You are watching the pulse. I am guy johnson. Eat, sleep, pray. The brandnew way to start your day. A great story. Harris. We would check out the first european outpost. Paris. The most expensive suites. Let us stay in paris and our top story. Agricole said its profits were nearly wiped out in the second portugalsd to bailout. The details. We knew it will be bad and the number is a bit. Is exposed tole portugal. They own a 14 per they own a stake. It is the wiped down to zero. They took a charge in the Second Quarter. An extra 200 Million Euros for keptalue that has been down to zero. In todays debate to the 19 dates of backanto to the 1980s. Santo familyhe regain control of the company. That relationship has gone bad. One person said the bank had the family. By lets talk about one stock that is up. Investors are looking at the capital ratios and the bottom line. Talk about the figures ok. Expected andely priced in. Better than expected capital ratio and the corporate and itent profit is up is low in italy which is one of their key markets and we saw it decline in the Second Quarter. They had a net income of nearly one billion euros. In the Second Quarter and the other big news on agricole is they had a submitted their internal review transactions with countries affected by u. S. Sanctions. ,he bill on the Conference Call they declined to say how much they are planning to set aside for this wanted they did say the transaction was significantly lower than peers. Had doneay, agricole better on the market than its peers. More than 10 of their shares since the beginning of the year since a decline of 10 . Guy . Thank you very much. The latest from agricole. Telefonica is offering to buy a r 9ilian internet fo billion. Matt campbell joins us to talk us through the deal. On this deals seems to be the sense. You have people at the moment. This asset is clearly in play. The question is, who will buy it . They put out a short release saying they have not been soliciting buyers. Everybody relies vivendi has been moving into telecommunications. It was only when and what is the number . The response was measured to say the least. They have pretty punchy expectations of the value for this company which has grown very rapidly along with a brazilian middle class. This story has a little bit longer to run. What is about the structure of this deal they do not like . Is is the price or other aspects . Going on. Ngs first the number, 6. 7 billion euros. Last year, vivendi terminated a sales process because it wanted more like 8 billion euros. That has attracted directv from the u. S. Billion as the benchmark, we are a long way from that and most of it will be in the shares. Shares particularly in telefonicas brazilian unit. Vivendi still indigo with a foot tall in brazil if they take it. Still ending up with a foothold in brazil if they take it. Lighting up the phones as we speak to solicit interest and get competitive. You think there will be others . There will be at t who have been long speculated to go into latin america. We have local players. American mobile. Conceivably make an offer. Theres a lot of players that can come around should not beicas bid accepted. Matt campbell, the latest on the telecommunications story. Hotels, profit dropped 8 . We caught up with sco and his first ceo in his first interview. Look, there are some situations around the world that are political or social or fighting going on in certain markets. Clearly, we have to protect our guests and employees. None are that critical in terms of our scare. Love to take a very longterm view. We see markets like russia and china and the middle east words a lot of longterm opportunity. We have to take a very longterm view. The majority of our profits cant from a u. S. And europe. We will take a longterm view until it can be buffered. Until we are confirmed. The momentum of the business and what we are looking at over the next three years seem strong. Hiss that was the ceo, first interview of the day. You will hear more from later in the day. Talk about gears and autos. Cars. Beat estimates on suv sales. Big cars selling. Bmw first. They were expected to deliver a profit . Almost 5 higher in profits. A record profit for tell you. They are successful in the united states. A record profit for toyota. It is the suv. Their highlander. It is off the chart. We are seeing the margin, the profitability they are making it is rising as well. Srom the highlander and lexu and rav 4 has been doing well. Ota is the biggest carmela carmaker in the world. It is 30 higher than a volkswagen. Les were more in terms of volumes. If you put it all together, toyotas profit is bigger than gm plus four plus nissan. This is a huge company. A really surprised turnout. In sales taxhikie has not been offset by the dominant united states. Sens w is a classic lassic. Is a c almost 50 increase in sales. They keep on increasing and bringing in new models. 16 new models is what they promised. Termshey are dominated in of their margin. In terms of profitability stopped beating the likes of audi and mercedes which both want to rip away the crowd of the luxury carmaker. 11 of sales is their profit. Than mercedesre and almost double mercedes and audi makes about 9 of its sales into profit. It is far beating the competition. X5 is whipping the competition. 6,y said series 3, 5, and all dominate. Chris they are making gay f as they are making a fourw heel car. Wheel, you push it and let the steering do is nothing. Can they make it work . Caroline hyde on bmw. Well talk more about it later and in the x7. We will take a break. Oil. Latest violence into context. That is all coming up on the pulse. Good morning. Welcome back. You are watching the pulse. Fighting in iraq sent oil prices tumbling. Is feeling the heat. Tony hayward, the ceo, is sticking to his forecast. We have to wait 15 minutes. He wouldve a Conference Call. We will learn about his personal view. Cfo said of their operations are safe and secure. Plans to remove verse and no. The big concern yesterday that 6. 