francine: yellen delays. -- stock decline. yen, gold advance. sweden's riksbank cuts further. we assess the side effects did's monetary policy running from solution to problem? sam walsh gives bloomberg his gloomy outlook for the industry in 2016. ♪ the pulse,elcome to

live from bloomberg's european headquarters. i'm francine francine lacqua appeared less into the markets. let's check in on these equity markets. there is quite a lot of red. we are seeing from a lot of these investors telling us there is risk off of move. the selloff that drove stocks to a two-year low is back on. each of the stocks from the euro 600 down. this follows declines in asia. how much investors want to take some of those risks. financial markets seem to be repricing global growth slowdown. let's get on the second board. this is the price for gold. you can see gold advancing quite a bit here the bank is down 6%. if you look the price of oil. it has been fluctuating a little bit currently. if we have that up for you, it -- let me get it up for you. it is the one we are watching. it was gaining a little bit

earlier. whetherainst the main opec and non-opec will come together. there is correlation between a price in the markets. that is what most people are worried about. is it to the bloomberg first word news with nejra cehic. posted -- as well as refining profits to help the it felt 26%her -- from a year earlier. rio tinto shares are lower after the money company scrapped its progressive dividend policy amidst the collapse and commodity prices. it sent up new spending cuts after a four-year profit tumbled 51%. .am walsh set into an interview he expects 2016 to be worse than last year. we will bring you more from the

interview. network announced stalled last quarter. jack dorsey wants to make the site more accessible. it has been unable to attract a wider audience. francine? francine: thank you so much. investors continue to run from risk. riksbank continues to cut into deeper territory. at's get to the bloomberg for market check with mark barton. marco is today's game -- mark: yesterday's gain has been wiped out. there it is, down for the eight day. we are at the lowest level since october 2014. persists.essage it could them the rate hike that

the fed indicated at the end of last year, failing to assuage the fears about a global economic slowdown. that is the stock story. this is the central bank story of the day. rates cutting interest further into negative territory, -.50% the repo rate to from -.35 percent. just 10 out of the 18 economists surveyed by bloomberg forecast that move. it is a move to survive inflation. it is a move to stop the krone from depreciating. the riksbank has sculpted to cut rates further here it is market asn the fx well. a big message from the swedish central bank today good check this out. we have already knew that the sovereign bond market was the best performing global developed

bond market in the world. check this out. the 10 year yield has fallen to a record low, 1.31% because of the light. been pushedes have so far into the distance. i cannot see them anymore. crude oil dropping for its sixth consecutive day. we have fallen by 17% francine. .82 -- $26.82. that is the lowest since 2003. the latest piece of news, crude stockpiles have been delivering new york futures, expanded to a record day to show nationwide supplies drop pe -- drop. we are in turbulence. francine: market, thank you. --et yellen signals a delay

market volatility -- anticipates the economic conditions will evolve. it will warrant gradual increases of the federal fronts rate. in addition, the committee expects the rate to remain for some time below the level that are -- that is expected to prevail. financial conditions in the united states have recently become less supportive of growth. with declines and broad measures of equity prices, higher borrowing race for riskier borrowers and a further depreciation of the dollar, these developments if they prove persistent could weigh on the outcome -- on the outlook for economic activity in the labor market. although declines in oil prices provide some offset, i do not

to be the fomc is going soon in the situation where it is necessary to cut rates. let's remember that the labor market is continuing to perform well, to improve. i continue to think that many of the factors holding down inflation are transitory. i don't think it is going to be necessary to cut rates. with that said, monetary policy is not on a preset course. that that would be necessary, obviously, the fomc would do what is needed to achieve our goals that congress has assigned. francine: chair yellen. how much will we see? the market has priced it in for the first half of 2017. my next guest has is that on

