Transcripts For BLOOMBERG On The Move 20160805

It rbs back in the red. The buildout british lender posted a loss. We asked the companys cfo about the numbers. Ananna we are less than half hour until the open. A bit of Risk Appetite out there. We saw asia but tire asia flat tire. Up. 4 on the euro stoxx 50. The domestic focused Company Getting a push by the bank of england stimulus yesterday. Lets get a look at some of the other assets. Asia tracking higher. It is down on the week but msci asiapacific has been managing to perform. Japan is basically flat but china has been pushing higher. The pound of higher, making up for the losses yesterday. Meanwhile, i want to keep a close eye on the u. S. Data,l important jobs will we see the Unemployment Rate fall . Keep an eye on the rand. The anc losing their power in the elections should elections. , it is all about anna lets bring that to our viewers. World bank of scotland has royal bank of scotland has posted a loss. A 20 80compared to Million Pounds profit a year earlier. Cfoking to bloomberg, the explains the details kind of figure. When you bring down the loss of desperate down the laws, the core business made another one billion pounds, as is typical with us were in the middle of restructuring theory. Substantialpretty provisions taken. Number of people being hired for permanent positions in the case loved the most in seven years in july. Physically to report by markets and the recruitment. This the drop as a dramatic freeforall. It provides a fresh indication that the brexit decision will hold back growth the day after the bank of england said the outlook had weakened marketing. New york stock has asked Goldman Sachs to provide more information about its work for the state invested fund. That amid investigations whether any Money Laundering section violations occurred. The head of Financial Services has asked for a meeting with Bank Officials by the end of the month. Goldman says it has been in dialogue with the dfs. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. This is a bloomberg. Caroline. Caroline fascinating story, sarah. Lets turn our attention to the data points in the usa. Figures are released at 1 30 p. M. U. K. Time. The u. S. Jobs figures have slipped in the past few months but now economists see the july number returning to this years average, around 200,000. Slower growth is learned is firm represent a challenge for the Federal Reserve as it decides whether to hike rates. Daniel, give us your breakdown. Are you expecting these numbers to change the Federal Reserves viewpoint on when they should hike . Do you and to speak a hike this year . Daniel we keep in mind that the become less, they important each month in terms of determining what the fed is likely to be. At this point no one is expecting a hike in september. It is hard to see a number coming up that is going to change that. The is going to do from bias that the fed is going to be on hold, even if we got a number much stronger than consensus. Something like we got last month. That by itself is not enough to make you think they would hike in september. Caroline lets take that covers us to further. Are we to see a rate hike this year . You haveseptember desk to go out to september 20 17 it seems like a long time to wait. The numbers were going to get today, clearly the story has not been about job creation for some time. It has been about a lack of wage growth. With that change becomes asian . Daniel probably not good we need to realize we focus on a lot on what seems to be week growth but inflation is low. In real terms, inflation is not actually all that bad. Even if you so and acceleration at this point, that would be good news for this from an economic point of view. But not enough to change the decision function for the fed. Anna we have seen the jobs numbers come down significantly. What is it . 4. 8 is in the expectation. On my bloomberg, you can see the dollar has started to pull away. Continuing to test in the blue line, this is the dollar index creeping up over the course of the past year. The jobless rate continuing to fall, seeing improvement in the overall jobs data it are we going to see more dollar strengthening. If youre into spitting later in the year a rate hike. What does it have in terms of assets . Clearly emerging markets daniel at this point that we keep pushing out the time that you expect to see the fed to hike, that argues for a weaker dollar. It is a relatively benign environment for risk assets. Benign environment for it the u. S. For now that is going to persist. That is going to help emerging markets. We are going to get to a rate hike but that is likely to be december at the soonest. Even though you might get a shortterm had to markets whenever that expectation goes up, it may be one and a reasonably long pause again. Much. , think very thank you very much. You said something will get to a rate hike. We will hold you to that. Up next, carney delivers. The bank of england delivers a slate of stimulus. How effectively be . How effective will it be . Cfo speak to the companys about the results and the future of tim p later, we saw the impact of brexit on the u. K. House prices. We are speaking to the head of housing economics at Lloyds Banking group. This is bloomberg. Welcome back. This is on the move. A Beautiful Day in london. 7 40 and the ftse futures will be a little bit higher, up by around. 4 . 90 minutes until we get there lets get the Bloomberg Business flash with tom mackenzie. Anna. Hanks allianz says it Second Quarter profits fell. It missed analyst estimates. Decline to income 1. 