"onthan: welcome to on th the move." we are counting down to the european open. i'm guy johnson alongside jonathan ferro. jonathan: it's not often deutsche bank has to come out and say -- that is executive what has happened. deutsche bank has to reassure investors after the death gets pummeled. guy: are the banks feeling the pain? that is another question we need to ask. we will be talking about what happened to japan overnight, the tenure going negative. that is a significant move. stocks down over 5%, the yen has

been surging. jonathan: and investors are thinking risk.we go to italy with an exclusive interview with the italian finance minister, and his peripheral risk that is back on the table. ten year yields exceptionally low on an historical basis. you're starting to see that divergence. guy: yeah. bonds spread out not as much as the financial crisis, that something we need to think about. here's caroline hyde with the bloomberg first word. caroline: thank you. deutsche bank has become the largest lender in four years to compel to reassure investors and employees that it has enough cash to pay debt. the ceo has failed to generate confidence in his plan to cut costs. d has more than double this year. its share price plans yesterday.

writers threw bricks that police that hong kong at one of the busiest subway stations. the protest came as police closed down illegal food sources. they fired warning shots in a bid to contain protesters. italy's finance minister says the expected decline of the public debt is here, marking a turnaround for the euro region's economy. changing financial markets are skeptical. erdogan spoke at an exclusive interview with john nicholsb y. >> given real growth, and given a bit more inflation, we will see dynamics of debt accelerating downward, and this will change the market. caroline: globally is, 24 hours a day -- global news, 24 hours a day. guy. guy: thank you.

what a day it was yesterday. markets around the world being battered. how are we going to open this tuesday morning? let me take you to the bloomberg function. this is the fair value calculation, and the dax looks like it will have another difficult, difficult day. london looks flat. euro stocks down by around 6/10 of 1%. jonathan: switch at the board and go straight to the bond market, japanese 10 year yield subzero, negative yield. there it is. -0.03%, 10 year yield at 1.69%, the lowest in about a year. dollar-yen 121, posted decision to take yields negative. a stronger japanese yen amongst all this risk aversion.

bottom of the board, gold, eigh th straight day of games. guy: the bond markets are looking nervous. ok, let's go to our top story. let's think about deutsche bank and what is going on. it became the largest lender in four years to reassure investors and employees that it has enough cash to pay its debt. this comes as european financials soaring, the riskiest european bank debt around 8%. all those gains have been wiped out, even after interest payments. let's bring in simon ballard, well.rris is here as simon, was a mistake for deutsche to make this statement? has it focused attention rather than reassure? >> certainly it has exacerbated the situation. iny kept it to themselves

the short-term and we wouldn't have seen this extent to selloff, but focusing on then, it's triggered a greater selloff. at the end of the day, we have to realize that it was designed default,ithout driving but now in the context of china and the energy market, the u.s. going to another rate rise, people are wondering just how close to the edge you can get. how much further will you have to fall? jonathan: what we are doing here's reassessing, repricing risk -- my question is but what happened if they did fail? moveu'd have a seismic across the financial market. yeah. it would be very ugly. jonathan: [laughter] i raise the question because it was designed to fail, and you

wonder if we have appreciated the consequences of the fail. dan? >> if you want to look at what has happened, in particular with the prices, it's -- what you are seeing is a downgrade in expectations. it was a big selloff that we had, and we haven't seen improved valuations. normally with that kind of decline, it would look cheap, but it doesn't, because earning expectations are falling as well. that is the context we are in, where the sellout is different. it was concern, risk aversion. but the earnings look solid and now we are asking questions about the earnings. guy: when i render through this sheet that deutsche hands out a couple weeks ago, every single operating division within the investment bank had a bracket performed i.e had negatively year on year. have they created a situation where it is impossible for deutsche to make money? >> well, it is certainly a different world. for will sectors, it would work,

but it doesn't work for financials today because we are in such a different world in terms of the regulatory landscape oand monetary policy. it is quite a different world. it's not clear how the banks need to be structured, to how the regulators will let them make money. jonathan: simon ballard came on to talk about the consequences -- bringing up the equity, deutsche bank, the share price less than half of book value, 1/3 of the liquidated value. what are we discounting here? you look at the book value and where these companies are trading, what are we discounting? >> it seems to me to be an overreaction. 2008, atmpare it to that point you have a real economic imbalance that triggered the financial market meltdown. here we are getting a lot of stress of the financial markets, but if you look behind it and see, where do i see -- and say,

where do i see the imbalance, you don't. i don't think it is commence or it to a we have now. yes, we see this in stability, yes, we think this nervousness will persist, but we don't see it as a signal of things to come the way some people do. jonathanguy: give me a sense ofg this market is. >> from an investor's point of view, it is incredibly important in terms of the hunt for yield as we move further and further toward negative rates. you have to go further and further out of your comfort zone without necessarily knowing what the underlying implications are, should the market turn. it has become a very sizable, from trading perspective, but one of the questions now is, given a liquidity of the market, there is still some liquidity in the primary market, from a regulatory perspective.

