And the ecb president mario draghi says low Interest Rates are not to blame for europes bank problem. Does deutsche disagree . We are less than half an hour away from the european open. Whether we expect futures to deliver for us today. We are very much risk on. We are expecting of pop and european equities to the tune of around 1 . Questions still to be answered. I will show you the contract table on oil. But what is happening with canada and australia. We saw them all flying overnight. The yen taking the brunt of this on the downside. Music to abes is im sure. Indepthe you a more look at what is happening. Has toldyellen lawmakers that the fed is looking into what she calls disturbing compliance failures at the biggest u. S. Bank. Ted leonsis review will investigate reaches including mortgage abuses. Yellen was responding to questions about the fake account scandal but would not confirm the fed is considering fed president Patrick Harker will give his first ever media interview here on bloomberg. The head of the Worlds Largest of the traded Hedge Fund Manager ofs that in the face complacency it will lead to outflows. In a world of these low rates , he start the year in the whole so some people find it difficult to take the right amount of risk. Need to be very tolerant of swings in piano. A revolt in spains Main Opposition Party could help end the Opposition Party deadlock that has realized politics. The committee stepped down in a move that could trigger solution. Sanchez led lawmakers against joy as primest ra minister in a recent confidence vote. The government says that gdp rose 6. 4 from the Previous Year up from 518 are sent in the previous up from 5. 8 in the previous period. Bloomberg news 24 hours a day hour by 2600 journalists and analysts in more than 120 countries, this is bloomberg. Its get back to our main story. Outline agreed to the of a deal that will cut production for the first time in eight years. The deal surprised markets with oil jumping on the news. Irans oil minister said he was lees that an exceptional decision was taken by opec. A very good argument, exceptional argument. Im very happy. We had a very constructive argument in opec. Overcomethat they can the many very difficult situation. Appointed. Art is lets get to our men on the ground. Thing, these deals sound great when you look at the top line, but when we get into the details, the difficulty starts. Where are the details still to as you said, have a surprise agreement that all comes down to those finer details. Ultimately they did agree as a group to cut back on production arrange 32. 5 million to 33 Million Barrels per day. Allocation of those Production Cuts will be crashed out. Vienna,y reconvene in they will announce who will get what kind of hit. The other question is the timeline. What is the role of nonopec supply. This has been the headache the fact that you have that resilience from the nonworld. From russia something at record levels. It comes down to bringing everybody together on the table in vienna and making sure everybody is still on her because there will be considerable pushback from some of these members. We see that they are entitled to produce as much oil as they are currently and a lot of them are producing at record levels. Why the change of tone from saudi arabia . That the u. S. W oil industry has been put flat changed the what is view . It has been a remarkable change in his it should. The reality is that saudi arabia is grappling with financial difficulties. Thiswere concerned that oil deal might fall apart. The government has to rein in spending to cover a budget deficit. Economy underudi pressure to try to bring prices back up. The strategy which started in late 4014, they would like to cut everybody else out of business and catch a market share. It did not quite work out as planned or at least it has not worked out as fast as they would have liked because the market is fundamentally oversupplied. Guy great coverage coming out of algiers. But we turn our attention briefly to what is happening in japan. Is speaking at the Association Conference in tokyo. In terms of some of the headlines crossing from all the governor is saying, he says the new policy framework enables the boj to act reflexively and is seeking an appropriate yield curve to hit that target which is more symmetrical. Compensatershoot to they get some degree of balance coming in. Jim crawford, european equities Portfolio Management joins us. Big oilre running a company at the moment talked me through what this means at the moment. Clearly it is a positive step. I think it is good if nothing else for sentiment but we need to make clear is that in terms of the numbers coming out it isnt really going to move the needle. As you say we have to iron out the details in terms of how it is split and we have to execute and make sure he sticks to those quotas and finally this is a number which can pretty quickly be picked up from producers in the u. S. You can see that very clearly. A couple of things strike me here is the the blue line at the time is where it was. It can it kind of highlights the fact that its been piled on. Significant jumps here. What will actually take to get oil moving. Its been a supply story for the last two or three years. Were coming out of the tunnel in terms of finally rationalizing supply. Forget, we are talking about supply in the spot market in the near term. We have seen huge supply come from the market because so Many Oil Companies have cut their exploration budgets. Be innow it is going to oversupplied market for the next few years but as soon as we start to get surprises on the upside, it will stop being a factor. Guy tim crawford. He will stay with us. Coming up, what does opec first Production Cut in eight years mean for global prices. We are all over the latest from Deutsche Bank. Mario draghi says low Interest Rates are not to blame for their banking woes. Those stories coming up. This is bloomberg. Guy lets get your bloomberg is this flash. Here is shery ahn stop shery ahn. Abouts company will cut 2. 