1 billion euros for more than 2 billion euros. It says it is operating profits at pimco fell. We will be speaking to the cfo did give them a desk Dieter Wemmer Dieter Wemmer. Growth in india and improved pricing. The Worlds Largest maker has adjusted earnings before taxes the Company Remains under the pressure to deliver on targets a year after it was created with a manager a merger. It is considering a direct london super blink. It will rank among the worlds longest flights. The cfo says the carrier is reese is set to receive its first 77 next year. That is your Bloomberg Business flash. Caroline . Caroline tom, thank you very much indeed. Turning our attention back to the United Kingdom carney has unleashed a hike its of stimulus. The Central Bank Governor said more easing could come as it feels the effects of its decision to leave the european union. All of the elements in this package have scoped to the increase. The mpc could Lower Bank Rates and expand the scale or variety of assets held in the asset purchase facility. The mpc that we see the effect of lower bound as a positive number close to zero but a positive number could the bank of england continues to stand ready to take whatever action is needed to achieve its objectives for stability as the u. K. Adjusts to the reality and moves forward to seize new opportunities outside the european union. Carney. Daniel morris is still with us. We hear central bankers talking telling us what they are doing and what they might do in the future. Here we had that but the comes as i had in the last hour with chris wyllie was about how limited his options given that he has talked about how he doesnt like negative Interest Rates. Is that sensible . Given us his genuine parts about Monetary Policy desk genuine thoughts about Monetary Policy genuine thoughts about Monetary Policy . There is a lot of concern about negative impact of negative rates. For the banking sector, that is going to be encouraging. I dont see that so much as a limitation, if it helps. As you said, there is some scoped to cut the rate. Caroline only for basis points. To qe it would come down by more assets. Well come back quantitative easing for the last several years it ever lower Interest Rates really make a difference when it comes Economic Growth . We are not so sure. Anna it made a difference when it came to stock appetite and we are seeing the ftse 100 with a spike. Even his mother for the 250 starting to encroach on the balancing act, getting back to where was before the brexit decision. On one of guys in johnsons favored points, one about the fx issue and we have the ftse 100 up 8 on the year. We are down 1 on the ftse 250. When you pull it in put it in dollar terms, we are down 4 on the ftse 250 in dollar terms. What are Foreign Investors who are about half of the market in the u. K. Doing to hedge themselves . Getting themselves into a cheaper u. K. Acidbase but are they trying to offset any worries about the pound sterling . Daniel they certainly need to. Were going to see parallels between the u. K. Market in the japanese market. It is lightly to become the case more so in the u. K. As it comes down to the profitability for u. K. Based institutions that have sales. It all comes down to what you think the outlook for the currency is, because once you strip that out for those companies that still have the mystic demand to worry about, you think that is going to be weaker, those earnings of and be lower. You need to make it up on the currency translation. Caroline what you make of the weakness in the u. K. Economy. We have had a lot of survey david survey data. It looks a lot it it looks really gloomy. Manufacturing dropping below 50. A slump, how deep is the slump . Is it a reception is it a recession . Is it vshaped . Daniel the u. K. Came in with one of the highest growth rates. I think he would see a recession coming with more than 2 , there is much wesco for the economy to slow down but still stay positive. That is our expectation. A slowdown, the recession necessarily. At that point, a more slow recovery comes to because uncertainty is going to persist. It is going to be given by the lack of investment because of uncertainty. That is something we are going to have to deal with for years. 1 . E pound is trading up where do you see the pound going . Consensus seems to be it will go 1. 27. We do not see that much of a reaction yesterday. What stopped a big selloff in the pound . Is it the talk of not going into a negative territory . Or bearish bets on the pound . Daniel a couple of things are going to be driving the value. Now that we know we are not going into negative rates. It will make you feel more confident about the value it however, when you see what happened in japan and they went into negative rates and a strengthened. That is a bit unclear. Look at the amount of quantitative easing that we have planned, it is relatively small in comparison to what the bank of england did previously. Not as much impact their thats not as much impact. Not as much impact the one thing that is going to drive whether we go toward 120 as opposed to 140 is how the negotiations play out. What do you think they hit is going to be in terms of trade . What impact on the economy . Over them mediumterm, it is going to drive the value of currency. We so morbid appetite for gilts more of an appetite for gilts. More record lows. This is a global phenomenon. The u. K. Very much at the eye of the storm. That go to things to keep in mind, one you look at the spread of yields on the u. K. Versus the eurozone. It is still relatively high. Scopedlative basis, they in the u. K. Market despite the policy, there still more room to go. We are still positive. The other thing you need to keep in the back of your mind is even though now we have the declining yields, based upon quantitative easing, at some point you would expect inflation to pick up, significantly good that you translate into higher yields did into higher yields. Expect issue more debt. They could be arguing for more guilt yields over a mediumterm. You might think when that transition might take place. Daniel morris, b. N. P. Paribas, stays with us. Caroline caroline talks of increasing yields. My lord. We are minutes away from the open. , we look at potential corporate movers in todays trading including rbs, a leons all who all leons reported . Next. Welcome back. 8 15 8 52 if youre in london. Quity markets here in Europe Caroline lets talk about some of the stocks that could be on the move it rbs a key focus. Posting a secondquarter loss on a 1. 