Transcripts For BLOOMBERG On The Move 20160728

72 . Investors regain postbrexit composure, Federal Reserve strikes an optimistic tone. Will the fed hike in 2016 . We speak to the ceos of Anglo American. They are coming up over the next hour. Caroline german sports good maker is raising its forecast. We have a flurry of earnings. Adidas coming out saying 2016 net continued operations will be up 35 to 39 . Well ahead of the 25 growth seen previously. Upping their forecast, secondquarter sales;ow sales uparter group 21 on ethics adjusted basis. This is an upgrade from the secondbiggest sports maker in the world as nike is clearly been making inroads into china. Well see how much we can see a turnaround in adidas. Lets have a look at how the futures market is spiking itself up for the market opened. Pretty lackluster after the Federal Reserve yesterday, we are seeing the futures market flat at the moment. This is your assets. This is the futures market currently, flat. A little bit of profit taking after the Federal Reserve seems to be showing overall growth overall growth is there but we will not be raising rates anytime soon. From our futures market to our asset check, lets have a look at what is on the move in assets. We have seen dollar weakness on the back of the Federal Reserve. That is helping metals, coppers on the up. We have the japanese yen on the higher side. Manus. Manus caroline, thank you. Top live on the go, looking at all of the comments coming through on Credit Suisse on their earnings. It has been a heck of a morning for earnings. Francine lacqua is live in zurich. Ryanith the ceo chilcote is live in london on the show numbers. Lets get first word news with Haslinda Amin. Haslinda Barack Obama Says americans must reject the message of here and division being delivered by donald trump areelect Hillary Clinton speaking in philadelphia, the president said clinton has vision and the discipline to move the u. S. Forward. Crisis,in the midst of she listens to people and she keeps her cool and she treats everybody with respect. No matter how daunting the odds, how much people try to knock her down, she never ever quits. Haslinda fed officials have upgraded their estimate of the u. S. Economy and taking a step toward raising Interest Rates later this year. At the mostly f moc members labor utilization has shown some increase but acknowledged that inflation remains too low and fell short of signaling that a rate hike could come in soon as september. The merkel is breaking up Angela Merkel is breaking off for vacation to defend yourself against criticism. The chancellor planned to remain out of public view during the summer break answered questions this afternoon for the First Time Since four assaults left 13 dead this year. News, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. You can find more stories on the bloomberg at top. Caroline. Caroline thank you very much indeed. Back to the banking scene, because Credit Suisse has beaten estimates hosting a secondquarter profit after analysts had forecast a loss at it is a first positive result since Tidjane Thiam set out to reinvent the swiss bank. He spoke to Francine Lacqua about the Capital Gains a swiss we have been very consistent in saying that we do not need to raise capital it we have been clear. We raised 6 billion. We have the highest we have ever had. We showed that we can prove many levels to drop back forward. We said we could do about a billion of disposals. So, look, you never want to be reasonable n a outcomes. Francine the swiss unit ipo, this will the according to plan in the second half of 2017 . We never wanted to be that precise. It is a deep strategic move. We we think it is a crown jewel. 453 million in profit. Do is to get the market to fully recognize assets which is a very good bank in the wealthiest economy in the world. It is a powerful at po which rethinks which we think will drive value. Final questiony on the fed janet yellen, if she raises rates sooner than a market expected, could it help banks . Overall, yes. Caroline that was the credit. Uisse ceo Tidjane Thiam how please was he with the results, francine . Look, this is results i get i guess he needed because there been questions from shareholders. It proves him right for the moment. I have to say he was pleased but i guess he was cautious. He says look this is a good start, but is only a start. He was smiling a lot more than he has in past interviews. His demeanor was more relaxed but he seemed very focused to continue with the overhaul. The way i would describe it is almost, he has not been in the job very long, about 13 months, became famous after he got the job last july. He did this big strategy. He always said the strategy makes sense but it depends on the execution. This is the first time you had an idea of where he was trying to go and it seems to be executed in the correct way. Anything could happen from now until december it would have to wait to see whether we have market volatility and how he says it, the environment, the external environment, wont be easy for banks. Well see how Credit Suisse navigates. Manus francine, think you very much. Great job. On the ground in zurich. , euan munro. W we have had a raft of reports. Thats when you listen to Tidjane Thiam, it is a tough time in banking. Deutsche bank, Credit Suisse, big job. Euan it is a huge job and i think the Banking System is under a lot of pressure. The ongoing reduction in Interest Rates the way banks need money primarily is the margin between the rates that they land and the rest have to pay for raising the capital. With Interest Rates going down, the basic Building Blocks of making profits are under intense pressure. No surprise he is trying to bring to the force some of the crown jewels he feels are underappreciated in the market with a partial ipo. Manus many people are shocked when he announced that. It is interesting that