Transcripts For BLOOMBERG On The Move 20140717

The morning. That is yesterdays performance, markets up 1 . London down one percent. We are waiting for the opening rotation to come through. Takes a little bit of time for those prices to marry up. Russia is trumping the news on sanctions from the u. S. Poll. E a bloomberg pollaid the poll of the said disinflation is the main issue. Globally, our poll is saying 47 see the equity markets close. 14 say that we are in bubble. Google poll says people are less keen on europe. Paris down. 5 . We have some car data. We saw overall car sales rising in june. 10 straight months of rising car sales. The sentiment in the market is lower. Renault was one of the out standards, but the stock is down. 25 . Vw also had the fiat sales going up. German sales were down. Badge did quite nicely. When it comes to the others, Edwald Nowotny ju novartis just missed on its numbers. What youve got there is the cloud. How to defy a market. Tell the market that the new product will do better than you thought. It is the holy grail for sap. Itv. Caroline will have the details on that which is basically you have john malone, Liberty Media going after, buying the bskyb stake. Sir. Nicely, thank you, anna, that is your lot. Eu coming. And together to escalate sanctions on russia to squeeze russias economy by limiting access to financing. Which industries will feel the heat the most. Yan, the Russian Foreign ministry saying that they are disappointed in eu has given into u. S. Blackmail. The eu agreed to sanctions against its own interests. This is a story that is continuing to develop. What are the sanctions . E United States, the sanctions against russia arm nothing more than a permanent attempt a primitive attempt at revenge. Lets go through what the European Union did first last night. They announced the European Investment bank, eib, will cut funding for russia. Easy for them to do. The ebrd will cut funding for russian projects. Set up back in the 1990s to help p ost soviet economies. Russia gets 1 billion from it every year. They will expand their blacklist of individuals and companies subject to sanctions. But the big player on the pitch was the United States which announced sanctions just before the eu. The u. S. Sanctioning some very large companies. Rosneft, perhaps the largest of them, the Worlds Largest publicly traded crude producer. Russias largest independent gas producer. Gasprom bankrs, has been sanctioned. As has the state development bank. This is a bank that has got its tentacles, its fingers in almost every section, area of the russian economy. Really big things. Exactly what are they doing . You can still owns shares in these companies if you are a u. S. Citizen and still get dividends. What you cannot do anymore is access the American Capital markets. They have been shut out of the debt and equity markets in the United States. They do not always rely on u. S. Equity markets for financing. However, you can imagine the secondary consequences of this kind of action. Seeing all of those companies and their share prices very much in play this morning. Ryan chilcote taking us through the latest on the geopolitical tensions. Joining us is a global Asset Allocation director at ubs. It is interesting to see sanctions escalating. The u. S. And eu kept warning this would happen. Were you expecting this . The sanctions really hurt. Im half iranian. Those sanctions were effective. Perhaps more so than military action. They will have to pay attention. Its also about the general Business Climate this creates. Show,t two days at an air where was clear that there were not as many visitors to the russian displays. Timing. S good we cut our equity by 2 3 this morning. There are many mispricing is in the market. Like a wildfire, you can see a lot of dry grass. You do not know when the fire is going to break out. This kind of geopolitical risk is the thing that could set off a selloff. You think markets are looking for reasons to go lower. As evidenced by the selloff we saw over the portuguese story. Epirito santo is a tiny bank, yet we saw the selloff. Thank you. He stays with us. Here is a look at what is coming up on the move. John malone buys a stake in itv as Rupert Murdoch sets his sights on time warner. We sit down with the chief executive of norder bank. All of that coming up on on the move. This is on the move, streaming online on your phone, on apple tv and on amazon fire. Two stocks on the move. Kyb and itv. Sayswner of virgin media it is buying a 6. 4 stake in itv. They are buying that from bskyb. Those shares in line with the market. Liberty global does not plan to make a full offer but reserves the right to do so over the next six months. See how that one develops and get more analysis of the changing face of media on both sides of the atlantic later on. From a car service to a carmaker. Daimler is going big with the worlds smallest car. The Company Double down on the line of and unveiled two new smart models last night. I struggle to picture you and the smart car. You are pretty tall. Tell me about your experience. I struggle to climb into one, but they are roomier in this version than the last one. Its an interesting bet by driving. Er about city they have a fourdoor in twodoor version. When i talked to the ceo about what currency moves are doing to their profits, he was not concerned. We need a Strong Economy based on efficiency and not supported by a weak currency. Therefore, i think it is fine. So mario draghi does not need to do more . At least not for daimler. The starting price, 11,000 euros. They have lost a lot of money on the smart brand. The growth of small cars expected to be 35 , up to 6. 