Transcripts For BLOOMBERG The Pulse 20140604

You are watching live from bloombergs european headquarters. I am caroline hyde. Missing masterpieces. We check out the big business of art theft. Ford is treading lightly. It looks pretty heavy. Lets start with president obama. He is with the president elect in warsaw. This is ahead of the summit in brussels. That is where we find hans nichols. The details. We have the public details and the private details. Is talk ofhere additional sanctions if russia moves the troops back to the border and has another incursion. Publicly, we have William Hague and we will listen to what he has to say. The sanctions are on the table. The have an addendum. They say it is unlikely and the same line is coming out of berlin. The german official is saying. He sanctions are unlikely listen to what William Hague had. O say this is an election with clear results and he has been elected with clear results. Bilateral discussions. This reduces tensions. These are all things we want to press against Vladimir Putin. President obama meets with him and heads here where the g7 will kickoff. Then, everyone is off to normandie. First, it looks like it is likely that president obama and Vladimir Putin will pass each other and we will see if they have a formal meeting. Thank you. Over to our top company stories. The troubles are mounting. The retailer deepens. Investors are bracing for the worst. The chief executive is claiming that they have never been so competitive. We are joined by ryan. Vfl thewhy the sales fell 3. 9 of stock bucks you know the things are tough when your ceo says that he has never seen a sales drop in his 40 years at the company. He has been there for 37. That says a lot. Is, thehing lightfourlike sales was down 3. 8 . The analysts, we talked to 14 of them, were expecting that. I guess we can speculate that that is investors saying it is not as bad as anticipated. We had an analyst on who was talking about the fact that there has been a problem with the stock throughout the year and it is down nine percent since january. The reason for that is because the analysts on a monthly basis keep revising the profit estimates. Specifically, for tesco. If you look at the profit margins, tesco would say they were above six percent. Then, they said they were forecasting five percent and now, they are not saying anything. They are trying to gain loyalty back from the customer. Whats yes. That is the get out of jail card. Slashing prices to help them out in the long run. You do notproblem if understand what the future earnings are going to be. That may be one of the reasons we are seeing investors have a little bit of a selloff. I am going with ryan. It is a slow day on the market. We are waiting for a few things to happen. How much time do we have . They are already counting. Nobody counts. 1000 days. They have been losing market share. And top personnel. Most recently, the cfo. One way to look at it is, crediting them, they have 29 of the market and yesterday, they said that, for the first three months of the year, they will lost 1. 5 of the supermarket market. It does not sound like a lot. It is the biggest loss of market share they have recorded and starting to do this math. It is a big deal and there is a sales decline. Who is picking it up . The four bigof supermarkets that have increased. And started cutting prices they had a great january to march. You have discounters out there and the little guys. Guys who are getting bigger. Aldi has a percent of the market and they are gaining. They are getting it from both directions. You have to do something, right . They keep saying that things are going to improve. It is too early to say when that is going to come. I think that, as charles was saying, if it does not come by the end of the year, people are going to say that they keep saying that. He slashed prices and you do not see an uptick in sales. Thank you very much. We will continue our conversations. To heathrow. Terminal two. T has cost 2. 5 billion pounds is it worth it . Olivia sterns is there. What is the impact for you and i will we travel . Thatu know, i would say terminal two is a destination in and of itself. Blumenthal,rd from he calls that fabulous fast food. Beer, mulberry, barbers. This is a retail, restaurant, and our hub. Hoped to help british airways. The trouble is that this is not going to add any new capacity to the airport. At their peak, they will move 45,000 people through. Without the new runway, the third run right, they will not get people off the ground. Yeah. No. Olivia, they are trying to compete with the glitz and glamour of the middle eastern airports. How do they become more competitive . They are trying to compete with these new splashy how this and i spoke to the head of Heathrow Airport earlier. She said that they are competing to get a third runway and they said that the success that they have had with the second terminal crews that heathrow knows how to spend money well and can deliver on costly infrastructure rockets in a timely manner. Here is what they had to say about building a transit hub. But if we want to capture the growing economies, we need to be connected to the new cities and we can only do that through how the airports. Can only be done with more capacity and building on the strength we have here hat heathrow air work. Heathrow is the natural place to be the worlds best. They spent 2. 5 billion pounds on renovation and it is part of an attempt to overhaul heathrow. They have spent 11 billion pounds over the last decade. They are trying to secure a third runway. The mayor of london is pushing for a third runway. They are hoping to be more competitive to win the third runway. Thank you very much, indeed. Olivia sterns is down at the second terminal of heathrow. We will continue the conversation on londons airport conundrum. The ofeak to commerce and industry. Check out what else is on the radar will stop the chief executive of Goldman Sachs sat down for a conversation. They spoke about what they face. Job, when say that my things are going well, there is nothing more fun and i cannot imagine leaving it. And, when things are going badly , my sense of responsibility takes over and i cannot imagine leaving it. It is a hard thing to do. I either love what i do because it gives exposure to great people andwhen things arey obligation takes over. Lloyd blankfein i here is what had to say about global growth. We will not recover until next year. In that scenario, we have a Different Group in different regions. 2. 