7 billion dollars worth of litigation. Mcewangbased ceo ross has embarked on a fiveyear plan to shrink the global titan into the lowic lender saying inches rates environment in the u. K. Context saying the profits will be structurally lower for banks because of the low inches rates. Inches rates impact banks dramatically. They are going to be reviewing more of these rates over the next weeks because they are under pressure to pass on Lower Bank Rates to their customers. Caroline. Caroline an interesting theme hitting the banking sector. , it isow Interest Rates much more painful to earning a profit as allianz showed today. They saw 45 slump in profit. They had higher insurance claims to do with natural disasters so they can i get any investment. Eturn to offset that they kept their portfolio they kept their fully retarded. They kepthis their folio. Anna this is the worlds biggest maker of insulin. Lightly missing estimates they are adjusting their 2016 at outlook being trimmed. Rising u. S. Price pressures. They have been updating the market on the they say the market ascus is Market Access is lightly to remain good. Boost sales amid pricing pressure from peers who asked about the expectations in the u. S. Health market with elections on the horizon. We are going to be speaking to the ceo of novo nordisk. Caroline they cut their fullyear outlook. So too does the luxury maker hugo boss. Here in germany, the stock fell 1. 5 because they are granted scale back their outlook. 17 . To fall by they have seen a decline but only in the low doubledigit area. Clearly the fashion label that is hugo boss not doing so well. Look at the erosion in the share price. A lot of people changing their look. How do you give it in terms of in europe . What you look for in europe is Earnings Growth because margins in comparison with u. S. Fundamentally companies should be able to raise margins. Forave been expected that quite a while and its time earning season comes in, you are disappointed. That is a key dilemma for investors on a relative basis. It looks better than the u. S. But you do not see the earnings numbers coming through. That is what we need to see for the market to turn around. Daniel morris stays with us. Well talk to him about other matters. Am, it is the market open. Teachers a little bit higher at the start of trade. This is bloomberg. Anna good morning and welcome to on the move. Im anna edwards in london, alongside Caroline Hyde in berlin. We are moments away from the start of european trading. Caroline has your morning brief. Caroline its jobs friday. U. S. Payroll numbers for july are released today. What kind of figure could take to change the feds great pass . Profits slumped due to higher claims due to natural disasters. How stormy is the outlook amid record low rates . We will speak to the cfo. Rbs back in the red. The bailed out british lender posts a one billion pound loss. We ask the cfo about the numbers. Open, we up for the can see futures pointing to a green start. We followed asia higher, we followed the bank of england stimulus making a little bit of appetite for the riskier assets. This is where we closed yesterday, up some 1. 5 . Now were starting to get going on the open. Ftse rising up 1 10 of 1 already. Keep an eye on rbs, with bigger losses than expected. We are waiting for the dax to open. Dig into thets individual industry groups. Heres nejra cehic. Nejra yes. Lets look at the imap. Just to see how we are doing. Consumer discretionary is leading the gains up 2 10 of 1 , now 3 10, material leading even higher. In asia, it was energy and consumer discretionary. Looking pretty similar in the commodities. Health care stocks look like the one laggard, down for tenths of 1 . Otherwise it is pretty much gains across the board. It is pretty much a green day, Energy Stocks up. Lets take a look at the gilt yield, which is just opening up. It dropped 15 cases points yesterday, falling to a fresh record low after mark carney and the bank of england cut rates and announced a number of other measures that pretty much surprised the market. Were up just one basis point on this yield, at 65 on the 10 year yield. You can see the drop that happened yesterday. The three stocks we are watching, i want to start with alleie anne. Second quarter profit almost halved. The biggest insurer in the u. K. Facing higher claims due to natural disasters. A long focus on pimco, too. Outgrowths grew, and we are waiting for that to move. Meanwhile lets take a look at worldsdionordisk, the biggest maker of insulin. It trimmed its sales and profit forecast for the year due to pricing pressure in the u. S. Net income did rise 19 in the Second Quarter, and the number was a beat. Taking a look at rbs. I wont say too much, because we will hear from manus cranny, who interviewed the ceo, but they did pose a larger loss than estimated as they set aside more money. Anna thank you very much. Lets get to rbs. Theyve posted a larger loss than estimated in the Second Quarter. The loss of britains largest taxpayer owned lender was in excess of one billion pounds. Manus cranny has been speaking to the cfo. He joins us now on set. Manus, you spoke to the cfo. Another quarter of provisions. Is there any end in sight . This is a messy set of numbers. Manus another set where you look at it and it stirs things 450 Million Pounds for protection insurance, and that is assuming. But this big number we are looking at, 700 Million Pounds relating to shareholders. The cfo and we chatted about brexit, the bank of england, and we started with the numbers. When you break down the numbers, the Court Business the core business is protecting operating profits. But as is typical with us, we are in the middle of intensive restructuring. Substantialpretty conduct provisions tightening. We obviouslyppi, reacted to the consultation that was out this week. We have taken another 450 Million Pounds of ppi in provisions. We would hope and expect that in relation to that new consultation, a full and final provision, and then there were some additional provisions in relation to conduct