Transcripts For BLOOMBERG The Pulse 20140224

Guy johnson is off today. This is the pulse. Just getting some breaking news on the final euro zone inflation readings for january. The previous months reading of 0. 7 has been slightly upgraded to 0. 8 . Still well below the ecbs 2 inflation goal. I wonder what this will mean for ecb policy. Lets have a look at eurodollar. We might have a little bit of reaction on that. You can see 1. 3764. It already rose a little bit after some figures from germany. Lets start with the crisis in ukraine. The Nations Capital stood president has been put on the wanted list. Police have issued a search warrant for Viktor Yanukovych. The acting interior minister says yanukovych is a suspected of mass killings of civilians. Ukraine may be on the brink of a debt default. The nations finance minister said it needs 35 billion in financing to stay afloat. S p earlier today. Ukraine if you look back at the history of its independence, there has always been a roller coaster. They are a cyclical economy. Politics has the really been determining investment from abroad. Also from inside the country. Over the weekend, the speaker of parliament was named interim oppositionimprisoned leader Julia Tymoshenko was released. We will keep you updated throughout the hour. Scania isck of surging after volkswagen offered 6. 7 billion euros over the weekend to buy the rest of the stock it doesnt already own. Hans nichols has the details in berlin. Is this offer going to be accepted . Yet. Dont know over the weekend, you saw some of the minority shareholders talk about the role, the need for scania to remain listed in stockholm as a publicly traded company for it to maintain its competitive advantage. What you see this morning, the stock is up some 32 . Thatook at the premium of 6. 7 billion offer. What you have seen with that unclear it creates if markets think another offer is going to come and make it even higher. What volkswagen once here is synergy. They want to be able to combine everything so they can go against the daimler and volvo. So they can have the same synergies that have been so successful in their auto unit. They own some 62 . To get control, they need to own 90 . For that, they need some persuasion. Scanialong does shareholders have to accept or reject the offer . March 17 to april 25. That is their decision period. They need to make a decision in that time. Then it is up to a vote. Profitsd their yearly and their quarterly profits on friday evening. You see just what they need here. What they need is the growth that you have from scania. Their profit was about 9 present. The Truck Division at vw, about 0. 4 . This remarkable Success Story but not on the truck side. That is what this bit is about. Hans, thanks. Hsbc shares are taking a hit today. The following profit missed analyst estimates. Manus cranny joins us with more. Give us the details. It would seem having read through a few of the analyst notes that its top line missed on revenue by about 2 . Bloomberg Industries Says it is tied to hedges. At first glance, it looks like weaker than expected performance in europe. That is the first initial take away. Overall profitability rose by 9 . Innings at hsbc since the financial crisis kicked in. These guys are cutting costs. Cutting costs just didnt make the grade, mark. That is also another issue. Cost to income ratio is coming down but it is not anywhere near the mid 50s level that mr. Gulliver, the ceo wanted to hit. 2. 6 , theill grow by u. S. By 2. 5 . In china, there are no red flags on the Property Market. That is what gulliver is tallying at the moment. Doing quite nicely. Lets stick with the news in the banking space, turning to ubs. Bloomberg had this exclusive report that it is seeking immunity in this probe by the eu and u. S. It has been down this road before. It has. Ubs managed to avoid the single they just single biggest fine from the eu on the back of settling over libor. In other words, going first, telling the regulator what they know. They dodged a 2. 5 billion euro bullet in terms of antitrust fines. We have two sources familiar with the matter saying that ubs is seeking an imminent deal with the u. S. And european regulators. So far, the fx market investigation has claimed the scalps of 21 people. 21 people have been suspended during this investigation. Ubs has one person who has been suspended. It looks like ubs have learned from what they did previously which is go first, go fast and go forth. If you can deal with the regulator, you are exonerated from any financial slap on the wrist here in europe. If you come in second, you only get a discount of 50 . You come in at number three, you only get a discount of 20 . To go first has significant financial impact. To go first in the United States goes you immunity. It still leaves you with the Justice Department to deal with on the small matter of fraud. Thanks very much, manus cranny. Here is what else is on our radar. Malan fashion week wraps up. Bloomberg has been speaking to a handbag maker. Its chief executive says the Company Wants to branch out. We dont want to be a bag company. Expanding in textiles, and jewelry, watches. Nokia has introduced three android smartphones at the mobile World Congress today. X plus, and xl. The phones will be able to access android apps and apps from nokias own service. The products are into developing markets. Be dropping to microsoft for blackberry when it comes to software for its system. Be lessrys is said to expensive than licensing windows. It may boost the flexibility of the speed of the next system. The auto giant has been struggling with incar technology. Lets return to the situation in ukraine. Leaders scrambling to form a new government after the ousting of president yanukovych over the weekend. He