2 million units. The four x four is six centimeters shorter than the fiat. When you put three of these in a line, that is the difference between the goal line and the penalty kick. I try to do that for mark barton. He would be able to understand that. The two door, you can fit four of them between you and the goal. Anna . Fighting talk, hans. Somewhere there are photos of me as a goalkeeper in the football soccer game. I will not be sharing those. Lets get back to much more serious issues. While this event was taking place, the u. S. And the eu were announcing sanctions. To be worriedng about how this will have an effect on their business . Officially no. On line is they will execute their plan. What he said on russian is that the important thing is that they are growing in terms of market share. So far this year we have record sales. Very strong and good position in russia. Sure that thisry will continue. Anna, even though these autos will not be available in the state. They are available in europe. The 10th straight month of increased sales, up 4. 2 . Europeans are buying cars. The question is will they be buying small once . They are buying dusters it seems. Hans, thanks for joining us. Obal asset us, the gl strategist at ubs. Lets touch on some of your concerns. You mentioned how you are reducing risk. We talked about the geopolitical influences. Your concerns are around inflation. Thats right. Money has been pouring out of etfs, linked to u. S. Inflation protected securities. People are not buying inflation attention. If you look at the core pce numbers, they have been rising. Inflation in the u. S. Has been rising. There are many reasons why we think inflation will rise. The fed is discounting it still. The fed will surprise by hiking sooner than people expect. I think that will put life back into markets. At the moment the scariest noise of the trading for possible that is silence. Others say that we are in a neutral face. Phase. Ke,n when the fed does hi they will do is lower. If you look at their forecasts. Muchshould be hiking faster and the rates should be higher already. Nc withket is out of sy what we think is going to happen with inflation. Fed policy is going to change fx. It is going to change equity Risk Appetite and it will change what happens to fixed income markets. Stay with us. Have a going to pause in our conversation. Sawea banks says it increased Commission Income and reduce loan losses. The ceo joins us from stockholm. We have been through a few of the highlights of your Earnings Report this morning. Tell us how general training has been going for you. Been a pretty good quarter even though we have to admit Economic Growth is slow. Lending demand is low Interest Rates are low. We have some headwinds, but we also have some tailwinds because, as you correctly pointed out, our Corporate Activities are, we are doing quite a lot of deals on the equity and Debt Financing and m a. So we see some corporate activity which is coming into the Commission Income. Our saving sector is huge. We have the highest inflow ever of new money, not only from the nordics but from all over europe. So that is also a generator of Commission Income. That is an interesting 10. Trend. Last month they cut their repair bigger cut than expected. Is that having an impact on your business at the moment . Yeah. Both yes and no. Yes in terms of deposit rates are disappearing and margins are zero. That is a negative. Even though the economy is growing, we need to support it. It is a fragile recovery all over europe. The main reason for the move by iriskbank was a fear of deflation. We do not see it yet but the low rate should stimulate demand. Some inflation. I think we need some inflation in order to get the economy going. What impact will it have an Household Indebtedness . In sweden, Household Indebtedness is at record levels. Help, theseg ot heto reduced Interest Rates . No. Of course, lower Interest Rates will not help on that problem. The structure is different in sweden versus the rest of europe. Houses to using their finance their living. You can see the message from thebank is that it is up to politicians and banks to control how much leverage the household sector gets. Through the interest rate. To work on inflation and work on general demands. Weden is holding a general election in september. There was talk from the opposition about a special bank tax. Your thoughts . Yeah, still talk. Actually, the whole tax legislation for corporate is changing in sweden. Banks will be treated in a way which is not quite clear yet. So we do not really know, but we are already paying a tax in sweden, a stability tax. Lending tax will in will be a cost to the economy. So i do not think it is a very good idea, but it is a possibility. Thank you for joining us today. Nordea banks ceo joining us from stockholm. Lets get back to our guest. A global asset strategist at ubs. You have been taking risk out of your portfolio but as you said, it is hard to get the timing right because all you hear the moment is silence. In a sense from the Trading Floor because things are quiet. Do we wait then for the fed to make a significant change in its rhetoric, and that is what is going to create a trigger for something in the markets . That will be one of the things. The uks going to hike sooner. First out of the gate will be the bank of england. Lets see what happens here. Lets see if Risk Appetite stays when rates start to rise, especially the housing market. Then the fed will come out of the gate next. Those are the known unknowns. Then we have the politics. Tricky. There we think about what is happening with china and japan. Japan thinking about re militarizing. What is happening in the South China Sea is something that could be very important. The extent to which you are reducing your risk in your portfolio is substantial. Absolutely. We were running the biggest ever overweight until today. In equities. We have cut that by 23 we think the risks are asymmetric now. 80 of the rally over the last year in the s p have because of been because of equity. Great to get your thoughts. More on this mornings media moves next. When we get back on on the move in just a moment. Welcome back to on the move. John malones Liberty Global itv. A 6. 