4 of its workforce. They said at the movies one of several actions to reduce operating costs. The company added that the job cuts and the costs associated do not change the Financial Outlook for the year. Credits recent barclays are in separate edelman talks with the u. S. Justice department over the toxic mortgage bonds that settle the financial crisis. They said the deal could be announced within several weeks. The u. S. Has only asked Deutsche Bank for 14 million. This is Capital Management has agreed to enter into a deferred prosecution agreement. According to a person familiar with the matter, the admission of guilt is part of a settlement with the doj and ftc. That is your Bloomberg Business flash. Guy will get the inflation data out of germany later this its having some effect on what is happening on the cpi number. You, but ito show is a chart before the conversation with tim crawford. Numbers, thepi blue line here is what is happening with the oil price. There is a correlation here but it is not exactly one for one. Do you expect it to spike as opec does. Weve already discussed that there is double to be sorted out in the details. Spike wouldnt be the word i would use. I would expected to start strengthening. If you look at brent this is a oneyear contract. Even with opec weve only just come up a little bit and were one buck from where we were a year ago. We bounced back but not much. Forget thaty to europe has been improving even on last year. Things have been Getting Better in europe. It could have more of an effect on expectations. Guy will it convince people to invest in european equities . There has been too much focus on this political risk. Clouds judgment sometimes because things are Getting Better and european equities account for about 20 of the worlds listed equities. If you cannot find Good Companies you are not looking hard enough. What is your definition of a good company . One that can grow. Growth is important, valuation is important. This is the key with europe. Like everywhere else in the world yields have been suppressed. You have seen people being forced into other into any sort of asset. Those are the ones that are overpriced. Picks theis basically minimum volatility stocks. Money has been flooding in to the bond proxy trade. This is something you would be running away from. As long as yields stay low that is sustainable. I dont like my odds over their. European growth or commodities and multiples that are high, but compared to the u. S. , they still have relatively good value. Guy were moments away now from the European Market open. Up next with a look at some of the potential corporate movers including vw. Caroline has been speaking to the carmakers ceo. This is bloomberg. Far be it for me to tell the doj about deadlines for blue have a settlement. Guy that was mueller talking to hyde. Ne by year end . Is that likely . Saying his board manager is in the u. S. Right now managing to move production forward, moving consent and the discussion forward but clearly he is trying to put an end to what has been the financial implication. In terms of sales, i have been speaking to the head of volkswagen brand behind me. Theyre launching the new electric vehicle. They say that sales this year will be higher than they were and consumers do not seem to be that rattled by diesel gate. The financials are rattled but maybe not the sales. A new brand. Ashing they have a new electric vehicle. It almost resonates a bit like brexit. Are we not seeing the real implication quite yet question mark does it take a few more years in terms of research and development . Of tesla and likes daimler. No Justin Timberlake yet. Guy serious things. Caroline will be with us throughout the morning. A great interview with vw. Do you like these stocks . They are on the point of a Big Industrial change. Very tough to invest in spaces with this kind of shift. It is exciting. A lot of risk in terms of regulation and disruption. The reason why they have come back so far this year is because of volume. Specifically the u. S. People are starting to ask whether we have seen the peak and how much more they can grow in terms of the numbers. Guy so you would avoid the big manufacturers, not the supply chain . You get better bang for your buck if you buy the suppliers. Back,f numbers to come what you do get is more stuff sold into each car made here onward. Guy if you want to carry on the conversation, head to top live. You will see our coverage. Sort of what is happening with the indian rupee. Says it has been attacking terror camps on the pakistan border. It is having an effect on the market. The market open is next. Guy welcome. Im guy johnson at bloombergs European Headquarters in london. Caroline hyde is on assignment. But we are moments away from the start of european trading. Ive got your morning brief. Lets talk about it. Crude capitulated. Saudi abandons as opec strikes a deal. Oil surges failed to break 50 per barrel. The real question is who will take this hit. Deflationary pressure. How oil affects global prices. A read on cpi out of germany today. We are waiting for the spanish numbered across as well. Mario draghi says low Interest Rates are not to blame for europes banking problems. Does deutsche disagree . The European Market open is now upon us. Well watch the spanish number drop as well. We are expecting a positive start, very much for sentiment post saudi story. This is what we saw yesterday, and as you can see, a little bit of fall off toward the backend. But we are expecting european equities to rise. Well have to reposition the chart to show you whats going on; were expecting a fairly decent to jump. 100,an see the ftse expected to do well. Were already up by around. 