Transcripts For BLOOMBERG The Pulse 20140724

Good morning, everybody. You are watching the pulse. Im guy johnson. To 20 feetrs fly up high. Meet the hover board. This looks like a fun way to spend your summer. Ofs, live with the ceo Bentley Motors. This is a books wagon owned business. We will talk to him about his exposure to russia and how he views the ongoing geopolitical story in relation to his business. Talking of which, we have been talking to a number of big bosses this morning who have significant business in russia. Ceo. F them is unilevers he says he is committed to the country. Caroline hyde joins us. He said earlier this month that a land ofssais asa as opportunity. Is that the sent to government this morning . He is not steering away from that. In june, he was meeting with the deputy Prime Minister saying they were looking at acquisitions over there. They recently bought a Makeup Company and russia. In russia. They have more than 6000 employees. An. Com think. Company. Glodutch is the pressure building . He was very calm, but clearly his Business Model is not changing. My thoughts and said tha ympathies definitely go out to the families. It is a definite reminder that we need to get the political leaders to stop and to come with solutions. It obviously makes the people suffer but it is not good for business, either. For hundredsaround of years and we will be around for hundreds of more years and we will continue to focus on the people everywhere in the world and make their lives better. Many of the conflicts you see in property and exclusion. You can trace it back in the ukraine as well. We have to be sure that we continue to help these economies do better. I think that will be the main contribution we can make. You say you want european politicians to step up. Do you want to see more sanctions . Do you want the netherlands or the u. K. To be meeting . To be leading . Saying we have too many conflicts in africa, the middle east, ukraine. It is time the leaders put a global government system in place. Obviously, that is what we will work on. We are committed to doing our business everywhere we can help the people. There is no reason for us to say we will not have longterm plans in every country including in russia. About 1 billion invested by russia. In this is a very compassionate and sensitive man. He was caught in a terrorist attack in 2008. The bombing of the tosaj mahal hotel. Cannotot someone they empathize with these terrifying situations but clearly he feels that his misses need to pressure politicians, but they are not going to change their Business Models because of certain unrest. Maybe not a direct impact as a result of the story we have mh17,covered via flight but nevertheless russian economy looking more tricky at the moment. Ruble weakening. A concern. T to be it has to be. He did speak optimistically about how the second half is going. As long as politics does not wrap up any further, as long as we do not have a terrible situation, he feels that we are troughing in terms of sales from unilever. They put out numbers that have disappointed. 3. 78 missed in sales. A 400 million euro hit from emerging markets. Russia continues to see an economic slowdown. It is teetering on recession. He says as long as the situation in ukraine does not escalate, we should hit a trough. He sees the second half improving as long as it does not escalate. A number of ifs there. Caroline hyde been talking to unilever ceo. The data has been interesting because the market was short and to the eurozone numbers we have had. We had the aggregate number coming together in terms of the manufacturing data. And services. Both have risen. Let me show you the euro. I want to show you this, because the market eurodollar. The market was clearly sure going into the data, particularly the german number. Thatan see the spike resulted from that. So the market was short. Therefore you get a much bigger leg higher. We are still out of the range. 1. 3474. Lets get an idea of what these numbers are telling us. That, we need to talk to hans nichols are International Correspondent in berlin. Im in berlin. Good morning, where the number was strong out of germany, soft out of france. When we get the composite number it is off the charts. Pmiame in at 54, the number that has services and manufacturing. The consensus estimate was 52. 8. So a full point ahead. That means there is a lot of strength in the euro zone outside just germany. Things picking up in spain. Unemployment dropped lowerthanexpected there. Overall, this is a positive number. In keeping with. 3 gdp growth. We will get growth later in the month. It may even be higher than that. It is that strong. We will watch and see what the euro does and what this means for the bundesbank or the ecb. Does it mean that they will have to strengthen the euro and have the germans less likely to do quantitative easing . Russiae note on exposure. We were bracing for bad numbers coming out of germany because of pressure exposure. Take a look at some of the companies there, what their revenues are in russia. Pretty high. Allel, basf, siemens, billiondollar sales but it does not seem to be affecting their bottom line. Its amazing. The fact we have had this strong number at a time when everybody was expecting the ecb to have to do more. But it paints a picture as well of the trouble inside the french economy. France seems to be the outlier. When i look at the poll numbers more in depth, well try to see how much more is there aside from germany. When you look at these numbers right away, part of it is explained by germanys strength but not all of it. Weigh againstto that, the softness of france. A tale of two countries. What france does in terms of their deficits, what they do for ratio. Ebt to gdp it will be increasingly difficult for hollande to figure out ways to stimulate the economy when the rest of europe is doing what it is doing. And that gets us back to sanctions, the mistrial warships. What does france do on those . Jobs andclearly needs growth but he could be in a difficult position. Guy . Hans, thanks very much, indeed. One other number that came through at the same time was italian retail sales. A really disappointing figure there. Some economy showing strength. Others very much not. France, italy may be suffering right now. Has nichols working his way through the date of this morning. Now u. S. Regulators have lifted the ban on bengurion airport. Some carrier say that could cancel more flight. Stillncern there safety. Elliott gotkine is live in tel aviv. The faa says it is safe . Israelis would say it has always been saved to come and go from israel, and the faa was overreacting. But the u. S. Federal aviation administration, the regulator and the u. S. , now says that after taking all the information into account, they have concluded that it is ok for u. S. Airlines to fly to and from israel if they want to. Some airlines may decide they still do not inc. It is safe to do so. Is still do not think it safe. There are a number of airlines that are still not flying. Korean airlines and Turkish Airlines. A quick look at the arrivals and departures. A vast majority of flights they canceled or not final. Thanks for the update. Elliott gotkine joining us from tel aviv. Bengurion as he says, not fully open. Coming up, were going to talk about moscow. And basfs