Transcripts For BLOOMBERG The Pulse 20140618

We are your in london. Mcdonalds secret world cup menu. Find out what you can order under the counter if you are in brazil. The super sidecar, we check out the vehicle trying to break the land speed record. But get into industrial policy. Ge is said to be refining its alstom bill to assure bid to assure france this is the deadline. Casens chief is making his to french lawmakers after presenting a joint bid with mitsubishi yesterday. Carolyn is all over the story. She is in paris. The offer could come as soon as friday. In the meantime, we heard from siemens ceo in front of french lawmakers. Three weeks after the ge ceo eser to testify, joe ka knew we had to convince lawmakers that his offer was the best. His offer with mitsubishi would safeguard jobs and investments. I talked to him before his appearance before french lawmakers. The feeling is the president is a good listener. He had been listening to ge and siemens and he knows the facts and im sure people she i am that we areeciates financially superior. Ge responded saying they will. Efine the guarantees on jobs more than the 1000 job creation theyve promised and they will make sure the french retain access to their nuclear technology. A joint bid from siemens, teaming up with mitsubishi. They agreed to sell a 10 stake to mitsubishi. The ceo told lawmakers he had been in contact about the 900 Million Euros offer for 10 stake. The discussions were ongoing. They reiterated that they are not planning to sell their alstom stake in the short term. I put the question to the mitsubishi ceo yesterday. I do not know. We have not received any comments. Ceo will also testify in front of the french lawmakers, in front of the same committee on july 10. About the alstom takeover. We are building up to an interesting june and july. It will be a fascinating to see exactly what happens. Italian Prime Minister is juncker foracking European Commission president. Andrew fry joins us with more from round. It looked like he is going to be the kingmaker because cameron needs renzi on his side to block the nomination. He is ready. Inis not a done deal, but is it is increasingly likely. Please by the signs that have been coming out of germany about support for his push for more flexibility. Cker todayet with jun and get an update on the limits of the steam policy changes are. I think we could see things develop pretty quickly. Everybody wants to get this done and hammered out before the leaders walk into the brussels summit next week. In terms of how much flexibility we can expect for the italians, there are many in brussels that want them to stick to the rules. How much flexibility will be available . It is tough to quantify. There are different approaches. The main one is changes in the classification of investment spending, running the classification of investment broadening the classification of investment sentiment. This will be important for italy. It will give them some more flexibility in creating jobs, which is the main problem in italy and for the Prime Minister. He has this unemployment figure, which is that a record high for the past year. His performance Going Forward is going to be judged on that. He needs more flexibility and to be able to spend and create jobs. That is andrew fry. Minutes, wehan 30 will get the latest minutes from the bank of england. This is the last meeting. Those minutes under scrutiny. Did carney have to move . Our markets editor is here. What are we expecting . Look, if you see any shift from the nine male, that is the first from the 9 million, that is the first headline we will look for. Did anyone dissent . At the last meeting, the mpc decision was becoming more balanced. We will focus on that. Have we had a shift . Evidenced area, more of slack is needed. This is where the dropping of the bomb came or the bernanke moment. Kearney, mr. Carney, the governor said, we may need to raise rates earlier than anticipated. Be very wary because this is not to do with housing. That is critically important to do with the velocity. We know the train is coming. Thereafterelocity that is important. There is a great chart. The price of money for three months in december of this year, bopping along, singing a song. Explain this. Before the speech and the markets are. 75 positive by christmas. He spoke and it was one percent. Look at the longer term chart. The last time there was a full drop in the price or the assumed risk, it it was during the bernanke taper moment. Has carney had a bernanke moment . The head of Peterson Institute said he was surprised by mr. Statement. Either they have massively upgraded their forecast based on some new internal analysis, which we wont know yet. Or he did not quite calibrated right, which happens to all Great Central bankers. He was trying to say, do not get to it do not get too carried away on the other side. Eileen towards this i lean towards the second. I think he got the calibration wrong. Investors say he will not be assuaged from moving on rates. Ok. We we back with those minutes in 20 minutes. Still to come, our coverage of Technology Week continues. We will be back out live with Caroline Hyde. She is there with more on the smart revolution. Apartment. A smart everything is connected to the internet, 300 items. Scale that up, what about if every streetlamp was connected to the internet . What efficiencies could we save sayseconomy . Cisco systems think 19 trillion worth. Well be talking about all the sorts of trends with the arm ceo after the break. Good morning, everybody. Development coming out of police areraqi confirming the insurgents have seized the refinery. This is north of baghdad. Refinery and it has been surrounded for a while. We have seen clashes this morning which resulted in the insurgents capturing the refinery. There is a loof refined petrol there and it provides an interesting potential source of revenue for them as well. It is a significant development. Oil is up a little bit. It is beginning to trend back down again. Lets get back to london, Technology Week. Caroline hyde joins us with an exclusive interview with the ceo of arm. Morning, olivia. Holdings makes the chips that connect these devices. A lot of hype and excitement, we are here in a flat with 300 items connected to the internet. The opportunity is really big. Our partners make the chips. Based on our processors. Predicting accurately how big it will be is quite hard, that when you think about the opportunities around connected Street Lighting or Parking Spaces or livestock, hundreds of different applications where this technology can be used to make things a lot more efficient. Usedur designs are being by chipmakers. To go inside a callous stomach