devaluation. you had one regulator, the head of a big state owned chinese bank are saying, our policies fluctuate. and the market's perception is that the yuan will be depreciated. it goes to the fact that either they need to communicate better make a choice and whether they are free-floating or continue -- jonathan: i think the panelists the regulard to appeared in the sense that when the market drops and you have volatility and you suspend ipo's, you make it almost unpatriotic to be selling. i think you have big issues, especially when you try to make the shift to a freer market economy. i think they were too kind to the regulator. francine: i agree and the sense that they could have been a little bit punchier but actually once we had a conversation before it started. then everybody was saying it is

so complex and he is so highly regarded and they wanted to make sure he kept his job. that would be a ferriair assessment of the reality of it. jonathan: more after this break from davos. ♪

francine: welcome to "the pulse" live from davos, switzerland. it is day two. let's get to the bloomberg first word news. nejra: thanks. european equities have given up earlier gains with the stoxx 600 trading flat. after shares in asia continue to selloff overnight as the u.s. stock market fell. shares in sharp have jumped in tokyo trade. it offered $5.1 billion for a

struggling company. a spokesperson for sharp says it is in talks about it liquid crystal display but refused to comment on discussions. advanced after policymakers quelled speculation the bank of japan is preparing to boost the stimulus next week. and aide to prime minister abe says it was "too early." that is your bloomberg first word news. what is me show you happening with european equity markets, showing you the board. we are the flat. that is the best description of the situation. u.s. fair value pointed to the s&p opening down .7%. one stock in germany is deutsche bank. the quarterly numbers not exactly great. this is the year to date -- down 24%. down 10% today. elsewhere, we have seen the shanghai composite visiting --

finishing in negative territory . the kremlin saying within the last few minutes the move we have seen on the ruvell this morning is not a -- on the ruble this morning is not a crash. in advance of mariota draghi's draghin, -- mario decision the euro-dollar trading at 1.0897. francine: nissan and renault shares announced it was recalling -- shares are down after it announced a recall. renault is planning to recall several thousand vehicles. the company has lost 3 billion raud investigators search three sites in france. the ceo joins us.

we have not heard such great news out of your company. should investors believe? you have not cheated categorically. one, butd it since day people are prudent because there have been precedents with other companies. we understand that. except that we need to establish the facts because investors decide on facts. we said from the beginning, no cheating. beinge norms are respected. there is an area that is not regulated, which is the real driving emission. and we are opening there will be a position from the european commission on that. so at the end of the day, we limit this confusion, are you in the norm, or in this area which is not normalized? all our cars follow these -- and cheating is a completely

different issue. i understand investors' preoccupation with maybe there is that. we said no. francine: but you started an internal investigation -- >> yeah, yeah. the government is checking and the government officially said there is no cheating. you're confident that nothing happened on to your watch. nissan was also investigating some cars. have they been cleared? >> all cars are being investigated. all cars are being investigated. and you are going to the same problem that in real driving performance or emissions you will see multiple of the emissions that you find on testing. for all commenters, the question is what is acceptable? by the way, we are talking about emissions. diesel.alking about francine: what is acceptable?

>> that is not for me to say. the regulators say. let's not forget the industry you have -- electric cars, you many others, technologies. here we are talking about one specific emission on one technology. on this particular emission and technology, the norms are being respected. outside the norms, we probably need a rule. francine: how long do you expect this to hang over your share price? >> the share price is more about the unknown. people have questions. francine: when will that stop? >> i think within the next weeks when more of the data will come and confirmation of everything we are saying we have been saying -- we are saying we take any risk to tell you there is no cheating. francine: why? because the job would be at risk, the credibility? >> the whoele company would be t risk.

when you take your time to check it and when you take it -- you check it, there is an announcement. francine: what has been the most frequent question by shareholders? >> is there any liability on the company? that is the main question. why the share price go down because people imagine there will be liability because they are cheating. are reassured there is no liability, but the problem is more about expectation in areas which are not normalized, things will light up. francine: they announced the deal about voting rights. france has not kept its promise to reduce its stake in renault. >> i don't know. you need to estimate mr. of economy. i'm not worried because there is a commitment and there is no reason not to believe this commitment. understanding need to select the timing. francine: you also promised on

nissan you would hit an 8% global market share. >> we have a midterm plan which of fiscal year 2016. you're very fast. you have to wait a little bit. we have announced half year financial result at 7% operating margin, and we think it should be better than the share. yes, we are on track but it is too early to announce the scorecard. the game is not finished. francine:, i want to go back to this concern about liabilities concern about whether i gubuy oe of your cars or not. will that impact your market share? >> no. we are not seeing an impact on our sales. not a much the sales, the orders on the cars are totally normal. francine: give us a sense of the mood in davos? we talk about china and oil and russia.