5 . 68. 87 is where we are trading in london, other markets should follow suit. Well also get the spanish number. A cpi number just a little shy of expectations. It was expected to come through a. 9, its. 8. Lets dig into the details of the market open with manus cranny. Manus the devil is in the detail. We expect the stronger opening. These are the sectors and financials, but is the energy component, running by over 4 5 up, but can it get above that 50 level . Yellen, what is a conversation from janet yellen worth to the market these days . They just cant get the market to catch up with where they want. Energy is the lead Industry Group on the upside. Dollaryen the manifestation of a risk on move. Lets have a look at the gilt market. This is december, the christmas future contract, opening down 20th points. But if you look at the longerterm correlation growth between that of cable in the gilt yield, it is undoubtedly locked in step sterling is going for its fifth straight quarterly loss against the u. S. Dollar. Longestooking at the flow of the downside for dollars sterling since 1984. We have a guest yesterday talking about the bank of england ready to do more, and you can see that correlation. Some individual names we are keeping an eye on barclays and Credit Suisse getting closer to potentially doing a deal and settling with the department of justice. They have already set aside 2. 5 billion pounds but there is no exact amount. The stock rises. This is the highperformance classics business if you cant get sales growth you go after ripping business. Up,ciency gains, stock nobody risk is the other major focus. Denmark as go in research and development along with the hq function, stock trading up. 45 . Is dropping ever so slightly and the question is was it a capitulation moment . Will oil stay above 50 . Or have they done it very few others can . Keep an eye on the data, allimportant over the next couple weeks toward the november devil in the details from opec. Guy thank you very much. Tune in. Lets quickly talk about the ftse 100, it is not far away from its years high. Euro is down 5 , and thats important. Keep an eye on it you may see a break up. The Banking Sector continues to be front and center. Lets quickly talk about thewe l surrounding deutsche stealing the headlines. You can see the stock up i 2. 4 . It has been crushed over the last week, and the year. Its trading now just north of 11 . Get closeting to to a single digit stock. What happens next . Many across the sector have blamed, in part, extremely low Interest Rates for their probability problems. The author of that policy addressed the issue yesterday in berlin. Mario draghi was meeting with german lawmakers. Some banks have promised that they have to have a low level of interest rate, and possibly with other reasons, either Business Model or management. And also this was generally acknowledged. It was a very satisfactory exchange. The expectation is that the ecb would continue until you have reached the objective, namely of the deflation rate from the eurozone which is close or below 2 in the mediumterm. Guy mea culpa. Joining us, whos right . Is it john cryan or mario draghi . To be fair, it is probably a bit of both. The plan was, lets have to we, monetary policy, asset prices will go up, you downsize your Balance Sheet. That is sort of played out, but deutsche still has a big, whopping Balance Sheet of 1. 8 trillion. So i think the issue the problem isdeutsche still has a , whopping balance now is that wie flat yield curve, they can to generate profit. They cant internally generate capital. Neither of them is right or wrong. So i think the question is now, can you generate that equity by setting up assets . That is a we have seen from assets in the last 48 hours. Guy how much more can they do . The amount of money that potentially has to be raised is enormous. Absolutely. But the issue right now is not their capital, its more sentiment and confidence, telling both shareholders and their customers, look, we are ok, we are fine. And that is what the bank has been doing. There is very little they can do now other than, as i say, show their intention to raise that cash. We arent at the stage where they need to go to the market yet, but it will depend on how big the settlement is. Guy are they investable, european banks . It depends on how you define investable. If you want to trade the ba nks, there is a good valuation argument you can have. They are undoubtedly cheap. I dont know if Deutsche Bank would be the one to play, but if you are looking for a longterm investment, the industry still needs to shrink, so i think you are going to see some shortterm rallies where you bounceback. Sustainable . Is a longterm investment . Guy thats the interesting question. Deutsche simply says, i buy a s . Is a longterm basket of european banks at low stick it ini think, my back pocket and hold it for 10 years. The only time frame on which i can understand the possibility of doing that. Thats the thing. The risk reward you would not want to forget about them. From our point of view dont forget, we talked about this in the break, we looked at the valuations, its the denominator. The