Announcement. Oil bidding analyst estimates. Feeding off it until we got last night, beating saying a bit of a troughing. Asml equipment which makes the chips for intel. Alibaba. Lory from up managing to wrap advertising. Working and ibm together to create apps. These are companies that have been feuding for a good three decades. Bowl adveas the super rt. Liked it. Rs byebye library. All that and more. We are talking about china. They have released the latest check on the economy with Economic Growth accelerating. Better than estimates. Is this an economy that is restructuring to you . I think we have to dig deeper. The headlines figure 7. 5 . How they got there is another matter. You look at the dear the year to date. Pricing that the country would be expanding. The median estimate was 7. 4 . The expansion quickened the first time in three quarters. Two opposingg at forces. We have this pulled down by this big and sharp drop. On the other hand you have what economists have targeted called targeted easing. Banks to lend a little bit more money. From economists we spoke to, property. That will weigh on growth. It is a very huge component. You consider that if you take all related sectors. Steel, construction, chemicals. More than a quarter of final demand so it is ok for now. This is one to keep at the back of your head. We go to retail sales and factory output. How do these speed to gdp figures . For factorye beat output. 17. 2 . That is infrastructure spending. Factory output 9. 2 . Single digit growth higherthanexpected stations. Fromonsumption spending cars and cosmetics, furniture, food at 12. 4 . Atit short of estimates 12. 5 . Fore was a median estimate retail sales. Back to you. What amazes me when you get these chinese numbers, when theyre bad they must be very bad. This cycle will say us that cannot be good. Clicks or less stimulus going forward. When you talk about the exhilaration, the first time the economy has said accelerated in three quarters. Happens is the economy salaries for quarter in the slips back. We should not make much of this is a trend. We will be talking about that in a minutes time. Janet yellen appeared before the Senate Banking committee on her first date. She does said despite the jobless figures the labor market is a major concern. Labor force participation appears weaker than one would expect based on the aging of the population and the level of unemployment. These and other indications that significance like remains in labor markets are corroborated by the continued slow pace of growth and most measures of hourly compensation. In this testimony will be incredibly detailed and nuanced. I think what you get from janet yellen, if you get to read big profile paper, this is a lady that is not just concerned about unemployment as a data point. She is concerned about the unemployed. She still sees too many people unemployed and she sees it as harold to do some thing about it. Isn they have sort of said [inaudible] on the fiscal side the government is not doing too much at all. She is talking about the Participation Rate not being high enough. Reconcile those two things. More people are employed and yet what is the issue . The issue is wages. She does not see enough money in peoples pockets. She does not see enough wage growth and for her that means a slack in the economy. There are people of working age that are unemployed for six months. It was amazing. She did seem to say if the bettersuddenly did get faster than expected maybe Interest Rates would have to go up that she said the market is nowhere near. Lower it was a lot more nuanced. The big take away for me did not come from the semiannual testimony or from the q a. It came from the feds Monetary Policy report where the Federal Reserve say equity valuations of smaller firms is one of appeared to be stretched. There was the selloff earlier this year. I had a chat with someone about this lately. My question is what can she do about this . The fed cannot said policy. Or twitter. Ook there was a bit of a reaction. A bit of a selloff in the small caps. Is such as that state of affairs to tell you that for the fed to tell you that valuations are overstretched. The housing bubbles are making them but this is a fascinating move. Put money . Vestors we are seeing treasury yields remaining low. Spoke for how long yesterday . In our and 50 minutes. And 50 minutes. She will speak again today. What more could she add . A lot of people will bush are on the stuff we did not get a response to. I do not think we got enough on her view on inflation. Take stocks, people want more color. It remains to be seen. We have earnings coming through. Breaking. Got asml they beat in terms of their gross margins. Quarter. Is the third is deteriorating and sales will selloff. Sml makes the equipment that make chips. It looks as though they might slow little bit. Ofse chipmakers, the likes intel and samsung are delaying their orders. They are saying we do not know when we will need to upgrade. We do not know what we will have to make these powerful, more smaller chips which asml has the equipment to make. The orders are not coming as the or fast as thick or fast. The big pop in the share price for intel. Betterrd quarter will be in terms of sales than anybody anticipated, they say. They are a big customer of asml. Presumably that would be good news. This is the likes of pcs. Troughing. Ights a buying computers but wheres the mobile growth. Theyre saying deterioration and they are nowhere. Checkig morning for today. Apple and ibm have set aside a three decade old rivalry in favor of a partnership. We will see the Companies Develop software for iphone and ipad users. Thisthe thinking . Gives apple an opportunity to ofsue corporate users iphones and ipads. Everyone uses it for its own personal needs and businesses use them but it is limited in how must able use their iphones and ipads. People check your email and calendars. They obviously surf the web to do they do a lot more, can you get approval for an expense through your phone, can you run project . That is one of the things that ibm does very well. They do it on the cloud so this is a way for them to team up and it gives apple