he went hard, fast on his costcutting ipo. It is tough to ipo anything in this market. It shows a real attempt by banks to bring forward anything that is going to value, to try and make sure they dont come under imprint come under intense pressure. Interest rates are so low and on rising for some time. Caroline it is interesting, we had Deutsche Bank yesterday. Many feeling the chief executive is a little bit to open, too transparent about saying that investors, potential yourselves come are less willing to do business with them because they are worried about the capital adequacy. How much are you looking at the adequacy of banks . How much do you think they are vastly underpriced . They are clearly under pressure. We need to be careful. Weve got this possibility with clients money. We have a responsibility to and we will do a lot of Due Diligence to make sure that its a case. They knew to be they do need to be concerned. That is going to be an ongoing pressure for the banks could having said that, for the banks. Having said that, i think it is a much more trickier situation because they are trading at massive discounts to big value. Dangerous activity to try and short bankshares at the moment. Some interest still devolving over Deutsche Bank. Great to have you with us. You are going to be sticking with us. We are going to be talking more about Central Banks and keeping Interest Rates low. Next, it is the long past to hike long path to hike number two. Market remain skeptical the market remains skeptical. Well get a second hike in 2016 . Dont miss those conversations in just a few minutes time. This is bloomberg. Caroline welcome back to on the move. The skied you uptodate with the Bloomberg Business flash lets get you uptodate with the Bloomberg Business flash. Paribas. N. P. Little changed. Upset by a slump in equities. You see like hes the First Quarter, you can never be protected from uncertainties. They can stem from many angles. It can be revelatory, many things. What you typically see is one can rebound. Paribas is b. N. P. Different as i is diversified between International Retail and Corporate Banking and the like. We feel confident in the overall evolution that the bank will deliver on its overall next line haslinda haslinda profit fell to 1 billion. The lowest price are continue to hurt the companys income. This was thanks to the tech giants smartphone and aggressive cost cuts. Something was also the samsung was the beneficiary of sluggish iphone 6 sales. Manus. Manus haslinda, thank you so much. It is a slow crawl to hike number two. It has possibly begun. Policy makers to get step forward toward raising Interest Rates later this year. It stopped short of signaling a move could come as soon as september. They upgraded their assessment of the economy and saying nearterm risks to the outlook have diminished. Despite that more confident tone, the odds of a hike this year, they still remain below 50 . Have a look at this. This is the 50 , the odds of a rate hike crust on the back of the china market. We recovered ourselves all the way back to 80 . You need to see cbus  80 to ga hike. Me. Munro is here with lets get his take on this chart. What do you make of the statement . They need to get the market closer to 80 expecting before they can go . Euan it is difficult to know how they can do it. The changing story is if you look back in february in january when the odds on your chart declined, that was the first time the fed started to talk about international issues. Up until that point, the main drivers of u. S. Interest rates have been u. S. Unemployment on a declining trend. The other thing was Inflation Expectation which has seen a big step up. All of a sudden you have a new factor being brought in which was china, and more recently brexit. You could argue why should it be so important that something that has very small consequent is on the u. S. Economy is a driving factor. The answer is because they are making it so. Yellen is being overly cautious. I think sometimes central bankers have been a major element of the callback from the Global Financial crisis in some of the moves that were taking taken. Some of the moves were important to get the economy back on his feet. I dont think there are a lot of on to endorse whose new business develop an idea is resting on further Interest Rates or 25 basis points higher lower from the current level. We are in a situation where we have an exaggerated sense of the importance. I think it is other aspects that are going to be driving Global Growth from here. We have the bank of japan and perhaps the market is exaggerating the bojs importance at the moment, so much hope being put upon governor kuroda to up the ante in terms of stimulus. On my bloomberg, were seeing how far negative rates have come as the japanese debt. The plunge in the purple line beat the 40 year yield in japanese debt it we see the 10 year tumbling in the white line. Clearly we are seeing negative yields across the board. How much more can Monetary Policy do, particularly in japan with fiscal stimulus not easing Investor Sentiment . Ewen euan it is crucially important. The contrast with the u. S. , in the u. S. Weve got low unemployment. It has fallen. We are seeing wages gone up wages going up and inflation creeping up. It is moving there as Energy Prices soar. In japan, nothing is going on of any great consequence other than what was made to happen by the authorities. Hobbies move and is of as japan arethink we in closer to a stage where we deed r we need fiscal stimulus. Printing money to buy Government Debt maybe they need to print money to spend on the economy in japan or do something dramatic. Us euan munro, the ceo of caroline . Caroline were going to be looking to another corporate, diageo showing sales in line with estimates. Joining us is ivan menendez. Thank you for joining us. Youre looking optimistic saying you are