question is where does that go . Where does the value go . Guy is whether or not the boj is prepared to push them. That would be political to say the least. Lets talk about whats happening out in india. We have seen authorities confirming that they have hit targets inside pakistan. The market has been reacting fairly negatively to this. The equity market has turned around, and as you see, the indian rupee has been selling off. The pakistani authorities have not reacted well either. Clearly this is a four line of tension that continues to simmer, and occasionally erupt. The equity markets out in india, not taking this well. Up next, federal dissent. Explaining the decision last weeks meeting. We will talk what Central Banks are going to do next, and the chances of another fed hike in 2016. Plus, will ireland be that big winner from brexit . We will think to the Deputy Governor of the irish central bank. Hits one billion downloads. What next for this app . What does tech look like after brexit . This is bloomberg. Guy welcome back. Lets check in on the markets and show you what is happening. We have something of a rally on our hands, as you can see. European equity markets are certainly trading higher and doing very nicely. Lets talk about some of the moves. Thats where it gets interesting. I want to take you to my mrr, the function showing me this column, up by 11 , dominated by oil, particularly the suppliers. Most. E up more than though interestingly enough, the high over the last five years was 16 pounds. Were not training anything near that. Just to give you context in terms of how far these stocks have fallen. But the Energy Sector is up 4. 5 today. Now lets turn to the central bank story that continues to dominate. Everybody is waiting to see what will happen in december. We saw something of for the fed, quite a large amount of dissent. The bank of england is used to this, but you dont really see it in the fed. Federal dissent is a big issue, and yesterday the president explained her dissent at the fomc meeting last week. She said if we continue to delay, we risk having to undertake a steep price later on. Meanwhile, one former fed official says they are running a much greater risk. They say they are data dependent, but in september, they said they couldnt even point to any data that suggested they sustain. But they made the case that the economy has strengthened, that uncertainty has been reduced, so they just said, we are going to wait. Think, todamage, i their credibility of them being data dependent. It is troubling. I think the market is not so much read about the economy. I think what they are really doing is predicting the fed is going to react, because that is the way they have reacted in the past. Guy Charles Plosser on the fed. Tim crawford, from hermes, still with us. Pwe still dont know whats goig to happen. How pivotal is this decision to your investments right now . Depend on december or march, i think it was i would find it very hard to sleep. Wereility is crazy talking about what he is that rates should have gone up already. They should really be higher than they are now. The way they leave it, the harder it gets to have that title, to get up to where they should probably already be. It, theer they leave more wary people will be. We have artist seen signs in the u. S. Economy so i think the momentum is definitely slowing. Guy volatility continues to be crushed. Lets bring this chart up volatility is just on the floor at the moment. You talk about not being able to sleep at night absolutely. I think that is the inverse of that, where it has kept on going up, this ecb push has just gotten stronger and stronger. Yourself, you see these geopolitical headlines if you ask how long can that last . I think that is why key for us now is when you are looking at directing your investment, dont go for macro cause, they are based on do you raise now or in three months go with the stuff thats growing. If things do get volatile at least you know you are Holding Onto Something that will be higher in three or four years. Guy the problem is what we are seeing is the correlation between stocks is very low. You throw the baby out with the bathwater. Risk on moves are driven by macro and everything gets tossed out. Its not just the bad stuff, everything does, and then the market rallies and its the terrible stuff that seems to be better its difficult to be taking stocks and saying this will do well when you are getting pulled around by those sort of things. If you do manage to find those companies, we picked up some great names after the postbrexit pain and look where we are now. And notmes have come up lost steam like some they kept going. Thats because they are trading at good valuations probably even before the hike. The panic we saw in the markets was a great opportunity for buyers. Guy everything is just crushed together with this gravitational force. How easy is it to avoid that bond proxy traded . When investors talk to you about what they are looking for and what you were thinking is the rational thing to do, whats the gap . Identifyyou have to where those different pockets of the market are. Whats important is that you are clear on what you are buying. If you are buying a bond proxy, you know that you arent getting amazing growth rates, that you are getting something which is consistency and that you are paying a higher multiple for consistency of delivery. Whereas when you are buying growth, it might be more volatile in the shortterm but what you hope to have is a higher amount to two or three years down the line. Guy difficult to understand. Difficult to take a few years forward. Great to see