iran coming back in the markets. these are crucial markers for your industry. >> obviously, there is a lot of talk about china, a lot of talk about iran and what is going on in russia and brazil. when davos meet and the stock market is going down, this becomes the main topic no matter , shook as we want to have on the larger, people come back -- no matter how much focus we want to have on the long-term, people come back. francine: you said you want to be in iran. >> we have been a partner of the iranian market for a long time. renault has always stuck to iran. we have a lot of plants. we always look, is it a green light? we moved from the red light to an orange light. now it is orange, not green.

francine: with partnerships, are you in negotiations? >> we have been working with partners for a long time. it is reviving this partnership. we don't want to go in a situation where we do not know what is a legal frame, because there are political agreements signed. but they need to follow with legal agreements. we need to make sure the legal frame work is cleaned. francine: the concern is going to quick? >> exactly. you discover yourself taken into a legal battle with, or with the handicap and markets you are not suspecting. we do not want this. we are ready. we know what we want to do. we are just waiting for the light to go from orange to green. francine: do you want a fully fledged manufacturing industry? will you make cars that? >> we think this one million car market will move very quickly to double the level where it is today because this market has been held back for so many years, with so many constraints.

we do not want to good should to it by shipping cars. we want to build locally cars. francine: is it any different from what you had in the past? >> much more massive. francine: how much bigger? scale, more platforms, more partnerships, more technology. we will go full-fledged. francine: you're saying it is very difficult to look at world growth when there is turmoil on the markets but how concerned are you about russia? we look at deflation, the price of oil. russia is a huge market for the car industry. >> exactly. unfortunately for 2016, we will see another decline on the russian market. after 45% decline for the last two years. so, the situation is really not very bad, not very good. now, carmakers are preparing themselves. some of them just let the -- left the country. others, like us, believe there will be recovery in russia. we do not know when.

what we're doing is localizing our technology, refining our plans, making sure we are working on quality, etc., for the recovery to come, so we can be much more competitive. francine: thank you so much for your time. i know we have breaking news out of russia. yesterday we had a record low on the ruble. what is it now? guy: this time related to the murder. we are getting details from a u.k. judge. probably poisoned under fsb direction and putin probably approves the murder. inbably -- "probably" quotations. that will play into the geopolitical fielding could have sanction into the story. it has been a tough day for the russian ruble today. that's a two day chart. sharpncine says, a

weakening of the ruble which the kremlin says does not represent a crash. y will continue monitoring that breaking news. we have plenty more coming up from davos. next, we will speak to the president and ceo of canadian fund manager -- coming up next from day two from the world economic forum 2016. ♪

erik: welcome to "the pulse." francine lacqua has gone up to chase him newsmakers. i am fortunate to have one with me. he is the chief executive ,fficer of the caisse de depot one of the world's largest investors, the second largest pension fund in canada with $250 billion under management. good morning. nice to see you. we live in turbulent times. so, here's what everybody wants to know. se has one hundred $60 billion invested in public markets, mostly bonds and stocks. buying, selling or trying to look beyond what we are dealing with now? michael: there is a lot of

uncertainty, volatility. that is the issue at the moment. but honestly, i do not think that's "the" issue in our minds. i think "the" issue is that we have to get past, we got to get focused on the real economy. is fixation wek th have had since the financial crisis with monetary policy on the relationship between monetary policy and the financial markets. on, are you saying the fed is to blame for this? michael: not at all. i think the monetary authorities did a great job coming out of 2008. i think they operated at the highest level. they did an absolutely great job. that being said, monetary policy has run its course. now the focus has to be on the real economy. the focus has to be on putting in place a strategy for growth. that's different than what monetary policy has been doing. monetary policy has been focused

on increasing asset prices. former policymaker in your right now. michael: a bit. what we need is growth and public policy focused on growth. that means is structural, pursuing technological change. but most important, i think that involves investing for growth. erik: that is important because you need to make money. that is the job of the pension fund manager. you wanrned almost a year ago that stock markets were running out of gas, and you have been warning that returns were be harder and harder to generate. how are you positioned? did you come in risk on a risk off? we are pretty defensive investor and we have been for a while now and that has served us well. we are entering without -- erik: becoming more defensive? michael: continuing our posture. we have a focused strategy focused on a few things. one, investing in businesses and