the investment banks are no longer there, no longer able to step forward and take down the excess inventory, should the market become better sellers of these riskier assets, which is exacerbating some of the price moves we are seeing. coming into 2016, financials was supposed to be one of the positive plays. we were supposed to see margin improvements, global growth pick up. that all of a sudden we have which energy, the fed isn't going full normalization mode after all, and the margins are looking quite as robust, so we focus on the back and the capital structure, and it is not quite valued where we think it had been. guy: we are going to come back to this later on. morris.llard, dan minutes, in about 15 we will be talking to goldman sachs is just carried about where commodities are headed next. brent crude at $43 per barrel. do not miss that. japan., a down day for

stocks fall off a cliff. we're in tokyo to take you through all of the action. ♪

guy: welcome back. let's get you caught up. here is caroline hyde with the bloomberg business flash. caroline: thank you. pemex has named a new ceo. gonzales is a harvard trained economist and former deputy finance minister. the former ceo resigned after he failed to reverse falling output, and presided over 12 straight quarterly losses. 150 oil and gas companies tracked by energy consultant ihs may go dead. ihs says a further shakeout would have to stimulate deals that had been on hold, because

buyers and sellers have disagreed on asset value. the world's largest producer of platinum says it will place all expansion projects on hold, as it expects prices to remain low. anglo-american platinum has written down mines and operation. we have pretty much placed all of our growth capital projects on hold until 2017. one of the things we have is the one project in execution. we took a look at that, at the cash outflow, and said in the current environment, given the , the market does need additional nuance. we said we will put it on hold. caroline: that is your bloomberg business flash. jonathan: thanks, caroline. the global stock rout continued this morning in asia. huge moves in japan. today we are seeing the topics in the nikkei fall by more than

9%. ae yield dropped below zero, first ever for a g-7 nation. and the yen surged to 2014 high. let's get out to tokyo now to make sense of it all. we are joined by bloomberg news japan managing editor, brian fowler. try and make sense of it for us. the hardest hit today has got to be equities. >> yeah. it'kind of interestings -- it's kind of interesting, we just had the secretary come out, emphasizing that jgbs were being bought as a haven, and their financial system is stable. that shows you that there is concern in the government about what happened today. traders are saying it was pretty much like panicked conditions as haven assets were bought and stocks were sold across the board. we saw that banks especially led the way down, and they were kind of caught in a perfect storm between the strong yen and

concerns about deutsche bank, then of course the residual effects of the boj's negative interest rate policy. jonathan: is there any chance about an emergency meeting? dollar-yen, we are watching it carefully. how do policymakers react? i can tell you we are on watch for any sort of concerted action. we are talking about what the verbiage might be, maybe checking rates, which may come out at some point. we are definitely standing by. offave been told by some record that no meetings are planned, although maybe they are trying to mislead us, we don't know. all the officials are concerned, i think. moves were exacerbated by the fact that somebody markets in asia were closed, and japan was left to defend its

position by itself. guy: brian, how has this been taken in japan, given that the post boj decision -- as guy, is the market pushing back against credibility or is it been taking as the wrong time and wrong place, a lot of money pushing into the japanese yen? well, there is definitely truth in both those arguments. the things happening in china how they are, and with global markets looking unstable, there wasn't a lot you can expect the boj to accomplish without policy. at the same time, part of the selloff in japanese banks was due to concerns that there could yen waser -- the strong against all expectation, well below the range we thought japanese officials wanted.

for thethe reason falloff is there concern -- is their concern about getting the first step, seeking to deepen that, to take the negative even further. i think that is a real concern. great to have you join us from tokyo, thank you very much. let's welcome in daniel morris. dan, i want to pick up ryan's point. wereive rates in japan taken instantly as a negative for financial stocks, a negative blanket bottom line. that has been the story in europe as well. you just wonder whether the way it has played out in japan will set aside for monetary policy decisions from the ecb in march. do they need to look at that and decide -- we might be done with negative rates, maybe we should focus on the size and duration of qe? >> a couple issues. on one hand, i think that is