a massive salesforce in the United States of people to go out and pushes products. For ibm it gives them im an opportunity to get into the space which they have not been. They have been tied to the pc space. In terms of these corporate users it could be massive. They have 30,000 iphone users. Deutsche bank has 20,000. There is an opportunity here and that is the reason we saw both share prices is going up. Apple climbing nearly two. Blackberry. S more evidence that blackberry is losing its place in the business base. Teaming up to make software. Nike dropped the fitness band. It seems that apple have got a broader strategy. The great up with brands that are out there. The likes of nike have decided we are going to go with software. Nike wants to be good at what he gets into. It does not want to spread itself too thinly. It can win parts of hearts and minds and provide more apps on your phone. They do not need to rival samsung. Like that to the guys apple. We will do the software for you and build that brand. This is the theme of moving to mobile. Intel has not got the chips for mobile as quickly. They do not dominate that space. This is a move of everyone wanting to get onto your tablet sent smartphones. News thisof tech morning. Chinese growth accelerates for the first time in three quarters. Our next guest warns beijing is putting off its problems. That is coming up in two minutes. Welcome back. 6 15 a. M. In london. Chinas economy grew more than expected in the last quarter. Gdp and the engine was 7. 5 . The first time in three months or three quarters growth has accelerated. Industrial production last month rose 9. 2 on the year also ahead of estimates. For more on the state of asias largest economy, our guest. Welcome to the show. 7. 5 at least to me does not feel like this economy is restructuring. Am i right, am i wrong . Entirely right. You have taken the words out of my mouth. You have seen the quarterly numbers. Ahead of expectations. What is coming through clearly when you look at the break down s, the fiscaltor stimulus package is coming through. Growth has accelerated. The question is about growth going forward. Many have called for the government to do more and hope that stimulus could come further. Pressure offe the the government . The measures are working and they are preventing a socalled hard landing. Restructuring as quickly as you would want to see. They will let the market change and let the Property Market cool off. That was our view that it would be we were saying there would not be any big stimulus. Ackage theyre aware of the debt overhang problem and they are tackling it in their own way and any stimulus would be fine tuning which changes our view. The loan growth in the new credit numbers that came out earlier. Unbelievable. The new do numbers were up 90 on last year. If you look at it historically the last time the june numbers exceeded this level was 2009. Panic mode andin maxistimulus mode. What is coming through clearly as the started off minimum stimulus has become the maximum stimulus. You are pretty worried about china. We were just saying that this is the first time we have seen an acceleration in growth in three quarters. You think itle do is and how big of an issue, how worried should we be about the Property Market in china . Good question. Pumphave the ability to prime. The question is about the quality of growth. And theres a couple of things. What you see clearly is diminishing returns. Is giving yout less and less in terms of raven ever turn an investment. You see this in the corporate sectors. Growth apparatus and the overhang continues to build and with it capacity. What youre seeing is visibility of growth. What level of growth that we saying . The economy in china is growing at five percent to six percent. Questions. Ways the official numbers that the economy is growing by five or six percent, we expect it to slow to three percent or five percent. Fix some people will point to the collapse and some people will look at you till of the usage. What do you look at . We look at the number proxy variables with some of our favorites. , the one that is a good indicator is industrial production. That economy has become so synchronized with the chinese economy. We look at the trade data from the point of view of evil people [inaudible] and funding data. Insights. Us her coming up, betting on games. The italian Lottery Company agrees to buy the worlds guest slot machine maker. Is it a gamble . We will have more up next. Lets have a look at one of the key corporate stories in europe. To buyas agreed International Game technology. Bringing together the largest provider of lottery systems with the biggest slot machine maker. Ais is a much larger layer in 317 billion billion euro gambling business. Grapplingry is with sewer growth. Some International Games are will of fortune. One of the most successful of all time. They have been pretty in a day innovative. They have video poker. Interesting that they are flushing the cache. This industry was hit by the financial crisis. These are physical slot machines. This is about physical slot machines. There were some rules that meant that each book he could only have some ornate shop at so what they did was open more. You can have more slot machines. The government looked at this and thought we need to do something about this. They have whacked a massive tax on the profits of those machines and those companies will get hit and you wonder how it filters through. I went to a huge event, and it was amazing. Some of the machines they had on sale. It was the great and the good from all the casinos taking out these slot machines. They are quite funky things. I a we will be talking israel. Rocketestinian bombardment left a it fiction truce proposal in tatters. More from tel aviv. Rex welcome back. Your time to head out for fed check. The market seems to be focused and the dollar is moving higher. The market seems to be more focused on the language she used but rings got better. That is the backdrop and that is what the dollar is doing. And taking it to new zealand where we have a significant move. The biggest drop in the new zealand dollar. Prices are falling more