january. this continue, kevin doran. great to have you get are you surprised by the turmoil? there is no single factor that we can point to? kevin: i am try to remember the last time when financial markets were so disjointed. seeeast since 2008, you can -- 2011, yet the euro crisis. i cannot remember the last time it was so disjointed. francine: we have been going around in circles. the markets are anticipating something that will then happen. you need to price what happens to these countries that are oil-producing, exporters. what happens when this unintended consequences? kevin: let's look at the bond markets. , that iss and 10 years

a market that is pricing in zero no inflation for the next decade. that is what the bond markets are telling you. the bank it -- the banking sector is trading at less than half price. if i go to the proxy sector, with the proxy sector, if i look at the socgen, it is priced in at 70% to 80% decline. francine: this is the reality here at i remember when we were having the debate and yellen was saying she was going to write hike four times. now it is a reality they can hike no longer. has a feedbackl mechanism on the economy. , theinancial conditions monetary conditions are not there. the labor market is strong.

there is no reason -- there is a slowdown in growth, but no reason to be looking at a recession. francine: china is a difficult to read. are you not concerned this is a symptom of an ailing china? we're looking at a hard landing in china? kevin called what we are saying this kevin: we are seeing the friction affect. that is not going to be frictionless. what you're saying in the industry, they do not know -- they accept related what happened in the recent past. as a result, that whole industry [indiscernible] francine: d think the market is irrational -- you think the market is irrational? the markets keep on falling everyday. kevin: the market is the world's richest sentiment.

what we are seeing is human beings as human beings. all that is taking place is human beings thinking i have my money in the market, it is currently falling. francine: we will explore that good kevin, thank you very much. stay with bloomberg for more on the central bank it theme -- central banking thing. we speak to the riksbank governor. a lot more coming up today on today show -- on today's show as well. google analyze the industries -- we will analyze the industry's prospects. whether the u.k. should remain in the eu. total surprise. we will break down estimates, beating numbers. ♪

francine: will come back. it is not a total surprise that market turmoil and the risks we are seeing, financiers try to reprice risks means there is a selloff in europe today. on to show you the price of oil. what has been happening to gilts. the vti down the percent.

that means for the first time in a long time it has touched below $27. cents -- $26.64. this is after we heard from central banks the additional stimulus is at the ready. heard from janet yellen that she may not be able .o increase rate hikes we can see 10 year u.k. bonds at 1.30. let's get to bloomberg business flash with nejra cehic. spent on network equipment. the company cap costs in check. zero -- zurich insurance reported a loss after damage claims. tengion damagehe -- the tengion damage in china. fell in extended trade

after the social network announced that user growth stalled in the last quarter and said that sales will miss estimates. jack dorsey wants to make the site more accessible but as the name that's what has been unable to attract a wider audience. francine: it has been a rough week for bank stocks. down 20% on the months -- on the month. earnings that missed estimates. they took a hit on the investment bank and potential legal costs. the deputy ceo says he remains confident that the industry is not in crisis. today hasuation nothing to do with the situation we saw in 2008. we are not in this type of crisis, not at all. the banking system in the world is much more stronger. the average capital has been doubled. we cannot compare the current situation with what we had to

manage in 2008. the fear from the investors is coming from the potential no payment of the coupon of your debt. [indiscernible] situation is at the level that it is no risk for us not to take a coupon. -- in our situation, there is no fear regarding debt. us kevin still with durant. when you look in the banks, banks have been taking a battering. is -- does this come down to mallett's. malaise?