a cows stomach to determine if the animal is well or not. At the heart of these applications will be a small chip with a processor, some form of sensor. Monitoring ph levels in the stomach to work out if the cow is healthy or not. Connected to that is some form of Wireless Connectivity. These are the key ingredients. That could be deployed in all sorts of places. Trains,spaces, subway all over the place. In just a bull tablets so you can work out in just a bull ingestable tablets. Is there concern about security, privacy . Is that anything you have to respond to as chief executive of arm . Absolutely. What data can be used for what purpose is an important area. Providing some of the key technologies so that the data can be secured. It will dictate how the data is used. It is important issue. As a consumer, you own your data and your able to dictate you are able to to take hallock its used how it gets used. The user of the internet you as a user of the internet of things can feel comfortable about where the data goes. Numbers are being bandied about. John chambers said 19 billion. Do you have a sense of what the internet of things can do for your business . As a provider into the Semi Conductor space, we think about the number of chips. It is in the tens of billions range. We are seeing early experimentation. Some of these chips are absolutely tiny, a few square millimeters. When you can do that, you can make it very low cost. Cloudst coupled with services, you get people experimenting quickly. This is london Technology Week. You are based in san francisco. Give us a sense of the energy and the creativity you are seeing some are like Silicon Valley compared to what we are seeing in europe. Is it equal . Are we still far behind . Silicon valley has been around a long time. Lots of Startup Companies and lots of infrastructure to support that. Whether it is to file a patent or funding or just local expertise, it has been there a long time. A lot of worldclass universities on the doorstep. Here in london, we are starting to build a similar sort of infrastructure. A lot of these companies coming together just to talk about what they are doing. One thing that epitomizes Silicon Valley is the Network Effect that comes from these companies together. You are basing you are based in cambridge as a company. If the southeast becoming the hub . Will be oxford and cambridge . More armo see holdings, millions and billions being made by these companies. Helpsumber of technology ubsund the u. K. Ho around the u. K. , lots of startups in cambridge, manchester, many places where you are getting this. One of the key, denominators is the fact that there is a you the common denominator is the fact that there is a university there. You will get started companies. You will get Startup Companies. Everyone talks about your street lamps and car parks already connected. How long until the wider public will understand the potential . You are talking about the millions and billions of chips. Lets take time for us to realize the opportunity for everybody to get on board . It is a new technology and these things take longer to deploy and people like to think. Most numbers of the public neednt know about the benefits from the internet of things. Do you think much about how street Lamp Technology works when youre Walking Around . You really do not. As a consumer, you will not think about that very much, but you will feel the benefit through the fact that the infrastructure is taking less energy, taking less cost to maintain. Much thank you very much, he for you jet back to america he for you jet back to america, the ceo of arm. Extraordinary, all of the potential applications of the new internet of things. Whether you need smart chips and all of those things is up for debate. We will carry on the tech conversation. We will be live with tech city u. K. Later on the pulse. Time for a quick check on the equity markets. Equities are rising for the second day. It is acronym city today. Mpc, said. Fed. Go to my twitter account because there is a cracking article. Will janet yellen to a full carney . There is the dollar, it is traveling higher. Lets take a look at sterling. Alreadye dissent is priced in. Could it be that his speech was driven by the with of dissent . Whiff of dissent . Join us for that breaking news. Welcome back. You are watching the pulse. I am guy johnson. I am olivia sterns. We have breaking news. 90, the attached to the last rate decision. The boe is surprised. Way. Ound is going that mpc in aggregate is signaling that we are going to get a rate cut rate hike, probably this year rather than next. Which ties in with pimco, and a number of other houses. Torcharney really lit the last thursday night, saying that the markets perhaps should readjust their view on when rate hikes will come. Lets take a look at the shortterm chart. There is a couple of other things coming out on the Monetary Policy committee in terms of their view. They are saying this is where we go into the nuances and the boring my new shop. For some, the hike decision was balanced than early and won a 14. That takes me back to last month. The decision was becoming more balanced. We are seeing more balance used again. That is the same phrase being used again. You have got to get ready. Guys and girls have got to get ready for the prospect of higher rates before the end of the year. This is going to set off the debate about the velocity of rate hikes. If we have a look at what else the mpc is saying, premature tightening could see sizable lost output. That is two sides of the scales if you think about it. Get ready for higher rates before the end of 2014. We can see how that is reacting. On the right side of the scales, they are balancing that out. This goes back to the heart of what mark carney said last thursday. Raising rates right now is almost the last line of defense. That is not what he wants to do to control the Housing Market. That is why they want to use those macro credentials. Boe headline, clearly surprised by the low probability attached to a 2014 rate hike. Miles, we had a story saying that he sees only a 10 probability. The markets have repriced the rate hike. What is the expectation now . Still early 2015 . Pimco says the Fourth Quarter of this year. Despite the low inflation numbers, the lowest inflation since 2009 which you got yesterday, nothing will stop the bank of england. Guy, i am surprised at dollarsterling. Fairly flickering. Am i being unfair . A lot of it has been priced in. Waysis repetition in some of what carney livered. In some ways, we have had the message. Thatis just a confirmation the mpc is broadly thinking along those same lines. The boe saying it would be difficult to reverse the first