wellplaced for 2017. What is the key driver . Ivan it is the momentum in the business. Onh a lot of focus sharpening our consumer focus, our sales execution and everyday efficiency. If you look at these results, we grew the top line 3 come away expanded margins, group cash flows. Our businesses performed much better in north america. There is real momentum there. All of our global grants are the portfolio is high in business. The beer business is back. We are wellpositioned with where the world is going to our sector has attractive graphics backing it and people are taking better. Diageo performs well in those conditions. Caroline how by china in terms of a growth trajectory . Will we see growth from an industry in terms of the drinks market in china . Where do we see profit going for diageo in that area . Ivan china, we have two businesses. We have a business which is going very well because chinese white spirits which is an experience spirit and expensive spirit. A bottle is over 55 pounds a bottle. Strongly positioned. The International Spirits business has been slow for a few years after the austerity drive. I expect that to get back to mid singledigit growth. Shifting china to a consumer led recovery will be good for us. There is strong private consumption that will support the growth for example of Johnny Walker blue label. Highend discussed whiskey is doing very well. To put in context, china is 2 of diageo. I expect is to grow mid singledigit. Poised toesses are deliver robust growth in the future. Manus ivan, it is manus. Great to talk to you. Before you give me the stock answer, it is early to say how brexit is going to impact you. Your role is to be a forward moving a four looking man. Discussed whiskey sales, are you disappointed by brexit . What do you think the ramifications are for your business postbrexit . Simple. Is quite diageo, 6 of our business is in the u. K. 25 of our this is his scotch whiskey around the world. Scotch whiskey is the thriving export sector for the u. K. In a postbrexit world, the thing that is most important is that we keep great conditions good for one of the uks most successful drink export businesses. That is what we are advocating for his keep the conditions for scotch to thrive good around the world. Manus the other big news story is it looks like there is a bit of a fracture in the abn in the sab deal. That would be good news for you. Would that mean you can work closely with sabmiller . Are two fine companies. Im focused on momentum in our business across spirits. We are going to keep accelerating that momentum through the great execution we are doing. Manus you are smiling too much. You are smiling at me too much. It would be good news for you if the deal did not go through, wouldnt it . Ivan i know as much about it as you do. What i can tell you is what i am focused on which is getting our business to perform and be one of the bestperforming Consumer Product companies in the world. That is the mission. Manus ivan, we got to leave it there. You are right. It is one of the greatest guessing games in the world ivan, thank you for insight, your numbers and the world postbrexit. Ivan joining us there. Vw . Caroline numbers keep on breaking. It is a busy thursday. It is a beat for volkswagen, 57 billion euros being pulled in the Second Quarter in terms of revenue. That was ahead of the they percent declined we were expecting. It looks as though this is a client on the Previous Year at operating profit in the first half, 2. 7 billion euros. The First Quarter investment in automobile units was 4. 5 billion. Theyre looking to contribute to efficiency. Were going to be talking about Anglo American after the break. Manus good morning and welcome. This is on the move. Im manus cranny. We are minutes away from the start of the trading day. Caroline standing by in berlin. First of all, your morning brief. Caroline . Caroline ni surprised, profit at Credit Suisse. N 18 ,come falls more tha but stays positive. Shellshocked. Net income at europes Biggest Oil Company misses by over 1 billion. Profit falls 72 . And the slow crawl towards hike number two. As investors regain composure, the federalr cautiously optimistic tone. Will the fed hike in 2016 . All eyes on futures as we enter just a few seconds to what the open. Weve been pointing lower throughout the morning. Off by just 0. 1 on the euro stoxx 50. Will we see significant outliers, significant moves from some of the Companies Reporting . Lets have a look. 0. 1 ntly up well, down looking at the ftse 100. We are waiting for the euro stoxx 50 significantly. Looking pretty flat as we speak. Were about to speak to Anglo American. As of now, looks as though a cautious Trading Market this morning after a cautiously optimistic Federal Reserve. Manus that slow crawl potentially from the Federal Reserve, not a news for the banks overall. Anything that delays the rate hikes will weigh on the Financial Sector. The stoxx 600ap, inching a tiny fraction lower. Consumer staples are the laggard this morning, down 1 8 of 1 . The three big names we are keeping an i on, one is about the consumer. Is your neck of the woods. Youve got a move there. Royal dutch shell also down by 3. 25 . i lc overall numbers. Credit suisse, waiting for a price on that. Royal dutch shell, again, in tune with all the other oil majors. It depends on where the oil goes. Profits drop. Weaker refining margin. That is driving royal dutch shell. Credit suisse delivered a profit. More from francines interview with thiam a little bit later in the show. A sector that has seen its fortunes change this year, the mining business. Ins american has risen january. They released earnings that the on profit and sales. Joining us is angloamericans ceo. Thank you so much for joining us this morning. What the market really wants to know is about your asset sales and your Debt Reduction program. That is a turnaround. It was a demolition on the stock price in 2015. How is it going . So far, so good. We announced it really dramatic a pretty dramatic restructuring. We are on track for cash flow. We said we would generate 400 million in the year and we generated 1. 