what they would like to do, it is whether or not they can. the ecb has more leverage and it is an easier decision to move to agreeve rates, though i one hand might be the better option. but i think it should give them pods. -- give them pause. i think it might be the thing to keep in mind, and i do agree that as i go further into negative rates, despite good intentions, it doesn't seem -- strategy that a we will do this and this to mitigate the effect -- is there's something they can do to help the banks out? we had special lending for the banking sector for quite some time in europe. what is interesting is that you are not seeing stress on the liquidity side for the financials, so how does drug you read that? -- how does draghi read that? atif you step back and look

what their objectives are, in terms of growth and inflation, on the growth side you can argue that things aren't that bad, 1.6% for the eurozone is the trend. inflation, if you expect that to pick up once you have the role of oil, the problems are going to solve themselves. we don't necessarily want the central banks doing more for a problem that i would question is there. jonathan: one other option would be to move to the multitiered deposit rate. if it worked -- [laughter] jonathan: another question i want to ask is the effect on bond markets. clearly, an credible impact on bond markets. $7 trillion in sovereign debt, negative yields, 1/3 of that in the eurozone. dan, these are incredibly abnormal markets. what does that bond market tell you? >> it's telling us that central

banks are creating a lot of distortions with fixed income markets. had anhand, if we objective or a sense that we are going to normalize -- you go back to what we might hear from yellen this week, when we had that first hike, things were starting to move back to a world that we are familiar with. now we are waylaid off that path, but still feeling that direction, we will probably be more company. you would feel that we are not abandoning it. --this point, it is yellen it has caused this latest amount of turbulence, because people have lost their objective perspective they had for monetary policy in the u.s. guy: we will wrap it up there. thank you very much. dan morris will stay with us. european markets are solid. click the future box and you get the fair value calculation.

what you are seeing is that we are starting to turn green. the bid may be back on the table, at the cac is still down, and we are starting to see european equity futures begin to turn. jonathan: eight minutes away from the open. let's have a look at the other asset classes. the bond market is the big headline overnight in asia, jgb negative, the first in history. there we are. 3%.year yield, -.0 maybe things are firming up in the equity market, but it is still very much risk off. 115.27.en, gold was performing well. guy: i just wonder after such a big down day -- it's

unsurprising we see people coming in, looking to pick up stocks that have been so badly battered. by the real following, they will be plenty of other stocks dragged along for the ride, and will definitely take us lower. let's talk a little bit about those stocks and what has been happening over the last 24 hours with caroline hyde. caroline: all eyes on deutsche bank, of course. will we see any reprieve from the 9.5% selloff yesterday? they stepped into the market and reassured for the first time in four years, not only reassuring their investors but also reassure their own employees that they have enough money to be able to repay the coupons, to pay back the debt on there in subordinated debt. i want to show you another great function on bloomberg. you can see how much we saw in terms of volatility. you the biggest

lender deutsche bank shares since 2009, the lowest since 1992. this is the lowest on record for the deutsche bank overall equity. phenomenal 2 billion euros wiped out in one day yesterday. will we see any stabilization? so far, things are unchanged despite the reassurance. let's have a look at another one. after seven years at the helm, thae chief of alpha -- we're seeing changes at the top. helm of thethe overall banking unit taking over in the interim, but they do want to find a permanent replacement as soon as possible after michael wolff heads for the exit. so keep an eye on that stock.

3% to 4% are some of the calls i'm seeing. touey results coming in and showing strength, a great first quarter, sales up 5%. yes they had their seasonal loss, but the big challenge for this year is still to come. it is all about the demand for some vacations. this is why we are seeing volatility on the share price after those terror attacks that affected their key markets. european equity markets firming into the open. that is what we are looking at this stage, but after such a battering yesterday, it may be unsurprising that it is what we will see this morning. they could step in and pick up some of the stock. jonathan: interesting time to watch the ceo step down. on, morning, hsbc rumbles and the headquarters remains in

london. you wonder if this is the time to get rid of all the uncertainty. a lot to discuss ahead of the open. four minutes away, we're higher going into the open. ♪

jonathan: hello and welcome to "on the move." moments away from the open this tuesday morning. guy johnson has your morning brief. guy: jitters mounting at deutsche bank as the cost of protecting germany's biggest lender soars. the ceo has reassured shareholders and employees that it can cover obligations. in asia, the nikkei closed down more than 5%. the yield drop below zero for the first time, never havseen a g7 country do that. erdogan tells us exclusively that the market is about to change. we have been firming into the