kevin: the banking sector is example of how much bad news is priced into the sector. numbers assocgen's an example. -- on 60 euros with equity on the balance sheet. the market capitalization is 25 billion. while they are still producing returns on equity, it doesn't that sortense to take of write-down on the balance sheet. francine: i agree. compared to u.s. bank valuations are a lot more harsher on european banks. why? are we pricing and a possible

breakup -- are we pricing in a possible breakup of the eurozone? kevin: so you look at what is been priced in. you're looking at a slowdown, even recession within the eurozone economy, such that you have to write down 10%. this is the town with the cost of risks to nonperforming loans in the portfolio are falling. francine: what are the pricing in echo they must be looking at geopolitical risks. is it marine le pen. -- is it marine le pen? discounted banks in europe happen for a reason. kevin: they happen because of the sentiment. the only thing that can possibly have that sort of that cement is if there is generally -- that sort of that cement is if there is generally -- let's not forget

the chinese banking system is insulated within the chinese economy. the people who lent money to the largely chinese domestic investors. usecontagion effect that desk that you would see in the u.s. bank system in 2008 -- we do not see the same level whatsoever. francine: do think that deutsche bank was unfairly punished? kevin: i think deutsche bank music take a serious look at themselves -- i think deutsche bank needs to take a look at themselves and decide whether they want to be in this world. is european banking sector recapitalized. they decided which areas they want to be in. there are still your extended charters, your work -- your standard charters, your

barclays. they are now producing returns into the high single digits. see -- youasily could ease expectancy. francine: up next, profit takes a tumble at rio tinto p it we look at why sam walsh says what will be worse than 2015. coming up next. ♪

francine: francine: -- welcome back to the pulse. rio shares are down more than 5%. spoke to sam walsh this morning. industry is a cyclical and he goes through cycles. we are in a strong position to see us through every aspect of the cycle. the action we are taking in terms of reducing our costs and capital and revising our dividend policy actually means we will continue from a position of strength. -- guy: do you think 2016 is going to be the toughest year for the industry in a while? 2016 is looking like it is going to be a tough year. i said to our employees that i

expected to be tougher than 2015. 2017 is too early to make a call on. we are very focused on ensuring the long-term stability, the long-term strength of the business. francine: for more let's bring in stuart wallace. he is our executive editor. we have a great story on bloomberg saying the mining industry. -- now their dividend policy is in question. stuart: they are doing a sensible thing. to think about this way. they had a 10 year bull market, a progressive dividend market. sam walsh pointed out tough times as likely to end anytime soon. these are principles -- these are perfectly sensible things to do. it is not cataclysmic.

i'll think anyone will be disappointed. francine: what will they do with the cash? m&a? stuart: i think they will look at projects. his of what we have seen companies trying to sell forward their production. that is not really a business that rio is into. possibly. it is showing up that credit rating more than anything else. francine: how worried should we be about commodities? it is tough, but is it cataclysmic? stuart: for some of them it will be bad news. maybe not a company the size of rio tinto. dependent on three main commodities. even so, it has a spread of assets.

it is the small ones i would be worried about. echo stored, thank you for coming in. i highly recommend you going on to bloomberg.com. way, below $27. we will be back in two. ♪

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. . >> welcome to "the pulse" live from headquarters in london, >> total beat estimates in production and gasoline and refining profits helped the company weather the crute slump and if fell 26% from a year earlier. io tinto shares scrapped their dividends. the second biggest mine battling to keep the credit

rating. also set out new spending cuts after four-year profits tumbled 51%. c.e.o. sam walsh said in a bloomberg interview he expects 2016 to be worse than last year and sees a distress in major players in mining. we'll bring you more shortly. twitter fell in extended trade after the social network announced sales will miss estimates psms the c.e.o. wants to make the site more accessible but twitter has been unable to attract a wider add yeps. global news 24 hours a day powered by our journalists in news bureaus around the world. francine? francine: thank so much, njera. we've seen pricing of risks. let's go to the news. mark? mark: let's start with rio tinto where the price was down as much as 9% which was the biggest fall in september of 2011 and ditched the

progressive dividend policy and set out new spending cuts as it's trying to cave over the massive plunge in commodity prices that sent a profit down by 51% and the payout for 2016 won't be less than $1.10. it's held to 2015 diffident to $2.15. joining the likes of others abandoning dividends as a safeguard against the big slump. in commodity prices, the shares were higher and up by 1% today and raised the outlook for 2016 emits growth in its brand and stronger order, profit and revenue will rise at a double-digit growth rate and margin should be stable and net income rose better than expected 12% today. we're waiting for the arrival of casper rothsted who of ourse will take over as c.e.o.