has landed on the countrys wanted list and a search warrant has been issued. Ryan chilcote has been following the story for us. Where is he . Waxy was last seen just before midnight in crimea. It is just outside of balaclava. It is named after the balaclava itself. It is named after the city because that is people where them. Wore it is where british troops lost 250 people back in the crimean war. That according to the Facebook Post of one arson who has just become the countrys acting interior ministry. He is in crimea himself. He said that is where Viktor Yanukovych parted with some of his bodyguards late last night. With this letter, he gave up his ,ight to state protection jumped into one of three cars that was waiting for him with the remaining security guards he had and turned off his telephone. He hasnt been seen since. Crimea is a prorussian place. It was always part of russia only given to ukraine about 60 years ago. Some parts of crimea are actually saying they should now secede. We heard this before in the west of the country when it looked like yanukovych was going to remain in power. Now the prorussian parts of the country are saying, maybe we should go. His disappearance has opened up a whole new world. There is the extravagance of the palace which is extraordinary. It costs several hundred Million Dollars to build. It has a private zoo, toilets in the shape of thrones. The reservoir, that is where many of the documents as yanukovych was fleeing, were dumped by his security guards. Some of them immediately floated to the surface, easily collected because they were in plastic cases. Others went to the bottom of the lake. There is a team of archivists who are busy reserving these documents and a team of investigative journalists that have been investigating yanukovych while he was in power for years that are going through all of these documents. Now we know that yanukovych is a wanted man. He is wanted for mass murder of peaceful citizens according to the Facebook Page of the new acting interior minister. Obviously, this evidence is going to help them establish that case. Ryan chilcote there. Up next, we keep the spotlight on ukraine. We are going to look at the epic comic economic implications. Welcome to the pulse. I am mark. I am francine lacqua. Jonathan ferro joins us for a look at the currency markets. I will keep it short and sweet. Euro dollar, one euro now buys you 1. 37. We have the little matter of eurozone cpi inflation data coming in for the month of january higher than the initial reading. Does that take the heat off the ecb . Disinflation right now. The Million Dollar question on deflation. Thank you. Let get back to our stop story. Viktor yanukovych has landed on the wanted list and a search warrant has been issued. While the countrys political crisis was high on the agenda at the latest g 20 meeting. The imf chief Christine Lagarde said the fund is willing to give ukraine Financial Assistance but conditions would be attached. Ukraine is a member of the policy if it needs advice and Financial Support and wants to actually undertake a reform of its economy so that it restores the situation, the imf will be ready to engage when the country so requests. Lets continue the conversation on ukraine with matthew, a risk manager. The formation of a Coalition Government is the priority. What are the difficulties in creating this National Unity government which of course is the top priority . First of all, trying to reconcile some of the differences within the opposition themselves. We sometimes think of the ukrainian antigovernment opposition as being a unified body. Now that you ninkovich has left the scene, they need to Work Together to avoid internal bickering. Second, whether they are also able to create enough of a sense of unity government including politicians from Eastern Ukraine and former leaders from the party of regions in a constructive manner within this government. That could actually increase the risk of secessionist tendencies with some of these more prorussian regions of the country. What are the chances of them actually forming a unity government when we have Yulia Tymoshenko coming out and saying she wants to go for presidency . How much time would you give them to understand whether the opposition can get their act together . The coming days is the crucial time. We have already seen some signs that they are willing to include members of the party regions within this government ahead of the 25th of may elections planned. Of theseing some politicians, it still looks like relatively lowerlevel roles. It is a relatively positive sign. We are looking at the coming data as a creed phil period. Crucial period. The coming days are the most crucial time. It is crucial in gauging what russia will do next. What do you think . First of all, they are probably going to wait until the end of the winter olympics. It is a waitandsee situation at the moment. The most likely scenario is if the government does come to power and it is a prowestern see anent, then we could end to its economic aid, the package which was announced in december. That is very important for the struggling ukrainian economy. There would need to be a move from the eu to step in and fill that gap. Of the russiana government intervening more heavily . You are talking about withdrawing support. With the eu, is there a danger that russia would go a step further . There is. The most risky scenario is that it would refuse to recognize the legitimacy of the new government. It could also seek to help inflame some of the nationalist tendencies within the east. Although the unity Government Holding elections of the most likely scenario, there are a number of serious risks. The Secessionist Movement developing in the east would increase things like civil