market open this morning. it was such a brutal session yesterday, jon, unsurprising maybe. jonathan: maybe. but we still see signs of risk aversion in the bond market. apanese yields deflate, much stronger japanese yen. you wonder how long it will last. let's cross over to caroline hyde. caroline: you talk about a brutal session yesterday, and this reminds us that we saw the cac closed down, the dax down 3.3%, 300 million euros wiped out of market valuation yesterday. but we are going to see a tiny bit of a bounceback, up 1/10 of a percent at the moment. clearly some optimism potentially creeping back in. is it time to buy? how we hitting that level of low people want to get back? we have seen the risk aversion trade really playing into that, we see the japanese yen continuing to be in vogue. -- money ishe back

going into the haven across asia. a painful day in asia, japanese stocks down by more than 5%. interestingly, keep an eye on gold. that is the other haven, just coming off highs, still at 1 186. interestingly, look at oil. diverging from the stock market, maybe this is what is starting to leave the equity market higher, and we know that that maybe thatbe you -- is why we are seeing a little bit of intensifying. the euro is being seen as a bit of a haven trade. let's look at the debt market. japanese bonds, money pouring in, yields going negative. we are negative, unprecedented

for a g7 country. tonwhile, we are starting see that concern about the periphery rear its ugly head. yields at 10.28% on the greek 10 year, moving money out of the periphery. let's have a look at the stocks to watch. i want to check in on one of the key movers yesterday, deutsche bank up 115%. -- up 1.5%. the chief executive and cfo had to stand out and say, we are ok, we can repay our debt. they have 350 million euros coming up in terms of coupons and theyd in april, are trying to reassure the market and employees that they have got the cash to meet that. their chief executive, michael wolff, off the helm. a mortgage lender is being heard. turkey.real pain in

guy: thanks. three minutes of the session, opening higher. i want to appeal this back. as you are hunting for the risk, the minorers are still down. --: they where the kind of it's interesting, oil and gas are not trading as high, buying back into those safer trades that are maybe not so badly beaten up and then it goes back to the gold trade. today may be some of those stocks are beginning to come back. and as we open up a little bit higher, oil goes up as well. 2%, brent at $33. here's what's happening over the next 60 minutes -- first up, deutsche drama. they feel compelled to reassure

lenders that they have the ability to repay debt. then we have an exclusive. the finance minister told bloomberg that his economy is on the up. then later we speak to the global head of commodities research at goldman sachs about where he thinks these markets are heading. guy: for deutsche stock firming, but yesterday it is absolutely slumping after it became the biggest lender in for years to come out and reinsurer investors that it had enough cash to pay its debt. germany's biggest bank says it has more than sufficient means to pay coupons on its riskiest debt. let's go to hunt nichols in berlin with more. -- to hans nichols in berlin with more. why did we end up with a situation where management had to do this? by anwell, it was a note analyst that they could have

trouble if they have additional litigation cost. when we look at deutsche bank, we see a company whose shares are trading much lower than what their theoretical liquidation value with. yes, yesterday was a bad day, but it is particularly bad for deutsche bank. only one company is trading at half their theoretical value, all the way down at one third. here's the upside. goldman sachs had a note out earlier -- they said compared to 2002 liquidity lines to the are at 700ntral bank million euros less, and they also noted that the tlr are hardly being used this time. that is an indication that the banks aren't under as much pressure. when you look at the share price, clearly they are. take a look at the stoxx -- you see them all the way back down to their 2012 letters. here's what deutsche bank did yesterday. they stated they have about a

billion euros to get them through a 2016, including enough for 350 million euros due april 1. for 2016, they say they have about 4.3 billion. that is contingent on them not having additional litigation costs, and that is the big gray area. you see a lot of the concern reflected in the swaps. the cost to insure debt of deutsche bank, that is up by almost 50% in this year alone, and it is much higher than its peers. yes, there is something quirky going on in the banking sector, but it appears to be exacerbated by deutsche bank and for deutsche bank. we will see how the market sources are saying -- it is trading at 1.5%, or it was at the open. maybe it has moved in his first five minutes. down 7% ont is still the here and there will be a lot of questions. last year, there were several

high-profile capital raising in the sector. i wonder whether the window is shut and whether they raced enough. talk to me about that and where we are. ago, heing back a year said they were confident that they didn't need to raise additional capital and that has been the same message every time the new ceo has been asked. a keep saying they won't need new capital. when you take a look at some of their peers, credit suisse, and you look at what happened in 2012 when some of the u.s. banks were under pressure. they felt like they had to go to the marketplace, shore up their balance sheets, get more capital involved. but from deutsche bank, the line has been they have enough capital and their ratios are almost close to their international peers more so than the european one. guy: thank you very much. deutsche bank trading high, by almost 4%.