issues in ireland and the 2008 shareholder rights effort. Manus this is besides litigation for the rights . We havent disclosed that, but it is a meaningful number. Manus you mentioned ppi. This is the final number is it true for 2019 . It is the formal number for the end of last year, but certainly in relation to the consultation, i would hope that its a final number. Manus what did you make of governor carneys look at stimulus . Do we, corporate qe, Corporate Bonds, what is the impact . Anything that is good for us is something that we are generally supportive of. In particular, we are a very liquid bank. 92 . D deposit ratios are we have put on more volume growth manus but it is going to squeeze your numbers. It will squeeze the interest margin. But will it help us lend more . No, we are already lending at a decent rate. Manus do you think the governor has that message, that it is tough to lend . Well, every bank is different. For us, it probably is more of a demand problem. Certainly not a supply problem. Here are so many other banks manus will you pass through the quarter percent cut . We will certainly look at it across the products and do what we think is fair and reasonable. Manus the governor made it clear message you have no excuse. You will pass it on. Im not going to sit here and commit we will pass it on, but we certainly will try. Manus look, its a tough set of numbers for anybody to go out and do. I think the message is very clear. It is going to get tough, it is going to be hard for banks. Maybe the point is that they havent gone beyond them. This is what will come through for the british media. One ofmade it clear, and the things he made was that you need to pass this on. Two, get ready for a tougher time. He is not a fan of negative rates. Given this set of numbers, they say they will be very reasonable. Its a slow down but not a recession, and ppi doesnt go away. Manus Caroline Anna caroline . Caroline such a cracking interview. Give us a sense of investment banks that have been hit by the fact that we have too many share sales on the table. It looks like rbs is adding to that issue. Manus yeah. Rbs,ams and glenn, part of when they got there bailout, part of the rules that you have got to get rid of this. They went on the road of creating a standalone bank. The reality is that in a 0 world they reviewed on the measures. They spent millions trying to do that but it is off the table. It has been the bane of their life, because this in part goes toward i know dividend is a fantasy, but this trade sale is what we expect to happen. Of course there are stories that santander is at the top of the bidding process, but he would not be drawn. Europe would not be drawn in terms of the favored nation states, but that has got to happen. Would they recoup the money . That will beat half. 1. 3 billion pounds on this process lost as far. Anna the ceo described to the task as the most complex technological challenge and banking. Daniel morris is still with us. My gadfly columnist, lionel laurent, wrote a great piece. Saying theytion will be responding to the governor later on this year by saying, we tried lending, but sorry. There is a bit of a demand issue, isnt there . How much will banks be able to lend . Not much. It is the exact same situation you have in europe, Central Banks are doing everything they can. You give them credit with the tools they have at their disposal. Are they the right tools for the problem . Not so much. If you think about any companies thendividuals to borrow, Interest Rate matters but there are a lot of other factors and the significance of the Interest Rate has fallen. If you dont see a profitable growth opportunity, why is the business going to borrow . We saw previously a chart of what happened to rbs, absolutely brutal. Give us a sense of whether the appetizing,oking because pimco today came out, writing that we are under assessing the value out there in bank bonds. They say they have managed the regulatory screw has been turning and there are safer assets but no one factors it into the price point. It does highlight that with this hunt for yield anything that has income is whats drawing investors in. If its dividends, corporate equities, people are going to continue to demand that and that is not likely to change. Among any of the assets defined that have a yield you feel secure with the outlook is something people will want to buy. Anna thank you very much for your thoughts. Daniel morris stays with us. Manus, thank you for that interview. Manus cranny. Rand. Up, the rising the South African currency is at its highest level since october after the president s party is rejected. Then we speak to the cfo of novonartus. Plus, a conversation with allienzes ceo. This is bloomberg. Anna welcome back. 30 minutes into the trading day. Lets check in on the markets, because one of the key movers are helping to drive us higher. Rbs isto move onto hurting, ftse the outperform or, cac40 up. We are diving into individual movers, debt on to member rank returns. You will see that we are speaking to executives of some of the biggest movers today. Novonordisk feeling the pain as they downgrade their forecast. They still see growth, but not as much as had been anticipated. They are the worlds biggest maker of insulin. The cfo 5 after we saw interview coming from manus cranny, a great piece of work, talking about how they arent passing on the rate cuts, but they have it over a loss that is bigger than expected. We speak to all the Key Executives and we are also looking at the South African rand. Anna absolutely. On the political story in south africa, the Ruling African National congress has conceded defeat in the local elections this week, in a Nelson Mandela base. Results are still being counted, but they risk losing outright control of the capital and economic hub. Its the worst electoral display for 22 years. Our reporter joins us from johannesburg. Great to see you. Could they actually lose power . They are still ahead overall, monday arent they . They are still ahead overall in the elections, looking at