3 and japan getting out of deflation and moving towards the two percent growth and inflation levels. Europe is still modest and in the black. Italys finance minister says that growth in the country is weak. Ierre told us he is meeting his counterpart on thursday. The purpose is to put jobs and growth high on the agenda and to be a priority on these issues to give priority to these issues. Tough times at tesco. We have been talking about the retailer trying to find a way out of the trouble they are in. We will discuss all of that on the pulse. Welcome back. Company news. The German Government is using their development aint. The proposal to buy the energy asset could go ahead. Staying in germany, shares this morning paid. Rest deepens a threeway unitnce between the truck and the munichbased company. They are looking to compete. The second largest life isr is providing buying an american insurer. Acquisitionbiggest by a japanese life insurer and will give access to clients across the United States. The japanese have a shrinking population and shrinking domestic demand. The president signaled that any energy cut will not be the final one. Our ecb editor joins us now. Mario draghi has promised that he will cut the rates if he needs to. How credible is it for him to do the other one is already negative and there is going to be further cuts. Walk us through the mathematics of this. The people we are talking to are talking about 10 basis or 15 basis points. The benchmark is currently at 25 basis points and if there is a cut in that, the ecb becomes the first Major Central Bank to having negative rate. Denmark and sweden have done so in the past. Whether or not that is the end is not clear. Forward guidance could be one of Mario Draghis clear strategies. There could be lower levels, if needed. He could maintain that language, even if there is a cut tomorrow. The rates could continue to fall. They could go from a little negative to more negative. He has room to fall. It is important that the markets believe that Forward Guidance does not change in there has not been a change in the ecb strategy. There is no talk of an exit, at this point. The signal is that he could come up with unconventional measures, as well. Government bond trading has been getting pretty exciting. You also have talks of lending to smaller companies. You are right. There has been intense speculation and there will be relief when we hear what the ecb has up their sleeve. The rate cuts the the market is looking closely at something to the bank of englands fundingfourlending scheme. On thended lend conditions. They said they may give five percent of the outstanding loan thatolios on the condition money is lent the two companies that are smaller. Is up for grabs. The executive board met yesterday and the Government Counsel will not make its final decision until tomorrow morning. There will be a formal decision and that is when we will finally hear more in the afternoon. Credibility and the ecb. We are getting to a point where mario draghi has to talk about five or 10 basis points in order to maintain the idea that there is Forward Guidance in place. The pointting to where it becomes incredulous. Will the market believes that the ecb has any credibility left when they are talking about tinkering at the edges . Course, thats, of we get measures from the ecb tomorrow and the market says, what is next . Worsening ine a the meter jim term mediumterm. An optionve easing is there. The ecb says theyre within their mandate. There may be some weakening in the inflation outlook. Not major. Still, potentially, some weakening. If that continues, that may be the next step. It is not expected that the markets will continue to speculate. It could be further down the line. Thank you very much indeed. We will have an update and Mario Draghis news conference. News of the company. Why ford is treading lightly with their truck later on in the polls. Welcome back. Trains, planes, now, automobiles. Ford is advancing this technology. Matt miller went to the. Utomaker massive pickup and theat ford entered terrain of the race is so brutal. We want to pass the durability of the truck. , we didter of impact not want the competitors to see it. This is no ordinary truck. Instead of a Standard Steel body, it was made of aluminum and is 700 pounds lighter. The company proof that light is also tough. There is a lot at stake. This is a technology that will be rolled out in the new version of the bestselling f 150. Makes it stop quicker and accelerate faster. The customers can use that ability. It has always been special. Consistently. This new government standards are pushing the company and all automotive makers to deliver more fuelefficient cars to the masses. An essential part of the sustainability strategy. Enter the concept car. The lightweight vehicle behind this is lighter than the current production vehicle and that is to car sizes smaller. Is a mix of materials and aluminum and carbon fiber. Those materials can come together and create an optimal solution. Advanced materials cost a lot more than traditional steel and bring down the cost of lightweight components may prove difficult. We have not solved all of the challenges yet. This is where we see some of the future going and what we are working on now for our vehicles. Got to love them. Lets talk about a bit more of the truck story. We are seeing that there and i want to talk about volkswagen. Part of this is mechanical. They pushed shares out this morning and it was a receptive market. The stock is trading below that and the european markets are it is trading down. As you can see, a gap lower is the mechanical factor. You see the stocks declining further. The gp gdp data earlier on. This is the projection for it from here and it is not so good. The start of the day is trading up. Another currency pair that i want to show you is this. We have seen a bunch of pmi data coming through. One of those that came out came from sweden and, as a result of this, we saw the stock move lower this morning. It is down. 3 . Those are the assets we are talking about. Missing masterpieces. When we come back. Good morning. Welcome back. I am guy johnson. I am caroline hyde. Voting has ended in the syrian election and it will return aside to the presidency. Assad to the presidency. International leaders called doubt in the support. He spoke exclusively to me yesterday. Is a sham election. It is not election that means anything to most of the world. You cannot conduct a meaningful election in a country that is torn by war with so many people displaced, without opposition having any proper opportunity. The selection carries no credibility. Election carries no credibility. Romeeaking to reporters in. He told us that he is meeting his german counterpart in berlin on thursday. Well, the purpose of the presidency is to put jobs and growth high on the agenda and to give priority to these issues. Thousands of demonstrators to mark the anniversary of tnm and square ananman square. Hundreds were killed. More on this. Lets talk to william pesek. He is a Bloomberg View columnist and his opinions are his own. Talk to us about the amen andship with tian the administration. The deal of the people is that they will make them richer if they do not protest. In many ways, it is about social stability. When china wants to maintain growth at seven percent10 , it is about people staying away from the square with protest banners. The president is talking about reforming the economy and turning it upside down to make it not reliant on investment and exports. Doing that is destabilizing and will put people out of work. Any time growth goes towards seven percent, you see an active attempt in beijing to stimulate the economy and that shows a lack of resolve and confidence. It is all about the concerns of growth slowing and if the natives will get restless. The longer the growth stays near 7. 