war. That is a likely scenario. It is a risk. More active russian the new not currently talking about direct military involvement. But russia could withdraw its eu, u. S. Means the and imf would have to step up to the plate. Does that make it default less likely or more likely . I am not an economist and i can give the exact details. The fact that we have seen today that it looks like 20 billion of aid has been put on the table by the eu we know the eu moves more slowly than russia was in terms of providing that. There is a risk. The ukrainian economy is in dire straits. Russian aid was vital to the continuance of that economy without the fault. The fact that the eu has backed this is a positive move. What is going to be crucial is how quickly they can disperse this money and what kind of conditions they apply to it. Thank you so much for all of that. Come, the swiss army bunker that is protecting the world stayed up. We will show you how Tech Companies spared no expense in this super secure button facility. The 39yearold italian premier faces his first confidence vote in the senate today. Details after the break. Welcome back to the pulse live on bloomberg tv and streaming on the ipad and bloomberg. Com. Time for a look at todays hotshots. Stuntmen and daredevils across the world were in awe of damien as he completed the first human loop in history. He is a british gymnast, stuntmen and free runner. He needed to run the wooden loop at a top speed of 8. 6 miles per hour. Eugene won the opening world superbike race for suzuki. Out inshmans luck ran the second phase of the competition after his bike engine blew up in a cloud of smoke. He walked away unhurt but was eliminated from the competition. Fans turned 120,000 up to watch the second leg of World Championships in minnesota. The worlds best eyes cross racers battled it out over the perilous jumps and around the track. Italian Prime Minister matteo renzi faces confidence vote in parliament this week. It is the first test for the 39yearold since taking office. For more, lets bring in our italy bureau chief. How do the numbers look for nz . Obviously, the confidence vote in the senate is really going to be the close one for him. Party,ty, the democratic does not have an absolute majority. One of of the main the main reasons he formed an alliance with a centerright party led by his interior minister is because he needs those votes. He needs some moderate centrist votes to help push his program through. He will be unveiling his Government Program this afternoon in rome. For him, it is quite a key day. Tomorrows vote in the chamber of deputies will be less dramatic, less tension involved because his party has a clear majority in that branch of our lemon. Of parliament. What will a key points be . He has been talking about a couple of themes over the last 10 days. Number one is changing the electoral law and italy. Revamping it so it doesnt , aduce a Hung Parliament year ago when italy held national elections. He wants to have more of a cleaner, simpler solution that will produce perhaps one party or a coalition as the simple winner. Reform,r is labor reducing payroll taxes and Encouraging Companies to hire workers and reduce italys unemployment rate. Thank you so much. Coming up next, we are going to make watches the british way. The u. K. Company that is taking away at the competition. The latest part of our entrepreneurs series is coming up next. The swiss army bunker that is protecting the worlds data. Techll show you how companies spared no expense in this super secure mountain facility. Welcome back to the pulse. We are live from bloombergs european headquarters. Here are the top headlines. The acting interior minister the a warrant is out for arrest of Viktor Yanukovych. He was last seen in the black sea peninsula. In a statement on his facebook yanukovych is suspected of mass killing the civilians. The largest u. K. Consumer has enteredretailer talks into merging with carphone warehouse. They would have a combined market value of towns. Seekingaid to be immunity in currency rating probes. The december in december, avoided fines by disclosing its role in libor. Carved a name has for itself as a purveyor of fine timepieces. A British Company that is only 10 years old is quickly moving up the ranks. Series,of our special entrepreneurs, the brothers behind bremont. Dad died in a plane crash. Think life is so short, lets do something you love. Areiles and nick english aviation enthusiasts. After a flying accident killed their brother their father, they decided to start a business they felt passionate about. Bremont watches. Causing are about gears. Theres more to passion and a watch. We are designers. We design all of our watches. Some of the watches contain parts of historic aircraft, like 51ld war ii spitfires and p mustangs. They are often spotted on the wrist of the rich and famous. Proportion is making for military squadrons around the world. With. Up working they make 75 of the worlds a jet ejection seats. Company so rooted in history, what does the future hold . Opened up our own boutique in hong kong. Announced a large deal with boeing aerospace. We cannot double our production overnight. Giles and nick may have aimed high, but they do not think flying solo is for everyone. It takes a long time. You really do need to focus. No success comes overnight. I think you need that passion. If you have a burning desire, you can do anything. You can conquer it. I do not think it is in everyones dna. Lets continue the conversation on entrepreneurship. We are joined by judy myers. Great to have you on the program. You are more focused on Tech Companies, right . There is a vacuum where you hear about Great Companies that they never get to the market. Is this because we do not foster talent . Is