relationship with russia. Geopolitical turmoil. Yes, it is affecting business but the numbers out this morning tell of strength. We will go through the details when we come back. Good morning, everybody. You are watching the pulse. Lets get back to our big focus. Today we are looking at how european businesses with exposure to pressure are responding to the standoff between the country and the west. Basf is definitely one of those companies. Controversialns actions in ukraine, the firm is strengthening ties with gazpromm. Earlier, and edward spoke to the companies ceo. We are talking about an asset swap deal that is going to go ahead. Everything is in place but some legal preparations we have to do internally still have to be undertaken. Therefore, since it will happen in the fall, not as previously announced on july 1. Is there a chance that anything of a political nature happening this from at a National Level within germany or an eu level . Is must be watching what happening in terms of conversations about sanctions in the eu. Actually, the deal has been approved both by the European Union and the German Government last year. And what is happening, we basically increase a share from 50 to 100 . Gazprom is already dealing with the german gas market and they have done this for many years and a very responsible way. I do not eat any reason why they should change their behavior any reason why they should change their behavior. Do you think further sanctions would be a bad idea . Given the relationship between gazprom and the german the economy. It is ups point time, to the politicians to decide what they want to do and they will implement it. If sanctions are really increased over the next couple of days. What exposure do you have to the russian market right now . How do you see that changing . Is the relationship between your business and russia, is it going to intensify or lesson as we look ahead . Look ahead . As we if the russian economy does not grow, our businesses not grow. More importantly, our business has dropped a bit during this year, which is hurtful th because we have a lot of agricultural business in the country. We do not see a good recovery on the chemical side. On the oil and gas side, weve seen no effect on the political crisis which we watch. Ok. So basf exposed to russia by this asset swap it is doing with gazprom. Gasx in russia. It is a Storage Company for exposure to russian gas. It is exposed vis a vis its stock. It is a big relationship. How does it work from here . Patrick lambert covers the stock. In terms of putting basfs relationship with russia into context, how does it compare with other companies . Its important. Typically the European Center has safe exposure sending products to the russian market, 2 . Very little. For basf, its 20 of net income. A significant 0 the oil and gas business is 20 . Where shall we be in terms of value and production . Its important. How exposed to think the company is . The numbers. Ut we do not understand the geopolitics. Gazprom is being left of every list because of his significance to western europe. But life is becoming harder for gazprom and russia. In. Getting deals done things are slowing down in the south sea pipeline. We will see how it is how it evolves. So far we have not seen anything. The deal has been set up. Swap. A there is no impact today. The impact on financials. Worstcase scenario, we go back to twhere we were in 2012. And nothing too much in terms of valuations. Those of the specifics relating to basf. Wn terms of feedstock, ho importance russia in terms of basf . Ive read,from what heirany imports 15 of t gas from russia. Basf is the same. Atusing gazprom source gas 50 so it is important. They are winning. The energy. But it is not just basf. If you put that into the context of europe, we are seeing the feedstock goingd down in north america. We see china going down on coal. And europeans in between. Your expectation would be that those costs would rise . Is going to get more expensive. That would put all chemical assets under pressure. If you were sitting in russia thinking about where you would position your business, which is to be thinking about europe or opening new plants in the south of am erica . We would see us going elsewhere. Germany is very important for basf. Based tur assets here. Story, if we were to have to have substitution, would only accelerate that . Means forf what that european business, is it in any way able to quantify what the competitive disadvantage is . Gas tellst sure net the full story. It is always very complicated. Basf system a good job moving down as much as possible in germany to mitigate some of the early stages but typically there is 300 short. But he sounds confident. He sounds he is ok with the story. Hes ok with russia. But longterm, this is a big concern for his business. I think long term, i think europe will have to find solutions. To get other sources of gas. The u. S. Has already opened a line. We are going to export more. Everyone talks about iran. There are solutions. Thei think at the end of day, other parts of the world on working are working on this and we are not. We cant. Nice to see you. Patrick lambert joining us on basf. We will keep speaking to ceos who have companies in russia. We will. Be live withvisio a bentley we will ask if he is cooling down on the russian story. We have heard that same line coming out of fiat yesterday. Is bentley saying the same story . Back in a moment. Give you a quick update on the equity markets. A tough start. Vision called recovery. Services and expansion for the Third Straight month. Services at the fastest pace in germany in three years. Dont worry. Things are still catchy in france as regards manufacturing. The lack of structural reform is defined by the progress in the spanish part of the map. These guys are going to produce double the level of growth of the french were able to achieve. The italians but to reorganize itse reorganize themselves. The euro was short going into these. There were a lot of options being bought at 1. 3450. Germany is dragging the rest of europe upwards. Is supporthere there in the Foreign Exchange market. As norway begins to reconsider their options in regards to th eir Sovereign Wealth Fund and russia. Results galore. The stock of the day is nokia. No longer a mobile phone company. Now it is all about networks and gears. Once you get rid of those moguls, the stock does quite nicely as their profits rise slightly. Once you get rid of those mobiiles, the stock does quite nicely as their profits rise slightly. Good morning, everybody. Welcome back. Youre watching the pulse live from bloombergs European Headquarters here in london. Im guy johnson. These are the Bloomberg Top headlines. U. K. Regulators are said to be close to a settlement with a group of banks. People with knowledge of the deal said it could come this year. A chinese manufacturing gauge has risen to highest level in 18 months. The preliminary reading was 52 which certainly beat analyst estimates. The e. Sumbings considering expanding sanctions against oscow since flight ma 17 was brought down. The tragic incident is of course changed a number of things. One of which is the thrust. A plane tracking app into the limelight. The site has seen a 50fold increase in traffic as more people study global flight paths. Were going to talk to its