rate hike. That may be goes to a little bit of caution around that first rate hike. The first one in the cycle is often the most important. Nevertheless, you get a sense that they are taking this seriously. Or they be our they are being more cautious. The bank of england can be argued to start earlier. To start earlier means more gradual hikes. This is my bone of contention with the bank of england. I have lived through a number of rate cycles. When rate hikes, and this is where i have a big issue with there is nobody out there that can absolutely with any authority, even mark carney, died the markets. Nobody has a clue. We have never had this quantitative easing before. Will janet go for a full carney . Line of the day. Have a look at my twitter account. We are exactly where we started before these minutes came out. Yes, it will come down to janet. We will have plenty of coverage of that here on bloomberg television. Gradual rate hikes. The market has repriced quite significantly over the last couple of days. Yes. You have to be thinking that increasingly the expected rate curve, rate path of the u. S. Is going to be much shallower than we anticipated and probably peak lower than we anticipated as well. The market is continuing to price that story in. The market is currently foring in 0. 6 0. 75 september. The market is pricing in 1 for the semper. This is short sterling in the u. K. Saying, 1 for december and it is saying by 1. 15 . F next year, go figure on your mortgage. Do the calculations. We will talk more about what is happening in the u. K. Manus cranny will be back. We will get more insight later on the pulse. Now, a deal to end south africas strike is set to be delayed after the Union Representing more than 70,000 workers made fresh demands. Usomberg tv africa joins from johannesburg with more. Tell us, what is the union demanding . Good morning to you. The union says they want each 280 for the strike. Millionooking at 19. 6 over and above the 2. 2 billion that have been lost. Those are the three companies that have been affected by this 21week strike. They are saying that all workers facing criminal charges, those should be withdrawn. They have said that they will ensure no other strike occurs down the line if the Mining Companies pledge to not cut any jobs. We have heard which a bank coming out and saying that Angloamerican Platinum might be considering selling some of its assets, perhaps an easy way to get out of a cost implication. About zuma. This is the first state of the union delivered since the election. What did he say . A big part of what he had to say, what did he say on that . One of the biggest things we saw coming through, this is going to be based on the economy. The s p downgraded south africa just last week. This is all about ensuring investor confidence. He spoke about the mining strike. He said it is one of the reasons we see lower economic growth. He also said Mining Companies should be doing more to improve the Living Conditions of miners. He said that Mining Companies face a deadline this year to hostels be the converted into Housing Units and one person per room. These are all legacy issues for the companies. The other big thing that president zuma came up with was focused on what he called a radical socioeconomic transformation which includes the overhauling of the energy sector. It is something we have heard before. Thanks. We will be back to speak to you again later. Lets get you some world cup news. L jim the algeria. Algeria. M beat l jim made a comeback belgium made a comeback. The mexicobrazil game, 00. Staying with the world cup, brazilian law requires that fifa it is a big problem in brazil. Some seats are being occupied by people who dont need much extra space. Fifa is using World Health Organization guidelines to check who qualified for the seats which are sold at halfprice. Perform aorganizers random check to confirm whether fans bought the tickets meet the criteria. Twice the amount of seats for half the price . Or is it there are two seats . I think it is half the price for twice the room. With us incentivizing utep reach that limit to get a cheaper world cup ticket. Arrests a mexican drug trafficker on his way to watch his National Soccer team play at the cup. Probably didnt have a very good day or game. 00 and he got arrested. He was arrested at the airport in rio. Time next year a team from the u. K. Will try and break the land speed record. Their supersonic car is in the advanced stages of construction. Tom gibson got a sneak peek of what it looks like from the drivers seat. To break the land speed record, your car needs to be special. To break the 1000 mile an hour apex it needs to be an of technology. This is the newly unveiled cockpit of the bloodhound, a jet on wheels to you and me. For the comfort of the pilot, his cabin has to suit him. The Steering Wheel is 3d printed titanium. That is not all that is bespoke. He sat in a pool of resin to produce the shape of his seat. Her ring a 1000 mile an hour run, but how will cover 1200 miles in two minutes. Well miles in two minutes. 12 miles in two minutes. The instruments have been coated with a special nonreflective paint for optimum visibility. The walls are white for maximum brightness. The windscreen is thicker than a fighter jets and can survive and can survive an impact of a at 900 milesbird per hour. On board, one jet engine and two rockets. They provide 21 tons of thrust. Five years of design so far, the Bloodhound Team are aiming for a 2016 launch. Fast car. It would be quite a ride, i can tell you. Anyway, we are going to take a break. We are back in a couple of minutes. See you then. Welcome back. You are watching the pulse. Islamist insurgents have captured iraqs Biggest Oil Refinery according to a top security official. He refinery is located to the north of baghdad. Next guest says that any threat to iraqs capital could turn the world output of the whole country into disarray. The leads now is market analyst. Good morning to you. The news over the last hour is that this refinery now looks like it has fallen or is at least on fire. What are the implications of that . It clearly shows that isis is expanding its presence. This particular refinery supplies baghdad in general. It is likely to have an impact on the economy. This is one of the largest refineries in iraq. We keep hearing that we havent seen a bigger spike in the bulk ofecause Oil Production infrastructure is in the south of the country. Is that safe . You can question that as well. The situation seems to be getting worse day by day. Yes, the bulk of production is coming from south of iraq that the question is, if isis takes , the question of oil supply security in south of iraq goes flying out