1 billion in the first half. That is very pleasing. Atasset sales, phosphate 1. 5 billion, a 50 beat on consensus estimates. Phosphate, debt would be around 10. 3. Well on track to hit all of our target and very encouraged with what weve delivered in the first half. Caroline you see more downward pressure on iron ore. Tough for the diamond market. Tell us your outlook for the commodities sector in general. With diamonds, it was pretty tough last year. We had to make some pretty dramatic reductions. That looks like it has come through pretty well. Normally the second half is a bit slower on the time inside. So far, the indications are reasonably positive. We are happy where we are. With the foundations we played, very pleased with the progress weve made. There is progress in the second half. Weve done a serious lot of restructuring. Headcounts are down 31 . We reduced workforce numbers by 31 the first six months. We are prepared. Weve done the hard work. From our point of view, we expect better operating performance in the second half. We think we can weather what the markets will throw at us. Caroline is the worst behind us . Is china expected to show any pickup in demand . Weve had a strong first half. People are saying maybe the worst is behind us. We are not convinced. We want to remain cautious. We want to work hard and do the restructuring. Theres uncertainty in china. We hope the worst is behind us, but we are making sure we can handle whatever is thrown at us. Manus fighting talk there, mark. That is what it takes in this world. Tell us about your industry. Nickel tells me a very clear story. Supply was shrinking. Theirur industry put supplyside house in order . Were going to see more supply taken out of the market, mark, in the businesses you are in . Mark good question. Nickel is a good case in point. 50 of the producers are losing cash at the moment. It is not surprising to see volume off. Weve reduced our cost 50 in the last two years. That is what youve got to do to keep your nose above the waterline. I think there will be pressure across the commodities. Weve had the lowest prices weve seen in three generations in the industry. For us to be generating 1. 1 billion cash at that point in the cycle is a remarkable achievement from where we were and weve still got more we can do. Caroline mark, give us a sense of a nickel mine. Youve been talking about how debt is hitting your target. What about the price points you are getting for asset disposals . Argue hitting the mark when it comes to the nickel mine in brazil . Mark weve downsized the portfolio by 35 and weve not had any criticisms on the value to date. I think it is going to be tough. The good news is, with us generating the cash we have, we can be tough on value. That is the encouraging thing. At the same time, weve reduced our portfolio in terms of assets. We are actually producing more today than we were back in 2012. That is through efficiencies and improvements through the business. That is what youve got to do to make sure you are progressing and getting to the right place. Manus i just want to circle back to the conversation about rightsizing in the industry. What is the appetite . Will you get 1. 5 billion . I know youve delayed the decision, but can you assure the market that 1. 5 billion is achievable . Mark im not going to speculate on what prices we may or may not get. All i can say is weve got tough value thresholds and if we cant achieve those thresholds, we dont simply asset. Were going to stick to that policy. Were going to be tougher on those value thresholds. Manus just on that, would you ber these australian assets you dont get the price you want . Mark of course we will. We will not sell an asset for something that is undervalued. Some of these processes have taken time. Weve worked hard to get the value. Doorly put assets out the when we get value. 35 of the portfolio has been restructured. We will continue to deliver and to be tough on our value thresholds. Manus mark, i like the cut of your jib. Wellcutifani, we wish you on getting those debt levels down. American. Anglo Caroline Hyde . Caroline it is among the many Companies Reporting this morning. We are in the midst of earnings season. I want to check it is shaping up. Ive got the ea function lined up on bloomberg. Were looking at europe in particular. Type in ea and set it to the stoxx 600 as i have. 182 companies have so far reported. The sales surprised, slightly gloomy. Just over the 50 threshold of positive in terms of a sales surprised. We are seeing 56 beating in terms of profit. Lets have a look at the united states. Were seeing sales beats when it comes to the u. S. Out of currently 500, weve currently got about 232 have reported. Sales have surprised much better. 58 have beaten on sales. 