5 at onedown by point and it is an issue, people are concerned the Islamic State were able to take the oil fields in the north of the country and their capacity is 30,000 barrels a day which is not much but the issue is if they can take that, that the taymor in the north and maybe threaten to get energy assets. Werefo said these feels taken by the Islamic State and they are outside of the kurdistan region. Was grabbed land when isil moving on baghdad. Nothing he said to be concerned kurdistan. Thats not the only issue we need to hear from tony hayward when we here at 9 30 a. M. Even if they prepop the oil and the fields themselves, what energy andstan and getting it to market . Basically, they have the pipeline up to turkey and the coast up and running but the Storage Facility is in there and it is full. The reason is they are pumping it onto tankers. Those tankers are looking to bring it to market. Theyre having trouble offloading the oil. This big argument between the andral government of iraq kurdistan where the federal government believe the kurds do not have the independent right to sell the oil. Every time you try to offload, iraq at a minimum threatens a lawsuit on the wouldbe buyer. Some of the tankers have been able to offload but far from the full operation. That is what people want to hear from tony hayward. Will he be to monetize all of the oil they got . Insight fromore richard. You cannot actually sell the stuff. You can invest in facilities and the pipeline and storage until you can sell it, it is a really viable. I do not want to play down the events, a security question, it is a issue about the lack of export route that is the biggest problem for producers operating in the region or the company has concessions. Are we starting to see a little bit of a chink . The u. S. Is more concerned that baghdad is effectively not living up and not providing revenuesharing with the Kurdish North and as a result, may be a case to say that shipping to sell. . The u. S. Official position will be on getting over the kurdish capital and baghdad to talk to each other and reach a compromise. That is to keep them united rather than fragmenting and tackling the threat. Part of that, some kind of compromise would be about oil exports. It is secondary to the outside partners. Work if you are a company trying to get oil out of the country and to market . What does the future hold for you . A lot of uncertainty. That has been the case for the past few years. A breakdown and wouldve had exports that happened and then they stopped. If you do not have the pipeline open and steady route to market, you are looking at local sells. Well below market rate and volume that is not that much capacity. You cannot raise your production even if the ceo is ready. You are stuck until the pop line opens pipeline opens. What about the Big Companies . The fact you have axon axon holding concessions exxon holdin concessions. Prospects are very exciting for them. If it becomes a fully opened place within export route and they will wait and see. The little guys, keystone, afron, they are generating some revenue. Get a bigrying to part of their portfolio. They cannot afford to walk away. In terms of the fighting, the end markets, a major concern. Any sense from people you are talking to, the situation is kurdsibly fluid and the have lost ground. That is significant as ryan said in the piece, it is more than kurdish territory. The area they have moved into because of the iraq he army has abandoned them. Not as same as the territory that been holding for years. What today are focused on at the moment is the Strategic Asset is one of the main routes of supplies to baghdad. Strategice, this withdraw and they were willing to lose and a because it was not part of the core oil infrastructure. I do not think the main fields are at the same level of threat. Not being beaten back. There is not a major offensive by the iraqi government. To be a concern to the market. When you look at the oil price at the moment, theres a sense of the relationship between iraq and the price. The moment, it is fine. How much risk is there within the current price of things deteriorating or improving . We see Oil Prices Rise to have come down to 105. That could take a while longer to clear. Perhaps the Geopolitical Uncertainty is providing some support with the stock prices falling further. Andout a major escalation there is some way to go before prices may stop taking the. You have gasoline market and the a lot of west african cargo back into the atlantic basin. I do not think it will send the price higher unless we see something dramatic. It is a concern, a longterm concern because of the potential future of iraq which is looking poorer and poorer. We will leave it there. Thank you. We will take a break. Number. E 34,000. Thats how much a suite will cost you per night. It is the most expensive room. Of the newe a tour hotel for the indus peninsulas first outpost in europe. Tomorrow, bloomberg speaks to the mayor of london. She will join us on the pulse. Forward to that conversation. We will see you in a moment. Good morning. Welcome back. You are watching the pulse. Jonathan ferro has more. Asia, losses across the board. Pmi at a record low. What does it mean for european equities . Not a lot. 600 coming down over 5 from the 2014 highs. We have gains. 0. 8 . X is up by euro dollar is 134. With that in the pmi. We were expecting 54. 168. 49. One is will we get the 1 . Guest said you may well get that. On august 13, the Inflation Report. Another in five minutes time. Services pmi from the u. K. Of thisaround 3 4 economy and it matters. Watch out for that one. 7. 9 is what we are looking for. We will bring you the number after the break. What else have we got . The ceo of intercontinental to find out where the operator plans to expand next. And a couple of things. Boris johnson, the mayor of london, is giving a major speech tomorrow, it is about though future of the eu and in europe. He will talk to us the pulse, i am looking forward to that conversation. I hope you are as well. We will take a break. We will see you in a moment. Welcome back. You are watching the pulse. Very strong data coming out of the british economy. The july reading came in at 50, the dividing line between expansion and contraction. A threeday truce in the gaza strip are now in effect. Truce. As accepted this said it completed its mission of destroying tunnels in gaza. Agreeutors say they would to be offered to pay 100 million to end the corruption case. The billionaire has been on trial over bribery charges. Intercontinental hotel shares down a little bit this morning. Declined 8 . We spoke to the ceo. It was a first on bloomberg. We asked about the numbers. We have seen good momentum and a lot of growth. 