boss now, the guy who set it up. Hes the c. E. O. Good morning to you, frederick. The first question i have to ask you good morning, guy. Put in context what this event means for your business. We have seen a number of aviation events over the last few years. We saw the icelandic ice cloud which grounded us all for so long. A series of events. How does this one compare . For us, it has been the biggest one so far. As you mentioned, for us it all started with the icelandic ice cloud back in 2010 actually and en we saw a very big boost when m 36r7b370 disappeared in march. This one is even bigger. I was seeing some shots on the screen about what your app does. Briefly run us through. I notice on twitter you have over 100,000 followers. People do know it. Give us the information that you will give to people who use your app. The basic and most potential functions, we show the exact position of aircraft in realtime around the world. That is the core of the app and the website. How exactly do you do that . That strikes me as an awful lot of information. How do you gather it . We have our own crowd Source Network of socalled receivers around the world. As we speak, we have a little over 4,000 of these receivers feeding data to our network which we then put on the website and in our apps. How do you make money . I understand you can get the basic service or the premium. What is the difference . How many people sign up for the latter . The main revenue stream is the app sales that you mentioned earlier. So far the app has been the number one paid ap overall in 99 countries and in the app store. Thats the main revenue stream. The premium sup scription you mentioned is a good revenue stream for us but nowhere near the app sales and the number you mentioned with the twitter followers. Ach month our web site has vitors. Were able to get a fair amount of advertising revenue from that as well. The money we make we put into carry on. That was the question i was going to ask you. How do you reinvest that money . How do you bring the business forward . Our primary focus is and has been for several years now to build the coverage around the world so that the 4,000 receivers that i mentioned, wu put our money back into sending out more receivers around the world. We actually work with a manufacturer and manufacture these receiver ises and send them out to hosts around the world. Each week we send out about 50 new ones. I was reading somewhere this morning that you the function the not available yet. You the option of pointing a phone at an airplane flying above your head in the sky and your app can identify the aircraft and give all the details surrounding it . Yeah, that is the function available in the smart phone app. It uses the g. P. S. In the phone to be able to detect exactly where a user of the app is and also the gyroscope which detects exactly in which direction the phone is being pointed and that enables us to show which aircraft your pointing your phone or tablet at. What happened after we got news of the downing of flight mh 17 . Do the next 24 hours look like for the business and what could we see on the app when we actually use it . Walk us through the reyament of the situation on the ground and what it meant for your business . For our business, it meant a lot. Talking to your colleagues there for the following 24 hours. Also trying to do our best to keep the site online. I mean, the inflow of vitors to the website and users to the app brought down our servers a couple of times. We work very hard to try to keep the servers alive. One more question. Is it more apple denominated, your business or is it android as well . Curious to know the rell relative usage of apple versus android . Yeah. So in terms of app sales, apple is still bigger but android has gone substantially over the last two years. The difference is getting smaller every day. Interesting stuff. Frederick, thanks for your time. Were going to stay with the aviation sector. Were going to stay with the nordic angle on it. Easyjet is one of the biggest losers on the stoxx 600 today. For more on this story, this is the nordic angle here is ari. What did they have to say . It slammed first thing this morning performs since it has recovered a little bit. The numbers sounded ok to me. There was a big reaction to a relatively small the factors were indemreble the 90s. The costs were down a little bit more than expected. They have been adding capacity. They bought slots from earlier this year. In the longterm it puts pressure on yields. Generally, it seems like the range was just a little bit lower than what analysts were expecting. Is the reason for that, that they have taken account of whats happening with their moscow roots, whats happening with their tel aviv roots . Whats happening with their egyptian roots . Maybe analysts hasnt fully factored in those events . You have to wonder if some of them are waiting a little bit to see what the company would say. The company said the range they had given takes into account everything that has been going on. They they are still waiting for european regulators to say today about whether they are going to restart flights to tel aviv. Easyjet stopped flying there and then their moscow roots and egypt. Did they give us an indication whether they see continuing volatility in these kinds of roots . I think they did get say well, this is range will depend on what happens for the rest of the year. Egypts core business is europe, right . They added a base or they opened a base in amsterdam last week. They are really pushing in rome. They are adding space at gatwick. Their agenda is business passengers, the short haul flight. Moscow, tel aviv, egypt are all nice destinations that expand their network but it is not their core business. The focus is really closer to home. Thank you very much indeed for bringing us up to speed with easyjet. The flight ban has hurt israels touring best. Other businesses are urprisingly resilient. Just another normal day. [sirens] this is a daily routine. When they are not running for cover, workers about ithe kilometers north of gaza help sow and sell 6 million vegetable plants a year. A rocket actually hit this nursery. Look here. This is whats left of a missile from israels iron dome Missile Defense system. It crashed through the roof here knocking a tray of budding pep plants and all that is left here of the militants rocket is this. The c. E. O. Said it is business as usual. But that doesnt mean they are ot affected. Every time you have the siren, people have to run to the shelter. It is a lot of time that they spend on running and coming back to work. We have to stop all the machines around them again. There was a lot of damage to the cover of the greenhouse. It had to be fixed or replaced after each missile or shrapnel hit it. Further south, men and women are making solar water heerts. Gaza is 4. 