81 have beaten on profit. Give us your take. Is the u. S. Set to outperform that much more . Why is it out performing . Is it being helped largely by the dollar . I think it is being helped by the stronger u. S. Economy. I hate to say i told you so, but i was arguing that the Federal Reserve were being too cautious. It is actually in good shape. Some of the benefits of that economy are coming down in terms of higher wages for workers. It is not all coming through in profit. Some of it is, but that filter through is good for u. S. Consumption. To some extent, the u. S. Companies needed to report better results, because they are on a higher multiple. The market did have higher expectations. Im encouraged that generally speaking this earnings season looks like it is delivering to expectations. There are some Horror Stories within it, but generally it is justifying the valuation. Valuation,ifying the this is important. Everybody said israeli wont last. Ive got valuations on the bloomberg here. This is a very different story in the united states. If growth is on the up, the fed gets another one away. More bullish on the u. S. . How do i look at it . I think this comes down to the sentiment aspect of markets. I think it is something the central bank focused on. One of my criticisms of the way the fed are approaching things is they are taking their leads from the markets. If they are nervous and they put rates up, the market will go down. The market will go down if they move faster on Interest Rates. It is not going to do any lasting damage to the economy. We do have a situation where the u. S. Market has done well because they are convinced that the fed are not going to move with any sort of speed. That europe and japan might be more interesting. Even the u. K. After the decline in sterling. Weve got softbankarm, sab shareholders rattling the saber. The sab miller shareholders and inbev, where is the biggest opportunity . Theres still opportunity for people to go through the portfolios, look at companies in the u. K. That have foreign earnings. Also, companies in the u. K. With interesting intellectual property rights. That is the arm story. Onres been a huge discount u. K. Intellectual property rights. Maybe the way that will manifest itself is people coming in and trying to my u. K. Businesses. Caroline where do you feel the opportunity is in europe . What about the rest of the eurozone and the eu . Are you looking optimistically . Which sectors are undervalued . U. S. Consumer sector, we dont think that things are as gloomy in europe from an Economic Perspective as perhaps a lot of people feel. Even the Financial Sector is potentially poised for some recovery. Caroline we started to see perhaps Credit Suisse turning itself around. Give me a sense about volkswagen. Firsthalf profit falling 36 amid the emissions scandal. Perhaps been looking at the governance of the sort of companies. Yes. We would take a strong position on environmental, social, and governance aspects. These are really important for the longterm success of businesses. Volkswagen, in our view, it had directors that were there too long. That is historically a red flag for us. We didnt anticipate they were going to cheat on emissions, but we had identified weaknesses on the governance side. Whether it is Companies Taking like with the environment, historically they were drilling in the National Park in africa, or whether it was companies not paying a living wage. Weve taken a stand on these teams because these can be markers of longterm franchise failure. Think theyven, i paid a lot of compensation in the u. S. , much less in europe, and this doesnt look a terrible outcome for them compared to what might have been. Manus we are having conversations with ceos. I had one with mark cutifani. It was very much i felt they were quite upbeat in their perspective. Mark cutifani, that stock was trounced last year. It has turned it around here. That is all about creating cost, cutting debt. Does that story eventually run out of value . Dja . Zdo you like to hear thatf rhetoric from ceos . You like to see ceos being responsive. In the mining sector, there was gross overcapacity because people exaggerated chinese demand. It is very important that theres real focus on being as efficient as possible and closing down the least productive facilities. That does generalize across industries. We do like to see that. Costcutting is laying people off. That is not something where you find wonderful news. I would rather be in an environment where the economy is growing and companies are being efficient and expanding. Manus thank you very much, ceo of aviva investors. Up next, another conversation. It is mark mobius, who says, leave all the turmoil in europe behind. Asia is the place to be. This is bloomberg. Manus welcome back. Its on the move. Has Haslinda Amin is with us. Haslinda lets check in on stock movers. And rollsroyce. Emerging market currencies rose the most in two weeks after the Federal Reserve left Interest Rates on hold and signaled it is in no rush to raise them. The msci haslinda, it is going to be one of those days. Im going to interrupt you. Lets talk about emerging markets stocks. They are hitting the highest level weve seen since august of last year. Can it last or is risk aversion going to take hold . One man can tell us a thing or two, mark mobius. Always great to have you with us. It seems to be, mark, that Federal Reserve is crawling towards a hike. Emerging markets have a window of reprieve. Will it continue . Mark i think it will. If they do raise rates, it is going to be by a very small amount. World arearound the searching for some kind of return. The place to get it now, first of all, is emerging market bonds, which are paying a much higher rate. A lot of that money is leaking into the equity markets, which is why emerging markets have outperformed in developed countries and the u. S. Manus would you still say that being more overweight the bond in the emerging markets story then perhaps the equity story . Mark yes, at this stage. They are such a great opportunity to get some fairly good quality bonds at high rates compared to what you are getting against the u. S. Dollar. Going down the line, you have to get into equities. With more and more money coming into the bond market, it is getting into Corporate Bonds and emerging markets, which is good for the equity markets. Caroline mark, great to have you on the program. Give us a sense, you talked about asia perhaps outperforming. Talk to us about china. Today we were hearing about clampdowns in terms of management products being sold. How much are you optimistic or pessimistic on how the governance and the government work with the chinese stock market . Mark im optimistic because they are