5 , the less reform takes place. The events of 25 years ago still remain a presence in the room. About talked at length what the president has gone to. It is a difficult balancing act he is trying to get. What is he doing to hit that 7. 5 target . 7. 3 is what the economist forecasts. Spent 10ime minister years doing nothing to reform the economy and it is a big task. We all agreed that the economy has to slow drastically in order to rein in the economy. In many ways, the problem is too much credit creation. When credit creation slows, there is a domino effect. The president is looking around and try to figure out what he can do. The downshift has not begun and, the more we see beijing take steps to avoid the downshift, we have to say a reform is taking place. I consider this like abenomic. Prime minister abe has accomplished none of his domestic reforms. Will the chinese president do better . Whats thank you very much. William pesek joined us from Bloomberg View. That is an amazing piece, if you get a chance to look at it. Lets go back to heathrow and a new terminal opening their. Is opening. Erminal lets find out how staggering this is. Lets go to Olivia Sterns. Thank you. This is smooth sailing at terminal two. It is unlike the launch of terminal five that cost billions of pounds and they lost thousands of bags, while canceling hundreds of flights. He wanted to have a soft launch and ensure that it went well. It does appear to be going well. They are stress testing the banking system. It all appears to be working. Lots of new bells and whistles to look forward to. Restaurants, blumenthal restaurant and i spoke with him earlier. He describes some of the food. It is pretty exciting. And liquidg pizzas nitrogen frozen ice cream that is frozen instantly with compressed gas. This is the first time that an airport has allowed a wood burning fire inside a terminal. What is happening at terminal two, will it be enough . As beautiful as this terminal is, it does not add any new capacity. What they want is a third runway. Back to you. Thank you. Lets get to the next guest. Colin is a chief executive at the London Chamber of commerce and industry. There is glitz, lamb or, and no more capacity. Well, it has been disappointing and we do not have extra capacity in the southeast. Wherever. I think that what we want, from now on, is what we need to remember is the report after the election. We have no commitment from either Political Party that they. Ill for phil fulfill this what business wants a certainty. We want government, whoever that is. Whatever theyand say, they will do. There is another runway at heathrow. Whatever it is, what we need is certainty and we need clinical agreement. We need people from Political Parties to stand up and stop messing around about minor election all advances in london and say that this is what the country needs. We talk about the need for one more. He started coming out with his First Tranche of the report and he said that we needed one more runway. Have we been conservative here . Yeah, howard is a politician with a small pe who is been around for a long time and knows the problems of even one more runway. What i would say, not that i am an expert, but as a trade mission, business organizations will do this this year and we need to know. We know that it is not about run one way one runway. Is there anything that can be done right now . What happened today, i have been around the second terminal and they have been working incredibly hard to make sure that we get what we need to get. A smooth runway. Who are these people . They were volunteers from moves across country who are testing the airport and there were lines of old cases that were being sent through. This is an effort. This is very good stuff everyone has been to terminal five. For three years running, the best running terminal in the world. In terminal two, it looks very similar to terminal five and has a wonderful feeling of spaciousness and that will be great. Without extra capacity on the runway, we are not going to be able to keep up in the trade wastes race. We have seen the number of routes reduced and we have seen all of these places get new airports. We need extra capacity. Into the airport is important. But it is. It is a problem in london. What extent do we need to rethink the way that we think weut this question mark had look at these airports . Are we being aggressive enough . We need to have a link between heathrow . Would have a pocket . We are going for one runway. End up with ao subpar solution once again. We have already heard talk about that and pressing the government to make sure that there are rail links. They are being upgraded. They are being upgraded. It is a race. We have crossrail coming along. In termsee an upgrade, of getting to airport and that is very important. We have the infrastructure. What we need i come back to ,t unless we get politicians we need extra capacity. We will not have the debate about how we get there because there will not be a debate. We need politicians who are brave enough to say that they get it and they understand that they need extra airports and we need to have the ways of getting people there in an environmentally friendly way, as he can be as it can be. And, an efficient way. Her people to invest in london, their First Experience is an airport. That is why terminal two and terminal five transforms themselves will stop that is very important. If they are, you know, circling around england for an hour because there is no runway capacity, the impression is lost. They have to be together. This is a good day. Terminal two is refurbished and the plan is great. There has to be extra capacity or we will lose the advantage. Orare you picking up anymore feeling that the wind is blowing in your direction . Lets put it this way, it was a shadow transport sector. We are not going to consider it. They said the same thing. Groups like the London Chamber what are you going to do about it . You not hear government ministers talking about no more runways. It has taken years for them to get to that position. It has taken years. Why wouldnt we have extra capacity . Now, everyone takes the position of extra capacity. Now, we need a final stage. We have spent years looking at this. We have people looking into it. Why dont we just have the politicians