4 stakes i in liberty acquired the shares from bskyb. Its called located. So clarify it its complicated. A bit of a swap going on. 6. 4 stake in itv. They sold the two rival john malone, Liberty Global. Taking it off his hands for 481 million pounds. This is a very shrewd investment. So says alex to group. Alex degrude. It makes x factor and downtown abbey. They get their hands on itv 1 and all of this great content. And really an interesting move global also liberty bought another content maker. Midsomer murders. Anove this quote, it is expensive and global case of musical chairs. He he had a great take. When asked will john malone and Liberty Global make an offer, they said they do not intend to. They have got six months. Analysts are saying is what he wants is content to drive version subscriptions. He built a relationship just by owning 6. 4 . Also what is so interesting is stake . Bskyb selling the this is another game of musical chairs, because it frees up cash italiayb for buy sky from Rupert Murdoch. They take us across the atlantic. Rupert murdoch not only owns 39 of bskyb. They have been eyeing up time warner to the tune of 75 billion. Rejected so far but could come back for more. M a is hot in this area. The second most and any sector. 540 billion dollars. When they come back, sap and focus. Welcome back to on the move. We are just 30 minutes into the trading day. Lets see how things are shaping up. D of geopolitical risk to add into the market picture. Lets dig deeper with manus cranny at the touchscreen with a few stocks to watch. Geopolitics will prevail across market senate. There are some individual names on the move as well. Ll, it does not get any more exciting than this. They test a gazillion products out there from the mining industry. Medicalto autos and devices. They have missed on their numbers. Caroline has taken you through the nuances of what is going on in the media stage. One by mistake in itv. Getting his hand on content. The market not in the mood to make a full offer. Sap. 3. 5 , the stock rises, as online, all about the cloud. They guided earnings. Its a relief. No bad news. That is good news. I wonder when you see analysts writing those kind of comments, it ss sad. No bad news is good news. Is that a good enough reason to buy a stock . You are in that kind of mood. European car sales rose 4. 3 in june for the longest stretch of monthly gains in four years. Registration rose to more than 1. 2 million vehicles. Big gains in renaults budget division. Israel has agreed to a fivehour truce at the request of the united nations. The temporary ceasefire will allow civilians time to resupply as the israeli army prepares its troops for a possible ground invasion. Obama and theck European Union have imposed more sanctions on russia. This time the u. S. Targets banks, energy companies, and defense firms and their latest attempt to punish the country for its alleged support of separatists in ukraine. What we are expecting is that the russian leadership will see once again that its actions in ukraine have consequences. So we took a look at the saint is imposed by the u. S. Earlier, but how about those imposed by the eu . We ahave more on that, and what else came after the meetings taking place in brussels, which is where she is. What exactly did the eu agree on . What the eu decided in brussels goes beyond individual sanctions. It does not quite match the u. S. Sanctions yet. Level three,o to three, that would include a broader sector of the economy, but it does come with two new measures. First they include entities, meaning they are going to target some russian companies, including some possible oligarchs in the inner circle of putin. Quite yett specify which companies are going to be targeted. They are going to leave that to their diplomats to decide and come up with a blacklist by the end of this month. The second big measure and that is a very symbolic one they took last night is about public funding. They decided to cut off public lending to russia from the eib, the European Investment bank. Something they can do because the eu governments own the public lender. They will use their influence to cut off lending from the bebrd. The European Bank for reconstruction and development. The Eu Council President spoke last night. He said that the conditions set out by the eu last month have not been met by russia. The flow of weapons and personnel across the borders is uninterrupted and violence continues. There are still no no substantial no peace negotiations. We consider the russian side has not sufficiently used its influence on the separatist to deescalate the situation in eastern ukraine. The Russian Foreign ministry reacted this morning on the website saying that they were disappointed that the eu gave in to what they call u. S. Blackmail. Also on the agenda and brussels, the leaders were supposed to the point a few top jobs for the eu, but they fail to do that. That is right. That was the original purpose of the summit. That was completely overshadowed by the ukrainian situation. To appoint the new diplomacy chief as part of the new Commission Led by Jeanclaude Juncker. They had to replace catherine ashton. One of the reasons this failed is that the Italian Foreign by easterns rejected European Countries who see her as prorussia. They also say she lacks experience after just five months in the job. Another job they had to replace and discussed last night was the Eu Council President. To agree on that. They decided to call a new meeting at the end of august. Of course, what they do not want to see is some political infighting like we saw with David Cameron during the nomination of