moving towards a more liberal market. Theres no question they want to move in that direction. The amazing thing is the Economic Growth in china has surprised on the upside. A lot of people were expecting a much greater slowdown. Theres questions about the quality of the data, but there is growth, particularly in services. Im optimistic. If you look at the chart for the shanghai index, it is at a low point. I think it is bound to be coming up in performing fairly well. Caroline how does one buy into the equity market, particularly with the fx risk. Yuan and socgen see the depreciating further, that the government will be happy to see weakening. Where do you play that . Mark youve got to be careful on that. It is true that the renminbi has been weakening, but i think it is at a point now where the chinese are worried about allowing too much more because of capital flight. They want capital to stay in the country. They dont want to lower rates too much, to scare people to move into the currencies. I think we are probably nearing the end of this depreciation. They are getting a lot of pressure from trading partners as well. Not saying there is not going to be more depreciation, but it is not going to be significant. Manus lets talk about turkey. Weve had huge political disruption. The currency has come under tremendous pressure. Are you one of those investors that say this is an opportunity . Are you part of the inflow story . Mark to a great extent. We are not aggressive in turkey at this stage, but you mentioned you are in berlin. If you saw the interview with erdogan, he apparently was quite impressive. It will be interesting to see what the reaction is. I personally think that we have to look at turkey more closely. We are not rushing in, but we are looking for opportunities there. Caroline weve discussed china, turkey, the u. S. Fed. Talk to us about the bank of japan. We are getting policy decisions tomorrow. How much are we going to see the search for yield push money into markets . Think what is happening with this strong yen, youre going to see a lot more investment flow out of japan, into other countries. Youve seen some of that. You are going to see that in a bigger way. Not only in the u. S. And europe, but in emerging markets. It is going to be interesting to see how the japanese operate Going Forward in terms of mergers, acquisitions, and so forth. Manus mark, thank you for joining caroline and myself. That is mark mobius, executive chairman of templeton. Go cautiously into turkey. A big day for markets. Shell profits plunged 72 . Were going to discuss that next. You are also seeing lloyds deliver some tough news to the market about more closures and potential job losses. This is bloomberg. Manus welcome back. This is on the move this thursday morning. The fed is crawling towards a rate hike. They are not there yet. They have to wait and see what the bank of japan actually does. 30 minutes into the trading day. This is how the equity markets are shaping up. You can see basic resources and industrial good are all driving the overall stocks complex higher. It will come down to what appens from the bank of japan. Quite critical of the inability to have fed to take the market on and raise rates more aggressively. Those are the markets. Caroline has the individual movers. Caroline . Caroline we have had such a wealth of earnings. Royal dutch shell down 3 . Profit collapsing as we see remaining weakness in the oil prices. Cannot get its head above 50 at the moment. Down gos the share price to the tune of 2 by volkswagen. We see other car makers in the red today. Today we get a bit more flesh and color and v. W. , the brand has seen first half profit down 38 on the back of that b. N. P. Paribas, we want to dig into the bank with much bigger profits than the likes of Credit Suisse. Manus some of these big movers 5. 21 t looking at them, billion has been wiped off the value of shell. T is in shock. Missing analyst estimates. We have Ryan Chilcote on the energy case today. Talk me through the difference. I suppose i have to break this company down in terms of upstream and downstream. Refining is where the shocks seem to be. Ryan they missed their estimate. That didnt help. We saw the same thing at b. P. A negative surprise when it comes to refining. Beyond that, they didnt go well in their gas business either. Those things didnt help. Of course you and i talk about this a lot period of time refining is the hedge against lower oil prices. Now we have this perfect storm. Double whammy. Call it what you want. Lower oil prices and lower refining margins. It doesnt look like that is going to change in the immediate future. Gasoline stockpiles around the world are massive. Manus what about b. G. . You have the upstream and downstream. Take us through that. Ryan i wasnt expecting a surprise on the jep upstream side and thats what we got. If you think about it on production, they miss by 127,000 barrels a day. We were talking two hours ago and i was being very cute when i said oil prices follow oil price. I forgot to include you have to bruce the oil. 120,000 barrels a day. 6 million a day over a 90day period, that is over half a billion bucks. Then you have the losses on the gas and the downstream side as well. Upstream, you know, we thought we understood the picture, at least in interprets of prices. We didnt know these are guys that are going to get hit. They got hit on the disruptions. They have to repair the pipeline. Addition to that, they were unlucky in as well. Manus thats why you hold on to these stocks. Hold that dividend. Ryan, thank you very much. Chilcote with the very latest on shell. Volings wanen volkswagen, caroline . Chris they caroline they reported a profit drop. In the first half of this year, we saw that drop. They are having to set aside more money for litigation overs the emissions scandal amounting to roughly 18 billion. Ere