you; thanks for joining us. Tim crawford at hermes. Stay with us. A big exclusive today. Bloomberg surveillance interviews Patrick Parker in his first ever oneonone media interview. Thats coming up at 11 00. Up next the crude capitulation,. Said he abandons as opec agrees to freeze. But who will take the hit . This is bloomberg. Guy 21 minutes past the hour, welcome back. A quick check on the markets. Opec remaining the number one story; look at whats happening in the Energy Sector, up by over 4 . Nt, though, look at that after that significant rally we are giving back some grand. If you take a look at the longerterm charts from brent and wti you will see that while the spike looks decent, it really isnt earth shattering in terms of what it is going to mean going forward, particularly for inflation. Decisions, and this is what the oil market is pricing in for opec who will take the pain when it comes to the cuts . Why did saudi capitulate . Lets start off with some of those questions. Joining us on the phone, the chief Oil Market Analyst. Good morning. In some ways, the easy work has been done. They made the decision to cut but they havent decided who will take the hit. Good morning. I think thats exactly why the market is a little bit cautious and skeptical, because again, this is a big step, the first cut since 2008, and its positive because they have had a lot of discord. But the devil is in the details cut . O will of, andm left convinced iran will have to freeze around current levels. Guy who was the winner in all of us . I do think ultimately, the industry and opec. I think opec came to this agreement despite all the obstacles mainly because they want higher prices, and when opec production rises to normal, prices dont tend to rise. I think this will lead to higher prices, but share producers will be happy and so opec. Guy fisher producers will be happy. If i am running a rig this morning, is this a free lunch this morning . I dont think its a free lunch. The one thing i will say about costreduction as it goes back up again, costs will go up. It will come down but not to the extent that has been hyped it will continue to grow but i dont think it will grow nearly to the same amount even as prices go up because productivity has stalled. Guy walk me through how the oil prices are going to develop from here, given all of this. The critical factor in my mind seems to be demand. Yesterday,ng to ian and he was saying the reason why the market is lower now is because we all got the demand story wrong. Story has the demand been very strong throughout last year, even the first half of this year. Our expectation will be week. If wefactors started giving higher prices because of this cut it will weaken even further next year. Having said that, demand is still growing at about one Million Barrels per day, but some people were expecting 1. 5 million to 2 million, and that is where the change has come. Guy what happens if nigeria can get more question mark what happens if libya can . The cut on the table is around 800,000 barrels per day, but nigeria and libya are the exception. They will be allowed to increase. I think you and i both know that even though they will come back with some production in the shortterm it will be extremely volatile the political situation is far from resolved. You arent you expecting a sustained increase from either of these countries. In the best case, opec Production Cut is about 800,000 barrels per day. Productionbring back you will still get a 400,000 barrel per day cut. Guy did opec have to do something . Up to the failure in doha and whats happening in algeria, was it we had to do something here . I think so, and also one of the things is that we detected a shift in the tone, particularly from saudi arabia. I think the freeze doesnt cut it anymore. They will have to reduce production if this rebalancing is to accelerate. Keeping it at record levels will keep the market oversupplied. Guy will they stick to this, even when they figure out who will take the hit . I didnt think so. Saudi wants a higher price. The devil will be in the detail, said as they emerge, i do expect prices to emerge until then prices will be lower and that is the precise reason why they will want to make it work because they want oil prices to go into it. Guy great to get your take. Thank you for joining us. Chief Oil Market Analyst at energy aspects. Up next, will ireland be a big winner for brexit . We are live in dublin, speaking to the deputy head of the irish bank. That conversation is coming up. Brexit dominating what is happening with the Irish Economy. A quick look at the markets; the Energy Sector is flying. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Guy welcome back. Is brexit an opportunity or a threat for ireland . We will be speaking to the governor of the iron centralbank who have already begun exploring moving from london to the irish capital. We spoke yesterday at the summit ceo ofe richard, the American Asset management, said ireland could be the big eventual winner for brexit. We think ireland is a huge beneficiary as a result. If you look back and put things in perspective, three years ago guy bruce richards. For more on this subject, lets go to mike mckee, in dublin. Michael . Good morning. We are with the Deputy Governor of the central bank of ireland, so lets follow up on that idea. Brexit is the subject of this conference everyone was concerned about this, particularly on ireland, yet we havent seen the data. Days innk its early terms of the outcome of the vote. Considerable uncertainty remains in terms of the timing of the uks decision and the exact details of the arrangement