his tasko battle nike and become number one once again. we saw gen falling, france's second biggest bank, shares down 13% and fourth quarter profits missed estimates, earnings that the investment bank fell and set aside potential for legal costs and the bank signaled it may have difficulty reaching the profitability target this year because of headwinds that include record low interest rates and volatile financial markets and gen is down 13%. these are the big gainers and losers on the stock 600 today which is down by 4%. look at the big gain by a country mile, mehta. that's the most ever. milan dmbing with a legal address in holland and run from pennsylvania in the united states says it will buy mehta in a cash and stock deal worth

$7.2 billion adding the swedish company special drug products and european operations. what a day for mehta shareholders. francine? francine: thank you so much. euro zone finance ministers are gathering in brussels to discuss a bailout review. the meeting comes as the stocks have dropped seven consecutive days sending equities to a 26-year low. let's get more from hans. how much additional cash does greece need and what are the stumbling blocks to access that cash? hans: the stumbling blocks are the colleagues of the review of one part of the program. there seems to be a great deal of concern whether or not there's a political will in greece to get these next stages done. what we're talking about is the disbursement of $4 billion to $6 billion euros and gets them through the beginning part of the summer and not the back half and we've seen the process for the economy and particularly a stock market

that's been battered and down to 26% year lows and you look at the historical chart, it's not a positive story for greece. the last five years have been negative as well and we have competing economic forecasts. the european commission said you had 0% growth in 2016 and greece's central bank puts it 0.7% % and they're saying growth for 2016. not a lot of confidence there. pension reform, you look what greece spends, it's about 15% of g.d.p. it's about twice as high as the average. you have average payments around 900 euros and 2.3 million pensioners. that's the big question. here's the other one, francine. what's going on in terms of cronyism since the current greek government. and in the last three months you've seen an additional government affiliated

positions, the sereza party get position. that's what the finance ministers could be focusing on and do they have the political will or the majority. they have a three-seat majority, the coalition in the house. that's razor thin and strikes in athens and we could be back in brussels sometime soon talking about this. francine: thanks so much. one we have to keep a close eye on. up next, total is a surprise, france's largest oil company beats estimates by ramping up production in the face of slumping prices. we'll break down the results coming up next.

>> saudi arabia cut production. will iran cut production? will mexico cut production? will brazil cut production? who is going to cut? francine: that was igor sechin. he spoke to us exclusively on the sidelines of the international petroleum week conference in london. as the oil majors grappled with the price of crude, total has posted fourth quarter earnings that beat analyst estimates and the company says it will deepen costs and investment cuts. joining us from paris is the

head of oil and gas at alpha value exxon. great to have you on the program. thanks for coming in. how worried are you in general about the smaller oil and gas companies, someone like total. they didn't do too badly and it's a tough environment but are we looking at defaults of some of the smaller rivals. >> i am. it's driven mainly by better output or more efficiency and good for the future. where we're a bit worried is on the refining side because it's supported in the 50% of the earnings and that looks like for us not stable. and we see it decreasing in q-1 which could be an issue regarding the cash flow position and in the end it should lead to lower dividends. so we believe the oil and gas company already did a great job but there is more to do. oil parties are not at 60 so far what the company is looking

for next year so there's still much to do to bring it more flexible than it is today. francine: you were talking about total and the share price is gaining and you're saying there are concerns downstream, upstream production isn't looking completely good and margins aren't bad at all. give us a sense of the cost cuts, the investment cuts and what they mean for the price of oil in the future. total announced it today. b.p. has done it, and shell has done it as well. alex: yeah. and i think there will be more cost cutting first which is good for efficiency but also for investment. we already see today that the cut in the investment down in the sectors will lead to three to four million missing from 2020. that's where i believe the business model should be changed, if for example we take