project and really states where we think we can bring some operational value and create value. -- in projects and real estate. we're focused on investing in places where we think we can find economic growth. and for us, that means the united states. it means emerging markets that are taking on the challenge of structural reform. countries like mexico, india, hopefully columbia. these are places that are taking on that challenge of doing the structural reforms and the investments they need to do to create growth by investing in infrastructure and investing in education at what those countries are doing, the u.s. is doing to some degree, the u.s. needs to do more, we need to do more in canada, it is all about engaging in a set of policies -- policy,etary government policies -- that are going to give these economies the opportunity to grow more. erik: how do you do that with a 69 cent dollar?

how do you compete for real assets globally? term investorlong from our perspective, yes, we need to be conscious of where the currency is and yes, that does influence our decision-making. erik: the price you buy at does determine the return. michael: it is not something that changes the underlying strategy of what we are doing from investment point of view because what we're doing is looking for assets we can hold and create value with over the long-term. it's a factor but not something that changes fundamentally the strategy. allocating more now, this year in 2016, to alternatives like hedge funds, real estate? michael: not hedge funds. erik: why not? michael: we are long term investor, so we do not think about 2016. we think about what is the world going to be like from 2016 to

2019. look but your pensioners at your returns every year. michael: over the four year period, are we we going to look for opportunities to increase our exposure to real estate, to infrastructure in particular, to private equities? the answer is yes. not as a longer-term investor we are not in a situation where we are saying oh, completely risk off now. we are being selective and prudent and how we do it, prudent and how we structure the deal. r focus is we are going to invest in places where we think we can find growth because growth is the challenge the world is facing. erik: before we wrap up, is now a time to be shopping for bargains? michael: i think we are starting to feel opportunistic because we may have some ways to go -- there may be some rock 'n roll. there will be rock 'n roll in the markets over the next while but -- erik: meaning?

michael: if i knew that, i would be a billionaire. i think there is going to be some rock 'n roll. it does require prudence. at the end of the day, with the focus that governments need to have on building growth, do we think the world is falling apart? do we think this is 2008 all over again? we do not. erik: there you have it. thank you very much. great to see you. he talks about the what if it being a billionaire. he will have to settle for overseeing $250 billion. that is the chief executive officer of caisse de depot. excuse me. let's leave it at the caisse. more from the world economic forum in davos, switzerland. , we will speak to the governor of the reserve bank of india following the fed hike in december, what does he think about the stability of the ruby? stay with us -- the stability of the rupee?

stay with us. ♪

there is no basis for china to depreciate the currency because of you look at the fundamentals of the economy, we still have a very sizable surplus. growing at 6.5%. this is not the combination for a depreciation of the currency. francine: that was fang mr.

xinghai, vice chairman of the chinese regulatory commission. it was all about china. tom si is with me. in this panel, we try to figure out where growth is going. we talked about the fed. but on the regulation, there seems to be a market difference. so, the market is pricing in a yuan devaluation which probably makes -- which policymakers say they will not do. tom: the communication is interesting. everybody talks there book. even madame lagarde talks her book. what i found so interesting is very much on topic. and i thought the regulation china, he was talking his book, but he was very clear 0-- no we don't need a lecture. francine: when i asked him about transparency, he said, i'm on

your panel. tom: jonathan spence has 800 pages on transparency in china. francine: we have a great lineup coming up. th highlight would bee the governor. from the university of chicago and the public service -- in inda. -- in india. to bring his academic ability to where we are with the second day of market volatility. francine: and structural reforms in europe and elsewhere. tom: the broader picture with butessor rajan is important i would emphasize, folks, this idea of markets ok, until an hour and a half ago. you stepped on the podium with madame lagarde, and the markets fell apart. it is your fault. francine: she did say she would consider a second term. we'll also have that conversation.

"surveillance" is up next. on bloomberg radio, it is the first word. for our viewers, "surveillance". we talk about the threat of terrorism as we bring you day to hear at the world economic forum. -- day two at the world economic forum. ♪

francine: asian stocks tumble. europe stabilizes. u.s. futures trade lower as brent continues its fall. how will the oil price play into this afternoon's ecb rate decision? and christine lagarde weighs in on the recent turmoil. >> in a way, having a summary of volatility is all right, and it is compatible with this market-driven principle that china is enduring.