quickly than the market anticipated. Against alls dying 16 major currencies. That is the biggest losing streak since december 27 and the korean one also on the move. The finance minister says we have to be prepared for this economy and also the view is that you will see a pretty significant move. The biggest twoday loss in almost six months. Stay tuned. You Janet Yellens testimony is the big one for the market. Leaders of the five brick [inaudible] new Development Bank will finance Infrastructure Projects throughout the founding members countries. Janet yellen has appeared on her policyay of the testimony. Despite signs of growth it still needs stimulus. The economy continues to improve come of the recovery is not yet complete. Monetarydegree of policy accommodation remains appropriate. Theirael have renewed rates on the gaza strip after a rocket attack left and egyptian truce proposal and tatters. The israelis had accepted the proposal but hamas said it was hoursnsulted. Within six 50 rockets had been fired from gaza into israel. That attack left one israeli dead, the first in eight days of fighting. Onfor more on the latest israel, we are joined by elliott gotkine. Does this mean were closer to a Ground Invasion . Theres still no decision. Thee are tank brigades on border. A Ground Invasion is within the capacity of israel. Hartman and stirred netanyahu speaking in a press conference was saying we will not stop until we have read israel of the threat. Israel wants the rocket fire to cease. A number of air raid sirens this morning. Israel is carrying out attacks on the gaza strip. The death toll is rising still. We are above the 200 mark according to Health Ministry officials. Israelihad our First Casualty. A voluntary a volunteer taking food parcels to troops. Critically injured in a mortar explosion. To save. Stay safe. Volkswagen is ramping up capacity in north america while promising to cut costs. A year. N euros hans nichols joins us in berlin. What is behind the plan . Theyre setting the benchmark pretty high. High labor costs, no one disputes that volkswagen does a and job at reducing cars producing cars that people like but they have a hard time with their profit margins. Take a look at what the ceo said. We must take action that is clear, effective, and painful. We have a lot of catching up to do with our competitors in terms of productivity. It was even lower last quarter in 2013. He compared toyota at eight. 8 and hyundai at 8. 8 . Almost 600,000 across the world. When you look at the labor costs in the u. S. , germany, and japan you see the difference. Mrs. Auto sector wide but this gives you a sense of how expensive it is to produce german cars in germany. 40 point eight euros her hour. Japan although we down to 29 point 96. In the u. S. Where they have had massive restructuring it is 25. 6 euros. Inkswagen is adding jobs chattanooga and tennessee. 2000 and jobs and new jobs. They talked about the need to trim down factories, especially where they are not producing cars profitable enough. It looks like in east germany there may be some hits. Is phenomenal it is half the price in the u. S. At the moment. They are tackling the costs, where is the target . Advantageit of an area they want to get to profitability to eight percent. They own body and portion audi and porsche. Just a fraction,. 02 . The account for one fourth of profitability. Vw will be profitable but for the brand there will be job cuts in germany. Thank you. On the car sector. Nes. Ve more tech sector news. Beating analyst estimates. Intel did that last night and today we get the asian competitors coming out with a net income Second Quarter. Beatingn at analyst estimates and margin improving. This is a company that is benefiting from new apple and iphones. We are getting more chip demand from them and potentially for more 4g processes. The chipmaker is managing to win out and it seems to be on the mobile side of things. Far more tc heavy overall. Yahoo yesterday and alibaba. We have sales in the Second Quarter dan 3 . Net income down. Theyre saying were not satisfied. Trying to change things up erie it she has been buying tumblr. Eyes on there yahoo screen. When not doing it. Advertisers are not being lured over. The idea that they will hold onto maybe more of their ali baba stakes. Is that heartening investors . There was a little bit of a selloff. Investors are looking up beat on the alibaba side of things. Theyre saying we will not sell as much as we were estimating. Huge growth, this is said to be the biggest ever ipo in the United States. Share sales could he up to 160 billion. When you get a 22 stake that is an isoearner. They have said we will sell one third less because they have future growth but half of that will go to investors. Getting a bit of a cash windfall here. Aboutryone was talking yahoo . They were talking about her because there was a meeting with that sheas turned up to a number of hours late and reportedly it was because she overslept. The criticism and pressure on her is absolutely huge. She did apologize and said she was very sorry. Howge a goes to show much she is under pressure. She is trying to show she can have it all. She once claimed she gets forgets to go home and go to bed. She has been at the company for two years. She promised, came from google and promised she would turn around advertising. Getting moretill advertising. A 13. 8 million deal made in heaven. Announcing a 13. 8 billion deal neos. 50 of airbuss new yahoo is scaling back the number of shares or can sell in the ali baba ipo ensuring it continues to benefit. Ali baba and investors other than yahoo are likely to make up the difference by increasing. He number of shares people familiar with the matter have told us. Yahoo will return at least half the cash it reaps from the ali baba ipo to shareholders. Mulallys appointment to googles board less than two months after the Technology Company unveiled the latest drivinge for itself car. Intel, the worlds Biggest Semiconductor Maker forecast threequarter Third QuarterThird Quarter sales that topped analyst estimates. It will be 14 . 