Jeanclaude Juncker at the eu commission. Thank you very much. Reporting there from brussels. Lets bring in Ryan Chilcote in terms of the impact of these new sanctions. Gastrombank. U. S. Sanctions will not affect their financial stability. One of a number of companies that have been named now by u. S. Gastrombank is russias thirdlargest banker. One of the reasons why they are saying this as they get a lot of money from their depositors. However, if you pull away or remove one source of funding which is what is happening with these sanctions, then of course other sources of funding get more expensive. That will get passed on to other borrowers. To recap. You heard caroline talking about what the European Union did. The u. S. Came out with their own sanctions even while those eu leaders were deliberating. The first and most important sector that was hit was the energy sector. The company most important there was rosneft, the Worlds Largest publicly traded oil producer. Listed in london as well. Their shares down just over five percent at one point this morning. Bp owns a 20 stake in rosneft. They do a lot of business together with exxon. That is one to watch for sure. Inatek is another company the energy sector. Novatek was down more than 7. 5 this morning. Another company to watch. We started this conversation by talking about brings. Banks the sanctioned along with gazstrombank. Bank. S a state of element he gets most of its money from the russian government, but it has its hand in nearly every deal in russia. So this is going to have long legs, long arms in terms of its consequences for the russian financial system. We heard the ceo of russias secondlargest bank who said in australia said that the sanctions that the United States introduce could destabilize the russian financial system. Tell us what exactly this name. Theset it means is companies are shut out of American Capital markets. They cannot go to the debt or equity markets for anything but the smallest of maturity when it comes to debt. Mean,t it does not distinction from other sessions we have seen is that you cannot own the stock. These are american sanctions. The tougher of the sanctions. If you are u. S. National, you can still do this with these companies and still own their shares. You can still get their dividends. But obviously they are less attractive because if they lose access to u. S. Capital markets, that is not helpful for their ability to fund themselves. Huge were saying, that is consequences in terms of their ability to fund themselves i n other markets. Ryan chilcote with the latest on russia. Lets return to the macro picture. Is the european economy getting worse . That is one of the questions in a new bloomberg poll. Jon . Thank you very much. I will not read too much into these numbers but i will shoot them straight. More than 1 3 investors area. Thae eurozone restricted a negative benchmark rate. That is restricted. Why wouldnt i read too much into this . This is not a majority. It does give you a sense of what the ecb faces. Ofy ouvnveil a new set measures. What they ask is what next . That is exacerbated by the fact that mario draghi unveils all this and says we are not finished. Everybody wants to know, what else have you got . We have got the asset purchase plan. We have not seen any real shape of what this is going to look like. Q. E. At least they are talking about about most people are saying that is not imminent. So there are some numbers to look at, but i dont know how much you can read into them. There was also a poll on the performance of central bankers. Who came out on top . Mr. Draghi himself. Whatever you think about the institution, mario draghi viewed favorably by 74 of investors. He comes out on top. You have got to say i am not surprised. What i am surprised that is the man at the bottom. Governor kuroda. The governor of the bank of japan. What more can that man do . You could read from those numbers that investors do not like q. E. I am not sure that is the conclusion theyre supposed to take from this. Jon, they give very much. Jonathan ferro in front for. Up next, novartis, the profits disappointed. We will see what is weighing on the Worlds Largest drugmaker. When we are back in just a minute. This is on the move. Up at the is coming top of the hour. First up, a fragrance maker posted profits lifted by the emerging markets. The chief Financial Officers will give us more details. Stars chief executive talks travel and the impact of the euro. Novartis turned in disappointing results. Appropriate it reported profit and sales the shade below estimates. We are joined. Analysts. 140 sam, what happened then with novartis . Disappointed but not buy anymore just margin an inner misfortune. It is quite difficult for to look at the orderly numbers, especially for a company such as novartis which has a cross in swiss franks. And a whole host of other currencies that are affected. You know currencies have been volatile in the past quarter. That was not the only reason. Analysts overestimated how much diovan worse going to sell in the second quarter. Not by much. Generic. Gone something that can be explained away. What is interesting as they have kept their guidance on the top line for the year, but it looks like analysts are a little bit below that guidance figure. Tell me more about the outlook for 2014 because this is a business that is going to structural changes. Those structural changes, you will not notice necessarily on the Group Numbers this year. All those deals do they did with glaxo. They close early next year. So the Company Started dividing up its pnl and helping people look at continuing and discontinuing operations. But what is interesting is that theyve got a slightly higher, if you look at the midway and midrange of sales, but that is not changed since the first quarter. What has become clear is their