that the u. K. Will have with the European Union after a trigger article 50. Clearly the Irish Economy is potentially one of the most impacted the union, given the close trading ties and other connections we have with the u. K. But whats difficult to predict is the exact impact, nonetheless our view would be that over the medium to longterm there will effect. Negative we have revised our gdp growth. We are expecting it. People wereot of predicting we were just talking yesterday about the possibility that if they lose rights a lot of banks moved to dublin. Have you been in contact with any . Have people talked about the possibility of moving here . Many other firms have talked about moving to dublin and clearly a lot of people are talking about that. The central bank has had some inquiries from banks. I would say it is early days. We know some firms are talking to local, legal firms about the potential to move to ireland. We think banks are important aspect and clearly ireland as part of that and part of the banking union, so all banks are supervised by the ecb in conjunction with Central Banks, the same standard applies to all banks. It provides the framework across the area. Mentioned in cooperation with local banks thats you. Are you in position to absorb more responsibility . Banks meansmore more customers. In the central bank we have been considering the potential impacts from that and the governor is on the record saying that we need to make sure we can deal with it. Michael you have been in charge of npls for european banks. Big topic for the rest of the world, and the eurozone. Update us on the status of that. Are any particular banks threatened at this point . Isthe work we are doing about trying to bring a consistent approach to how we supervise it. Its supervisory guidance our expectation which we expected to manage. What we are looking for is to make sure that the banks have very clear plans with how they will deal with them and what we are looking for is deliberate. Nd sustained reduction michael is it at this point a problem that is under control . Investors seem to think they are troubled. Thats an issue of concern. There are high levels of nonperforming loans in many and i think everybody except that these issues take time to work out and what we need to make sure is that banks are clear about their plans and are making consistent progress. Michael ireland had a property room, then a bus, and one of the ways you tilt with the rebound is to put caps on mortgage rates. Now that the Property Market is heating up there are questions about whether they are too low. Over the week and you gave a speech that was interpreted as saying they arent too low yet. Our rules cover when borrowers are taking out and mortgages on private houses. The central bank is in the middle of the review where we expected to announce the outcome in november. I have said consistently that the objective is to protect both the banks and borrowers, so we are thinking about both aspects in the review. The issue is to make sure that the levels we set the cap act are based on evidence, where we have asked people to submit information and that we are analyzing a wide range of information. We expect the final outcome of that first review in november. Michael people want to a free speech thinking you are saying we arent going to raise the cap. Is that correct . There is absolutely no decision made yet. We are in the process of the review and there is call for public evidence. To say it is important that stability and rules like that, its very important in terms of managing expectations and in terms of how they operate. If you get into a situation where you are frequently tweaking and changing things, you are underlying that stability and bringing more uncertainty to the market. We need to make clear that we are very alive to that but if the rules require changing, and if there is evidence to show why we should change, thats a position we will take. Sharon dunner he, thank you for joining us. We will send it back to you. Guy thanks very much. Michael mckee, joined by the Deputy Governor of the central bank of ireland. Lester to some of the Corporate News we have this morning. Novartis will cut around 2 of its workforce. They say the move is one of several actions designed to reduce operating costs. A challenginges competitive environment going forward, especially in the United States. They added that the job cuts and costs associated dont change the Financial Outlook. The companys ceo joins us now on the phone from denmark. Good morning to you, sir. Thank you for taking the time to update us on whats happening. Is this a signal that you think the price and pressure of the United States will become more difficult . Good morning. Its a reflection of the fact that we already know that the pricing for our products in the u. S. Will be lower next year, in there is some uncertainty about the pricing levels in 2018. That will result in lower Revenue Growth for the company against which we have to adjust our cost base to make sure we have a healthy margin to be able to financially risk. Guy is this the start of many cuts or do you think this will satisfy what needs to happen . We are trying to find the right balance between ensuring lower costs shortterm entertaining Growth Opportunities longterm. We have a very strong portfolio marketucts, and into the or entering the market over the next couple years, we would like to support those, and they will generate growth longterm. We think this is the right balance. Guy you are making cuts in r d. Many people would argue that this implies you are cutting into the muscle rather than the fat. Can