the national vote. They were at 55 this morning with 1 10 of the ballots yet to be counted. The what is that they have lost districts,two major the first 15 years ago when they gained the majority of their district, and now the main sickened Nelson Mandela bay and they are very significant. Yesterday the main oppositions said that his party had the majority of votes. It may also look like they could be in trouble in johannesburg and victoria. Only have seen is that some of the largest districts in johannesburg are trickling in, giving them a slight lead this morning, but we still have that 10 yet to be counted and we will see whether that sways the vote. Caroline ill pick it up from here, we want to talk Market Reaction. We have a great chart showing how we have seen a rampup in the South African rand on the hope that the anc will have to shake itself up. He is a cultural guide, this is a reference to hemingway, but overall this is a pickup since december give us a sense of the Market Reaction on the back of the election outcome. Anna looks as if we have lost contact. They you very much. Amo mbatha. Our guest is still with us. Boost as we move toward what looks to be a disappointing performance from the amc. When you look at emergingmarket currencies, they are these domestic, political stories, whether it is brazil or south africa. But overall you have to lay the dollar and what the fed is doing. What looms largest . It has always got to be the dollar. Fortunately, over the last year, really significant appreciation in emergingmarket currencies the good news is if we get one hike this year or next year, you arent expecting such a future because they have already gone so far. If you are looking at local currency i investments, you can feel more confident on the currency side. Bring peopleant to to my screen once again. We are seeing is a we have gone as far as we can. You are looking at the equity department, emerging markets continually underperforming by the s p 500. Its tracking higher since 2012. The blue line, painful when it comes to emerging markets, factored into the dollar strength. Give us a sense if it is time to get into the e. M. Stock market. I think it is certainly time to be thinking a lot about it. It is not necessarily a pound the table moment, where you take butyour money into e. M. , there are a lot of factors pointing toward outperformance of emerging markets versus developed over the mediumterm. I think people should be looking into it. A big driver has been commodities, and what we really need to see to feel that it will turn around are the sectors of the market. You are seeing that in consumer discretionary, technology. It looks like it is perhaps a turning point. Anna we havent talked about china. We had minutes of conversation without it is that good . We arent getting the negative headlines we were this time last year. If you look at the most recent pmi for china, you have manufacturing about 15 and rising, services above 50 and stable. Its not like we feel they will but the accelerate theory is that it would slow down dramatically but that is off the table. Stability is really what emerging markets need. Caroline we will say farewell after this chapter. Give us two assets you are keenly looking at going into the weekend. Look at where we should beginning into. I well, in the shortterm, think we want to be in underweight risk assets. We are in a similar position to december, where valuations are and thelatility is low, earnings season wasnt particularly positive. If you are going into august, often a month when you see volatility, shortterm is a bit cautious. The longerterm, like europe and emerging markets. Will beee a dip, there an opportunity to move back into Asset Classes. Anna thank you very much. Daniel morris, bnp paribas. Novonordisk trims its on price pressure from the united states. We speak to the cfo, next. Anna age 23 in london. 8 23 in london. Tom mackenzie. Tom the royal bank of scotland has a larger lesson estimated in the Second Quarter. Britains biggest taxpayer owned lender saw a net loss of 1. 0 8 billio8 billion pounds. He explained the Details Behind the figure. When you break down the loss, you have to start with the fact that the Court Business has billions of pounds in pretax operating profit. But as is typical of us, we are in the middle of an intensive restructuring period. We saw some pretty substantial revisions. Being number of people mired for permanent positions in the u. K. Slumped the most in seven years in july, according to a report by market and recruitment and employment confederation. It described the drop as a massive freefall. It provides a fresh indication of the brexit Decision Holding back Economic Growth. The day after the bank of england said the outlook had weakened markedly. Factory orders unexpectedly decline in june. Quarters adjusted for seasonal swings and fell 0. 4 from a. That is as demand for investment from within the euro area slumped in the runup to the referendum on eu membership. New yorks tops banking regulator has asked Goldman Sachs to supply more information about its work with the malaysian state investment fund. Thats amid investigations into whether any Money Laundering occurred. The head of the department of Financial Services has asked for a meeting by the end of the month. Goldman says it has been in dialogue for some time. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. This is bloomberg. Anna thank you. Novonordisk trimmed its forecast for the year; the worlds makert insulin has shares lower this morning. We are joined now by the ceo of the company from their headquarters in copenhagen. Great to have you. Youve trimmed your outlook, cut back the outlook, because of the pricing pressures you face in the u. S. As you look ahead, did you see any change to that pricing pressure . What could change the pricing in your favor . The pricing environment in the u. S. Right now and for the contracts for 2017 have been moderately negative due to the competition, and yet we hope that the pricing label will stabilize so that in the future we can see growth from our strong portfolio of new diabetes drops. Seem the pharmacy benefits to be pretty aggressive when it comes to putting how does this particularly shape up . Is a concern, a trend . Our main drops in the u. S. Has been very good, and during our contract negotiations we have been trying to keep the contracts open to ensure choice for patients, and we can report int access for our drugs 2017 will be at similar levels to 2016, which means we will have good access and we will need to compete in the market. Anna you mentioned you hope the pricing pressures are based in the united states. Do you see any signs of that happening . Is there anything changing structurally in the market that would allow your prices to rise . Will, what i do see if well, what i do see for the future is innovation that will create value. It creates value for the patience, for the healthcare system, and for us. We have the most innovative pipeline of diabetes drugs. Introducing our new products will more insulate us from the pricing pressure from generic drugs. Caroline the competition you talk of, they will ramp up the competition next year. How do you prepare yourself for new entrants into the markets . How do you prepare your lineup facing competition . Well, we have been trying to establish Strategic Partnerships with some of the major ppms. In some cases we have elected not to be because we believe we have Premium Products that are warranted higher price. Its a normal, competitive negotiation. But for 2017, we are secured. We have good access. It came at a slight cost on price, but we can compete next year. The Health Sector is always a big political issue in the united states. You have an election looming. Do you see any difference in the candidates . Is it too early to say what their agenda will be with regards to health care, and what that will do to your Business Prospects . We have not had real, specific proposals from the two candidates in terms of health care, other than they feel that drug prices are too high in the u. S. Alsove to remind ourselves that whatever is being discussed during an Election Campaign is not necessarily what is being enacted afterwards. We sell how difficult it was for the Obama Administration to get obamacare through. I think there may be some changes, but it is not going to be rapid, immediate changes. Anna are there other geographies you are going to focus on whilst the u. S. Works out Health Policy . What growth do you see elsewhere . The first half numbers for twice 16, we noticed growth in china was surprisingly strong. We have in a way rebounded in china. We have had various surprising strong growth in japan, canada, and generally in what we call emergingmarket. Some of these markets are influenced by a negative currency move. Some of them are influenced by low oil prices. But in general, on average, we see strong growth in emerging markets. Thank you very much. Novonordisk ceo joining us on the back of their results. Thank you for joining us. From one ceo to a cfo, europes largest insurer reported a drop in profits on higher claims of natural disasters. Lets get more with the cfo, joining us now live from munich. Thank you for joining us. Interestingly, you have been talking about the financial markets. You say they dont like the ecb buying Corporate Bonds what about the bank of england and the Corporate Bond buying . Is there any end in sight to the low and sometimes negative rates you see . Good morning. Like that we dont the Central Banks are competing in our main asset class, because its an asset class we need to and that liabilities, gives us additional returns have central to bankers as competitors in our core activities. Also i believe, as i have said distancet is this between the various risk classes of bonds should be the risk measurement, and not a large market player who was flattening everything. Anna there is potential opportunity, though, with Lower Borrowing costs. M a i know you have the cash pile you want to put to work. You say you are intensively looking at mergers and acquisitions. What exact type of target will be attractive to you, and where geographically . On Asset Management and insurance companies, we have a broad appetite. We have no geographic preference. Does theion always is business you by fit and can you integrate it . Doesnt help you for making the next are teaching step . And also is the price justified . As an insurance group, as all financial institutions, we cannot swap leverage for acquisitions. We always have to pay shareholder money. Anna talk to me about the negative rates environment. Wewe look at your numbers, got an update on your rule ofnce as a thumb, what does it do to the bottom line of the business like allianz . Look, i think we have demonstrated that we adjust our life segment exactly to the challenge of the lower yield environment. Our life operating profits are slightly up. Believe that we can actually produce in the future very good profits in the life segment. Where you see the Immediate Impact of the falling Interest Rates is in our propertycasualty segment, where we have a reduction of almost 10 in Interest Rates, which means we need to work even harder on getting the combined ratio in the right direction. Ratio end, the combined is a good way out to get out the problems of the Interest Rates. Go ahead. Anna do you plan to store more cash there as a result of the negative Interest Rate . No. Well, i think its when you run 650 billion investment portfolios on balance sheet, how much cash do you want to staple in a large safe . I dont think it is practically possible. You have been reassessing some of your underperforming portfolios. We know italy has been on the block. How is the sale process going . Divestments ind this particular environment . We have announced earlier this year the disposal of korea and taiwan. We have taken for our career disposal in the Second Quarter hit a 352 million that explains most of the reduction in our net income and we are never talking about any rumors ares. Egulation or what we might do when we have