of the window. Of havingestion security over oil. The Big Oil Companies are removing nonessential personnel from their facilities in the south of iraq. To what extent does that degrade those facilities . Oil companies are going to take precautionary measures to make sure their staff is safe. In terms of degrading the facility itself the ability to produce. Are we going to see lower output . What we are seeing now is an increase from the south. Int is basically because krg particular is going to have leverage over baghdad. That is probably going to compromise the exports. Iraq is shia dominated, a safer region for now. It is able to export because of the south terminal. We would potentially see them in the near term, you could see some increase in exports with Oil Companies trying to export as much as possible. Putting their foot on the pedal. Talk to us a little bit more about kurdistan. Clearly they are gaining some autonomy here amongst the chaos. Even before this got going, they had started to export oil from turkey, right . How much actual capacity do they have to pick up the slack if we lose production in the south . If we lose production from the south, that is a major damage to the oil market. The south produces 90 of iraqs total oil. The restrictions were because of baghdad. They were unable to compromise on what should be given to krg. It could potentially rise for krg because they have that potential to increase it. Regions haveish irkuk which could increase the output. A part of the Northern Iraq region and not the krg region. Not replace the bulk of oil that comes out of the south of the area. Do i need to start rethinking my assumptions on what iran is going to be delivering over the next few years . Iran could come out of this as one of the big winners. I think you are right. The p5 plus one meeting is going on right now. I think iran has an upper hand here. As you can see from the western governments reopening their embassies in iran, they are losing what they initially had. Iran could see a significant role in maintaining stability in the region as iran understands the crisis. It does not itself want any stability instability reaching its own country. Iran could play a strong role and the west knows that. This might have to take a step back. We could see a breakthrough in nuclear sooner than we were expecting. Ok. Then you very much indeed. Come, cutting your carbon footprint. We are going to be live with the ceo of carbon culture to get tips on slashing your energy use. Welcome back. Youre watching the pulse. From governments to corporations, organizations worldwide need to tighten their carbon belts according to my next guest. Collective action combined with Realtime Data analytics can lead to big savings. He is ceo of carbon culture. Good morning. Talk to me about what you are doing. Effectively, what you are creating is a platform for organizations, anybody that effectively Consumes Energy and has a carbon footprint, to track their data, to open their books up to other people so they can get a view of what is going on. It is a sort of open source open data solution to the carbon footprint. That is right. Witharted working organizations in the u k and now we started work with corporations and charities as well. Initially what we were trying to do is help make Energy Sustainability and do something that is relevant and meaningful. Not everybody cares about green but there are lots of things you can motivate people to have that. I making it attractive and making it fit with the values people have. People think about what they are going to do on the weekend rather than how to save penguins. How can we frame the activities that lead to sustainability, the things we all need but are distant and abstract, how do we make those more immediate and enjoyable . The net result of that has been what . Where are you now with that process . We have discovered a lot. We have been learning what to do. What we do right and what we do wrong. , we may save 5 of gas demand in a few weeks. Just give me an example of what we are talking about here. Some of these things are fairly obvious. Being vegetarian cuts down on your footprint because you are consuming less the. And has a healthcare outcome as well. Lots of these things come together. People want to be fitter. They want to have a healthier lifestyle. Also, it is great. Everyone wants to do that. That applies in Business Decisions and political decisions as well. Everyone wants to make decisions that have the best outcome but they dont have the information to make the call that is good for business and saves energy and carbon. What you can do as well is give them information about how much companies are saving. That has an affect on the bottom line. One of the powerful outcomes is that improves the quality of data. They have got really good measurement, really good reporting. That enables them to make better decisions. What is beginning to happen with energy and carbon is the same thing. Organizations are opening up their data. The data is getting much better. Up tousinesses can save 20 of their Energy Demand just by using better data. They need to manage it. It is quite a cheap thing to do. When you start open data, that is what happens. Cities are beginning to see how when they join that together it can make the city a better place to do business. We are going to leave it there. Thank you very much. Kleist backing up marconi at the bank of england. A rate rise could happen sooner than investors expect. As the fed gets ready to release its decision. Ge set to make another offer for alstom as it fends off siemens. Internet of things a 1 trillion opportunity or not . Biginterview about the next trend in technology is coming up shortly. Good morning to our viewers in europe, good evening to those in asia. A very warm welcome for those just waking up in the u. S. I am guy johnson. I am olivia sterns, this is the pulse. Live from london. World cup menu. If you are in brazil and do not want a big mac. It is not argentine beef. News. Aking this is according to the ukrainian president. Going toting he is order a unilateral ceasefire shortly. Co the definition might be a few days, this is something to keep an eye on. , thekrainian situation explosion and the gas pipeline. As we get more information we will bring it to you. Lets turn our attention to what has been happening with the bank of england. It has released its minutes and the last halfhour, manus cranny has been deciphering the headlines. Break them down. Thats a bit of a buildup. No pressure. Nine people vote, including the governor. The focus was would there be dissent, did anyone shift their view and vote for a rate rise yeah code nobody dead, yet. Nobody did, yet. We now understand why mark carney said hello, you have it wrong. There will be a rate hike. It is going to come very fast and that is what these minutes say. Susan you expect. The bank of england is surprised by the low probability attached to the 2014 rate rise. Marconi, a lot of Market Reaction was driven in this way last friday. Low. R sterling a new why are we not breaking through 1. 