4 billion. The company says the forecast has fueled optimism for a stronger rebound in the pc market. Welcome to countdown. Get ready for airbus. Dealmade a 38 billion yesterday. With air asia. Tony fernandez on why he decided to bet big. It is one of the greatest aircraft ever made. Four years i kept pushing airbus. Look. An back and took a how long have you been harassing them . Four years. They told me know in many different languages. Politely. To their credit they came through and built a beautiful looking plane with a new wing. Andill save 14 of costs that will enable us to grow much quicker. The worldss of most expensive private jet expanding their range. We spoke to gulfstream about their latest line which will carry the traveler and comfort close to the speed of sound. We are sitting inside the g650. Eam it is the largest cabin and the fastest certified civilian aircraft in the world. Is a Cutting Edge Technology aircraft with an advanced cockpit. The most advanced business jet on the market today. This is a fairly standard layout for the g650. Seatsngement since 13 for eating, sleeping, and working. It is capable for flying almost 16 hours. You can fly at mach nine. The thing get quicker to destination. Million and 64. 5 we have a backlog that extends to 2017. You have to wait your turn in the queue but it is worth waiting for. If you live in germany or the you understand. We will look at that in the newspaper segment. Stay with countdown. It is time for newspapers. We are over an hour from the start of most european trading. We are joined by hans nichols in berlin. You always humorous. To get away. Germany disappointed in because they had this massive story with the world cup and none of the government leaders used it to bury a bad news story. Merkel could have announced years of tax fraud and gotten away with it. We did have a good story. The german Sausage Cartel is busted. They have been fixing the price. Page of aon the front single german paper which means if you have an is in germany wait for years until they win the next world cup and then you can. Extraordinary. I am looking at the ruling of the this counters. This is in the times. Decline. Had its first concernar less wrapped around it. Lidl is unveiling its posh red push. Where are the posh customers coming from . Lidl is not in the best part of town. Not just a london store. They will be opening in maidenhead and dorking. That back in the day, bloomberg did a tasting. Lidl champagne blew their socks off. These Big Companies are the recession beaters. E winners in the recession big winners in the recession. Of the we come out recovery. Those habits stay with you. It is not just a story for the u. K. Carl icahn rumored to be looking at the dollar store. He is trying to push these Dollar Stores to merge. It is not just a story for the u. K. So far can all may go upmarket. It is interesting. We have become [inaudible] rich people on occasion are ap. Interest rates raising the stakes on rates. They have in critical of Central Banks and the kind of instability that can create. There operating outside of economic reality. A big slap down. This is the daily telegraph. In big upside surprise was inflation data. For some people that will take the final box for that first vote. Many people felt this was because retail, the clothing pushed up prices and sales came on later. There were some oneoff factors in terms of energy. There was the strength of the british pound that has not yet been felt on the high street. That should keep inflation a bit lower than many people think. I think it emboldens them. The market thinks the Interest Rates will rise when, october, november. One in three economists before the end of the year. I have some news you can use. One could argue it is not really news. The headline tells it all. There is plenty of conflict. Tot until you cool down apologize and settle your differences. Why . You are in the defensive mode and you do not go to the root causes. You need to address the root causes. Here is one for the man. The men. Men,rks really well for not so well for women. Not apologizing for her policies. She has been called the determined dove. The recovery is not yet complete. The high degree of Monetary Policy accommodation remains appropriate. Onstay with us for more countdown and Janet Yellens testimony to congress. Picks ups economy speed. Growth accelerates for the first time in three quarters. No fed formula. The central bank has no mechanical answer for when it will start raising rates. The and ibm team up company sets aside 30 years of rivalry to Work Together on software. Welcome to countdown. It is 7 a. M. In london. I tell you what i am excited about today. U. K. Unemployment. Toward that first rate hike. Will it come early or earlier . Economists think it could be this side of 2014. Today. Ing tech asml. Big numbers out of living up to expectations. The Second Quarter looks bang on if youre looking at sales. At one billion euros. Margins on track for profitability. Asml makes equipment that makes the machines that make chips. Maybe we are not upgrading. We do not want the chips quickly. Many customers delaying orders. Watching the app space. Apple unlikely partners. They will concentrate on making business apps for iphones and ipads. Investors loved it. Stock was up two percent. 2. 5. P blackberry down. The idea that apple gets to use ibms salesforce and ibms knowhow in the Software Space to take corporate users off iphones and ipads and taking that genius that ibm still has and make those phones into more than just things that people use to check their email. And what very getting crushed. Another thing were looking at, china released the health check into its economy. I am not going to be cynical about these numbers. There is always a question over the route their reliability. They look pretty solid. If you look at things like power consumption and there is a. Ood chart from the economist you did see a drop in power consumption as well as truck sales. More or less as expected. You do the math, that is about roughly eight nine dollars, 9 billion. 7. 