you explain why that is happening . You could say in a way it is a result of our success. The reason we introduce products and the ones in late stage have shown tremendous beneficial profiles, and that requires that the of products has to have an even greater height of innovation, which means that those that do not have that type of innovation will have to be culled. We will be able to announce that soon what we dont believe we are cutting into the muscle. To theadding resources most promising projects. Guy is it getting harder and are the cost associated with it becoming more innovative . The more innovative you try to become, inherently you increase the risks. In that sense it is right, but we can see from the marketplace that we need to be innovative, otherwise it will be difficult for us to get reimbursement. We need better drugs but that will not be good enough and we need to prioritize the most support projects. Guy lets come back to the picture in the United States. What do you anticipate the politics will look like next year . That thaty thing is we know the price level we have we have negotiated contracts with the Big Insurance Companies in the u. S. , so we know the price picture for next year. What we dont know is whats going to be the resulting outcome of the president ial election and any political problems coming from that. Thats an uncertainty we have to factor in. Guy how are you factoring that in . But imow, curious to know how you see the symmetry on either side. Theell, if one listens to public debate about pharmaceutical pricing in the u. S. , both candidates have expressed a keen interest in looking at this politically after an election. I would say both candidates would potentially enact legislation or try to reduce Health Care Costs in the u. S. , so in that way there is perhaps less difference between the two candidates than how we see it. Guy thank you very much for taking the time to speak to us this morning. The ceo of noble nordisk. Lets talk a different kind of tech. Shazam has been downloaded over one billion time. More, the now for executive chairman of shazam entertainment. Good morning. It is hard to not look at the announcement you made and say profitable, one billion downloads are you surprised it has taken one billion downloads to get to the profitability . First of all, its very important for us because we are focused on extending our leadership position in music and creating new ways to brand at scale. This scale part means that their heightened participation rates. This is a new paradigm for the Advertising Industry is parallel to that we have to educate consumers that this is an extended proposition in terms of how they engage themselves. It takes time to move these categories, but we are delighted to reach this milestone because we are seeing higher participation rates which is driving revenues. Guy a few years ago would you have said one billion downloads is something that we will generate from positive numbers . U. S. Companies talk about scaling quickly and we are seeing that with so many parts of the technology sector. You scaled and it has taken you that long other companies were hemorrhaging cash despite the fact that they are scaling rapidly. We have been profitable in the past when we were solely in music, but while he recognizes that the world is changing, there are over 6 billion phones in the world today and its a huge opportunity to converge traditional media with people carrying these devices to create this new experience. That meant intentionally we have been investing in that opportunity and we are fortunate to have attracted longterm investors that believe in our vision and give us the head room to go after this opportunity. That has been validated. Participation rates around campaigns are 90 of our users spending time with that brand on their mobile devices and we are now getting millions of people engaging the single campaigns. These have been very successful campaigns with high participation rates. Guy you have to get a big number you have to get to that stage, the rate of return as you pus higher. Involvedr of people just gets better. You have to scale in order for it to make sense to advertise. At theou look advertising groups in the Public Companies talking about growing business, all focus is on digital. What that means is not Just Innovation its about scale and adoption with the consumer. What we have been able to do is create the right tools and the ability for these brands to create value added experiences its not just about engaging with an advert and having a simple experience, its taking that experience to the next level. I can book and test drive and see inside the vehicle, i can get more information than the brand can present. Guy i love the linguistics surrounding this. Nevertheless, as you say, very u. S. Focused. How does brexit affect you . We have been very fortunate with brexit. Our largest market, over half the population has downloaded it in north america alone and that is just one territory. In majority of our costs are the uk so we have benefited from that exchange. One of the comments i would make around brexit is that i am hearing some sentiment from overseas investors about a reluctance to invest at the current time because of uncertainty. The argument is that given the Historic Exchange rate this is a good time to invest and as you look at it appreciating over the future there is going to be high returns. I encouraged to see brexit as a positive. Guy congratulations on the numbers. Thank you for coming on. Andrew fisher, executive chairman of shazam entertainment. Thank you for being with us. We will take a break. Next, we will speak to the instituteof the zew ahead of german inflation numbers. That cant avoid Deutsche Bank. This is bloomberg. Guy welcome back. 48 minutes past the hour. Lets check in on india. We have seen some crossborder shelling this morning from the indian side to the pakistani side as a result, we have seen some repricing of assets in india has tension in the area escalates. The indian rupee has been under pressure. The dollar is stronger by. 6 . Earlier we saw the indian market in positive territory but that. As certainly reversed geopolitical tension being priced into the subcontinental assets. Lets talk about the day ahead. In 35 minutes we will get u. K. Mortgage approval data. At 1 00 p. M. You can we will get german inflation data. 30 minutes later, u. S. Gdp and initial jobless claims. 