the conversations i often hear over the banks and markets is what's new, what's changed. the answer is sometimes nothing. that makes you wonder what everyone is playing at last year, because clearly they were problems. -- there were problems. to look at what the outlook for gdp growth is in the economy. if we look at the u.s., 1.6% for europe, we worry about china, but combine europe and u.s. and it is still a times the european economy. we have seen these overreactions in the bond market and equity market. it still seems a relatively solid earnings outlook. that is when you see these big dislocations in the market. guy: i just want to get your take on this, and what it takes to get us down to the levels you see. this is going back all the way, the max chart you can get.

that is 2000. that's 2007, the financial crisis. is as 2015. look at that channel. what would it take us to get back down to hear? >> if you are waiting for an entry point where stocks are cheap, you would have to get to that point. right now we are still 10%, 8% above average in the eurozone. i think it says two things. if this. in terms of the big selloff, it will not be a real swift recovery. we are not that cheap. it will be at best a slow grind. the reason you can see that happen is if you look at margins and a potential profitability, it is still much better than it is for the u.s. margins are low. they can go up. they haven't recently, but they can, where the u.s. is still at high margins and they can only go down.

from a medium-term outlook, europe still looks better. jonathan: we will be talking about italy in a moment. last year, the ftse was up in europe, and now the worst. the story for italian banks has not changed. 20% of the loans -- but it is not new. it has been there, simmering away. i go back to the point of repricing risk -- that is not new, but the market is going to the negative news. is that really the story? >> what the market used to pay attention to and what they choose to ignore, certainly the banking sector and peripherals have ongoing concerns, and when you have this environment where people are more concerned, it comes out. what we want to look at is if you are in an environment to improve profitability, companies need to be able to reorganize operations, and you have to ask where it is easy and where it is difficult. regulation and you

probably have more doubts about when you need to generate profits and revenues aren't increasing. jonathan: we keep it on italy. we hear exclusively from the finance minister on the strength of the nation's. thanks -- the nation's banks. the ftse is up, dax in frankfurt also on the up, the rally in treasuries just rolling over, pretty much flat on the day. guy: looks like we have seen a very bad train crash in germany going into munich. be aware of that as you watch the international news. looks like several people have been killed. we will take you a little later to the german state of bavaria to get you more details. ♪

guy: welcome back. before we get back to the market action, let me tell you the latest we have in terms of the news surrounding a train crash in of area, german -- in bavaria, germany. around 150 people have been injured in this accident, and two have been killed. it is understood that two trains have a head on collision. we will come back to that story as we work our way through the morning and get more details about what is going on. jonathan: thanks. let's move on to the business

these. a strong fundamental, according to the italian finance minister. the deal italyd and the european commission reached last month in order to let the lenders offload soured loans. by someoneurprised negative reaction to the yield. >> i'm not sure that markets gave a negative reaction. for a long time we had been looking at how to introduce a bad bank making assistance and the regulation did not allow to reach an agreement with the commission. now we have reached an agreement -- this is what we think we can obtain, given the state of state regulations in europe. although some market reactions may be seen as negative to that,

a lot of interest coming from confidentry in being that this instrument together with our measures to accelerate the resolution will speed up npl. >> can i ask you about one particular bank? it is where you were a significant shareholder -- do you think the answer to that is that it will be part of that solution, that banks will gather together and rescue it? >> it has strong fundamentals. of course, a significant amount of npls. i'm confident a solution will be found, also with the help of the government. because the italian banking system can take advantage of situations like that. >> these are the answer in the italian banking system as

opposed to some foreign investor? >> it's not opposed to, it is come from injury to. but it underlies the fact that in the problems that the banking system has had to face of the past few months, the banking system itself has produced solutions that have shown the resilience of the system overall. provided resources and instruments on that fully voluntary basis that were otherwise intractable, because of limitations. jonathan: let's get the thoughts of dan morris. dan, make sense of this for me. a strong fundamental, but a big amount of nonperforming loans. can you reconcile the two? >> i think it highlights the difference we have seen in a lot of countriesn. -- a lot of countries. earnings for financials were

15,strous, but now you have 20% credit growth in the u.s. you hope that you would grow out of the problem but of course it is now getting worse. you still have these npl's. i agree it will be much more banal. guy: governments and regulators in the commission -- are they just making this whole story harder? this issue of bad banks -- they got to it eventually, and they are there now. why are they making it so hard? it does seem that we have got to this point where we are worried about the banks, making life a little difficult to clean up the financial sector. they seem to have this inability to know what the hands are doing, and they certainly are not shaking hands in coming to a consensus. >> it has had that schizophrenia for a while.