6 . U. S. Was above about the u. K. Was over 8 . We signed a lot of new deals as well. We signed more deals in the first half family have for about six years. Lot going on we opened the first of our new branding of hotels. Some good progress. Talk to me, we are in an upswing mood. That is the general consensus in the u. S. A lot of your business is seabased. Do you think that is the case . Will you miss by not owning more property . Not at all. Has become the accepted norm. Earning reale estate is not in the zillow the best thing for public companies. Is not necessarily the best thing for public companies. , which we00 hotels could not afford to do if we owned them all. It is not a stable income stream. You get big downturns, but big growth. We are much more stable. Weve announced a nine and a 9 increase in the dividend. Rooms, one of00 your biggest pipelines. The people ive spoken to say it is a unique opposition that you guys are delivering. How is the brand doing . What can we expect . Ask we have launched we have launched two new brands. It is focused on chinese customers who want the overlay and the security of an international brand. We have already signed 24 hotels to come into the system and we have had an credible about of interest from owners and potential customers. Potential both in china and outside of china. We will be looking to take it outside of china once we have established it. A greatgreat deal deal has been made of you wanting to stay independent. Shareholders pushing you to get into bed, pardon the pond, with somebody. Have you had any sitdown discussions in regards to a merger . There have been rumors, but we never count on market rumors. We are working for all of our shareholders. A billion dollars in 2014 allowed and were growing our business. That is what we are focused on doing. If you had to share a hotel room, richard, which brand would you like to get into bed with . Come on. Who is your preferred option . We have a lot of strong competitors out there. We are one of the Biggest Hotel companies in the world. A lot of organic growth. 1100 hotels not pipeline. In the pipeline. Ceo richardinental solomon. People are saying the reason why it is an attractive Mergers Acquisitions story is because it is an inversion story. Correct. The debate is this, you have rewardingnental shareholders by selling big time assets. From a keyt would be institution of shareholders, toge fund theyve employed review the business. What is the best way forward . Heard of that discussion was by china part of that discussion was by china. China is the most important part of this story Going Forward. If they do not do a deal, what is the most important of this story Going Forward . It is china. 15 of the revenue comes from their. Do they own assets there . They have developed the individual they will open those by december of next year. Why i focus on that clue that is the fastestgrowing market in the world. In the u. S. , where they also have a big presence. They have two assets in china. Err 20 other offers for people to own there are 20 other offers for people to own the hotels and they would manage them. 10 . Will loan 10 own yes. Do they have to get the model going . Lets it is a unique it is a unique proposition. Thee if they will be one argument would be this in regards to ihg. Revenuethe fees and even when times are tough. My question to richard was, we are coming out of that. Be,of the arguments would as a company, you are not well positioned to take advantage of prime real estate. Youre not in the position of ownership Going Forward. You cannot grow as quickly. It is a servicebased business, therefore, richard defending his business model. You can see the argument on both sides. Q a very much. Thank you very much. It features the citys most expensive suites. A few steps away, they guard the entrance to the new peninsula paris. The hong kong and Shanghai Hotel spent more than 1 billion to acquire and restore the building. We took this venerable building and maintained it while digging underneath the structure. You will find crystal leaves down the lobby. Six restaurants and highend chinese cuisine. An indoor swimming pull and 200 rooms, and ipad2 control everything in the room. Prices start at 900 a night, up to 35,000. Paris enjoys very high room rates. We want to be at the top of the paris market. The competition will be fierce. There are more than 50 Luxury Five Star Hotels in paris, some undergoing refurbishment. 200 million to renovate the ritz. The saudi royal family. New offers, will prices fall . I do not think prices will go down. The company says it wants the peninsula to be a new landmark for paris. But it will not be short of competition. Nice. Very nice. Let me bring you up to speed. The u. K. Data not very good. Had risen. This is the Service Sector, the bulk of the british economy. If that further pressure on the bank of england. We are not expecting a rate hike just yet . We might find out if one member of the Monetary Policy may decided to say, now is the time. The Inflation Report is also coming out. African leaders are gathering in olahington as the deadly ebp virus cast a shadow at home. Welcome back. You are watching the pulse. West africas fight against ebola is threatening to overshadow a big white house summit. They are in washington discussing the economy. The outbreak will likely take center stage. The director of the Nigerian London Business Forum joins me on the phone from nigeria. Good morning to you. Nigeria is not directly affected yet, but what is the sense that you get of the impact that this outbreak will mean for the west african economy . The outbreak is a serious that could threaten Business Operations in africa. That needs toenon be dealt with. Businesspeople generally in trying to prevent the outbreak in the country. Are feeling uncomfortable about i think we may have lost you. We will step out of that. The sound quality not that