9 00 p. M. Yucatan, janet yellen speaks to the kansas city Federal Reserve for them. We will also hear from other fed voices with speeches by mr. Harker, all on deck. A busy day for feds. Germany has data coming out later on, taking a battering as europe meets its economic and political powerhouse. Deutsche bank and folks like an face multibillion dollar fines deutsche and particular risks undermining an economy that is one of the few centers of global growth. We are joined by the president he joins us now from frankfurt. Is germany slimming down . Good morning. Germany is doing quite well if you see the data on the index that recently came out, we are expecting it by the end of the year, so unemployment is low and germany is doing great. Ok, lets break that down. We have problems with our banks how serious do you think those problems are . Actually, europe has problems with its banks and it is not a recent phenomenon. Hasink one problem europe is that it isnt leading up properly. Bad andanks are doing it is always bad if the bank isnt in control. I think a lot more has to be done and for german banks it is becoming clear on Balance Sheets. Guy lets talk about the building behind you, Deutsche Bank. Do you think that they should say, you know what, we will provide a backs up here . We saw the state in america, in the u. K. Backstopping the banks europe has not cleaned up its bank Balance Sheets does the state need to be part of that process despite what the politicians are saying . Actually, i think we have the right institution so that the European Central bankers are taking over as the banking authority. We have our stress tests being done and i think the next steps will automatically follow. For the government it is the last resort and it will be a long time until the government steps in. Point if he gets worse, the government has to distanceut we are at a from that point. But we definitely swiss banks should be more transparent, german banks are saying that it looks different from the outside than the inside. Yeah. There has always been some head scratching about the Balance Sheets. Mario draghi says he is not responsible, that negative in low rates have not been part of the problem when it comes to the Banking Sector. Would you disagree or agree . It is not helpful. Negative Interest Rates. On the other hand, you cant blame negative Interest Rates for all the problems in the Banking Sector. Europe is over bank and we need more consolidation in particular with german banks, they need to find different Business Models. Interest came from the interest a lot of the income came from the interest they earned and they have to shift this model. Guy do you think there should be a desire to generate a steeper yield curve . That be useful in europe . Can youpean that . Repeat that . Guy does your need a steeper yield curve . Sorry engineern is trying to a steeper yield curve. The boj wants to curve it on the bond market. If that something we need to do here in europe as well . Actually, if you talk to monetary economists, there is not much disagreement. There is a big debate among economists about whether we will have to live with low Interest Rates for a long time to come. Necessarily toce so wen the yield curve, have huge savings coming up and they are here to say with low Interest Rates for years to come. german unemployment data its very stated, very low. Unemployment grew by 1000 in september, an estimated 5000 decline. Thats not really significant given where we are. Is the phillips curve not working properly . We have incredibly low levels of unemployment in germany, italy are seeing wage growth we arent seeing the kind of consumption story that some would argue we need to see generated, particularly in germany. You. Yeah. We have a good employment market but on the other hand a rate increase goes with productivity. Productivity increases are very low and we have to go for proximity increase. Sometimes one gets the feeling from the out ride its a government decision, we see that they increase and that is what you would expect. But i would agree, more inflation would be helpful. Guy german unemployment is at the lowest level since march, 1991. On that note we will leave it. Thank you very much, indeed. Stay with us. A big, exclusive interview coming up later on. Deliveringker his first oneonone interview to the media. 11 00 u. K. Time. Im going to the radio. This is bloomberg. Francine the algiers accord. Saudi arabia abandons its policy to focus on high oil prices. Opec strikes a deal on supply. Game. Ame draghi says european banks should focus on fixing their own problems rather than criticizing the ecb. And the cold front from california. The debate to cut off wells fargo ahead of the testimony to the house. Can the ceo weather the storm . Welcome to the pulse, live from london. I am francine lacqua. Ha