5 is what we got for the Second Quarter year today. It does look like beijing will be meeting that target. Two opposing forces at work. We are worried because of this constructionrty and investment going into the Second Quarter. What aging did was targeted easing. The spending of money that was already budgeted for things like infrastructure, spending on public services. The second one which came last they last month when allowed some banks to lend cash to rural areas and small businesses. The economists told us this year will be ok. Next year, that may be where the problem comes up because that is when you have the slowdown down in property investment. Perhaps weighing on activity. We are right smack this year and next when all this debt matures. We are ok for now. Think back to you. Data have had some credit and retail sales. What are they telling you . Retail is a little slower than expected. At 12. 7 . Also out. S investment at 17. 2. Better than expectations. Thank you. China and focus. Chair janet fed yellen. That was the first day of her semiannual testimony. She said despite the latest strong jobless figures the labor market is still a concern. Weber force participation appears weaker than one would expect based on the aging of the population and the level of unemployment. These and other indications that significant slack remains in labor markets are corroborated by the continued slow pace of growth in most measures of hourly compensation. Let me give you the newsflash from yesterday. If you did not read the testimony in its entirety. In conclusion, inflation still below target. This was a little bit more nuanced. She said if the jobs numbers become better than anticipated we might raise rates quicker than you anticipate but they may stay lower than you anticipated. It is about how that language develops. Janet yellen the dove. Many are saying that she is covering every base that she can. Is she becoming less dovish and more hawkish with that statement that she said, stimulus might be required if the market might not be required if the market seems to improve faster and she backtracked. She was at least more measured. A lot more measured. Pushed on rates, there is no mechanical formula. She has gotten good at doing these press conferences with that doing too much away. She is concerned about the unemployed and it is an emotional thing for her. She actually cares about people and the way they feel about not having a job. We have talked about her dashboard and what she looks at. One of the ways that you can be nuanced is every time you speak introduce more data that you are looking at. Everyone took the jobless number being lower than it was supposed to be or where it was supposed to be and said this is good news. Rates could come forward and she said i am looking at other things like jobless participation. People are falling out of the job market. Theyre getting disillusioned and they do not feel they can get a job anymore so these numbers are a bit of a smokescreen. Andhe is looking at wages money. Wage growth is not enough. From watching this, the big take away for almost everybody did not come from the press conference or q a. It came from the policy report. The fed talking about equity biotech firms is being stretched. That moved the market yesterday. Linkedin, twitter, facebook all lower on that comment. Not by a lot. The question will still be asked. What can you do about lu asian being stretched . Shares beingt stretched . If you have a dovish janet yellen talking down the market in terms of you could have made some nice earnings if you were in the fixed income market but we will not see rates drive up that much in the nearterm future. Where do you start to put your cash . What is the rap there . Makes equipment that make your chips that go in your smart phone and tablet. They are having to invest big in making machines that make smaller powerful chips so that eating into the profitability because of the money theyre spending but the sales are not has beenp as much anticipated. Theyre realizing they do not want to order these machines as quickly as they thought. Theyre waiting for apple and others to update their smartphones. The demand is not there so sales will not raise 17 . It will be less than that. Saying that heo thinks he sees signs of the pc market may be picking up and a lot of people will take away from intels earnings were they said the Third Quarter will be better than anticipated. Presumably this is all good for xml asm and asml. Intel still dominates the pc market. It is a deteriorating market. It has nowhere got the market whack as smart phones. It is all about mobile. Apple will upgrade and they want some of our better chips. This year people are putting off their orders of these latest machines. It is not going well for 2014. You have a lot of people talking about Consumer Tech and disregarding the fact that for a lot of these big firms, the vast majority of the revenue comes from the business side and you have this egg apple tie up with ibm. Very exciting. They spent the last three decades feuding. They will team up and Design Business apps for the iphone and ipad. Not capitulation for ibm but if you cannot eat them, join them. Ibm got out of the hardware. Theyre focusing on software and services. With this allows them to do is to take the excitement that surrounds the iphone and the ipad and help apple reached the business consumers out there. If you take a big company like siemens, they have 30,000 most of these people are using their iphones to check their email and maybe look at their calendar. They will be able to put ibm designed business apps where they can get approval for things and do a lot more. We should point out that they have the bloomberg terminal bull terminal on there as well. Some of the got prowess of ibm when it comes to their cloud computing. It does not have to sit on the device itself. That is a big market. Investors loved it. Ibm up 2. 5 . Blackberry, more of its demise 3. 5 on the news. Take a look at ibm. Up 70 . That is annualized, total returns. 11 . The s p over the last five years up 120 . That is 17. 