70. It isted the highs, already having tested that part of the market. Some of the other issues. Rate timing, boe surprised by the low probability. How much is Spare Capacity have you got . What is happening with productivity as well. Absorbed more quickly than expected, using up more of our Human Capital resources in factories. Heading back to the Old Fashioned element, Spare Capacity is Conveyor Belts. So much coming off of the Conveyor Belts and you dont have another Conveyor Belt to use. Stay with it, moving onto the language of the mtc. War balance more balance. Repeated. He phrase along with the line that officials needed to have more slack reducing. 1 to 1. 5 , move earlier because that will help with the gradual trajectory. People have got their head around the fact that rates are going to rise. Does a second rise, and the First Quarter or six months after . What is the path look like . They guidance is that the trajectory or the velocity of on ae is more likely to be quarterly basis. The first one will be 25 basis points and then quarterly. I would counter strongly about eating that piece of pie. And rates go, memory history of rates in 25 years have they gone slowly and gradually. Minutese u. S. , five come out today. Some are expecting an acceleration of the tabor. What are we expecting to hear from janet yellen . That will come out from the minutes of the fomc will be where everybody on the dot. Laces their matrix analysis. There is great article on business insider, could janet carney . The full what mark carney did last thursday, you have got it wrong, we are going to raise rates. Downgrade expectations for the u. S. Economy . The imf has already done that. This year. 4 or 5 inflation picking up. Above 2 . Ge said to the refining its alstom bid to assure france. Presenting akaeser joint bid with mitsubishi. Coming down to the wire. They could make a new offer by friday. Perhaps some new concessions . Thats right. Probably not going to be an increase in the prize, 17 billion for the energy assets. Could be more guarantees offered by ge on the bid. According to people familiar with the matter, ge will increase the number of job creation. They have promised to create 1000 french jobs over the next two years. They want to make sure the french retain access to nuclear technology. Response to siemens lobbying yesterday in paris. Ceo, joe kaeser, the was in front of lawmakers arguing for his date with mitsubishi, he said it would safeguard french jobs. We do not make an offer to harm another company or harm somebody. We want an offer that will be useful to everyone to alstom, mitsubishi, siemens, and all some employees, to the alstom employees who are proud of their company. Dismantling. Ut on the contrary, to reinforce the group. That is testimony by the siemens ceo. Three weeks after jeffrey immelt. Lawmakers seeing more ceos than they have in a long time. In france, getting to stay on board is almost as important as theshareholders getting state on board is almost as important as getting the shareholders. Talk about mitsubishi, what have we learned . Whetherain question is the French Company holding 29 thelstom will agree to sell stake to mitsubishi. Mitsubishi has offered 900 Million Euros for this stake. The mitsubishi ceo was testifying last night. He said he has been in ongoing discussions and would like to see the french, long and take a 10 stake. Bouygues is not going to sell, we will have to ues what the ceo of bouygy will have to say when he testifies. Caroline joining us from. Aris the french talking about the Train Company essentially going to the americans or the germans or whatever, maybe that will not happen. A french train strike on. They want trains, they dont want to use them. French airport strike coming up as well. Ge likely to up the deal, they dont want the rail unit. Nice trains. Down withs sat caroline had to talk about the impact of the internet of things. Of all of these applications, it is going to be a small chip with a processor, a sensor. Tomach,cows s monitoring ph levels to work out whether it is healthy. Connected to that is Wireless Connectivity to remotely monitor. These are the key ingredients a sensor, processor, and Wireless Connectivity. That can be deployed in all sorts of places cow stomachs, parking places, subway trains. Goingn work out what is on inside your stomach or are you taking your medication properly. Hundreds of applications. Is there concern about , privacy, is that something you have to respond to . The issue about security come privacy, what can be used for what purpose is important. Is providing technologies so data can be secured. It is the applications on top of that that are going to dictate how that data is used. That as a important consumer you own your data and are able to dictate how it gets used. We are looking at a bunch of technologies and working with partners to try to put all these. Ieces together as a user, you can feel comfortable about where the data goes. Arm speaking to Caroline Hyde. The opportunities for the internet of things. What sort of numbers are we talking about and how real is this . This is pretty real, i am in a small apartment. I can play with the lights via the internet and switched the television onto cctv so i have security. 300 items in this flat alone connected to the internet. I can turn off my lighting and thermostat. Many estimate, mckinsey says by 2020, 50 billion items will be. Onnected to the internet seven times the world population. This is why the numbers are staggering. This is why mckinsey says you can have 6 trillion added to the economy. John chambers at cisco says think bigger, think 19 trillion. That is how much the internet of things could add to the Global Economy for efficiency. It is not about creating mood lighting. It is about every single light, streetlamp being connected to the internet. Why have one running that is damaged . You can tell the council it is off. Switched off when people are not walking through the road. Depressing the amount a locality spends on lighting. In hospitals, you do not have to on standby. The elderly at home can be less intrusive. You can have sensors throughout the house to ensure they are going by their daily routine. All this will save money and add to our quality of life. This is something that is not quite a reality yet. Many feel the internet of things is a fad, i think it is becoming a reality. Interesting he said consumers would not be interested in whether or not their street lights powered by the internet of things. Thank you very much. Coming up, a tale of two Central Banks. Looking ahead to the feds guidance. When we return, stay tuned to the pulse. Good morning, welcome back. A quick fx chat. List that happening with the cable rate. The reaction after the mpc minutes comment Monetary Policy committee is backing the boss. Surprised the market has priced the possibility of the first rate hike in 2015 rather than 2014. Maybe the market should reconsider this, the market has reconsider. As a result, we are trading a little lower. A little bit of caution creeping in. Maybe after some of the commentary, the rate hike cannot be reversed, other comments indicating maybe it is not quite such a done deal. That is where we are on the pound, 1. 