her talent we do not hear about . It is amazing to me when i hear that. Technology is not really an industry anymore. It is a layer that is affecting all businesses. You canunderstand how invest in retail or media or whatever you might invest in the Public Markets without understanding how technology affects those terms. One of the most Successful Technology ipos was a french company. Oftheir retargeting advertising, it is a massive industry that affects the likes of the wpps and the rest of it. In our own united kingdom, monetize the mobile banking is worth athink that billion pounds at this point. These companies do not come out of nowhere. Years to do x really well. Armed holdings is the gold ip; dr. World. Theyre building the architecture for the world. Armed holdings is worldclass. Is one of the top 10 successful companies. It is not that the entrepreneurs are not getting out there. We have worldclass entrepreneurs in europe. I think the financing of entrepreneurship, it is not worldclass. You like to get together the davids and the goliaths. We have created is a discovery platform. What does that mean for large, corporates that want to figure out a Digital Future . Trying to build digital revenues and create a digital p l. Corporates source and structure partnerships with digital enablers. Digital startups that understand that the world has gone network and they are creating new Business Models online. They are radically different than the way industry you store. People have to look at the facebook acquisition of whatsapp. Our minds work linearly. Technology has an implicit Network Effect to it. Thats why these valuations get bigger. The effect of technology on businesses gives them when it works, it works in a network way, not a linear fashion. Mark zuckerberg came under such scrutiny for the price he is going to pay. Are we behind or 10 companies not understand the value of technology . Are their specific Industry Groups that are lagging . By getting david and goliath to dance, we do that through dinners that we host, we do that through a sourcing mechanism, market scans. Whatlping the other see the other brings to the party, not everything is going to be a big acquisition like whatsapp. For nonsexy businesses across the country, from industrial groups to financial services, they need to find their Digital Future. That is a highly custom experience. Company,e running a retail, transportation, and you do not have a way to consistently discuss with digital startups, you are falling further and further behind. Fedexhad a whole show on and they see themselves as a technology company. We will continue the conversation shortly. Julie meyer. Stay with us. We will be back with her in just a few minutes. In 20 minutes from now, it is surveillance with tom keene. Were looking at the ukraine, the various event there. Formerus on the resident. Richard falkenrath will join us, formally with the white house. A bloomberg contributor. We will speak at length with him. We will also talk with jeffrey sachs. Nations experts on russia. After the olympics, the next step for vladimir putin. Thank you. A look at how european markets are trading. Manus cranny is at the touchscreen with more. Up in termsplit it of sentiment. The germans are confident. We have not seen it in 2. 5 years. Italians are nervous. Will they get a new leader elected through parliament this afternoon . Jpmorgan on a general basis, get ready for a nice uplift along the bottom of this map. Mario draghi has been handed a pass. Inflation comes in a little bit higher than the market anticipated. Should you be concerned about what is happening in china . A look at the close of business. The biggest drop in almost seven weeks. Lending to the Property Market and the property users and developers in china. They could come under pressure. What does that do to commodities . China is the linchpin, according to most of the people that walk you through the doors here. U. S. Equity futures indicated virtually flat. Traders out there are buying volatility. Taking a view that volatility will rise and equity will fall. That is the position as far as options traders are concerned. Futures traders are short. First time futures traders have been short since september 2012. They tend to know a thing or two more than i do. I will leave you with that thought. Back to you. Thank you, manus cranny. Zuckerberg Takes Center Stage at the industrys biggest fair. We will talk all things tech. Swantee speaking to caroline hyde. We are live at the biggest at event. Julie myers here. Week, i sawup last the Whatsapp Facebook deal, i saw a lot of money. Humans think, i wish i had got in on that early. Pick the next whatsapp . There are so many opportunities out there. We get in early. We get in mvp. A company has to have a product that is the minimum viable product. That is very unusual, to get people that are willing to put institutional money into businesses at that stage. We are attracted to entrepreneurs that do what we refer to as systemlevel thinking. Fedex as ad to the Technology Firm with trucks. Atra met is building Transportation Business drones, Drug Delivery and creating networks. We like entrepreneurs that think how the industry should work, not just how do i make an incremental application. They think, how should the industry were, how to the profitability work for the ecosystem. That is where you get the game changes. We concluded a 36 million euro deal into a company. We are looking for companies in the bitcoin infrastructure. Jairus . Of course they are. The way to look at risk, are there ways to mitigate . And break mydown leg, but how am i going to derisk of that . It is the same thing for start ups. How do you do you risk and opportunity. You dont give startup 10 Million Pounds when they have just