say, right, we are going to do this. An issue. This is a political debate. Thank you for joining us from the London Chamber of commerce. It is tough times at tesco. Can the biggest retailer manage their way out of their troubles. We will discuss that on the pulse. Welcome back. You are watching the polls. Tough times at tesco. That is not the only one. Competition is heating up. For more on their troubles, we are joined by the director who tells us how the pointofsale data look, maybe some surprise that the numbers were not as bad as anticipated. He says that he is not going anywhere. Is not where he is going. It is the problem. , they start a ago revolution when they started over and took over the industry. They have driven it by taking basically by relying on the fact that they are big and they can sell more. The problem they have, at the moment, as of the customers are starting to vote with their feet. And, also, the retail bulletin. Wayre about to launch a new of looking at loyalty and, when you look at basic loyalty measures, this is where they fall down. They have forgotten how to be a retailer and are doing lots of other things. People do not like them very much. Slashing prices seems to be one way in which they live where the customer in. It is terrifying how accurate they are and what more can they do to get our loyalty back . What are they doing better than them, in terms of getting loyalty . Things that two people expect from a retailer. The expect to be loved. Maybe not love. They expect to be liked and understood. Buy thect that they can products that they want to buy. Nd tesco on those measures. Falls down on those measures. When you look at what people talk and say about tesco, they say that they are unhelpful and they are not getting what they want from the people there. That,certainly the case tesco, versus their competitors, you see half the lift that they have. Website that bbc is flagging results in advance and one of the comments was that they are not going there anymore. They are talking about him going. Do we need a Leadership Culture change . Leadership leads you to where you are. What you have taken is the value out of the supply chain. Product is sold at a discount. Billionare spending 1 on improving it. When tesco was the bees knees, they were leading the market. Look at the market. And an edicter came down from the top. Nobody had any vision from the bottom. Are reliant, they and you ask the question onlier, they are focused their own customers. You get lots of stuff about 2. 5 millionand to haveds are at risk this and are much better at soaking up the difficult customers. And they haveblem to be nicer to people. Thank you. The director. Lets take a break. Converting recycled plastic into usable diesel fuel. With me now is the chief executive. What inspired you to look into this . 2004, it was a little bit before then. Ands replacing a cartridge i threw it into the bin, as people used to do. Thought occurred to me i wonder what happened to this. I went off and look at what is happening and it was a long i found that you can turn plastic into a fuel. Tons of it. I found that a ton of plastic of fueleates 950 liters and that is phenomenal. Right. You produced about 19,000 liters of fuel. Clean fuel. You put it into your car. , you arent numbers. Alking nearly 500 cars with just one. One plant. We have a demonstration plant that was our first one and was our child where we made the mistakes and perfected the technology. We have the plant in the united starting towe are build another one. In southustomers america towards the end of this are expecting this in colombia, of all places. And, interestingly, ghana is a place where we are making progress. Terms ofcheaper, and the cost of your diesel . It andre producing producing a liter of diesel. It is different in each region pump. U are paying at the i dont know what it is today. And has been wonderful to speak to you. Lets hope that it continues to grow. Michael murray. For those of you listening on bloomberg radio, the first word is next. The second hour of the pulse is coming up. Stay right there. Show of solidarity. President obama meets ukraines new leader for the first time as battles rage on the russian border. Tesco is trouble. Sales slump. Getting off to a flying start. Heathrow avoids the chaos with the latest major opening. We are live at the airport. Good morning to our viewers in europe. Good evening to those in asia. A warm welcome to those waking up in the United States. This is the pulse. Live from london. Also coming up, we are live at the European Parliament member Sharon Bowles. About the man to lead the European Commission. We will check out the big business of art theft. President obamas european trip. Lets talk about that. He met with the your ukrainian president elect. Hans nichols is to be found in brussels. U. S. Isst said the committed to standing behind the ukrainian people. What does he mean by that . That is sort of a continuation of what he said in poland, why he made the stop there. There is a lot of symbolism and pageantry to these visits. One thing we should take note of, the meeting was scheduled for an hour and it went close to one hour and a half. Obama came out and was pretty effusive. He was deeply impressed with poroshenkos vision for the future. Obama himself has said it is likely that he will meet putin on the sidelines. There will be lunch on later in the week in normandy. Round ofal new sanctions from the European Union or the u. S. Is possible. It was said in the clearest, most distilled version yet. If we have to, then we will. We are always ready in the u. K. If it is necessary. We hope it is not necessary. We hope that we will find ways to reduce tensions. The question, the challenge for obama and other g7 leaders, can they deescalate the tension given what is happening on the eastern border of ukraine and russia . Can they have the conversation not be about sanctions, but how everyone comes together, plots the course, charts the course for ukraines future . We have the u. K. Prime minister meeting with putin on friday. We know that the french president will be meeting with putin. It is likely that obama will meet with putin. A seems that there is diplomatic opening for putin if it is necessary. The beauty of the summits is that it allows for a lot of impromptu moments were people can pull each other aside for a brief conversation. We can get into an epistemological discussion on what a meeting is. If boudin and obama step aside for five minutes putin and obama step aside for 15 minutes and have a meaningful conversation, that is a meeting. Meal,y talk over there that may not be. More work needs to be done. Nichols, thank you very much indeed. Lets have a look at our company top stories. Tesco in trouble. The sales drop of britains biggest retailer continues to deepen. Investors have braced themselves for the worst. The chief executives are claiming that they have never been so competitive, but still the shares are falling so far this morning. Ryan chilcote has more. They have been slashing prices. Pushing a volume slightly, but not enough to upset the overall downward slump. Tesco has been really interesting. It starts with the ceo saying that in his 40 years at the company, he has never seen a sales drop like this one. 3. 