great. We will see if we can get him back and try to fix it. We will be talking about the story little later in this program as well. We will take a break. We will look at the Companies Competing for the green economies next big winner. Welcome back. You are watching the pulse. We are streaming on your tablet, we are on your phone, we are on bloomberg. Com. It will be easier to keep a secret on social media. E take a look at whisper it will allow users to share and disappear online. Do you want to know a secret . We all do. We love hearing secrets. Modern living is not set up for secrets. Instant messages, texts, i have an annoying permanence to them. They have an annoying permanence to them. Perhaps the pendulum is finally swinging in the other direction. Favoring the private over the public. Several companies are trying to cash in on this. Whisper was the First Company to step into this category and it created an anonymous twitter of sorts. Secret took the idea one step further. Secret will not tell you who said what, but it will tell you if it is a friend or a friend of a friend. Confide is little different. It lets you send Text Messages that selfdestruct after they have been brad. Been read. It is the text message equivalent of snapchat. They were in the news last year when it turned on a 3 billion purchase order from facebook. The company was said to be in talks with alibaba value being it at 10 billion. Companies trafficking in secrets and gossip still have some hurdles ahead of them. User agreement allow the services to share user data with Law Enforcement or under subpoena. You are not truly unknown. There is no denying below are of these apps and services. We are still High Schoolers would secret confessions and these apps give us an outlet. Furthermore, they are free. Give them a shot. I wont tell. Everybody has a secret. Kick is behind europes clean tech initiative. Leading entrepreneurs will pitch their ideas in the competition this month. Joining us now for more on this is the u. K. Director. What do i have to be able to do to get into this competition . You have to be an inventor. Maybe i should explain. Coined tow word, express clean tech. Concentrated on Energy Provision making a sustainable. Climate innovation goes beyond that. Efficiency use of water material, all of the things that you and i can access to reduce our dependence. It means ill be able to use my energy better. It takes in all of that as well. Plus a lot more. Church ofoad companies. How much interest do you get . Huge. We started off in 2011 and we working with startups for 3. 5 years and the number of applicants has gone up. The success rate has gone up. Last year, 80 of our startups got to the end of the process and were able to get a Million Pounds or more competitively. He 20,000 the 20 grand helps them to just get started. We have about 250 partners across europe and those partners are in universities, research institutes, big business, and government. That Network Provides a huge amount of support for our startups. Do . Hat do you how does it work . Accelerator and it is a threestep process. Develop their business model. We give a good deal of technical advice. If they pass that date, they go on to something where they discover the customers. That, they go onto the final stage which is to make the market investable. Ok. Give me a flavor of the kind of things in the running. One of them is a Company Called reduce. It allows you to when you have laser printed out something takes away uncopier. Trivial, butound the impact of using a paper a lot of waste is bad for the environment. You could reuse the paper. That would keep the floor clue very floor crew very happy. Expect to have to make it bigger . Will you have to make this whole operation that much more sizable . This whole sector is expanding rapidly. We do things a particular way and we are funded by the european part of our role is to reduce what we do to others. We will grow to a certain size. Thank you very much. Agricoles profits. Shares are rallying as investors focus on a betterthanexpected capital ratio. Telefonica offers 9 billion for vendi in brazil. The russian unrest escalates. Good morning to our viewers in europe. A warm welcome to those waking up in the united states. This is the pulse. Im guy johnson. Eat, sleep. We will check out the brandnew way to start your day. That is the beginning of the day, not the end of the day. Bmw to earnings. About whate details the story is all about later on in the program. Lets get to our top story. Credit agricole says profit was wiped out in the Second Quarter by charges in portugals bailout. Here are the details. Yes, Credit Agricole has a the portugal bank. That stake has not been reduced to zero. Now been reduced to zero. 500 Million Euros in related to the losses of the portuguese bank. Agricolebetween credit and banko a spirit of cento santo go back a while. That relationship is now over. The ceo of Credit Agricole said had the bank had been ended Credit Agricoles big ambitions in southern europe. Today is the end of their relationship. Ando, given all of that given the big writedown we have seen, lets talk about some good news here. What is it . There are some good news. This was already priced in by investors. Investors are focusing on capital ratio. Their capital ratio is much better than expected in the Second Quarter. Their tier one is at 9. 9 . That is better than estimates. Investors are reassured. The bank has reduced the risks on their balance sheets. They have declined the provisions of the risky loans him especially in italy, which is one of their key markets. Their Corporate Investment bank profit is up. Good underlying performance overall. We will live it there. Thank you very much indeed. The latest from Credit Agricole out of paris. Telefonica is offering to buy vivendi. Giant isean phone seeking to expand in latin america as earnings drop in home markets. Buyis telefonica looking to vivendis brazil unit . They have a big mobile operation in brazil. Gvt is a very successful, innovative brazilian broadband. People moving into bigger homes, upgrading home entertainment, coming online for the first time. This is the market. Prices going to be the issue. Price is going to be the issue. Vivendi is very and interested this morning. Lets talk about price. Uninterested very this morning. Lets talk about price. Vivendi is looking to see if there is anyone else out there. And the answer is that there probably are. Directv from the u. S. Was interested last year. Vivendi rejected their offer. They were looking like more for 8 billion euros at the time. This telefonica offer was 6. 