5 kilometers west. The a quarter of the workers are absent, called up to the army or home caring for kids whose summer camps cant open because of the fighting. It hasnt closed in over 40 years and is not about to start now. We have to satisfy commerce. The customer in australia and the u. S. Is not interested in the war shows no sign of ending soon. This is the third time these sirens have gone off since we have been here. Israeli companies cant ignore it, but they carry on regardless. Elliott gotkine, bloomberg, southern israel. Great stories from businesses that are being affected or not affected by whats happening with the fighting in gaza and close to the border. Up next, the e. C. B. We go live to germany with breaking news out of the European Central bank. Well see you with that story when we come back. Welcome back. You are watching the pulse. We have some breaking news from the e. C. B. Over the last few minutes. Not the normal news we get from the e. C. B. The Central Bank Says breach of security protecting a database serving its public websites has led to theft of email addresses. Lets find out whats going on. Hans has details from berlin. Hans . I finally get to talk about cyberhacking and eavesdropping in germany without mentioning edward snowden. Just after 10 00 local time the e. C. B. Put out a statement saying their database has been compromised. They have been very clear it is not sensitive or internal data. It as to be people registering at the e. C. B. That could be me, you, a journalist going there for a press conference or another public event and having those data scrubbed from their site and being compromised. Here is how they actually found out. Someone tried to sell the e. C. B. The data that had been stolen their site. They launched an investigation and have contacted the german police. Here is a quick statement from them. No internal systems or market Sensitive Data were compromised. The data serves part of the e. C. B. Website that gathers information for press conferences and it is physically separate from any internal e. C. B. System. It doesnt appear any marketmoving data was compromised but it is an embarrassment for the e. C. B. Guy . And as someone that has been to both conferences, im assuming they have my data which is something im less than keen on. This is blackmail were talking about here . Clearly, they are going your naughty email accounts that you registered, they now now know, guy. You are compromised. I have known for a while now. Therefore i can blackmail you. Ive been able to do it all along. Yeah. My secret is out. Thats how im going to use those email addresses for the e. C. B. Press conference. You want to be very careful about it in terms of giving them your full information. Hans, yeah. We could take this in a number of different directions, this conversation. I expect at some opportunity we will. Lets leave it there. Hans will dig around for another angle on this one. Were going to change direction completely from my email address to the focus on film. Most of it cant set foot on a film set. University studios theme parks let everybody react with their blockbuster. Can it achieve the same success n italy as the u. S. . Submarines. Ancient temples and roller coasters. Welcome. Inspired by the studio that made vita s like la dolce they are hoping to pull in 1. 5 million vitors by 2015. Visitors. It has been developed here. 250 Million Euros investment. 1,000 new hires. Most are young people. In recent years, the italian Film Industry has been more horror story than sizzling romance. From 20122013, money going into productions dropped by 25 . The Italian Government jumped in offering tax incentives. The studio has suffered. In its first six years, it turn 300 films. Nearly in the past few years, just 50. Will the legacy of the Silver Screen draw the Digital Generation of today . That vertical drop that has to be entertaining to go on. Lets talk about some of the other companies were toing on this morning. Facebook shares are expected to reach a new high today. It grew mainly by ad sales. It shows how far they have come since 2012 when the Stock Plunged on concern of its lack of mobile revenue. That has now been addressed. The Finnish Company nokia sold its mobile phone business to microsoft in april. Nokia focusing on its Network Business to compete with Companies Like eriksson. Laroche fell. The drug makers core earnings beat estimates. Were going to talk to their chief executive later on in this program. Talking of coast were talking to, were about to talk to the of Bentley Motors. First were going to check out the robot that is ramping up growing efficiency, cutting down emissions in car parts. We will see you in a moment. Good morning, everybody. Welcome back. You are watching the pulse live on bloomberg television, radio, streaming on your tablet, phone, on bloomberg. Com. I want to show you some Cool Pictures now. This was saturday. The red bullfighters championship. It was in munich. It took place in the middle of the lake. You have to check out these pictures. The australian biker josh sheehan did four double back flips to secure a victory. The first one was done in twix at this same tournament. He did four of them and described it as really scary. Yeah. Really scary. Im terrified. How on earth do you do four of these things . Crazy stuff. Right. Check out this. The latest piece of extreme watersports equipment that allows users to go up 20 feet in the air. It was invented by a fwreveragejeth jet ski champion. Thats amazing. That looks like so much fun. Ok. How good are you at reverse parking and finding your car park space in one of those big multistories. Pretty big waste of time and waste of fuel to be honest. A German Company is making the process a little more Energy Efficient and easier. It has a parking robot. It calls it ray. Stacks and retreeves cars helping them cut down on their emission footprints. How does it work . Lets find out. When you drive your car into one of those transfer stations, we do a full 3d body scan of the car. We recognize the tires and the dimensions of the car. Then ray comes and picks up your car. A key benefit of the system is that you can store up to 60 more cars on the same surface area. On top of it is a benefit for the user. You drop off your car and leave right away, you will find your car right at the same spot where you dropped it off. Reduce stress levels, what can you argue with . For those of you watching, it is the second hour of the pulse. Were going to carry on with the car theme and russia theme. Bentley motors c. E. O. Is going to be joining us to talk about his business and where they go from here. They have a new s. U. V. They are going to unveil. Roches c. E. O. Joins us as well. Well hear how business in the netherlands fits into the russia story. We will see you in a moment. Stay tuned. Committed to russia. The letters you deliver unilevers ceo will not dial down there. As onerengthening ties of its units partners with the gazprom, we will be talking to bock. O, kurt ban to telfts its aviv. Good morning to our viewers in europe, good evening to those in asia, and a very warm welcome to those just waking up in the u. S. I am guy johnson, this is the pulse, live from london. Is water propelled and lets users fly up to 20 feet high. The hover board. Later this hour. Live with the ceo of Bentley Motors in his first interview of the day. We talk about russia and the suv in Business Plans to produce 2015. Speaking of companies exposed to russia, we caught up with the er, he says he is strict he says he is standing in russia even though he is facing pressure in the netherlands. Caroline hyde spoke to paul polman. People pointing out that the netherlands is a huge exporter with great exposure to russia. I went to get the feeling from paul polman, is business