6 945. We had a touch at 1. 70 a few days back. More on the minutes, we are joined by the chief economist at ehrenberg. Thanks for coming down. The message from the bank of england is that they are surprised by the low probability of a 2014 hike that is currently in. Ed they say a gradual hike might mean starting sooner than later. Have you changed your forecast, when are you expecting a hike . Saying before mr. Kanye. The first hike will be coming in november this year. We heard from the bank of carney has prepared us for the first rate hike. It is never a done deal, the mets make that clear. We are moving that way with strong economic data. Why are we hiking rates in this country if it is clearly a concern about the Housing Market . Is it a concern about what is happening in terms of the rate of growth and dislike being used up and the unemployment numbers that have come down as quickly as they are . Why are we doing this . Is cominging together. We have the Housing Market with strong house price data. You could have argued this is just the Housing Market and that you might need regulatory tools rather than the blunt instrument of a rate hike to deal with that. We have seen strong Employment Data on the back of strong g rowth. Growth being at annualized rates of above 3 . If you translate the recent u. K. Labor market data into the u. S. , we would be talking about three months of 650 thousand u. S. Payrolls. Thats the equivalent of the recent u. K. Labor market data. Jobs are plentiful. It is the bottom trying to edge up. The forwardlooking centralbank , signs of a bubble in the Housing Market. A bubble possibly to come if they do not act. Is like your forecasts are ahead of confessing ahead of consensus. Above 3 , it was natural for fairly early this bank of england will be forced to hike earlier than they were saying. The Biggest Issue is bank of englands credibility. Thats the question i was going to ask, why should i believe . Everything i have got here, hes told me all kinds of things. None of them have turned out to be true. That is a serious issue has complained the market not priced in early rate hikes. The policy the bank of england is likely to pursue will probably be the right policy gradual rate hikes starting early. They will be not easy for the to believe what they are saying now is a guide to what will happen half a year or a year from now. The policy seems to be heading. He right way but credibility to dealps the goal is with volatility. Interesting theory. I hope that is not the goal. Then you will probably be playing with fire. If you are sending out misleading signals to stoke volatility, that goes against my understanding of how a central bank should behave. We will not get into that. Rateme where the terminal is and when we hit the peak in the cycle. Probably 2017 with a rate around 3 . We might the at 2. 5 by the end of 2016. What about the macro prudential tools we are supposed to be hearing about next week. Rate hike, last line of defense to cool off the Housing Market. What do you think he is going to announce . I think it will force banks to be more cautious. For instance, setting aside more capital against mortgage loans. And by providing clear limits to the value ratios banks can offer. Thank you. Stay tuned to the pulse, back with more in two. Welcome back, lets look at the new energy top headlines. Elon musk extending his factory concept to solar energy. His solar city announced plans to build a plant in new york state. The factory will have at least a gigawatt of annual capacity. It is snapping up another company for 350 million. Scottish Power Renewables a windn approval for farm. This could power as many as 820,000 homes. Generation is expected to begin in 2019. Fitch ratings says utility newanies can work with a mechanism. The affected companies include bdp. Gets aons tube makeover. How the internet of things could rejuvenate the worlds oldest underground system. The future of london as a smart city. Follow us on twitter. Guy is guyjohnsontv, i am oliviastearns. Welcome back. These are the top headlines. The bank of england released the last policy meeting, policymakers said a rate increase this year may be more likely that investors anticipated. The debate on the timing is very much heating up here in the u k can tell you Prime Minister will meet the italian Prime Minister will meet in rome today. One topic likely to be discussed as the countries austerity measures. The imf has released its latest report for italy as is the economic recovery remains fragile. Do European Union will have to rely on antitrust rules to curb Google Search engine dominance. Exclusive interview, germanys interior minister. Europe cant unravel chinese, american, indian, or south american companies. What kind of legal system would that be . That is not going to work. European look at how markets are trading. Manus cranny has more. Day two of rising equity markets, geopolitical issues taking a step back. Literallyspoke to are sitting at the desk going, when is the next leg owing to fall . Ukraine or to be something more prophetic in iraq . We have had the policy committee. What will come from the fed will really drive sentiment. The emerging Market Sentiment is lower. That ahead of Janet Yellens News Conference later on this evening. You see a little bit of money coming in, for example, the rupee. The market just a little bit unsure, a little bit hesitant. And dollar has more or less been on a rising burn as we meeting. His fomc it is just coming back off its highs. You can see the more recent trajectory has been on the upside, just a little bit softer into the trade. Today, a few stock stories. He was equity futures, the next big event is the Federal Reserve minutes and estimates. Equity futures in the United States flat. Im being overgenerous. Here in the United Kingdom or in europe, more specifically, a couple of stocks to watch. We have the high Search Engine here in the United Kingdom. Low end of the range for them. Profits up, margins down. Time, 25 minutes surveillance is coming up. He joins us from new york with a preview. What are you looking at today . We will be looking at value in the market, away from the fed, but the Market Reaction to what big Central Banks do. It is fed day. I will be on with Mark Crumpton at 2 00 p. M. Before that, value investing. Thomas purcell he with rbc capital will be joining us. I want to focus on this new vector in inflation. The back and forth on what gartner Governor Carney will do. Yesterday in the u. K. , we have data showing inflation coming in a 1. 