7 billion euros. It is largely in paper. Tosidering vivendi is trying get out of telecom and get out of brazil, that i not be terribly attractive. That may not be terribly attractive. There was also at t. They have been rumored to be looking around latin america for years. There is also the prospect of wildcards. Softbank. [laughter] they are buying everything else. Vivendi does believe there are other options. Matt campbell, thank you. Other company news. Intercontinental hotels saw profits. We caught up with the ceo. We talk to him about the impact of the standoff between the west and russia. There are situations around the world, whether political or social. Have to protect our guests and employees in those markets. None of them is that significant in the scare of our business. The hotel in businesses take a very longterm view. We see markets like russia, like china, like the middle east, where there are a lot of longterm opportunities. The majorityhat, of our profits come from the u. S. And europe. We take a longterm view. Short be buffeted by the term. We are concerned about that. The momentum of the business seems strong over the next few years. That was the ceo of intercontinental hotels. His first interview of the day. West africas fight against ebola is threatening to overshadow a big summit in washington this week. Hans nichols joins us live from d. C. It is about deals. It is also about ebola. Which is getting the upper hand . Good morning. Yesterday morning, it was all about ebola. The world bank came through with the 200 billion offer for west africa and there seemed to be a shift yesterday afternoon when this broke. Everybody was thinking, now we can get back to talking about deals. Ge has a 2 billion investment. You have some talk from south africa for 100 billion for a new infrastructure bank, largely funded by the u. S. The least amount they are likely to get, 900 million in new deals. Yes, that is a lot of money. But when there was an africanchina summit two years ago, the total number of deals totaled 20 billion. Investment,s to china is really the one that is putting whether money putting their money where their mouth is. Who are you going to be talking to . The World Bank President , we will be pressing him on what is going to be happening to the economies of the west africa countries. We have Steve Schwarzman. We have the ceo of marriott. We are looking forward to the Steve Schwarzman marriott interview and we will press him about obama. We will see if he agrees. We have the head of ford in africa. There is talk of a new ford plant in nigeria. Lots of ceos on the docket. We will be pressing them on dollar figures and the general Political Climate here in washington. Is it hospitable for doing deals . Alle will look forward to of that coming up. Hans nichols. Back on his old stomping grounds, washington, dc. Bmw delivers. We will talk about it. Full speed ahead. Good morning, everybody. Welcome back. You are watching the pulse. As you can see, something of a spike. The pound versus the u. S. Dollar. Reallyt this morning highlighted the strong growth we are seeing in britain right now. This is the pmi services data. It came through at its highest level in eight months. We were expecting a 58 reading. What it may also point to as well is the fact that we are going to see a rate hike coming through britain a little bit earlier than some economists are forecasting. Lets go from currencies to cars. Bmw shares are rallying. The largest maker of her luxury cars. X5 in particular is doing very well. Phenomenal. April by nearly 50 in terms of sales. It grew by nearly 50 in terms of sales. There winning on their 3 series, 5 series, 6 series. They are introducings 16 new and refreshed models. You might start to see margins and profitability dip a little bit in the second half of the year. The Second Quarter, 26 increase in profit. That is phenomenal. Margins are the measure of profitability. , 11 of allf sales their sales turn into profit. That is well ahead of audi. Bey say, we are going to investing in technology, we are going to be bringing out new products in the second half of the year. Generally, people are very impressed by the level of profitability. I love the management speak today. We are not costcutting. We will be serving the cost rises. The upward trajectory blah blah blah. Management speak him a management speak. They are saying they will keep an eye on the profitability Going Forward. In terms of the euro, it did dense lails dent sales slightly. Increase in profit, everyone is very impressed. We look forward to the new round of products. The new rollsroyce coming out. Loads of demand, loads of inquiries. Good news. Thank you very much indeed. Caroline hyde. Lets get some more analysis on bmw. Christina church joins us now from barclays. Good morning to you. I really struggle with white suvs are selling so well. Why suvs are selling so well. Bmw just cannot sell them fast enough. Do you think it can carry on . I dont think it can carry on. There are two conflicting aspects. Consumer taste is choosing suvs over the smaller cars and that is partly because suvs are becoming more fuel economical as all manufacturers make their cars, reduce all the co2 emissions on their cars. On the flipside of that, the regulators are saying they want co2 emissions to come down and fuel economy to come even further. To have to sell a lot more smaller cars in the future. You also have a geographical preference. In the u. S. And china in particular, suv growth has been extremely strong. Bmw is very strong in china. It is a prestige purchase. They will be building an even bigger one. Which is apparently absolutely massive. If they are prepared to go even further into this territory, the margin story is going to get better and better. I think absolutely. Key difference between bmw and mercedes right now