responsible . Do they need to lay on the pressure for more sanctions because it was largely dutch tragedy. In the mh17 we spoke to paul polman and he was local that european leaders need to rise up to the challenge. It is a reminder that we need to get the political leaders in the world to step up and come up with solutions to an enormous amounts of geopolitical conflict you see in many parts of the world. It makes people suffer but it is not easy for business, either. Startwould not say yes, laying on sanctions. He was very compassionate, given he, himself was caught up in a terrorist attack in india in 2008 in the taj mahal hotel. Toarly he knows what it is be in such tragic circumstances. He does want eu leaders to start tackling this. The business is going to be hit if we keep seeing geopolitical risks in countries where they have 1 billion invested and more than 6000 employees. To the sideve mh17 for a moment. The russian economy has been under pressure for some time. The ruble has been volatile. These are more direct impacts that could be felt right now than the impacts of mh17. This is a company that has made acquisitions in russia. They bought a cosmetics maker, they make ice cream. Not to mention food and personal care labels we know well dov, shipped many were being to russia. How much are they being hit . Secondquarter sales did not live up to expectations, largely because of foreign currency pressures. The ruble down by 6 , it has been slowing sales. I said are you committed to russia . A month ago, he said they thought this was an area of great growth, they wanted to grow organically. His tune is not changing. We are committed to grow our business everywhere we can help the people. It is important to us. No reason for us to say we have longterm plans in every country, including russia they are not changing. Not changing in russia. He did say the second half looks like it could improve. And the 3. 8 secondquarter, not as much as expected. If circumstances do not tear your a and we do not have ifther crisis, he thinks circumstances do not deteriorate and we do not have another crisis, he thinks people will start buying again. As long as ukraine does not become more volatile. Caroline hyde talking about unilever. Another company with exposure to russia is basf. The chemicals maker is strengthening ties as one of its units partners with gazprom. An asset swap taking place. Storage and trading in europe being swapped for access to gas in russia. Anna edwards spoke with the asfs ceo earlier this morning and asked whether the transaction will go ahead. Everything is in place. Some legal preparations we have to do internally still have to be undertaken. In the fall of this year, not as previously announced on july 1. Anything ofa chance a political nature could sway those or stop this from happening . Either at a National Level with in germany or a paneu level, conversations about sanctions at the eu . The deal has been approved both by the European Union and the German Government last year. What is happening, we basically increase the share of our totner gazprom from 50 100 . Gazprom is already dealing in the german gas market and they have done it for many years in a very responsible way. I dont see any reason why they should change their behavior in a future. Think any further sanctions by the eu would be a bad idea . Given what you have just said about the relationship between gazprom and the german economy. Think we have concerns about the effectiveness of sanctions. It is up to the politicians to decide what they want to do. Then we will implement it if sanctions are increased over the next couple of days. What exposure do you have to the russian market right now . How do you see that changing . The exposure, the relationship between your business in russia is it going to intensify or lesson . Does notssian economy grow and our business does not grow at this point and time. Our business in ukraine has dropped quite a bit during this year. Which is harmful because they have a lot of good agricultural business, a high profit business in that country. We do not foresee a quick recovery on the chemical side. Although oil and gas side, we have seen no effect yet on the political crisis, which we watched. Talks to anna edwards earlier this morning. Eurozone manufacturing and Service Activity has strengthened in july. Is it a sign that the recovery in europe is back on track . Lets find out, hans nichols joins us from berlin. We were expecting the possibility that we might see some impact of the russian story in the numbers, we did not get it. You may get it a little bit. Theres a difference between the Services Number in germany and the manufacturing number in germany. There is a theory that because the manufacturing is even higher , that could be russiainfluence. Overall, the gangbusters number, 54 was the read for services and manufacturing as mets estimates, 52. 8. Last Quarters Numbers and this Quarters Number is, we are still in the middle of earnings season. Last quarter was a soft monotony. Some numbers were good, some were not. This looks more like a qualified monotony, good numbers with one exception, perhaps a couple others. The big one is france. In tapering trail off france. It could be that we learn that their gdp is flat, no growth. Does not matter if they are 0. 0 were 0. 1. Germany is growing, germany has been able to pull the rest of europe out when we look at pmi numbers, which the market is reacting to. I thought i russia look at some of the big German Companies that have footprints in russia. The big manufacturing basis. Henkels, basf, siemens 1. 6 billion in 2012 sales. Yes, they are exposed. No, the numbers were not disastrous. One theory on why manufacturing numbers, it was wait a little bit by russia. Is not aail address large secret, but somebody has gone about obtaining it in a nefarious way. The European Central banks data praise has been compromised. It is not market sensitive information, but what has happened is people that registered at the bank have their emails taken from them. They were not encrypted. There is a data breach. It is not serious to market participants. It might be serious to journalists like us who registered for the event. I email is fairly public, can live with it. It is an investment for the ecb, which prides itself on security. Theyve contacted the German Authorities and are working with police. How they found out, someone tried to sell them back this data that had been stolen and that is how they find out that they had a compromised system on their hands. Fascinating story. This, theydetails on have our email addresses. We will find out more about this story. Hans nichols joining us from berlin. U. S. Regulators have lifted the ban on flights to israels biggest airport, bengurion. Some carriers say they could still cancel flights over safety concerns over the next few days. Elliott gotkine is live in tel aviv. As you say, this is being well received by the israelis that the faa is lifting its ban on u. S. Flights. It is up to the carriers as to whether they actually take advantage of that. European airlines, not so keen to fly here for the moment. British airways still flying by the likes of lufthansa, air france, still staying away from tel avivs bengurion airport. Curry and and turkish korean and Turkish Airlines also staying away. Hopingnsport minister the advice for the europeans will follow what the americans are doing. Still flying. When i have a look at the bengurion airport webpage, which has arrivals and departure numbers, most of the flights, with the exception of Georgian Airlines and aeroflot seem to still be canceled or yet to be determined. This is a big issue for israel. Torres and is one of the areas is one of thesm biggest areas being hit, and accounts for more than 7 percent of israels National Income and employs just under 8 of workers in israel. There was a Record Number of visuals last year, 3. 