5 annualized. Who is not taking money on the market other than me . Apple up moreup 120 . That than 300 over the last five years. We only talk about the lending house and the London Housing boom. The hardware and you will make the software. On the consumer side and that house side. That is interesting how that is developing. Tech, acheck, source of volatility. Stay with us. We will be talking to Stephanie Flanders. In two minutes time. Time for todays company news. Rio tinto said secondquarter iron ore production increased 11 . They expanded operations in western australia. The price of iron ore has dropped 27 this year. Airbus is extending its lead over boeing on this second day of the former airshow. The deal included a 13. 8 billion agreement with their with air asia. Pentagon confirmed that the f 35 will not make it. The fleet was grounded after one plane had an engine fire. The manufacturer is lockheed martin. To countdown. Said she islin watching the labor market. Guest Stephanie Flanders joins us. Lets just start with a broad question. What would you take from yesterdays testimony . Especially since mark harney started to introduce that different language around rate rises everyone has been waiting to see what we get that in the u. S. Him a what we see that in the second half and we have seen janet yellen reluctant to go down that path in a clear way. What she has done not just with this testimony but in recent speeches, she started to talk about the uncertainty around the path of Interest Rates. You can see why. The central bank spent several years trying to take the uncertainty out of markets and you have more hawkish voices causing too much exuberance in the market. They tried to introduce that back in this language about data dependency. Nothing like what we saw yesterday. She stressed that the approach data dependent. You have to look at the strong up thed we saw her flag strong job creation. Changeng that might their view and that was one of the more interesting things. Get unemployment numbers at 9 30 a. M. It did not think the bank of england needs to worry too much about rates. Hear at 9 30 a. M. That would influence the bank of englands decision on raising rates . We are on a path, we have had unemployment rates falling faster than they thought. We would say unemployment is likely to stabilize. I suspect we will not see a big fall back. If unemployment continues to fall and if you start to see not even a rise in wage growth but a stabilization and pay because pay has been so weak the last few months, much weaker than we thought. I think the debate now within the Monetary Policy committee is not so much around the timing of the rate rise as over the pace. If they do an early rate rise this that give them room to move more slowly or does that have all of us saying this will be every two months or whatever it is. The u. K. Will have that argument first. If we act soon or does that give us more room to go slowly . The u. S. And u. K. Have managed to inject this volatility and get invested, bracing for Interest Rates. What do you do if you are an asset manager, we saw a selloff last week. Is it still overweight in terms of equities versus fixed income . Equity still looked very cheap. It was never really easy at the time. It seemed like an easy call to say quite a strong overweight. We are not there anymore. Whatn was talking about she considered to be slightly overstretched valuations. On a valuation standpoint we are not there. Are in athink we low volatility world where Monetary Policy is extraordinary loose. Suggest going back to a fully diversified portfolio. Yourter the break i want call as to whether that inflation data is changing. Is still to come still to come. Ceasefire. We will return to our conversation about the markets. Stay with us. More to come. Joins usnie flanders for more. We were talking about inflation. We got that number yesterday. A pickup in inflation accelerating faster than people anticipated. That has got people saying they be there will be a rate hike. What is your take . It is quite striking, this number. They never like to feel that they are reacting. I do not think they will make a decision on the basis of this data. Big chunk ofthe the pushup was in closing prices. Big rise ino a transport prices but that is a very volatile part of the mix. Ist they would be looking at saying lets see what happens in the next few months. If we do not see that, if this floorto be creating a new or close to a new floor for inflation that would start to affect the judgment. If you continue to see the strength, this is an economy that has been growing at almost four percent annualized rate area just to have the data continue to be strong is a reason for them to think about rate rise. Maybe we should stop using the word hawkish. Hawkish. Use the word just for the debate. He gave an interview a while ago and talked about the balanced decision around rates. Just to say it was balanced was such a big deal. Maybe he will start opening a debate. Keep your eye out for this one over the coming months. Thank you. Welcome back to countdown. Cranny. Manus what we have is two big movers. Won. Ig drop for the to actnomy needs preemptively for risks. What youre seeing here is the dollar rising and the korean won falling. Traders are basically assuming a little bit more aggression in terms of rates. From there we go to the kiwi. This is the biggest drop in almost seven weeks in terms of the coin the kiwi. Dollar, theand biggest drop in almost seven weeks. Inflation is less of a problem than anticipated. Levelrice is the lowest since 2012. This fiveday losses the biggest oozing streak since december. The essence is traders are paring back the size of the rate issue from the new zealand central bank. Plenty on the other side of the trade with janet yellen speaking in day two. As well. Nemployment these are the top headlines. Nsaders of the five bric natio met. South, russia, and africas new [inaudible] has appeared before the u. S. Senate Banking Committee with testimony. Telling them despite signs of needingit is still stimulus. The economy continues to improve, the recovery is not yet complete. The high degree of Monetary Policy accommodation remains appropriate. Israel renewed its air raid on the gaza strip after a palestinian rocket attack left a truce proposal in tatters. Israelis had accepted the proposal but hamas said it was not