is the fact that bmw is saying that they can not only sell the suvs, but bring out even bigger suvs. Their technology is more danced. Advanced. They have the ability to lightweight these vehicles. The technology will be rolled out to the main series cars him a starting with the 7 series next year. Hybrid technology. To make sure that they can continue to sell these really big cars. So that they will not have to completely dilute the mix. Over time, smaller cars will be a bigger percentage. To makel still be able big profits on the big cars though. It is a good sign of how far danced bmw are with technology. In terms of the other end of the spectrum, they will have to sell more smaller cars, how does the move into frontwheeldrive change that dynamic . Theyre going into a territory they have never operated in before. French. G with the a very different market dynamic. The skeptics when they first announced frontwheeldrive were not happy with the idea of a sporty bmw going down this route. A lot of buyers of small cars dont know that they are driving a rearwheel drive car. They have been trying to reduce costs as a whole. Is gettingdo that platform integration, such as the small cars in the bmw brand and the minicars built on the same platform, the frontwheeldrive platform. We get the first car on the bmw platform coming on that platform this year. Consumers like the car. They prefer the practicality of this car rather than the fact that bmw drivers have preferred historically the stock units of the car. Stockiness of the car. They are trying to appeal to different customers. Do i need to worry about russia when it comes to bmw . They were asked is equity that question today. They said that the dynamics in russia at the moment are something that needs to be watched. So far, the first half of this year, volumes were just on 1 from last year. It is an area to watch. Is a high proportion of suv sales. But it is nothing like china, in terms of percentage of contribution to profitability. Weakness inigate one region. They have huge strengthen volumes, particularly in china at the moment. Thanks for the answers. Ristina church joining us from barclays. Credit agricole said profits dropped 98 in the Second Quarter on charges tied to portugals secondlargest bank bailout. Credit agricole shares a rallying. Are rallying. Telefonica has offered to buy the brazil unit of vivendi. Roache will by the Danish Company for a cash payment of up to 450 million. They researched genetic disorders and inflammatory diseases. Roche will keep Company Operations in denmark. Mumbais bike on congested roads can be a little bit dangerous. One group pursuing a greener, safer future. Gives ar of london keynote speech right here in our European Headquarters and he will join us for an inter indepth interview right here on the pulse. We will take a break. We will see you in a moment. Welcome back. You are watching the pulse. We are going to be talking about bicycles. Riding a bike in london can be tricky. Riding a bike in india can be downright dangerous. Mumbai is the classic example. One Nonprofit Group is hoping to make Green Transport safer and more available. This report. There was a certain contradiction in the idea of going for a relaxing bike ride in the indian megacity of mumbai. According to the world health organization, somebody dies on indias roads every five minutes. Getting around by bike is not for the faint hearted. Roads, nolly on these stops, no medical first aid. No organized infrastructure. That is what people are afraid. These commuters have decided to trade their cars for bikes. A notforprofit called smart commute has optimistically launched a cycle to Work Campaign for mumbai. It is aimed at reducing pollution and Traffic Congestion while promoting exercise. The danger on the roads is not the only challenge in mumbais sticky climate. Andrea for the cycles having shower rooms. When an employee comes in all sweaty. The new generation of cyclists has the odds stacked against them on and off the roads. It is the more Sustainable Future and it is worth it. Paul allen, bloomberg. So they have both got helmets on there. A warning for europes largest economy. Growth in germany. We are going to speak to the president of the phone. Ephone. Fo institute. The london mayor will be heading upstairs to an indepth interview tomorrow with boris johnson. We will take a break and see when a moment. Good morning, everybody. Welcome back. You are watching the pulse. Im guy johnson. The egyptian brokered ceasefire is the latest effort to end four weeks of fighting. Hamas has accepted the truce and israel will consider sending a delegation to cairo if a ceasefire is held. Israel is pulling back its troops from gaza. Prosecutors say they would agree to end the corruption case. The billionaire has been on trial over bribery charges. The court is adjourned until this afternoon. The july reading came in at 50. That is the dividing line between expansion and contraction. China ises failing to gain traction outside of the manufacturing sector. Interesting that the china number does not come into the european traders. After coming out the highs of 2014, europe is back up. A day of gains. I am going to get excited about sterling. 168. 8 1. Services. Pmi. 6881. Services. Pmi. Why does it matter . Three quarters of u. K. Gdp. This is the highest since november 2013. Look at the mpc meeting. The bank of england meets thursday. They decide. Many expected to stay unchanged. What we are looking forward to are the minutes released on august 20. If anybody says the data is good, it is time for a rate hike. They think the dissent comes this month. Does it matter . The color in the Inflation Report is the big one. When do we get that first rate hike . The data is Getting Better and better and better. Yes. I guess we will have to wait and find out. Its what makes it so fun. Thank you very much indeed. Jonathan ferro with the latest on sterling. Up next. Lance is tom keene joins us with a preview. Good morning. We will talk about china. Will talk to dr. Economy about the changes in politics. We will talk about china pushing back against the united states. Sir Martin Sorrell will join us as well from wpp. Im excited to speak to him about social media. Im excited to speak to him about facebook and google. We are looking forward to that as well. Were looking forward to the show. Thank you very much indeed. A great guest lineup. Bloomberg surveillance is coming up very shortly. A situation that is clearly deteriorating between the west and russia. The standoff between putin in the west. And the west. We are joined by the president of the ifo institute. Thank you for taking the time to talk to us. From an unusual location. I understand you are on holiday. Thank you for being with us as well. Withly the situation russia has to tear your rated. Clearly that is going to have an impact on the German Economy. Cash has deteriorated. Has deteriorated. Clearly that is going to have an impact on the German Economy. Only 3 of german exports go to russia. 