you change in regulations and it becomes more expensive. it is clearly continuing. jonathan: things could be a whole lot worse.we could be waking up talking about italian banks, not about a 10 year yield of 1.7% -- that's what's really changed. the ecb stepping in, and to some extent at least cutting the death loop we had several years ago. >> this is also what is so ironic about the situation. a lot of these regulatory changes were because of moral hazard. essentially we just have moral hazard of the sovereign level. imagine if you had druggie come in and say i will buy more peripheral bonds. any pressure you had goes away. i think that is the exact opposite of what you want. d?y: where does that en

everybody came in saying europe will do well this year and we have had a number of houses on this program talking about the fact that you want long peripheral debt,. and you wan to buy plenty of european stocks because they will outperform. so what is it going to take to get people back, convinced that europe is on the right track? >> what you would like to see is a hawkish tone from the fed. imagine how things were at the beginning, everyone was overweight in europe and as soon as that goes away and everyone is positioned for that trade it goes in the other direction, hence the extreme reaction. guy: the fed was -- >> as long as you had the belief that the fed was tightening, the better opportunity seemed to be in europe. this that is not the case, that whole evaluation is totally different. guy: always a pleasure to speak

with you. thank you very much. daniel morris. markets? jonathan: up next, we will break down the markets for you. equities in london -- where are we? we are just rolling over. 1/10 of 1%. by the bond market seems to have ebbed a way, three basis points higher. the japanese yen was a lot stronger than it was this morning. that has the risk aversion story, and it seems to have eased getting into it. on trend this morning. guy: more financials, more markets, next. ♪

guy: welcome back. european stocks just beginning to soften as we work our way through the session. let's talk about one of the charts that matter. it paints a pretty bleak picture for europe. caroline hyde is here to tell us more. caroline: the euro stoxx 50 are trading at the biggest discount versus the u.s. we have seen in the year. a year ago, the economic outlook was entirely different. he had just come off the back of the worst recession, very slow growth of less than a percentage point. but now we seem to be hitting that issue once again.

sawhe beginning of 2016, we analysts going overweight, we have strategists really projecting in equities that would rally. but instead we are now trading 20% versus the u.s. we are currently at the lowest, .70%, the lowest in about a year these are the where we are -- a --ar of use o the 2016, all ofin this seems to be taking a far bigger impact on europe than it is the united states. a global concern, the risk aversion we are seeing in oil and china, seems to be hitting europe that much harder. guy: that is probably a contribute in factor, plus big oil coming into play. everybody, as they repositioned, that arbitrary moment, decided

they need to go long on europe. caroline: they are still saying that europe is the place today. we still have people saying that is where you get in. but seven of the world's worst performing equity gauges are in western europe. the dax is one of them. italy is one of them. greek stocks at a 1990 low. wire we still there for having analysts saying we will have a turnaround? why are they saying that the stoxx 50 will job 10%? jonathan: not seeing much optimism this morning. we rolled over, financials this morning, banks down by 1.24%. the rally in deutsche bank up as much as 5%, now just 9/10 of 1%. guy: of the market clearly is still focused on the spread issue, still worried about what is happening. caroline: and where is oil? that connection is edging a little bit off at the moment. jonathan: jeff curry of goldman

sachs is coming up next. he joins us in just a couple minutes. we are 26 minutes of the session, equities a little bit lower, down by 131%. -- one third of 1%. ♪

jon: welcome back, i'm jonathan ferro and this is "on the move." we opened higher, the greek not last long. deutsche bank coming out and saying they cannot pay their debt. i don't know if that put more nurse into the market. guy: coming into the year -- the new year, we focused on oil. if oil went up, equity markets went up. now we are focusing on the banks. we have changed the narrative in terms of what is leading the market by the nose. jon: risk aversion is still very

much the thing. u.s. 10 year yield approaching a one-year low. down by two basis points. headline.he big 0.03%. stronger japanese yen this morning. eight days of gains for gold this morning. high. 2015 let's get you up to speed on some of the stock moves. point, --at one the wind systems is still want to be keeping an eye on on the chart.