8 down. He was speaking to the sales numbers. You know the company is in a pickle when your ceo says that. And yet, people thought it was going to be worse. Analysts we spoke to thought they were going to be down 14 . At the open, the shares went up. 2. 5 . Then they gave up those gains and now they are in negative territory. Points allen made a good earlier today. Investors in general have had a problem with tesco this year. Every month, the analysts have to revise their profit estimates. They just keep falling. I was reading over the weekend about a profit warning without a profit warning just guiding it lower, so never do you have to come out and say we are going to miss our targets. You look at operating profit margins, that is a perfect example of that. The guy didnt use to be that it will be above 6 . And the guidance was that it will be above 5 . Now, they are not exactly sure, they are not providing that guidance. If youre thinking about buying the paper, if youre holding the paper, thinking about the pricetoearnings ratio, that is not an easy calculation. It is about all of these metrics, but the margin the store to me is about one man. The ceo who said he is not going anywhere. When you hear that, usually it means he is embattled. The exit lights are beginning to flash pretty quickly. What are people saying about how long he has . He has already had three years. Here is the deal. I dont know what the board is thinking. They have been losing market share for three years. Now they have the sales decline. Deliberate,his is the decline, and it is going to to status quo when it comes to market share at some point and they are going to get through these problems, then he is probably ok. Charles allen answered this question by saying by the end of , he has got to start producing results. Take back. Ve to ryan chilcote, thank you very much indeed. Terminal opens its doors today at heathrow. It cost 2. 5 billion pounds. That is a lot of money to invest. The new german was very pretty, very nice. Lets go to Olivia Sterns the new terminal is very pretty, very nice. Lets go over to Olivia Sterns. 2. 5 billion pounds is going to buy you a lot more bells and whistles for passengers, including new firstclass business lounge for the Star Alliance members, including united. That is good news. The old United Business lounge was a little bit shabby. 33 new restaurants. The owner of fat duck is opening his firstever restaurant inside an airport. It is going to be specializing in fast food, such as liquid nitrogen frozen ice cream and some pizzas which he will cook in his new woodburning oven. The first time they have ever an a woodburning oven into airport terminal that i know of. 70 of passengers do end up shopping. They spend about 40 pounds each. It is a big opportunity there. Here is how the head of the Heathrow Airports describe the opportunity to me. Are veryf the shops british retailers who are having a showcase to the world of what they do so well. One of the worlds greatest has a restaurant here. You can enjoy british peer. Beer. Passengers will love having that real sense of britishness as they travel through their. Here. Lots of new reasons for passengers to come through here. That this new terminal is not going to add any new capacity to heathrow. What they still need to get is that new third runway. , but they capacity are looking to become more competitive, arent they . This is about stealing the glitz and glamour. Yes. There are two sides of this. Domestically, they want to have the next big runway. Gatwick also wants to get it. They promised they can deliver a second runway faster and less expensive than heathrow can do. They say, why not fly the rather over fields berg than sending it through the more populated airport around heathrow . Heathrow wanted very badly. They said they can deliver expensive Infrastructure Projects on time, and this object is proof. It is proof that they know how to spend money well, they say. The second part is trying to become a stopoff point to lure the global traveler. That is what heathrow was arguing. They say they are attracting a more global traffic. The race for win growth. If we want to capture the growing economies in the americas, asia, we need to connect them to the new cities. We can only do that through the airport. We are building connections. We can only do that with more capacity. Building the strength we have at heathrow. Heathrow is the natural place to be the worlds best hub. They are competing with the likes of gatwick to win the battle for europe. They are competing with the airport in dubai to try to lower the Global Transit passenger. Save 2. 5 billion pounds are spent here, but part of 11 billion pounds spent over the last decade to try to mend heathrows place as the premier place in europe. Still the fifth busiest in the world. The queue behind you is small. This is a staged opening. Soft opening. Exactly. It is only 10 capacity today. We all know how botched the opening of terminal five was a few years ago. Hundreds of flights were canceled, thousands of bags were lost. Heathrow lost several Million Pounds because of how poorly all of the chaos occurred around the opening. They have stressed tested everything today. They have sent 100,000 bags through the system. They have assured that all systems are go. But it is only 10 capacity. There are beefeaters. They are trying to play the airport up as a bastion of britain. We saw the beefeaters behind the head of heathrow earlier. Loving it, olivia, thank you. Eaters. Should bp to should be pizza eaters. We are live with Sharon Bowles next, we are live with Sharon Bowles. How should we take the job at the European Commission . Should we deal with it, should we move on . Life is about compromising or should we fight this one . Welcome back. You are watching the pulse. The currency markets. The ecb equities tomorrow. It is a little quiet right now. One of the things i found is the swedish krona. It is down a little bit this morning. Some betterthanexpected data coming out of the swedish economy. Quiet markets out there. Waiting to hear what mario draghi has to say. Lets talk europe on another angle. Jeanclaude juncker is getting a boost in the bid to takeover the u. K. E. U. s Top Executive job. Some strongly opposes candidacy for the European Commission president. Is he the right man for the job . Lets ask Sharon Bowles. , outgoing chair for the u. K. European parliament. What do you think of Jeanclaude Juncker . I have had a lot of contact with him when he was president of the