the example of shell oil companies, if they decide to increase in their investments, they can get the production one year later which is not true for total and b.p., in one or two years they decide to increase investment again, the production will only start five years later so there is quite uncertainty regarding the future. francine: how is total positioned compared to its competitors? alex: total is more linked to refining. i will say that it's likely above the sectors regarding the cost cutting and capex becomes a natural gas company probably like the other one and it's slightly both. the sector in europe regarding the old world and in the u.s., it's below because the cuts there on capex and opec have

been higher than what we saw in europe. francine: thanks you so much, alex, head of the oil sector at alpha value. let's get to the bloomberg business flash with njera in ings jera: regions china spent more on network equipment. there was a fourth quarter loss after damage claims that rank from storms in the u.k. the net loss was $424 million compared with a profit of $860 million a year earlier. twitter fell in extended trade after the social net york said growth stored and sales will miss estimates. jack dorsey wants to make it more accessible but twitter has been unable to attract a wider audience. that's your bloomberg business flash. francine: up next, we'll debate the u.k.'s european future with

two business leaders who take very different views, coming up next.

francine: welcome back to the pulse. streaming on your tablet or known and bloomberg.com. the issue will be discussed when two of the bank of england deputy govenors go on the hearing about the subject. let's talk more about the u.k.

and the european decision. we have the chairman and founder. and the c.e.o. of london advertising. thanks for coming in. we need to step up our debates and you're for renegotiation but for the u.k. staying within the e.u. michael, you're not. i'm unclear, first of all what exactly we're going to the polls to talk about. we haven't really started a campaign so everything seems to be too emotional at the moment. what are the facts. guest 1: the facts are quite simple because what is at stake is the membership of the european union and the single market which is worth $93 billion a year in terms of our trade. there's no example or precedent of any country coming out of the european union and having the same access or better access for the single market and is incredibly important and fundamentally about the economics and 45% of our trade and 228 million pounds of

exports. no one is saying all that goes if we leave but we have 50 trade agreements through the e.u. and obviously that would change if we left and it's a period of huge uncertainty, a two-year sort of renegotiation on exit which i don't think anybody can afford or risk. francine: michael, you disagree with that? michael: i do. we have a trade surplus for every continent but europe and the share of trade has gone down from 65% to roughly 45% and this is much more than just about trade. it's about who is going to govern our country. this is about the sovereign city of the united kingdom versus the e.u. francine: you're saying if we don't have a trade agreement with the e.u. what other countries can come in and make up for the money? rowland: because we have a trade deficit with europe the value of our trade is worth more to europe. so there is uncertainty in terms of the specifics. i think we have to raise all of the debate recently has been

because of cameron's concessions and deals is trying to negotiate and there's a the lo of messaging going on. the polls are all over the place and you can't really just make a decision at this moment on what is being put to the people because we don't know. but what we do know is that fundamentally the rest of most of europe is in the euro and we're not. and in order to protect the euro france, germany can do everything to ensure that the political concentration of ower exists in the e.u. to facilitate the long term -- francine: the u.k. has been a founding partner even if the country is not within the euro? role and: michael said 65 to 45 and talking about goods and if you add goods to services it's 53-45 and it's a fall but not precipitous as that. the key point is emerging markets and you would expect to

trade that percentage to increase but nothing like it still 2% and 4%, china and india. it's much, much smaller than the european union. the key things with these reforms that have been taken place is i would agree with michael, they aren't a defining moment in our relationship with the european union but they are very good reforms in the sense of getting a greater competitiveness and getting to michael's point, the relationship between the international, i don't think there will be a fiscal union with the euro but if i'm wrong and michael is right, the key thing is what is the relationship with britain and those other eight countries out with the in's and that's one of the reforms that they were getting which is probably one of the most important but the . ast understood outside francine: what we're trying to understand and we did a chart and it's unclear when i go to a vote or someone goes to the ballot box exactly what they're voting on, whether they under