47 said they did have contacts in russia. 57 of those have been negatively affected. That surprised us. The expectations for future business, i would say, are bigger than what the percentage of exports would have signaled. This is the reason why the ifo indicator went down recently. Three times in a row, actually. We find this significant. Duration, are the most firms saying this is shortterm, it is something they can manage . It becomes story if longerterm . What is the story if it becomes embedded . Well, this will likely have longerterm implications because we talk about direct investment projects, which german firms, similar to austrian firms, have started in russia and they are put on hold. Shortterm which is important here. After all, the german firms exporting are exporting not to Consumer Market but to produce industrial intermediary ,oods for the russian market which are based on longerterm contracts anyway. Professor, do you think that the government in berlin should take some steps to try to alleviate the problems . Is there something the government policy can do to help this . Of course not. No. Dont overdo the effect. I dont think this implies that germany will go to stagnation. Russia is not as important or important enough for that. It just means that our growth forecast, which were in the range of 2 for the next year, will have to be scaled down slightly. It is a negative impact, but the German Economy will continue to grow. There was no Government Action of that sort necessary. We should be very cautious, on the other hand, with sanctions in general. Im not sure whether that is the right method to use because we dont hurt the russians, but we hurt ourselves. To look forbetter constructive solution together with the russians. But that goes beyond my expertise as an economist. Yes, as an economist. It is interesting you say that. A lot of the Business Leaders we were talking to a few weeks back before mh 17 mirrored what you are saying. I would say that listening to what a lot of Big Companies have been saying in this reporting tone has changed. They are largely backing what Angela Merkel is saying. The change in tone coming from her has been quite significant. Do you think most companies are getting on board . It sounds like they are. It sounds like you are sticking with the original story. Yes. Theyre getting on board. The government has done everything to realign their policy. On the other hand, we should not a mightye russians areae military power, a mighty economic power. They will always be our neighbors. We have to avoid returning to a period of cold war. We have to try to find the way detante this period of which we have had the last 20 years. No one would have dropped to a t ofeful solution dream a peaceful solution to the soviet union situation. Even if the political systems are different, you can always do trade with one another. Then you can resolve your political problems. Where do we draw the line . Where is the line in the story . Is it when russia invades crimea . Is it when russia invades other countries . This is very difficult to say. That somebe clear actions were also taken by the west. It is easier to blame only the russians. Suggestions for participation of ukraine, moldova, georgia. That might have been a little bit too farreaching, in my opinion. The west could have been slightly more careful here. The russians did make the proposal to have a freetrade area. No one positively reacted. Everyone accuses everyone else. One step brings about the next. Everyone thinks the other one is the bad guy. Probably the russians are the bad guys, yes. We should not allow them everything they want to do. But where will all this lead . I am a little bit concerned that i see too little progress in finding a real solution for rest westh the and russia and ukraine can live with. Do think the conversation we are having here is the exact reason we have ended up in the situation that we are in . The desire to do business has overtaken the geopolitical mass mess that used to exist in western europe . The perception is that putin believes we are too interested in doing business and that is the weakness the west faces here. I completely disagree. The more trade you have with one another, the mutual interdependence is larger and the less inclined are the countries to dare military actions. Peace policy is trade policy and the other way around. We should not forget that. Goingfessor sinn, we are to leave it there. Enjoy the rest of your holiday. Thank you very much indeed. We have breaking news on the u. K. Banking sector. It has been cut to negative from stable. We will digest this when we come back. We will see when in a moment after a short break. Minutes past the hour. Welcome back. You are watching the pulse. Twomic militants seized oilfields in iraq. To hisyward is sticking forecast for production. Ryan chilcote joins us with more. He was not concerned. I dont know exactly what hayward thinks about this. According to the statement they came out with, he is not too concerned. Our operations remain safe and secure, pumping record volumes. We and all other operators are fully manned and operating at the highest levels. We have no plans to move any personnel. This is what investors have been concerned about. What isht be some of going on today. The stock is down about 1. 