euro group. I am not frightened of him. I think he was very while he and his negotiations. He is from luxembourg. He understands Financial Markets. In my book, that is a big plus. There are other worthy candidates around. At trying toeffort involve and democratize the process. That has notnk been terribly successful, other than perhaps in germany and austria. Nevertheless, it was an attempt. I am less fearful than everybody in the u. K. Yes, maybe he is a federalist, but not at the expense of losing the u. K. , not at the expense of pragmatism, i dont think. This has been built up and do something really quite major. People are talking about this being the in and out moment for britain. If he gets the job, it will further accelerate a path to an exit for britain. Away allt want to give negotiating tactics, but i would have thought that a graceful acceptance and then may be getting something of a good way to go. Is that the sense youre getting . No, im not part of negotiations. Our mode of operation is different from that of the government. There are times in the council side of things that you have to be tough. I dont want to interfere. Usually, when you are in the other area, you are compensated in the other. I would have thought that officials would have already done the reckoning on that. Used in the positive of Jeanclaude Juncker is that he gets financially Financial Markets. What are your you are stepping down, you are outgoing monetary at the Affairs Council what do you hope from the next parliament in terms of the Financial Markets in europe . Are we letting things get a little too lax . I think there is an element of looking at growth. Taking a step back and saying, hang on, are we regulating everything to death . I think that view is coming through. I dont think there will ever there will ever be a laissezfaire, hands off again. The focus is going to be on markets, on Fund Managers to read how do you get Retail Investors into longterm investment . This is the issue for the next parliament. It puts markets central. There has also been this phrase used repeatedly about market union. To go alongside banking union. But it is not a eurozone thing. It is a thing for the whole. We are talking about the goal we activet, to get the big Capital Markets like they have in the United States. Barriers. D of all the if they can really focus on that and really want to deliver the growth, this is very promising. You have people very independent taking up seats. In the last parliament, i think my committee was particularly strong on those issues. We formed a consensus across all of the groups. We had six active political groups. It is not always easy. We might try to make it look easy. But to keep everybody on board and doing an inclusive and a delivers results. I made a judgment call. Mostis how we were powerful as a parliament, the way to get the most effective results. I think we worked well together. There are a lot of people who have been used to that way of working that will return to the committee. The positions are decided at the Committee Stage and then by the time it gets to the plenary after the negotiations, you normally have got all of the big groups on board. That will still be the same. If they want to change things, they will have to intervene at the Committee Stage and do real work. You are going. Will the influence be significantly less in next Years Parliament . Whats all the conservative all of the conservative members are returning to the parliament. I presume a fair number of them will seek to sit on the committee again and one hopes they will succeed. Labor will put in their replacements. Know, my own party has not got a replacement for me. [laughter] the resulting one left. My seat was left. Not me and it. Not me in it. It is unlikely we will have the chair of the committee. We cannot deny that that has been useful. There are times i have also challenged the u. K. , come on, you have got to do it this way. In thedentity and end, if we negotiate and we get in there early and we talk to the commission and we dont do all of this haranguing staff, then we will be ok. Maybe we have to be a little bit earlier and some of the interventions. That would be nice. Final question. Is the ecb doing its job . Has the mandate that has 2 ,ation close to 0. 2 is mario draghi delivering . He would like to deliver. But it is not a oneman show. I think he is trying. Im hoping that they will go into these Uncharted Waters tomorrow. They have got to try. I said, do something, better late than never, last time. I immediately got responses from german favors saying that they liked those inflation and who was i to say that it should be eroded . There are very strong opinions in some countries from the set in some countries. From europe, yes they have got to experiment. Going forward, they can do all kinds of things that they want to combine macro could macro prudential policy with monetary policy. They are verying much looking at. So you can be looser overall with one and then tighten up again on the more granular scale with macro prudential. Nice to see you. Thank you very much indeed for joining us today on the pulse. Sharon bowles. We will take a break. It is time for todays number. 8 billion. That is how much in art masterpieces are stolen each year. It is the thirdlargest criminal enterprise in the world. Coming up, we will take a look at some of the missing masterpieces and we will take you inside the fbis team that tracks down the offenders. Also coming up see when a moment. Good morning. Welcome back. Youre watching the pulse. We are live from london. Im guy johnson. Lets get you up to speed with what is happening in the markets or not happening in the markets. It is a fairly quiet day. We have the ecb tomorrow and payrolls on friday. A couple of big things going on. Lets look at a few stock stories. Volkswagen. Low this morning because they are pushing stock out the door in order to pay for the acquisition for the rest of the truck maker they do not already own. Theyre basically bringing together a whole bunch of truck makers in europe. Theyre going to compete with volvo. Out the door and we are sub that a little bit. Tesco is under pressure now. Earlier this morning, tesco came out with numbers. It is the uks biggest grocer. It competes with walmart. Disappointing, though it could have been worse. We can talk about margins, we can talk about the numbers that the analysts love to get into. To my mind, this is a story about a man. This is a story about the ceo of the company who has had a threeyear tenure and has delivered only disappointment. It is beginning to get to the stage where you feel that the knives are out for him. How much longer has he got . And pouring money into european equities for quite some time. People have been pouring money into european equities for quite some time. There has been a decent rally since the start of the year. Double digit returns. The could be for the returns over the next two years. The potential for Italian Companies to outperform his strong. It is a pivotal moment. The italian market has already delivered this year. We are already up by 13. 