5 million. This year was supposed to be a record as well, things like the pope visiting places like jerusalem and bethlehem. That was expected to give a boost to tourism. Now notrs figures are expected to continue on that trajectory given what is going on in gaza, where, as well, we are hearing the death toll according to al jazeera is way over 700, 735. The vast majority of those are civilians. In israel, about 37 people have been killed. The death toll still mounting, a ceasefire still seems elusive. You talked about the tourism industry. In terms of the importance of what that mean for the israeli economy. Ive been reading a few reports suggesting that the isolation that israel could potentially feel if we get more and more of these stoppages surrounding bengurion could impact the ipo pipeline. That is a possibility. There are always a number of Israeli Companies planning ipos. Lets not forget that after the u. S. And china, there is no other country that has more Companies Listed on nasdaq in the u. S. There are a few big ones in the pipeline, the biggest one right the Collision Avoidance company. No suggested they would delay their ipo. And would delay meetings the like. Some ceos and start us here are serving in gaza, they have been called up to the army. A lot of issues affecting these companies. In terms of businesses, they are still continuing as normally as possible. They are affected, but some companies, for example, say they are filling their orders and sales. Yes, it is not normal and they have lost some staff for various reasons either because they have been called up or have to stay at home to look after children. But they are carrying on as normally as can possibly be expected. Thank you very much, Elliott Gotkine from tel aviv. Coming up, from heineken to unilever, russian relations for Dutch Companies are being tested in the wake of mh17. The business impact, when we come back. Good morning, youre watching the pulse, live from bloombergs European Headquarters in london. Is happening with euro dollar this morning. What we saw earlier on, two legs higher. The market was short going into this mornings data. Pmi numbers. The first leg higher was the german number beating, then we got the aggregate number from the eurozone. That was a stronger as well. French data was weaker and poorer italian sales but nevertheless, pmi data probably better than expected. The market was short and that the reaction you get. What is happening with the kiwi dollar. The kiwis were some of the first to get the rates cycle on the hiking front. Overnight, indication were going to see a pies and the possibility to see a positive the possibility of a significant terms of the current state. The head of the central bank talking about the potential for a significant fall. This chart does not really give you an indication of the cap we saw over here. Down by got that gap 1. 29 . Kiwi dollar u. S. Dollar. Lets talk about the middle east. We were talking to Elliott Gotkine about the impacts the gaza story is having. Some businesses are being affected, tourism. Surprisingly resilient. Elliott gotkine has been visiting Companies Near the gaza border to see how they are coping. [sirens] just another normal day. This is our daily routine. When they are not running for cover, workers at this company, it ate kilometers north of gaza, sow and sell vegetable plants. Actually hit this nursery while we were in the bomb shelter. This is what is left of a missile from israels iron dome system. It crashed through the roof, knocking out a tray of pepper plants. All that is left of the militants rocket is this. Ceo says it is business as usual, but that does not mean they are not affected. Every time we have a siren, people have to run to the shelter. Isis a lot of time that spent running and coming back to work. We have to stop all the machines and run them again. There was a lot of damage to the cover of the greenhouse that had to be fixed or replaced after each missile or shrapnel hit it. South, men and women are making solar water heaters. Gaza is four point five kilometers west. A quarter of the workers are absent, called up to the army or home caring for kids whose summer camps cannot open because of the fighting. The ceo says the factory has not closed in 40 years and it is not about to start now. The noise is terrible and the situation is not a pleasure to be here. Think of theo customer. The customer in australia and the u. S. Is not interested if there is a war here or not. The war shows no sign of ending soon. [sirens] the third time the sirens have sounded since we have been here. Onaeli Companies Carry regardless. Elliott gotkine, bloomberg, southern israel. Elliott gotkine checking out how businesses are coping with the story that is developing between gaza and israel. More on that story a little later on. Still to come, live with the ceo of Bentley Motors. Owned by volkswagen. We will talk to him about his exposure to russia as well as what he plans to do with his new suv, the design of which we are expecting in 2015. That is coming up on the pulse, see you in a moment. You are watching the pulse, starbucks reports later today. Ahead of that, we will take a look at the five coolest, most original starbucks locations around the world. [music plays] joined the navy, work at starbucks. Thats a bit odd, isnt it . New energy top headlines. Spains largest utility, even rdrola suffers a drop after Renewable Energy subsidies takes a hit. Italys Largest Company will take control of a solar venture. It plans to use the solar parts in its developing emergingmarket story. Welcome back, you are watching the pulse. We are live from woodwards European Headquarters in london. Set to paytors are close to a settlement with a group of banks as part of their currency raking investigation. A deal could come this year. The financial convict a 30 once to fasttrack the financial convict authority wants to fasttrack the investigation. Norway company reviewing as the eun russia considers sanctions in moscow. Sentiment towards russia has sour. U. S. Regulators have lifted the fromn flights to and israel. A rocket fired from gaza hit the ground near a tel aviv airport, bengurion. The ban was extended. Some u. S. Carriers may still ground flight even though the ban has been lifted. Thus the aviation news, lets get you the market news. Manus cranny has more. Equity markets were braced for doom and gloom in terms of the manufacturing and data that did not come through across the entire region. Has got issues in regard to manufacturing. Services are at a threeyear high in germany. Consider what is going to happen on the growth story france will deliver 50 of the growth. This country has been involved in structural reform, spain. Chinese manufacturing, 18 month