finished a product. Focus on them to milestone. When is the best time to start investing in a start up . To 10es say if they get million, im going to sell. That is exactly what zuckerberg did not do. What is the exact time to sell . A lot of people are looking for places to put money for tax reasons. They may have an extra x amount and they may want some eis compliance. People are crowd funding startups. They can put in 2000 pounds, 10,000 pounds, you do not need to put hundred thousand pound tickets. Retail investors can participate in this through entrepreneur countries. What you have with Mark Zuckerberg and all sorts of entrepreneurs who feel they are building a future industry theyre not going to sell out, why should they . They are becoming. Is so special. Zuckerberg realized with the p, they werewhatsap on a faster trajectory to get to a billion users. He knew if he did not get them out of the market, they would probably eat his lunch next year. He knows google was trying to purchase them. Considernot going to continue the googlefacebook battle. How do investors participate Venture Capital and the angel groups they are a great way to participate. That t means is 3 billionital made on the exit. Venture capital firms can deliver these outsized returns if you get into these highgrowth, early phase opportunities. If you wait until something is five or six years down the pike, the returns are lower. Whatsapp was three years old. That is the other phenomena. The cost of technology is coming down so quickly that if you buy companies that are over three to five years, the tech is probably out of date. Thank you. We will have to get you back on. Julie myers. Expresident is missing. We will discuss the latest and what else to watch for the rest of the trading day. A political crisis in egypt. Cabinet has just submitted its resignation. We are alive with the details. A check on the currency markets. Jonathan ferro zero the latest. A look at the eurodollar. Highs for the year, january 1. Bank in line. German business coming at a 2. 5 year high. Eurozone comes in better than expected. Two key pieces of data remain. One piece of data on friday. Eurozone cpi reading for the month of february. Ecb meets next week. We get the forecast for the euro zone inflation, two years out into 2016. That will matter for how hard the ecb has to act in the coming months. Elliott gotkine, ryan chilcote, all back with a look at what you need to know for the rest of the day. Breaking news that the Egyptian Government has resigned. What do we know . Confirmation from the tourism minister. The Prime Minister made a televised address saying that he was resigning and his cabinet would be resigning with him. What this means will become clearer over the next few hours. I dont think anyone doubts that general alice cc is still calling the shots. Expecting president ial and parliamentary elections to take place at some point. It could be that some of the people in the koran the current government are feeling a little bit concerned of some of the things going on in egypt. For example, the trial of the al jazeera journalist. Watch the egypt government resignation and the fallout. It will be something we have to keep an eye on. Watching hunt the hunt for Viktor Yanukovych. Town, at least that is where he was last seen jumping into a car as he escaped into the night. The next piece of the puzzle is what russia does next. This is the big unknown and the most dangerous one. Thanks a lot. Hans, what are you watching today . 2 00 p. M. , matteo renzi is going to be introducing a 16 member cabinet to the senate. Later on this evening, he will face the first of a confidence vote. He is expected to pass. He did get a big vote of support from one person who may or may not matter in italian politics. On the low merkel. Angela merkel. Face arenzi will confidence vote in the lower house of parliament. He is expected to pass. He gets down to the hard issue of governing italy. Is allthree top stories about political turmoil. Ukraine, italy, things seem to be a little bit better on track. In terms of what youre seeing on ground in the middle east, egypt is that much more worried because it was meant to be a little bit more stable by now, right . This is showing that the arab spring is maybe not working. Comes down to the economy. I am looking for any more onates on what is going there. A surprise resignation from the cabinet. A whole bunch of strikes going on by public transport workers. Theres a huge shortage of cooking gas. The politicians are deciding they do not want to be associated with the handling of the economy right now. Particularly, given the such big and there are divisions in Egyptian Society right now. There are a lot of things that are coming underscore name criticism. I guess things will become clearer over the coming hours. Thank you. Elliott gotkine with the latest on egypt. Ryan is following the ukraine and hans nichols is following italy. That is it for the pulse. Surveillance is up next with tom keene and his team. There is a manhunt for the former president of ukraine. After sochi, putin and russia assessed their relationship with the west. Jeffrey sachs of Columbia University joins us for the entire hour. Mobile Technology Leaders meet in barcelona and ask what is up. Good morning, everyone. This is bloomberg surveilla nce. Is monday, february 24. I am tom keene. With us is adam johnson and scarlet fu. The ecb president mario draghi said policy makers ready to add stimulus if the race in deflation risk rises. Yesterday german Business Confidence unexpectedly climbed to the strongest level in two point five years. Chinese stocks fell the most in seven weeks. In china. M Economic Data and the u. S. , the Chicago Fed National activity index. The dallas fed manufacturi