28 . Lets find out what we have coming up. In just one to five minutes, it is surveillance. Tom keene joins us now with a preview. , economicpot politics. You will be discussing obama over here, these waters, to europe, brussels. Were going to begin with mark fauber and we will talk about his emerging markets. Tomorrow. Eting what does mario draghi mean for the emerging markets . Then we go onto to the burning issue in the United States. Inflation. We will speak with Martin Feldstein of harvard university. You can talk about fiscal policy, washington policy. He is riveted on inflation right now. You have seen a lot of disinflation and deflation in europe. We will have to rip up the script to say the least. Bnp paribas is front and center this morning. We will talk about that. Just amazing. Bnp paribas all has to be about this New York Times piece. It is not only that piece, then bloomberg news, Financial Times and others. This will be an item off the meeting. E at the g7 when you see the foreign minister of france step in on banking issues, any given talk is front and center. What has changed in new york is bnp paribas is front and center in new york. Ts go on. A tom keene, thank you very much indeed. We have another angle for you on travel. A new deal worth 1. 7 billion for dufry. Ufrys ceo joins us now. This is a heavily fragmented sector. This is a very big acquisition. Are we going to see a rollup now . We going to see greater consolidation in your business . Good morning. Thank you for the interview. Coming to your question, yes, the sector has a need. We need to consolidate and we have been a consolidator for a number of years. In terms of size and strategic positioning. We believe it all made may be transformation for our industry. We will have a market share of 50 in airport retail. I think the consolidation will continue further. It is not the end of it. It is clearly a step. You will be funding this acquisition by selling shares and doing it with debts as well. To bey investors seem liking the idea of consolidation in these markets. You will be in 20 countries. You will be selling more shares, more supplier. Your shares are higher. I think we have been always very clear about our strategy. Acquisitions have always been one part of that. It is also clear that we need funding for that. We will have a very decent leverage. We will have 3. 5 times leverage. It makes a lot of sense to add equity. In terms of the strategic rationale, it is really compelling. With the nuance transaction, we will add another 50 countries. We will be and 63 countries on five continents. I think well we will be only the real global traffic retailer. And it is by quite a far margin. Herman investment perspective, i think we really have shown that being a leader can actually add value. We are talking about 70 million swiss francs of synergy. This is quite an amount. Ultimately, that this deal will create value for the shareholders. Including the capital increase. Overall, it should be a very good deal for the shareholder and for us on a Strategic Development perspective. Said, a pretty fragmented industry. You are a consolidator. Do the regulators get interested in this . Do they have concerns . Obviously, we will need to have regulatory approval. That is standard for these transactions. What you need to bear in mind is that the travel Retail Market is about 50 billion. It is within the global retail, is very much a niche market. From that perspective, we typically dont have any big issues because we are relatively small. Cannot buyhat people product anywhere else. Typically this is not a problem. Yourve us a sense of Growth Strategy Going Forward in terms of travelers. Inh is made of the fact that emerging markets, middle classes, typically china is spending their money when they travel through europe but chinas growth is not going to be quite as fast as expected where do you see the Growth Drivers coming from internationally speaking . Where is the traveler and where is the money being spent . We are in a very fortunate situation. When you have medium and longterm trends, we have longterm trends. The propensity for travel is there in developed markets and it is even more there in emerging markets. From that perspective, if you look at it, even developed markets like the u. S. Or europe, you still see growing passenger numbers. As you pointed out, emerging markets consumers are traveling more. What we have seen and were seeing that in asia, emerging middle class are traveling more internationally. This is one of the drivers of our growth. This is also why we feel it is so important to be in emerging markets and tourist destinations to be diversified in order to capture that growth. From that perspective, i think this transition transaction helps us in that respect. We are very positive about the Passenger Development Going Forward. Passenger the average growth forecast over the next 510 years is between four percent and five percent per annum. The big part of that will come from the emerging consumer, i will agree with that. Thank you very much indeed. The cfo of dufry. It is time for todays new energy. Bigger is not always better. Ford is experimenting with lighter materials to make its new pickup truck more sustainable. This is the massive pickup truck ford entered in the 2013 baja 1000. The terrain of the race is so brutal it is a victory just to finish. This vehicle did. We wanted to test the durability of the truck. We did not tell any of the drivers what this truck was. We did not even want the competitors to know. The ford engineers were hiding that this was no ordinary struck truck. It was made of aluminum, almost 700 pounds lighter. They went to extremes to prove that light can also be tough. There is a lot at stake. This is the technology that will be rolled out in the allnew version of its bestselling f150. When we light weight the s the vehicle, it help vehicle accelerates faster and it can carry more. Be andtweighting will always has been special. Weightl recently, Reduction Technology was focused on legendary track objects. Projects. New government standards are pushing the company and all automakers to deliver greener and more fuelefficient cars to the masses. It is an essential part of our sustainability strategy. Enter the fusion concept car. The light would vehicle behind me is about 23 lighter than the car production vehicle. That is about two car sizes smaller. It is an aluminum carbon fiber. But advanced materials cost a lot more than traditional steel. Bringing down the cost of ultralightweight components may be difficult. Of theve not solved all challenges yet. But this is where we see some of the future going. This is what were working