high. Europe, germany, germany high. Es threeyear what is going to happen in the u. S. . I know manufacturing is not the biggest driver in the u. S. , it is another piece in the Global Manufacturing causal that we look out. China hitting an 18month high. You is equity futures, that is not going to help anyone. Asian equity futures, this will help you. Facebook, down and terms of Overall Technology push into the advertising space. Record close of trading. Dow jones, 17, 060. Housing data in the u. S. , jobless numbers, new home sales in the 470 5000 is expected to come out. That is the complexion of u. S. Equity futures. A couple stocks, lets have a look at europe. This tells a great story. Asia, heus was on in always talks about the downside. He is saying russias situation will be resolved in the next one year to two years and we are at a sweet spot for stocks. Trading higher. Short on these numbers and the fx desk and cover on the back of the pmis. Take you to switzerland, to roche. The Company Posted numbers, the swiss franc having a significant giant maker of oncology drugs. Lets talk about what is happening next with the business. Its ceo is on the phone now, severin schwan, thank you for your time. Let me ask you the question were asking all our ceos this morning. How big is your exposure to russia and does the deterioration in relations between the west and moscow concern you . Russia, for us, is an important market. However, if you look at the a whole of you from a whole point of view, it is less than 2 of our worldwide sales. We believe that in spite political turbulence, we would be less affected by potential we arens simply because offering highly innovative, lifesaving medicines. Most probably come at those products would be less affected by political turbulence. Another big subject that has been affecting your business, what has been a Significant Development on the m a front. A number of deals being done with your peer group. Do you think we have seen the bulk of those deals . Can you give us your assessment of the m a landscape and your potential involvement or noninvolvement in that story . Far as our own m a strategy is concerned, there is no change. We continue to focus on very ,argeted acquisitions, projects and technologies which complement pharmacy and diagnostics. As far as the overall industry is concerned, my hypothesis is that we will see further consolidation and further segmentation of the market. On the one hand, local generic producers and on the other hand, highly innovative companies. Those companies in the middle who do not have a necessary economy of scale to operate in the generic segment or do not offer medicines that make a difference for patients, those will disappear over time. Can i ask whether or not using the tax landscape in the u. S. , a lot is being made i of x inversions and companies with tax overseas, it gives u. S. Companies the advantage. For us, it is not relevant if we pursue m a opportunities. It is more about the strategic fit for those products and technologies, do they really, meant our franchises . Of course, it is also about economic considerations come a price, but tax, specifically does not play a role for us. If you are in a position looking at an asset in a u. S. Company that has a Large Holdings of cash outside the u. S. And did not want to repatriate that money, do you think that would put you at a disadvantage . We are seeing a lot of u. S. Companies buying in europe. No, i dont think so. The overall conditions of having a headquarters in switzerland are actually good ones. There is a reasonable environment from a tax perspective. I do not think this puts us at a competitive disadvantage. There, thankave it you for your time, severin schwan, ceo of roche. Lets talk to another ceo, a different sector. Shift gears, literally. Ceo sergiofiats marchionne has said his company bit onoled down a russia and will decide what to do what the dust once the dust has settled. Another ceo in the auto sector, the ceo of Bentley Motors, wolfgang durheimer. Bentleys hair and company is looks like an, exposed to russia. Bentleys Parent Company is volkswagen, exposed to russia. Talk me through bentleys exposure to russia. What events over the last few days mean to your business. Morning. From our side, we are in a good way at the worldwide scale. Facing a very interesting Business Year and we project growth in all dimensions in turnover, profit, and volume. Of course, we are hit by what is happening in russia and ukraine. For us, market wise, this region is cooling down a little bit. In ukraine, it is very tough. Sell not the time to bentleys in this country. Luckily, we have europe, continental europe, the u. K. , the u. S. And china. In china, for example, we grew by 61 in the first half of this year. This is heavily overcompensating what is happening in russia. 2015, were going to see it as easy from you. Weve been talking about this for quite a while. Can i ask you how an suv is going to change the nature of your business . Porsche has been successful at developing an issue the strategy. Audi has the platforms you guys are going to be taking advantage q5, and possibly a bigger one. How does that change your business and what is the opportunity there . On average, our customers who own 8 cars. Every of our present bentley car suv in hisas one garage. We know the customers names, their specific request. I am absolutely sure that the suv will benefit the bentley business in the same way it benefited to other brands, like porsche. We probably will not do it in the same scale, but we will increase our business. We will increase our reach into the market. A luxuryll add performance sec into the segment that has not been there yet. Cane will be no one who deliver the exclusivity is, the prestige, and the craftsmanship that we apply to our cars in the future and in the suv business. How many of those guys who have got as you fees in their car parks right now are audi and porsche customers . They need to be customers either from porsche, mercedes, audi, and volkswagen. We are a very competitive group. This also is a big difference from the Volkswagen Group to other descartes groups other big car groups. We dont have a problem with competition. We raced each other on the weekends and we go for customers on pointofsale. Everybody is a competitor who is delivering to the suv market. And we will try to go for the very upscale customers, for the ones that other opinion leaders in the segment, the ones that really want to reach the pinnacle of the suv in the future. Do you think it would be ok to compete with lamborghini . Lamborghini is part of the group. They would love to produce an suv as well. At what point does it become difficult if everybody in the group is doing the same thing . I think there will not be difficulty. As i mentioned before, one of the major subjects that differentiates the Volkswagen Group from other car groups, we do not design regions to brands s towe do not assign price different brands. Everybody goes for the market and everybody tries to give his best approach. Grouples figures of our are approaching 10 million cars in total per year. This is a very successful approach. We race each other on the weekends am a sometimes for ared out of the same group on the starting group. This will happen this weekend at the 24hour race. We do not have