the reason it is doing well and clinging onto the green is that it boosted its dividend. it is predicting revenue this year that will top the record it set for itself in 2015. this is a company that has managed to wrap up profit year in and year out. system raging -- raising their dividend. keep an eye on swedbank. arestock dive slower and we seeing one of the worst performers on the stock 600 this morning. as we see the chief executive to part. wolff leaving and being replaced by the woman who is currently the head of the

banking unit but is only an interim ceo. arguing for change of leadership. some instability amid a very volatile time for banks. pandora., the maker of those charm bracelets that we see so much. the worst performer as you can see. dropping on the back of its results as well. the danish maker of this charm saying revenue growth will still be there but not nearly as fast as 2015. therefore having to trim their overall expansion time. commodities.lk

unlikely to have some room to go even higher. but ask a simple question. is -- let's ask a simple question. is oil cheap? >> the key point here, we saw this this week in terms of oklahoma where nymex price is, the inventories and surpluses are pushing up against infrastructure constraints. they're constraining the ability of supply and demand to adjust which means they have to start to do all of the adjustment. if there's one thing that could cheapen oil markets it is volatility. broken the cash and carry entourage between the spot prices and the fuller prices. mainly at happens in landlocked areas like cushing, oklahoma or austria and other parts of europe. happen on aly to

global basis. this sounds like a very fundamental reason for what is happening in the oil market. oil and thet the relationship to the fed, the dollar, etc.. is that secondary to the physical constraints? >> i think there are two points of stress in the oil market that are important. one is operational stress which drives the $20 there'll. -- barrel. oilhink the volatility in price is going to bounce between $20, operational stress on the bottom and $40 financial stress on the top. if they can get to this point -- the difference today versus

hasr oil cycles in the past flexible exchange rates in places. the investment grade, equity markets. all of these arrangements were put in place to distribute the risk around the world. historically when we have a collapse in oil prices it is severe and local in terms of economic activity. i want to point something out. we put these risk sharing arrangements in place to make the world a safer place and not a riskier lace. we think of what happened off the back of the oil collapse, you had the collapse of the soviet union it helped fuel the savings-and-loan crisis. these arrangements are here to make the world safer. do you think it is safer? >> will find out. a high-yield analyst go for the

high-yield markets. we cannot create a connection in the what is going on commodities space in creating systemic risk. one of the issues that is a thate bit less clear is there is a progressive tax that exists. the oil prices come off, tax rate in the producing countries also comes off. russia, a place like the ruble has adjusted with the oil prices so that the oil price in rubles is relatively constant. the problem is the oil price comes off in the tax declines. it shifts the burden away from the corporate and onto the sovereign. the question that we have to ask you lookforward, when at sovereign debt and we're places like venezuela becoming more important, does this become a bigger problem? it does not appear to be

systemic. >> witnessed in the linkage of oil and high-yield into the financials. how is that going to manifest itself. worry about the financials and every other tweakers went to make life a little bit more difficult. >> if you look at the numbers it is 162 billion dollars in the u.s. of high-yield energy debt. look at the banking losses in the 1980's. they were around 10% and right now the market is pricing in 12.5%. the world is much more flexible today in terms of cost, wage rigidity and so forth. i would argue that the loss rates are likely to be less than they were this time of round. >> when people tune in and watch this program this morning, they want to know your thoughts in the price action.

the move towards an equilibrium. the conversation where having, you will see that level already where we are seeing that rise in volatility. we think it is not enough. you go down to make this happen. >> we saw the market first go down and 26 last month. we are definitely in the zip code. it's based on what we call cash cost meaning once you breach prices have toy, spike below cash cost because if to shut production in almost immediately. for us to nail that number down perfectly is very difficult. i would not be surprised if this market goes to the teens. we got to that $26-20 eight dollar range we started to see action.

we started to see price volatility turn into fundamental volatility. the most striking feature of this market is the lack of a supplier response or even cutting and budget expenses by the sovereigns in those pullback in isis but now we are beginning to see fundamental movements. -- $20 perdollar barrel number was based on fiscal differential, location differential, all that's very different. >> as he look ahead to the rest of the year is your message to expect more aggressive downside moves to get the markets to rebalance. >> we look at the late 90's and early 2000's. it was littered with false starts. we traded 10 dollars, $15. >> we think it will carry on six to nine months. that is what you did almost all of 1998 in the first part of

1999. surplusrgue that this is likely more extreme. it really doesn't change this high atof a trend lists price volatility. jon: commodities researcher at goldman sachs. it isn't over. after the break we will take you from energy to the metals market. brent crude trading higher up $33 per barrel. stocks are little bit lower. the dax down by 0.3%. ♪

jon: welcome back, we're 44 minutes into the session. caroline: police and germany say two trains have collided with the run 100 people injured. is at leasted press 200 people have been killed in a town in the bavaria region southeast of munich. ceo.s named as a gonzalez he is a highly trained economist at a former deputy finance minister. after he heigned