joined by bloombergs reporter crystal. Give us a sense of what were oswego the breakdown of the brands. They came out with preliminary numbers last week. What is the amount of meat and bones geerting today . Were seeing that the audi and porsche brand are still within volkswagen and the volkswagen brand has seen the profit decline at 36 in the Second Quarter. That seems like a big drop. On the other hand, if you consider all the extra charges and costs that are triggered by the scandal, that is still a pretty robust result considering the really difficult situation that the brand is in at the moment. The 2 fall that were seeing in a share price today, is that reflecting generally caution Going Forward for volkswagen . What is in the prime eye of an Investor Base now . Is it the next set of legal ramification in this emissions scandal . I think it is definitely the uncertainty about the final financial fallout from the scandal. They have multiple lawsuits still going on. The Legal Investigations are still pending. The final report on the from the joans day law firm in the u. S. Wont be published until the end of the year. There is a fair amount of uncertainty. On the other hand when they released the preliminary figures ast week, it went up 6 . Chris bloomberg cars reporters all over the volings categorien story. Volkswagen story. Manus lets go to caroline who is stand big with this. Caroline, run me through the highlights in terms of numbers. What saved the day . Caroline to b. N. P. Paribas as you were mentioning seems to be doing a little bit better than ome of its european peers. It is beating estimates. In fact they have done a lot of their restructuring, closing branches in retail. Cuts by 12 at the Investment Bank division. That division, revenues up 1. 4 . As you are mentioning, bond trading, surging and offsetting the drop in equities and finally the is again from sale of their stake in europe. I spoke with the c. F. O. Of b. N. P. Paribas who told me that he breverage bank is able to french bank is able to becausor the diversification. You can never protect it from uncertaintyities. It can be many things. What you typically see is again, one can rebound on these activities. Particularly thats why a bank like b. N. P. Paribas is so diversified. It is diversified between retail and International Retail. We feel confident in the overall even thrution the bank will deliver on its overall trajectory. Italy, they ever a big operation there. The pretax profit is up. But the revenues were down 6 in the Second Quarter. Turkey, general right 1. 6 billion euros this year. Manus thank you very much for the latest on b. N. P. Paribas. Up next, caroline, what a have we got . It is your favorite. It is my favorite. Ere talking tech, ma us in. Amazon announced announces their report a little bit later. The facebook really a ji set to open. This is bloomberg. Manus this is on the move. It is 8 41 here in london. It is 3 41 in the middle of the afternoon if youre in hong ong. For real this time, manus, lloyds will eliminate an additional 3,000 jobs and 4 Million Pounds of annual xpenses as they attempt to staveoff a brexit slump. Credit suisse unexpectly returned to profit during the Second Quarter. Income fell to 170 million swiss fraungs compared to a year ago. Royal dutch shell reported a 72 decline in Second Quarter earnings. Profits fell 1 billion from nearly 4 billion a year earlier. The lower crude prices are mpacting the income. Manus shares jumped in late trade. The Company Reported Second Quarter profit, revenue needed to be corrected. That beat on analyst estimates. The number 6. 44 billion dollars, 84 of which came from advertisingoing revenue from mobile, facebook fortunes contrast with those of twitter their video Ad Technology is not ready yet. The got a boost from mazon phone. Great to have you with me. Good morning. Manus i can remember when we used to sit over there on another show and you said it is all about transactions for facebook. The big money growth was in europe. I thought that was fascinating. And there is a decline in the meshes. The whole key i think is to realize what they have not yet in asia. I think that is really going to be a huge opportunity for them in the next couple of years as is their monetizing things like nstagram and to a certain ex tent, whatsap. Caroline this is phenomenal when youre digging into the numbers. Profit revenue doubles. Evenue growth 59 , phenomenal. What about this live function aspect they have got going . Ow much of an opportunity is that . Another massive opportunity. They have tried to own every type of media you can consume in app. Lace or one they have three properties whats app. S. I dont think there is anything else that is going to catch up to it any time soon. As you mentioned, live videos. It is changing culture and news and how people are creating life events and breaking history. Caroline youre an investor daily having to decide how you keep control or what control you want over a company when youre investing. Facebook has take an ticket out of google and have decided they will be selling more shares. Is that something you like or in when he can take such massive on whatsapp . I think it is a tough one for investors to tal swallow. When you start thinking about it. How unprecedented it is in nobody has a right to complain given how strong the results have been. Youre going to see a lot of reaction if it starts to go south. Nobody is really complaining or griping. Nothing can be said. His control and zuckerbergs decisions have been spot on. Wonder if he is looking at snapchat every day thinking about other acquisitions. Manus youre getting ready to line up some of your companies in front of you. Come on in. What has gone wrong on twitter . They have not5n right. Facebook has. We talked about it before. Im bizarrely evangelical about how it has been socially impactful. T is so culturely impactful. Even blogging if you think about it, how many people blog and do emails. Those basic platforms never made money. It is just periphery services around them. I wonder if twitter is going to be a platform that everybody uses but lufrl never make money . Manus nintendo, pokemon. 