done it we will announce it. Anna can i ask about pimco . Obviously a lot of market focus there on the outflow. I see what youre are saying about not interfering in the daytoday runnings; of course you have a new ceo arriving fairly soon. What would you like the priority of him to be . Well, first of all, even before he arrives, we will be positive that we will achieve flat, a net zero inflow outflow for the second half of the year. That is still confirmed by the Management Team of pimco. When he arrives, i think he can pimco inart to lead the next development phase. Maybe that is less known. Pimco is already by now a very strong hedge fund manager. I think when we would isolate our Hedge Fund Businesses that be in we would actually the top 10 rank, in the global list of hedge fund managers. I think we need further to broaden our Asset Classes where we generate future revenues, and i think we need a broader perspective, and therefore the handover to the next generation i think is a welcome step to bring pimco back to the 60 or lower cost income ratio as he has seen it in the past. Caroline do you want broader perspective . You have a very Broad Perspective when it comes to your own geographical reach. Some of that exposes political issues; in particular, turkey. How are you reassessing the turkish element to your business, given some of the issues going on with erdogan . We are the Market Leader in turkey Aspen Insurance corp. Share which ist equal to market share in germany. It is a very, very large business. We have many employees. First step is that we have to ensure our employees are secure. We are headquartered in istanbul, so we were certainly concerned that nothing was happening to them. They are all fine. I think also we have helped all our customers who incurred damage during these days of unrest, and i think that the first stabilization is to take care of customers and our people. Turkeyn, going forward, needs the stabilization through the economy that the country can go back to normal business, business as usual, and certainly we will ensure that our business can help. Anna thank you for joining us on the program. The cfo of allianz, joining us from munich. Caroline has breaking news. Caroline coming from house prices. In the u. K. It is an obsession. U. K. July housing prices fell by 1 . That is more than the estimate of 2 10 of 1 , and worse than june, when we saw a rise of 3 on the month. This month in july, and the ramp up to brexit, house prices falling, threemonth house prices rising on the year. Want to dig into the affected brexit felt and on the Housing Market we will be speaking live to the producer of the numbers after this quick break. This is bloomberg. Anna we have been speaking to the executives of rbs, and there a change will pick up the key stocks to watch. Nejra caroline, lets take a look at the biggest movers on the stoxx 600. Lafarge up, one of the best performers. Although this company is under pressure to deliver on targets a year after the merger which created the worlds biggest cement company, it has also pricing,o improve on and it was a slight beach compared to expectation, which is why we are seeing the stock moving higher. In terms of the worst performer, novonordisk is one of them. It is the worlds biggest maker of insulin, and it trimmed its profit forecast for the year after losing a key contract in the u. S. There is intensifying pressure from customers to lower prices in the u. S. , which is there largest market, and growth in 2016 will be weighed down. Looking at rbs, britains bankst taxpayer owned posted a larger loss than estimated as it set aside more money to cover a lawsuit. Plans to create a unit but it still seems to be that headline number where we are in rbs fall. Anna thank you. Lets get the Bloomberg Business flash with tom mackenzie. Tom thank you. Lafarge has reported secondquarter earnings that met estimates in india and improved pricing. s adjusted operating profit rose to 1. 76 billion. The Company Remains under pressure to deliver on target after the merger. Qantas airways plans to use a boeing 787 by the end of the year, and is considering a direct london leap that would rank among the worlds longest flights. The ceo says the carrier is set to receive its first 787 next year and will continue orders from airbus. Taiyo the shares have risen despite predicting a 37 plunge in earnings because of a stronger yen. The currency rise has wiped almost 5 billion off the operating income of japan. Toyota alone has taken a 2. 3 billion hit. The companies have cut losses and have asked the government for help. That is your Bloomberg Business flash. Anna thank you. We have had one of the first housing indicators since devoted to leave the eu. That vote took place in june. Halifax july home prices fell by 1 month on month, more than was estimated. The homebuilding and real estate sector has been one of the hardest hit since brexit. Joining us on the phone is the headed housing economics at Lloyds Banking group. Hes with us now. Thank you for joining us. Take us through what you are seeing in the market, and how relevant it is, how much of it comes from this post brexit vote world. Good morning. There has been a 1 fall in the july figures against june. We very much worn against reading too much into the monthly figures, because they can be quite volatile and although we have seen to other falls earlier on in the year and put it in context the decline in july is less than what we saw in february before the eu referendum. That trend insee house prices, we didnt see the occasional monthly decline. I would certainly warn against reading into that figure. If we are to look at the Board Meeting full underlying trend over the last three months, then that actually increased a little bit in july, although it is interesting to note that there have been signs of slowing in the underlying rate, so some of the heat is definitely coming in the market. Caroline not exactly a complete fall away. Is it unfair that some of these building stocks have been beaten up quite so much . Is the market over