expectations for earnings growth. They are going for a reasonably higher number than the numbers are forecasting. Coming fromles are growth products, which are things they ought in 2009 or h ave patents out for 2018. Tell me about what they are doing with google. If you look at the alcomm business where all of these contact businesses are living. The two pieces that were not doing so well were th ele ocular lens, the ones that get surgeons to replace and contact lenses, particularly in the contact lens care world as people are switching to more disposable. There is a lot of competitive rusher. Innovation is key. This fits that. This is very innovative. We need to see if they can give results. People are used to, one of the indications suggested this is for diabetic so they can get a constant measure of their glucose levels. Youru leave a microchip in lens to your smart phone. What they need to do is to prove that it is as sensitive as a glucose monitor. That took quite a long time to develop. A fascinating direction theyre moving in. They are cutting admin costs as they face generic competition. Yes. What will you see with this company is that as it products switch to more Specialty Care products to more oncology type products where the prices are healthier and the cost of selling them our lord, less than if you were selling to every gp, the reality is that that automatically brings down the selling and administered it costs. The same is true for novartiss r d. They have the biggest r d budget. Theyre close to 10 billion per annum. They are expecting that to come down. Thank you for joining us. The director of european research. Sap is one of the biggest gainers on the stoxx 600. The largest maker of Business Management Software Says online applications help boost sales. We spoke to the ceo in an exclusive interview. Oud is a logical step in simplifying your business. That is why it grew 39 . We raised our guidance for the cloud for the year. One very important point for investors, though, is our core business, the Traditional Software Services Grew 8 in Constant Currency. So the core is still growing and it is holding solid while the cloud is really taking off. You mentioned t there about foreign currency concerns. It hit by 2 percentage points. What are the main currencies you are feeling the biggest exposure to . The euro is knowledgeably strong. Would you like it to become weaker . Well, i would, actually. But the fact of the matter is when you look at our business and the investors judge our business, the tendency is to look at things in Constant Currency because that is what we can control. Right now we are running a very profitable business. We have made the transition to the cloud. We have 38 million users. We are the Fastest Growing Cloud Company at scale of the world. At the same time, the core is solid. I think what investors are seeing out there now is we have moved the company to the Cloud Company. The German National Football Team ran sap hannah and considers this to be the 12 man in the pitch. If you can have this realtime insight radically simple fight the way you run your company and have a combination of assets, whether on premise or in the cloud, and all of that is integrated, you can win some things. German National Football team proved that at the player and team level. But companies are proving that the world over. I am very confident. I have never seen more tailwind behind saps Business Model than right now. That was sap management. Oretinto sees iron trading close to relative levels. We are seeing a reduction in prices which we are running at high levels. We have seen that the price has come down to a more normalized level. Which reflects the point at which supply and demand cross. Daimlers chief executive says mario draghi does not need to act to lower the euro. We need a Strong Economy based on efficiency and not supported by a weak currency. Therefore, i think it is fine. So mario draghi does not need to do more. At least not for daimler. 3d robotis hoping this is the key to bringing International Artificial intelligence to the mass market. Why intel think he will want your own jimmy very soon. Hello, i am jimmy. I am completely open source. Jimmy can walk and talk and tweet and take teachers. He can be programmed for a number of custom animations as well as customizations on how he walks and the style of walking. I am not the best dancer, but ladies want to teach me new moves. We want 21st century robots to be social companions. It will be a long road to get them there, but the idea is that you will be able to load different apps to give you their friend functions. About opensource robotic platforms is that we are standing on the shoulders of giants. We are taking a lot of the work that takes a tremendous amount of man hours to get up and running and we will completely open sourcing it. Everyone starts really with a running start. Y capable humanoid form that can already walk and talk. Do all those things. They can focus on the more advanced functions and behaviors of a robot. Intelng him inside is an unit of computing. This gives us a massive amount horsepower. E of it is not something we have been able to do until recently with technology catching up where this. I think i need one of those. We are in our into thursdays trading session in europe. One stock that is on the move is fiat. Whispering in the background. Manager magazine is saying that vw and fiat are exploring a possible takeover deal. Fiat shares are up by 3. 7 . We will explore that further. Does it have legs . During the pulse up next. I will be back with the pulse coming up next. Russian rout. Ruble slides as the u. S. And europe rampup sections. John malone buys a stake in itv. Plus, every cloud has a silver lining. Sap shares rally. We bring you an exclusive interview with the ceo. Warm welcome to the pulse also coming