4 every morning when we come in. That is phenomenal which has not translated to the bottom line which involves renegotiation. Is that what we walk away with as investors, a lesson from the nintendo story . Is it becoming a much bigger driver . I think augmented reality is going to be here for a loonk long time to come. Youre going to start seeing it, it started in japan before it started in north america or europe, commercialized opportunities with mcdonalds, for instance. Bloomberg paying for people to bring football. I think it is early before that is reflected in the value. Caroline im sat here in berlin. One of the big hirers here is amazon becoming a tech hub here in europe at the expense of london. Give me a sense where you see amazon coming out . There is much optimism. I think they will have a great quarter as well. Youre going to see a lot of upside in their web services and what it is doing behind the scenes. Obviously theecommerce business is ubiquitous. Everyone knows about its. It doesnt always show profit. It basically powers the rest of the internet. It is basically the sort of spider behind which Everything Else is hanging on to. That and google. Caroline it will be interesting to look how google or alphabet falls. I made my own brexit. I have come out here to berlin. There is so much about we miss you. Caroline ill come back every noup and then. Berlin is trying to lure a few more people out here. They are on big trips over to london talking about the cheap here and all they do have going for it is a lower cost of living, lower wage base and an easier lifestyle or more relaxed lifestyle. What is missing from the ecosystem there, they will get it, by the way, they just dont have it now. It is not something i worry about as a media threat in london or the u. K. They dont have m a opportunity or the big market. If you had berlin and frankfurt in the same city and berlin, frankfurt and munich in the same location, i might be worried but what we have in london is the Cross Section of Financial Services market, Technology Markets and the political and policy making machine of the government. We have that in one city and massive trade industry. You dont have that anywhere else in the world. Im not worried for the longterm at all. Caroline great to get your perspective on london tech, European Tech and the u. S. Jugser knots that have just been releasing their earnings. Great to have you on the show today. Up next, back to berlin. Were talking more about this capital Angela Merkel cuts her holiday short having to defend herself. Well talk about that next. This is bloomberg. Caroline welcome back to on the move here in berlin and the big story is political because chancellor Angela Merkel will address the latest terror her annual erm at summer press conference. She has canceled her vacation and pushed it up today. She comes underfire for her refugee policy. What is the message . What is she going to be trying to alleviate at some of the pressure she is coming under at the moment . On the one hand, she will make clear that everything is under control. That authorities have everything under control. At the same moment of course she will try to convey the message dont get hysterical now. She will try to calm the mood. That is always her role. She is known for having good nerves and i think she will try to calm down the german public. Caroline actually she has been looked to for a real steadier at the moment. She is has been in place the longest. Her refugee policy in particular, the open door policy is coming under much more criticism, particularly from slightly machine extreme policies building here in germany. Yeah. Exactly a year ago at the last Big Press Conference in the summer, end of august, it was, she said well manage this. One year later, of course, people realize it is actually not that easy as she said. I think she will have to admit to a certain degree that the flow has gone down but the integration of more than a Million People is much more difficult than we thought. Caroline interesting as you talk about the integration. Were seeing unemployment change coming about in germany. We have got 7,000 less coming for changes. It is more a more positive story coming from germany. I want to dig in how the jobs numbers is being helped by a flow of rant and potentially people, more asets, more talent. Is germany picking up on the refugees who are coming in on this . What about Companies Looking to embrace some of the refugees that have been coming in . Is that a positive story as well as negative . You focus on the more sensational story. That is of course the terror attacks these days. Merkels nirbling message has been these people can initial message has been these people can work for germany. People realize they are not so qualified. They have to learn the language. They have to integrate. Some of these people for example dont shake hands of women, for example for example, which is kind of a problem. It is more difficult than many thought. I think she has to acknowledge that. Caroline well see how that press conference unravels later toot. Thank you very much. R bloombergs government reporter here in berlin. Stay with us. Bloomberg television has the ulse up next. They will kick it off with a talk with jan etc. Henry. The fed takes the step toward the second rate hike but stops short of committing to september. It Credit Suisse surprised. The bank beats and expected return to profit. It is Tidjane Thiams plan working . Will bring you an interview with the chief executive. Eurosr reports a 72 drop in profit as it faces a challenge is faces a challenge