5 yearoveryear, the lowest level in nearly five years. Interesting to see how that factors in to mark ernies thinking. The message from the bank of england this morning am a still surprised that when markets are pricing and a rate hike st. Nick unlikely, and 2014. Could likely be 2014. I dont think theres been a great reaction that i saw. You see sterling, 1. 6946. 169. 46. I think it is this ferment of a very low base of inflation where up we go, is it enough yet . No. But do you pull forward from 2016 . You see the raging debate with what bill gross is adjusting and imf and what those more. Ptimistic are suggesting these people are more optimistic than the imf. It really looks like the u. K. Is pulling ahead in the same month the imf downgrades its forecast for u. S. Growth and also says they got it wrong on the u. K. And austerity may have been the way to go. Thank you so much, tom keene. Surveillance in 25 minutes time. But get more Market Reaction. Were going to talk about tech. System isnderground the worlds oldest, 150 years in of ation getting something technological makeover. It is part of a general move by london to use the internet in the underground to help with an increasing population in moscow. Londons underground carries the cities 8 Million People on one billion trips a year. Theres a problem. The city is growing bigger and that means more stress on infrastructure. Harnesshe u. K. Wants to the internet of things to make london smart and make smarter investment into infrastructure. This Research Facility is trying to do just that. It is finding ways to make catapult systems more efficient. We know where the car is. It is connected with gps location. We can so that information to local authorities, there is a pothole there, please, go fix it. That is the kind of Technology Wont want to make happen we want to make happen to improve the efficiency with which the transport system works. That means monitoring. Microsoft is working with two other companies for sensors that monitor things like escalator vibration and check for a minor maladies im normalitys were temperature. After your journey, if you feel like hitting the shops, the Crown Estates has installed beacons on regent street. Soon, smartphone shoppers will offered discounts as they browse. Heathrow, has smart toilets. When repairsrators need to be done. Globally by 2025, we estimate it to be worth 900 billion pounds globally. We want you could capture about 10 of that market. Investment into making london down nt afford to be dumb. Guy, youre not sold on the smart toilets . It is energy efficiency. But continue the conversation on londons future. We will be back with Caroline Hyde after the break. London technology we continuing. She will be live with the ceo of tech city. Actually, we had to her now. Caroline, take it away. Thanks. The ceo of tech city u. K. Joins me now to talk all things internet, all things Technology Week because it is london Technology Week at the moment. How much is london embracing the mentor the internet of things . How big of an opportunity is it for some of the started space tear . It is a terrific opportunity. London is known for a lot of development. But theres also cambridge, which is close by, just a few miles away. Theyre very well known for hardware, which is why we are launching the internet of things grant fund to sort of combine the expertise you get from cambridge and from london and the expertise around the internet of things. You have expertise in hardware, middleware, and software and apply Business Intelligence in order to sort of korean a stack stack, i call the iot the expertise you need to bring together opportunities for startups and later stage companies. Digital meet the physical world. Tell us how they can get the fund and what startups what it will do for startups, will they immediately be able to or is it moret for councils and the government strategically looking at lighting and health care making a more efficient . The internet of things is a transformative development. It could be either a consumer application or a Business Enterprise application. The point is, the opportunity ,round the internet of things it crosses both those areas. We are partnered with john lewis and unilever because we believe in some instances, some of the applications that may come through or some of the winners that may come through will need to access a route to market, access consumers. Some of them will be consumer and some will be Business Enterprise applications that are much more about efficiency through sensors and data collection, to make better Business Decisions. Youre helping growth tell us how important you think the Technology Sector is becoming for growth to the economy as a whole, to the United Kingdom and indeed, the world. Goingre is clearly a boom on not just in london, but across the u. K. Was in newcastle a few weeks ago, there is a lot of opportunity right now in the tech sector. I think what is great about what is going on here in the u. K. Is youre getting a lot of companies that are developing solutions to existing business protocols. If you think what is great about london, youve got the Strong Financial sector for, but then you have this fusion going on between Technology Companies working with the financial city, banks, Insurance Companies and trying to figure out, what are the applications and solutions we develop to make our companies more efficient . All techwhy 2 3 of investment in europe has been in the u. K. As i said, it is not just about london. It is about hemorrhage celebrating it is about , gaming in newcastle, Artificial Intelligence in edinburgh, and robotics in bristol. I mean, that is what is exciting. I think theres a real momentum now in the position of the u. K. As a digital powerhouse in the world. Whats one thing are you hearing from the startups that they need to just carry on the sort of powerhouse that is developing as you say . With anything, i think talent, having a