5 . Investors saw what the Islamic State did over the weekend, seizing two oilfields. Shey said, hey, maybe genel assets in kurdistan are at risk. The company says, not just yet. Thank you for the update. Ryan chilcote bringing what we need to know. Lets get analysis from the situation about the situation. Good morning. Good morning to you. The time that was lost by the turns kurds to isis the ground that was lost by the kurds to isis, people seem to be making a lot of it. They hold them . We have not seen the Kurdish Forces in battle. Armies get trained in battle. The fear in the minds of investors is that they turn out to be as flimsy as the iraq he army was in iraqi army is mosul. They are essentially regrouping right now. Theyre thinking about further incursions by isis into kurdistan. Itselfqi army needs help. In the absence of a more unified government, a more Representative Government in baghdad, with a Prime Minister that formed a true coalition of interests in the country, the west is reticent to help. There are question marks out there with regard to how much further isis can go into theistan and and how strong Kurdish Forces are going to be in repelling isis. These are small towns and it is difficult for me to believe that they will continue to the extent where they start to affect companies in kurdistan in the short term. This could be a buying opportunity for some investors who are looking at some of these companies. There is a redline there. From all sorts of parties. Not just the Central Government that now wants to help curtis dan. Kurdistan. Isis even want to . Baguette seems to be a much bigger focus for them. To be a muchems bigger focus for them. They can more easily move in a southern direction than fighting the kurds. Declared that the question is the timing. It does not look like this is the right time for them to be doing it. The primary target is disruption of baghdad for now. There are all kinds of other operational difficulties that are affecting Companies Operating in kurdistan. One of them is being able to sell the oil they produce. They cannot offload or offload in the middle of the night. Does the changing dynamic on the ground change the dynamic of whether or not the kurds will be able to sell their oil as it becomes more important for baghdad to work with the kurds . Does that relationship change . The level of risk has gone up across the board. Incursion,this tiny the level of risk for curtis dan and the export of oil out of and thean kurdistan export of oil out of kurdi and it will bep reflected in the price. All of that needs to be factored in. What we need to watch for is whether there are further incursions that solidify this level of risk. Whether there was more risk that makes it more costly for companies to be there and export the oil. Do you think the relationship between the kurds and the administration is going to change . Money has not been flowing in the way it was originally designed to do from baghdad into the region. If anything, they postpone the referendum that the kurds have in mind. I would think that primarily what is on their mind today is keeping the peace within kurdistan, rather than securing autonomy. The Central Government will need to support kurdistan. Part of the support is the transfer of funding into kurdistan to help them meet the threat. It is in the interest of the Central Government that kurdistan is able to face a threat from isis. Lets talk about small companies. Put so much of what they have into this region. What about the bigger Oil Companies . They can take a more handsoff approach, wait, watch, see what happens. Will they continue to do that . I would think that that is what they will do for the time being. Not least because they are diversified across iraq. Secondly because they have the infrastructure, the security infrastructure to protect their people. I doubt very much that they are going to roll back any operations or commitment because of the small incursion into. Reas that were not prior we will even there. Thanks for the analysis. Day by day. Now, we are going to take a break. Up next, we will look at the fight for independence. A highstakes tv debate. That is tonight. We will have more on that in just a moment. As we speak come a russia is canceling tomorrows bond auction. Isas we speak, russia canceling tomorrows bond auction. We will take a break. Welcome back. You are watching the pulse. The pound is bouncing back today. The pmi reading comes through north of 59. 58 is what we were anticipating. The stronger numbers drive the pound higher. Who does that pound belong to . That is going to be part of the debate we will see tonight. A bit of political theater for scotland this evening between 8 00 and 10 00. We will be seeing the first minister taking on alistair darling, the former chancellor. Tonighto debating whether or not scotland should remain within the union. At the moment, the polls seem to favor the union remaining as is. I. E. Scotland staying in. Can mr. Hammond change that . We will have coverage of that tomorrow. He hasr darling, well honed his skills in the houses of parliament. Dont underestimate him. Hammondnow what alex can deliver when he joins these debates. It will be interesting. We will bring you plenty of coverage tomorrow. That is it for the pulse. Keep it right here on bloomberg television. Bloomberg surveillance is up next. Live from new york with tom keene and his team. Martin sorrell will be joining the show from wpp. Looking forward to that conversation. Follow me on social media. We will take a break. Enjoy bloomberg surveillance. We will see you tomorrow. This is bloomberg surveillance. Israel and hamas are in truce. Will frightening recommence fighting recommence on friday . 20,000 troops on the u. K. Border. The ruble turns. Facebook, google, twitter they own the world. Will madison avenue ever be the same . This is bloomberg surveillance. We are live from a World Headquarters in new york. It is tuesday, august 5. Joining me as always, scarlet fu and adam johnson. Lets get right to wear morning brief. We get mixed Service Sector data overnight. The u. K. It was better than forecast. The strength in the u. K. Was due to rising wages. Be why mr. Carney is anticipating higher rates sooner than expected. U. S. , we get the out of our own. Of our own. Quirky stuff, but important nonetheless