consulted. Within six hours 50 rockets had been fired from gaza into israel. Leaving one is really dead, the first in eight days of fighting. Areuropean Union Leaders going to meet in brussels tonight. They will talk about more sanctions against russia over ukraine. Chancellor merkel and president obama spoke yesterday. This is adjusting. What the u. S. Would like to see is for the eu to go beyond these individual sanctions. We had 72 people sanctioned. We have a couple of companies sanctioned by the u. S. Think that is a swat on the hand. They want them to go further. The u. S. Called a bunch of the eu ambassadors and the other day and says they show them evidence that the russians are actually engaged in this, that they have a staging point just over the border where all these weapons are coming through. The u. S. Saying that the socalled separatist leaders are actually often from moscow, acting under russian government orders. They are not really separatists. So the u. S. Pushing up the rhetoric. We heard from Angela Merkel saying she was asked if there will be more sanctions against russia and she says she did not want to prejudge or preempt any of the decisions. She has said they have not spoken with all the member countries and there are 28 of them. Other countries worried about these extra sanctions. What are they concerned about, the Economic Impact of these sanctions, they have stronger trading relationships because it would hurt the entire block. They have fragile economies and their concerned if they do deny themselves in business with russia, if there is Company Sanctions that denies their company the right to sell things to russia, the u. S. Would like france to not sell those helicopter warships that would he parked off the shores of wemea but the french say already did the deal and it is worth a couple billion. Why would we not . This is going to be interesting because the polish foreign minister said this is a credibility test for the eu. We keep saying the russians must stop and we keep threatening them and if we do not do it now what are we . Lets within russia the perception is there being seen as a joke or a badge of honor. They laugh about it. It is an honor to be sanctioned. Quietly it has had a real halting effect on all investment in russia. Nobody likes that. They would like to move beyond but that is not something you will see in front of the cameras. The car move it on to industry. Volkswagen is ramping up capacity in north america. While promising to cut costs in its core Passenger Car brand. Hans nichols joins us from berlin. Toughs behind this pretty costcutting plan . They have remarkably high labor costs in germany. That is what behind this what is behind this. They can do a great job building cars that will hit the 10 million mark that it went it comes to but when it comes to productivity, the ceo of the heent group, listen to what had to say. We have a lot of catching up to do with our core competitors in terms of productivity. Take a look at these productivity numbers. For half it numbers, they are 2. 9 . That was 2013. The First Quarter they were down to 1. 8. Toyota is at 8. 8. Much more profitable. Hyundai at nine percent. Employees 575,000 thele across the globe. Biggest of all the auto companies. When you look at their labor costs countrywide you can get a sense for how expensive it is for them to produce their vehicles. Look at what is inside germany. 48 euros per hour. In japan, 29 euros and in the u. S. , 26. That is maybe why they are adding this plant in chattanooga and adding 2000 more workers and some of the plants in east germany where they are producing cars that are not selling quite as well, they may be having some job cuts. Being efficient being so behind when it comes to the auto sector. What about the fast cars, we have the latest on the bribery case against formula one chief executive bernie ecclestone. Their related because they o cars. Here is his defense. I read the banker but i did it because i thought he was going to divulge information about a family secret tax account and there would be problems with the u. K. Tax authorities. I did not bribe him to influence the sale of formula one. It is a remarkable turn of events. This came about in the court room and munich. Bernie ecclestone took the stand. The case is ongoing. This has larger implications because john malone wants to buy formula one as he seeks a cable empire with something to run on it. I will admit to the deed but i will say my motives were slightly different. It is a great story. Is quite amazing. 12 it is quite amazing. Truth will out. The margins rsche bringing new life to 911s. Has millions of fanatical followers and there is a reason for that. It is not by chance. It is because of design. And we is Rob Dickinson porscheand modify old 911s. Part of the mantra here is that this car is not meant to look like a custom car or car that has been fiddled with. The car will always be apportioned 9 11 and everything we have done builds on that proposition and it has been lavished with some passionate love by a bunch of lunatics in california who respect and honor what portion did. Orsche did. Was with my parents in 1970. It made this incredible noise when he went by. That fascinated me and inspired me through the rest of my life. We call this our captain america car. The stillman looked for car that was sporting in the and luxurious. They have an exquisite level of taste and they are gentlemen and ladies with the fairmount of net worth. Of net worth. Nt 500,000. Itth of works in such a way that it reflects the amount of passion that goes into them. This can take eight months. Our work is one of admiration for a company we love. Keeping these cars on the road and making them better than they were 30 years ago and give them a second life is an honor for us. Is cool and forever will be cool. It just is. Beautiful car. Much better. User per second, we talked to the tech companys new president. That is next. Welcome to countdown. It is 7 44 a. M. We will go to israel. Elliottoined by gotkine. Tell us what is going on. Was supposed to be coming to you a few minutes earlier but siren sounded and we had four very loud explosions