pipeline of talent is essential. Which is why one of the roles we is forming senior policy makers in about the challenges and the needs of this entrepreneurship in the u. K. One result of the work we have been doing i actually hearing these challenges is the introduction of the Exceptional Talent visa. We are working with the home office in endorsing visas for helping later stage highgrowth companies attract the talent they need in order to continue to grow. And sometimes you need to look beyond the borders of the eu of brazil and russia and the United States, singapore. I think that is one result where we basically right intersection between the private and tech sectors in the government in order to address specific issues. But that is deftly one of the essential toe seen the continuation of this momentum in growth. It is been wonderful speaking to us. It is been wonderful speaking to. Back to you in the studio. We will be talking much more about robotics. Apparently, good in bristol but also some universities in london. We will be live with them tomorrow. Thank you so much, Caroline Hyde, there were the ceo of tech city. We will be back in two minutes. Good morning, welcome back to the pulse. The china has blocked the formation of a Global Shipping pact is in shares tumbling. ,or more now on chinas move our guest joins us on the phone from copenhagen. Good morning. How did you guys, the other partners and pretty much everybody else, do you think ms. Read how the chinese were going to react to this . That is a good question. I think we have worked diligently throughout the process with the ministry of commerce try to address some of the concerns that they have flagged early on in the process. For most of the process that we would get to a compromise with them. And at the end of the process, they decided this was not enough for them in the market share where we propose to cooperate on some of the traits were simply too high for them to let the deal go through. There any hope of the peace freelance coming back . Are you hoping they might change their mind . We have stopped all the work on is the decision of the ministry of commerce is final. The piii in its current form is just not going to happen. Find a to move on and plan b or substitute scenario because the most important thing that the work has shown us is in this competitive industry, there is a way to get to a lowercost raise them without was previously possible. It wont take the shape of a p3 alliance but we have to find another way to tap into the years tond the come. Theres potentially a plan be available to you guys here. Clearly, low rates are something you need to deal with. There is capacity in the industry. To do. What designed p3 what can we be looking at Going Forward . A lot of digital engines on this already. Give us a sense of what we may be looking at Going Forward. For us, we have different tools in our toolbox that we need to activate. The thoughts are not at a maturity level yet that we can share final solution but we have to look more at how we operate our fleets, the speed of our services, the potential corporations that we can initiate in these trades even if not the same shape and form as would have implied, but extending cooperation and looking at a different would operate in some of the features that we will try to tap into the savings. Do you think this is a specific case or do you think this is part of a growing trend that the chinese wanting maybe to flex their muscles, particularly when it comes to Regulatory Oversight of large global deals . It is a very difficult question, and certainly one that i cannot answer. I have only had dealings with the ministry of commerce in connection with this case and im not really studied the jurisprudence on some of the other cases, so it is difficult for me to really comment on that in terms of trend. Where are we with overcapacity . Have you cleared out the glut were will we still seem prices struggle for the coming years . I think the industry in general is saddled with overcapacity for years to come. What we were trying to do with p3 was to manage the fleet in a different way but also open up for possibilities of cascading tonnage around and managing the overcapacity in a much more responsible way than what seems to be happening right now. So it was really to try to manage that overcapacity, reduce the cost, and improve the product. Now, this cannot take place. It means that root cause of p3 is still there, theres overcapacity in the market, low growth in the trade, and theres a fairly high audibled. These root causes will need to anotherssed one way or by the players in the industry. We will leave it there. Vincent, thank you for joining us. Were going to take a break. Welcome back. Table making session lows this after the bank of England Committee delivered its last minutes from two weeks ago. It was pretty unequivocal. The market is maybe mispriced the possibility of a 14 right hike. That is not what i would have expected. We have already taken this one up so maybe it is already priced in. Now for look at what were watching for the rest of the day, were joined by manus cranny from our markets editor. You are watching the fed. I think the whole world will be watching the fed. I have to say, i love business insiders headline. Imagine janet yellen telling the entire world shes going to raise more rates more quickly. But who am i . Look, theyre going to give us new estimates in terms of what is going on in the United States, inflation and growth. I think there will probably be more importantly tomorrow morning, i will be tortured. Members of the fomc, they get a piece of paper and go, oh, you think rates are going to be there, there. Before that, we have this press conference taking place shortly between the british chancellor and the chinese premier. We do, indeed. There is a live shot. Is chinahat we know has 500 billion dollars to invest. No hard landing. Growth at 7. 5 is Strong Enough to make growth of point. We will see you tomorrow. The shiite leader of iraq and baghdad coalesced power. Executions of sunni prisoners signal new sectarian divide. President obama considers selective airstrikes. The fed, they meet. Are they behind the proverbial eightball . Adam johnson needs a new belt. That is an exclusive. This is bloomberg surveillance. World live from our headquarters in new york this wednesday, june 18, i am tom keene with scarlet fu and adam johnson as well. What is wrong with my black belt . Classic kind of guy. It matches my shoes. You need a Mickey Mantle read. Overnight, the bank of england expressing concern, surprise perhaps in the minutes by the markets low perception of a potential rate rise in 2014. Theyre saying, market, wake up