failed to reverse falling output. about 150 oil gas companies trapped by ihs may go bust. buyers and sellers of disagreed an asset value. that is your bloomberg is this blast. guy: guy: the world largest producer -- he sees nonie to try to erase cash from investors. the ceo of anglo american said he is halting all expansion projects while prices remain depressed. >> we need to be in a good place to manage the business in this environment.ng my view is we do not need to go back to the market. we need to focus on reducing our net debt level and that will

ensure that we have the firepower. jeff curry, global head of qualities research at goldman sachs. let's talk a little bit about that volatility and its relationship to the rest of the commodities complex. how do they interact? >> if we take the volatility last year of all of the commodities and we rank order them, what we find is that electricity is the most volatile asset on the earth. at the bottom is gold. it isy i can think about you cannot store electricity given current technology so supply and demand are locked in together. if you have a shock whether it's the blue men shock or others, if it cannot break apart, what has to adjust? we go down natural gas is the

second most volatile asset followed by crude oil and then we get to the metals. and we've reached storage capacity, supply and demand are interlocked so now volatility has to shift to the prime all stop like to make the point that all you knew as a parking lot, a chain-link fence, a guard dog for security. this means that you do not have that same self correcting mechanism and as a result the cycle can be far longer in metals. finite and bring to it. what that says is there is a trade here in terms of continuing to be along the energy space versus a short in the middle space. jon: angle american down 5.8%. again.ting hammered

if volatility is if option of storage capacity, what is the lag time between that and the metals rebalancing. a retort in three to five years? >> i like to look at the bulks. that's the first market. they still have not rebalance those markets. i want to become just about the bulks in the metals. weather is more uncertainty given years estimates. they have had a demand shock that energy hasn't. to bucket commodities into two dockets. or.is commodities like iron the other is the commodities used to operate the commodity. it's not really

negative or positive. in contrast when you look at the commodities they are taking significant hits. >> i like to borrow a line from ikea ceo who says it is peak stuff. theseuilt too much of type infrastructure -- capex type in for structures. peey pushed -- capex ty infrastructures. guy: when you look if the metals story in china, do you have any idea on how much stuff there is? how much storage there is and how much we will have to wait before this gets worked out. there must be an inexact information story. >> we have some idea of what is off exchange but as you point out it is a dark spot.

far less in energy. the two markets that we have the best information on our agriculture and commodities. to dictate the survivability we have a much darker spot in terms of assessing the inventory levels. we can estimate where supply was and where demand was. again, it argues for a much longer. of adjustment -- and much longer period of adjustment. jon: in energy versus mining, is the mining story and the metals story going to take longer to recheck librium? ofch -- take longer in terms equilibrium? which sector takes longer? >> if we look at the financial stress -- we have financial the metals market.

>> i'm sewing to think that all we have is operational stress -- i am starting to think that all we have is operational stress. bankruptcy was not enough in the cold markets to get these guys to shut down. they have to go to the operational guys which are running out of cash. the zinc market turn the corner? they ran out. metals market. >> i'm sewing to think that all we have is operationali think os really the governor that creates the turnaround. thinking about financial stress, you have to get to the point that capital markets have been completely shut off, they have run out of cash balances and then we can talk about a recovery. the ones we see happening more sooner than the others is going , which we have seen in the key bulk markets. paradigm ing the

terms of how we think about this . glco if you want to look at the commodities complex on the terminal. up next, more on what is happening in japan. ♪

jon: welcome back to "on the move." it is pretty card to keep up with were equity markets are this morning. , losses, gains,

losses throughout the first hour of trading. we will bring you the latest u.k. trade balance figures. the u.s. releases its monthly short-term energy outlook on oil. bringing you coverage from new hampshire. richard jones joins us now. some headlines in the bond market. a big story out there from deutsche bank, what takes your attention? rates inhe fed hiked december, we had a basis point move lower in those 10 year yields. that's unbelievable. guy: what does she have to say or do to calm the narrative down? is in a tough spot

because financial conditions have tightened. on the other hand, what she probably wants to send a reasonably upbeat message about the economy. she wants to strike that balance and i think it is a very difficult thing to achieve. jon: when a central bank says ball pike figure -- ballpark figures and they push back against it so aggressively, you wonder where we are at in this conversation. for the fed, have they change their mind? it looks like the philip curve still exists in the market. has anything changed their mind? >> what strikes me is the number of times since the fed hike they've made a policy mistake is something i don't think we were expecting.

it is kind of a double-edged sword going on here. jon: for me and guy johnson, best of luck for the rest of your day ♪.

francine: european stocks open lower. zero.se seals dip below the yen strengthens. as the cost of protecting thesche bank debt soars, lender feels the need to reassure shareholders. bear sayst pound that sterling will lose regardless. we talk brexit. so, welcome to "the pulse."