blowing the risk proposed to the overall Housing Market . I think it is really underlying how much uncertainty there is around the Housing Market, but also the general economy. If we are looking at hard evidence, there is actually very little around at the moment. What we have seen our various surveys, to do with purchasing manager indices or consumer confidence, also some of the housing surveys from the Royal Institute of surveyors. They put out a fairly gloomy survey. There has certainly been a decline in sentiment, and there is a great deal of uncertainty about what will happen, maybe some fear about what the outcome will be. But in terms of the hard figures, its too early to judge. We have had very little hard evidence that things have taken a turn for the worse. Its going to take a little bit of time, and i think that is particularly true in housing, before we get any solid evidence of what has been happening post the vote to leave the european union. Anna give us your thoughts on what the bank of england should do. We saw them act yesterday with a suite of measures. Do you think we will see the bank of england rolling back on some of the regulations data imposed around homeownership market . With a view to boosting the market . Or do you think they will be happy to let stand . There have been a lot of changes to regulation, and i think a lot of those are for good reason and certainly wanting to make sure that we dont go back into financial crisis, which we saw a few years ago. I think they will be reluctant to be rolling back on those regulations, but i think they will be very much in a mode of wait and see, let us see how things develop. Theres a lot of speculation, but to be sure, we dont really know what the impact is going to be. We are going to have to wait for a few months, and i think the bank of england has come out with an early package of measures clearly designed to make sure that the economy doesnt deteriorate, and we do see the economy remaining on an even keel. That they will be watching everything carefully in the coming months, and i think they will take action if they see the need to. But at this moment, they dont have plans to do more than what they have done. They have hinted at a third bank rate cut over the coming months, but we are going to have to see. They Just Announced new measures; we will have to see what impact that has and whether or not the economy remains on an even keel they will only be taking more action if they see the need to, and i dont think we can speculate at this stage. Anna you can speculate as to what happens in the future. You are still waiting for hard evidence as to what is happening outside the bubble of london. What is happening geographically in the u. K. . Thats very interesting, because we talk about the u. K. Housing market there isnt really a u. K. Housing market, but there are local and regional markets. We continue to see a split market, london and the southeast have been very much the top performers over the past year. They saw house prices grow to double digits. If you go to the rest of the country, particularly into northern england, holland, wales, its a different picture. Some parts of the country have seen very small declines in house prices and other areas have fairly small rises. It is very much a mixed picture and it is almost like the london market is separate to what we are seeing elsewhere, different issues in terms of affordability , particularly for firsttime buyers. Anna thank you for your time. Martin ellis, Lloyds Banking group. Up next, data dependent. Jobs day in the u. S. Is there any number that can convince investors, either on job creation or wages . This is bloomberg. Anna welcome back. Here are some highlights before you go through the day. At 1 30 u. K. Time, we get the closely watched data from the figures. Creation after the European Market close, munis is due to issue moo dys is due to update its great on turkey. Then the rio digit euro real olympics get under oh that olympics in Rio De Janeiro get underway. Lets talk about the data we get from the united states. What with the fed need to see from payrolls today to justify a rate hike . We are joined by Richard Jones great to have you. Maybe the question should be, is there anything that the payroll statement can tell us that will get them to hike rates in september, or could anything in the wages data get them to hike rates in september . Richard i think the volatility we have seen in this number over the past couple readings is do we see a massive mess . Do we see a massive beat . Do we see something in the range of expectation . In all three of those scenarios, the most we can expect is shortterm volatility. Realistically for september, what we need to wait for is the speech at jackson hole toward the end of the month, which i think will do more to set the tone for september. Caroline the dollar index completely sanguine. We are trading flat. Over the course of the year, the views that would see a rate hike have been falling away, and we are seeing the dollar down by 3 . Is it a year of downward trajectorys for the dollar . Richard well, i think its a difficult one to call. A lot of people are wrongfooted by the moves we have seen. In terms of the dollar, it depends on the pair. If you look at the dollar versus the pound, there is a u. K. Story that has driven that across. The u. K. Versus the dollar is a less exciting story. There are a lot of different moving parts. I think it shows the uncertainty and all the different themes we see. Anna thank you very much. Richard jones from bloomberg first word, with us to preview what we will get out of the united states. The European Equity markets are in positive territory. The ubs head of u. K. Rate strategy joins francine and the team next on the pulse. Loss to talk to him about. This is bloomberg. Nonfarm payrolls day. What will the data say about timing for a fed rate hike . Rbs thinks one of the uks biggest banks posted a bigger loss than estimated. We talked to the cfo. Opening ceremonies take place in rio tonight. Welcome to the pulse