trade or what they're looking at trade or whether it's again, it's emotional and whether the e.u. rules my life and is taking over the queen and government. michael: if i was advising the exit campaign, there needs to be clarity in terms of what the facts are. i totally agree at the moment it's unclear. francine: we don't know. michael: there are a number of facts that need to be made. first of all, in terms of coming back to talk about sovereignty, this country has caught many years to have the right to govern itself rather than to be under a foreign state and that's essentially what the ultimate decision is going to be based on because when we voted in the referendum of 1975, we voted to join an economic union and what has happened subsequently which the british public never had a direct vote on is whether to take the sovereignty of the country -- there's a very important part of the sections cameron was seeking to negotiate which i think in bloomberg he said he wanted to maintain sovereignty and that

is all the decisions that will be made by the e.u. francine: the u.k. is opting out in certain measures but at the same time the u.k. is at the negotiating table and what i keep on being told. it's better to be a part of the clan and try to negotiate rather than being kept out and having rules still on you. roland: i don't recognize any shape or form michael's description testify as a foreign state. there's three parts, the council of ministers which are the democratically elected ministers from each individual state. there's the commission which is actually appointed by the counsel of ministers who are democratically elected and obviously the european parliament that is democratically aleced. what i would agree is that it's one layer removed and there is an anti-politics feeling at the moment. an anti-politicks feeling to westminister and anti-politics feeling to brussels and i get that but it's not a foreign state because we're right at the heart of it and freely choose to be a member of it and

i would argue we have a huge influence in it. the single market was created by margaret thatcher and think this commission is more liberal, outward looking and competitive than the one we ever had before and it would be supremely ironic for britain to leave the european union right at the moment which the european union is looking more and more like the bringish outlook. michael: but they don't establish that policy perspective because he is an extreme advocate for joining the euro. roland: he wasn't. michael: november of 2008, in the evening standard it was clear that it was proposed we join the euro. roland: i hold that against you. michael: the country didn't want to join the euro. roland: we have a great option but in the european union, it's perfect. michael: you talk about the

governing bodies of the e.u. and when angela merkel can open the doors to a million immigrants, that can have a profound impact on the british. we saw the chart showing how mmigration has become -- those immigrants up to three years, people understand they don't have the right to reside in the u.k. which is no decision of the u.k. -- [inaudible] roland: it would take six years and they will have learned german and i can't understand why you think they'd want to come to britain? michael: i'm explaining why the chart shows immigration is a concern. roland: i completely agree with you. michael: issues are being decided upon british people have no decision on. and why they move -- roland: it's a concern if we come out of the dublin convention and allows you to return the asylum

seekers back to the issue they came from. and it's an issues that has to be confronted. there isn't an option of fortress britain where we have no trade and no migration. we have no movement of people t all. we have to tackle it together. francine: is it difficult? we were looking at europe. but is it more difficult to govern as a liberal moderate in our day's world. if you look at the modern day governments, cameron has bucked the trend and has done an extremely good job and am a big supporter and waiting to see the results of the negotiation before i came out with my personal view on what was going to happen in terms of the e.u. heart of the

and it does actually show something which most people are divided about this. but i think the issues are going to be about economics and going to be about our position

in the world stage and will be about security. and we're stronger together. it's not all going to be about sovereignty as michael hopes it will be. francine: the show is ending and we have to get you on to continue the debate. thank you both. we're back with "surveillance." ♪

francine: yellen delays. the fed chair warns the volatility could push back rate rises. slipping oil. crude trades below $27 a barrel. gives bloomberg and outlook for 2016. riksbank cuts rates further. this is bloomberg surveillance. i am francine lacqua. tom, when you look at inves