a problem with interbrand competition. Are expecting china to be your largest market in 2014. A20 5 to 30 sales growth story in china and 4014. Can you give me a sense of how the clampdown on corruption, giftgiving is affecting the car sector, particularly in the end . I dont think there will be a major difference on the market approach to the subject. , project that china will not for bentley, grove on 61 as it did in the first half of this year. If the growth rate maintains above 20 , it will still be a tremendous growth rate in comparison to other markets around the globe. Everybody will be happy to be in the two digit growth rate. With the growth rate, we have forecast and china. Come to the u. S. In 2014. It is a competitive market. The people, the achievers, the businessman, the people that are leading the social life in china like to be seen in bentley cars. For this reason, we believe in a successful future in the chinese market. Energynal question about efficiency. We have seen porsche they getting to do this very successfully, using hybrid technology to make their cars go faster. Hows a your customers feel . Bout hybrid technology you think about bentley and rollsroyce is an smooth transmissions, smooth engines. What does hybrid technology, plug in hybrid Technology Bring to you . Collects the first competitor in the luxury market that introduced a hybrid at a car this year. Ina hybrid technology will be a leading technology for the future of Bentley Motors. By the end of this decade, we have hybrid Technology Available for 90 of our cars. Opinionomers are leaders. They are in the pinnacle of society. And for this reason, they are termshe early movers in of new technology. Hybrid technology is reducing the co2 emissions of luxury cars by about 60 . Able to go 50 kilometers pure electric. When you approach a city like london, you can do your in city driving on purely electric modes. I think this is the technology to have in the future. Going to leave it there, wolfgang durheimer, ceo of Bentley Motors in his first interview of the day. Thank you very much. Back in a couple minutes. Back. D morning, welcome you are watching the pulse, live on bloomberg television. Of the biggest losers on the stoxx 600 even though it says annual profit will gained 14 . We are joined by kari lundgren. Investors are not impressed but it is the outlook they are not impressed with. Looking at it has been expanding at gatwick airport. They mentioned that immediately. Something that was going to weigh on yields. That is part of its longer twoyear program to expand at that airport. Investors were looking at the range they gave, it was slightly lower than what analysts were expecting. They are putting a few things into the mix when it comes to moscow, tel aviv. I think the sense is that there might be a little bit of caution. Was affected by the flight bans going into israel by the faa for u. S. Airlines. Easyjet also decided not to fly into israel. What is the Bigger Picture on that . The faa has lifted the ban, some airlines are remaining cautious. Body thatopean regulates this recommended that airlines not fly to tel aviv. Decided easyjet decided to stop but will start flying again as soon as they can. It is one of many routes. They have a huge Network Across europe, moscow is another route that you would think might get hit given what has happened in ukraine. They are small pieces in the overall easyjet picture. We are whipping through the news here. We have an inbound flight to has gonehat apparently missing. What do we know about that . Very little. Still try to find out the type of plane. From what i know, it is operating out of spain. Is feeling a little on edge given what has happened in ukraine. We will have to wait and see whether that was an issue with the plane or terrorism on board or whatever else might happen. Earlier we were talking to ar24, a flight tracking website. Aitter saying it was relatively old they are on top of that. Lundgren with the latest aviation news. We will take a break and be back in a couple minutes. Good morning, welcome to come youre watching the pulse. On your tablet and bloomberg. Com. Covering Foreign Exchange markets. A bunch of data out today that were expected to show we were going to see a rush effect on the euro zone economy. We did not get that. , thearket, the pmi data market went in short expecting data would show less negative numbers. Not what we got. If you go into a mac it short and get better numbers, you get this effect, cindys legs decent legs higher. Range we havee been recently but are better than we were earlier on. What about the rest of the day . Talking tote is here us about the situation surrounding sanctions and russia. Getting a bit more detail about europeanround the capitals regarding the options on the table visavis sanctions. Is called an options memo, it goes to all the member states. It lays out options for taking sections into the sectorial range. Interestingost parts is the idea of restricting Russian Companies access to European Capital markets. More than that, restricting european investors access to new russian equity issues or debt issues. Would be pretty astounding and is further than the u. S. Has gone. This is just a list of options they have got there. What are they actually get to these options is the facteresting given that this is a financial story were talking about. The british ways and this conversation is having. I can tell you who has got a voice, we just passed headlines from the u. S. Envoy to the eu, who, surprise, surprise, happens to be at the eu council today for those discussions. This is a little bit of the u. S. Nudging the europeans along. You set theng that plan could sharply boost russian banks insurance costs. It would have a meaningful impact. It is kind of you cannot get access to our capital markets. Some of them cannot get access already. To the u. S. Markets . Cost is about raising that of capital, those companies are less profitable and pass on less money to the russian budget. It is tangential, but over time. Kind of a way to surgically, that is the way they would like to think of it, mess with funding costs and the russian economy. Smelly, if they cannot get funding from europe or the u. S. , they will go to state institutions in russia. That creates a drag. Not enough deposit in russia to fund all the necessary investment. That is the angle. Story, keep tracking the thank you very much. Covering the sanctions story. That is it for the pulse, keep it here on bloomberg television. Surveillance is up next, live from new york. See you tomorrow. This is bloomberg surveillance. Israel will do what is necessary to bring calm. The fighting continues as america negotiates a ceasefire. Opportunity in investing in emerging markets and specifically in russia . Linkedin moves beyond your resume to compete headon with facebook. Good morning, everyone. This is bloomberg surveillance. Im tom keene. Joining me, scarlet fu and adam johnson. An incredibly busy morning. Chinamanufacturing manufacturing rises to a high. European manufacturing rises to a high. One weak spot, japan. Exports fell slightly. Bloomberg. Com has a good article on this. Part of the reason is that japan is no manufacturing and other countries. Not just on its own soil. That is part of the story we are seeing in the u. S. Economic data in the u. S