overhead. Rockets still fired into the gaza strip. We had our First Casualty in israel yesterday when a unteer was hit in a critically injured in a mortar explosion. Israeli airstrikes on Gaza Continue as well. You have some live pictures of the gaza strip that we are able to show and at the moment we heard a few minutes ago as well that thereporting told 100,000. Azans to leave their homes ofy have hit some homes those belonging to islamic jihad. Other militants responded with rockets into israel and israel resumed bombardment of gaza. Quiteath toll above 200, a number of civilians as well. Stay safe. There has been a change behind mind candy. Ceo is stepping down, taking a more creative stance. Welcome to the show. For the change of management your role is temporary in some form but wheres the emphasis for you guys . Big brands about to launch and that is where we need to go is to make those as successful as we can. How do you make it successful, you have been incredibly popular. The critical next step seems to be going mobile. They have not been able to ramp youhat hill is quickly as wanted to. How do you make it possible . The mobile space for kids is difficult. It comes with all sorts of andty challenges commercialization challenges. Someone has to crack it or else kids will not be able to enjoy mobile. We are used to looking after will make it work in a way that is commercially sensible and viable. We decided, i have three kids, they spend half their time on the desktop we have and 45 yoile phones. When you talk about the difficulty in commercializing the mobile space, the focus seems to be on how parents do upfront to pay for apps which is true. Is not because in a sense the Technology Got ahead of parents and parents have all kinds of objections to their children disappearing with the mobile phone in the house. Your kid goes missing all of a sudden. It is not just about the cost of the apps or the safety concerns which are multifaceted. There is too much of this going on. Yes and no. Kids have watched tv for years and it is a predominant mechanism where kids get to watch entertainment and enjoy brands and characters and read stories and so on. I feel like this is an extension of that. Is divertedion between these platforms. It is a big way to engage and interact with storytelling characters and get the same enjoyment out of these different rounds. I feel like it is a shifting landscape. Technology has shifted onto devices. You have commercialized it how . Popjam. Like instagram. They can share th ings things they are passionate about. Work this out going forward. Subscription has been incredibly successful. Parents seem to really enjoy that model. Are you still looking, have ambitions to take this to market . The u. S. . We have huge ambitions for the company. We want to create their worlds greatest Entertainment Company for the next generation. We really want to make that happen and we believe this is the way to do it. In terms of ipo we have work to do. You have seen the federal that theire out valuations are stretched create what would your response be . They are leveraged on one very strong brand and that makes them look unsustainable. Where is we are trying to commercialized the number of Different Properties and have successful rants create you have a multiple, you are in a much safer bedrock if you have a multiple portfolio. My kids wish they were sitting here. Thank you very much. 10 minutes to the market open. Check a big theme. Janet yellen the big theme as well. And u. K. Unemployment. A beautiful warning in the city of london. We will give you everything you need to know ahead of the market. Were back in two. Welcome back. We are seven minutes away from the market open. Caroline hyde and Ryan Chilcote joins me. Is the company that makes the machines to make chips. Providers, samsung and those sorts of companies. Not looking so hot today. This is because the Second Quarter looks in line. We saw sales where they would be. The problem is the orders are not coming through as thick and fast as they thought. Machinecular for a new that makes smaller, more powerful chips. All the orders will be delayed until 2015. Had goode the fact we news from intel. Many had thought we are getting strong things coming beatingel, both estimates. These are chipmakers, they are saying that the pc market is recovering. Mobile is growing. It is all about memory chips at the moment, it is about storage. Where the more powerful things are is the applications and the desire for those logic chips is not there yet. You have got your work at out for you. What is on the radar in terms of the market . Rex janet yellen, day two. Futures high a month across much of europe. If you have a Federal Reserve that is about valuations the fed says they are stretch. Many of these will have to deliver some strong earnings. On the move is next. In three minutes time. Welcome to on the move. I am jon ferro in london, just almonds away from the start of european trading. Futures were little changed through the morning. Chinas growth accelerated. Today in the u. K. , what will unemployment deliver . That comes out at 9 30 u. K. Time. Ryan chilcote, caroline hyde, what are you watching . One thing i am watching is ibm and apple. They are partnering up. They are going to make business apps for the iphone and apple together the iphone and the ipad i should say. Investors love the news. We will look at that in more depth. I am looking at marissa mayer. She is still struggling to turn around sales at yahoo . Investors are looking on the bright side with cash coming in from ali baba. Initial share sale, the biggest hit in the u. S. On record. Sharesere in europe, could be on the downside. Sales dont meet analyst seemings and deliveries to suffer for 2014. Thank you very much. Tech, the sector in focus this morning. Even the fed has something to say. Janet yellen comes up later this evening. Make sure you watch that. Markets just opening across much of europe. Manus cranny is at the touchscreen. Equity markets, lets just see, they are probably going to wait and see what more established voice gave a get from yellen. Those notes that came out talked about valuations