on now for our next generation of vehicles. Youre looking at live pictures coming from warsaw. President obama visiting dignitaries there. The country of poland celebrating 25 years since gaining the first seats in parliament paving the way for the eventual democracy in the country. A day of celebration in poland. Yet to actually sneak a peek at obama. There he is. You will be also meeting he will also be meeting the new leader of ukraine later today. We will take a break. Welcome back. You are watching the pulse. Youre looking at live pictures coming out of warsaw. President obama. They two of his four day trip. In poland. A poignant time, given what is happening for the east of poland at the moment, the situation in ukraine, with the development visa regression visavis russia. Yesterday, we got news from president that he will deliver a 1 billion pledge to boost the europe,story here in as a warning to russia. We will hear from european allies. We will listen to what he has to say. Will they take on board what is happening in moscow . It would be very nice, from a u. S. Point of view, if europe u wouldoney and the e argue that the situation in ukraine has changed. Is it going to change spending here in europe on the defense side . It is incredibly unlikely. The u. S. Has been calling for nato countries to spend more on defense for 40 years. The targets are changed. The message has been consistent. European countries just of not done it. At the moment, affordability is not there for the vast majority of european nations. The perception of a threat is very very patchy. I would entirely agree. There has been a pivot to asia. That did not bring about many changes. Governments do not feel they can spend a lot of money on defense. Not much has changed in economic terms. Even the russian activity has worried people for the east, there isnt the money to expand projects without short and political gains for the governments. What would be the key projects that the United States would want europe to put spending on . What type of weapons . Drones . And the ongoing security cyber wise . The last sixin months is that the u. S. Has deployed forces to eastern in a veryexercises immediate, rapid way. European nations have taken much longer and have done this at a much lower level. Any European Defense spending that would have improved the ability of european nations to contribute to defense and deterrence in the Baltic States and Eastern Europe would be an improvement. It does not have to be more equipment. It has to be the ability and willingness to send troops, aircraft, ships further. Is runpean procurement on national lines. Changes in the geopolitical story, whether it be russia him and maybe start to russia, maybe start to focus minds, that we europeanocus on vehicles for creating the weapons and vehicles we need to use . Are we actually going to start to see that actually happening . Been a longterm plan, as well. When it comes down to it, the beit that the infrastructure in ones country over ones Neighbors Country tends to take precedent. Clearly, it can be done. One of the calls has been for better coordination. Even if you dont have companies are interviews which cross borders, there is a movement of skilled laborers and a movement of ideas and the ability to pool resources when it comes to Cyber Security communication systems. It may not result in more weapons or troops are aircraft in the short term, but it will hopefully cut the waste and replication across borders. Startyou think that will a catalyst for these things . Maybe that will be a good first step. Do we see a catalyst happening here that could generate that kind of move . In some ways, yes. The big concern for european the Critical Mass. You dont have the sheer mass of u. S. Companies or the products they produce. You are coming in with higher overheads. That is difficult to undo and a very short amount of time. Maybe a sharing of Services Across Europe allows them to move into emerging markets with a more combined picture. The european Critical Mass of the product is maintained. You can devote more energy to local partnerships. That may be an area that is easiest to develop in the short term. Fund is1 billion largely about sending military are way. If there was going to beast be a slight increase in spending and military in military, which business would benefit . The swedish government gets it. They feel they have spent too little. They feel a direct threat from russia. Defensed their future will have more Fighter Aircraft and more submarines. Of a a very unusual case company being for direct beneficiary of a germanic change in government policy. Dramatic change in government policy. Indeed. We are back in a couple of minutes. Lets talk about the currency markets and cable rates. Lows. The better than expected pmi service data. Hiring is strengthening. That will close the output gap. It may further encourage the bank of england. It may encourage the possibility of raising rates. President obama is in warsaw this very moment. Later today, he is in brussels. Hans nichols is there. Quite the european tour. It is the european tour. Ofs is always a mixture substance and symbolism. The symbolism is quite clear today. The royal palace in poland. To celebrate 25 years of democracy. When you first started seeing elections there. On a substance, an announcement in equipment, nonlethal equipment for the ukrainians, body armor, ministrations equipment communications equipment, night vision goggles. You are sending troops night vision goggles, but you are not actually arming them. But what do you think theyre using the night vision goggles for . The distinction always puzzles me. The ukrainian seemed pleased with that. President obama seemed quite effusive after his meeting with president elect poroshenko. More pageantry tonight. A dinner and tomorrow more. A distantare on possibility. They want to work on how to try to mend of this conflict, mended together, and hopefully have a fresh start with president poroshenko. Hans, you will be covering that for us all day. Thank you very much indeed. That is it for the pulse. We will see you tomorrow. Ecb day. This is bloomberg surveillance. Markets turn. Report. Jobs can facebook and twitter make you like advertisement . In aars ago gunfire nameless man in tandem and square. Good morning, everywhere. We are live from bloomberg World Headquarters in new york. I am john kane. Tom keene. Joining a scarlet fu and adam johnson. Here is adam johnson to begin your wednesday. Overnight Euro Area Services expanded the most in three years. A lot of data coming out. Starting with the adp employment number. Adp, the guys who processed 20 of the payrolls here in the country. When they are processing more it tells you people are hiring. We will see in the correlation of fridays report. Not oneforone but a good indicator. I asked them nonmanufacturing at 10 00. Ism nonmanufacturing at