Welcome. You are watching the pulse. We are live from bloombergs european headquarters. I am guy johnson. Busy morning for the eurozone. The french finance minister is ofnning 21 billion euros spending cuts in 2017. He has outlined next years budget. He says the french government sees the deficit falling 4 in 2017. We wont get 2. 8 until 2017. This is the line that really encapsulates the story from the french this morning. The rhythm of Debt Reduction is appropriate to the situation, safire says. No further efforts will be demanded of the french. The government needed to put the country on the right track. Refuses austerity. That tells you a lot about the direction of travel here. It is going to maybe continue to change the relationship with germany. We have also had news out of the germans this morning when it comes to manufacturing, below 50 according to the pmi this morning. This is the flash number. That has sent the euro tumbling as well. We had a touch at 1. 26 yesterday. We are now well below 1. 26. That is having a Ripple Effect across the currency markets this morning. We will get more on the french budget later on in the morning. , aing no to austerity fascinating line from the french today. On eurodollar. Continue to watch that space. Lets turn to our company news. A torrid month for the new tesco ceo with news that the u. K. Regulator will be investigating the company after its overstatement of profits. Lets get more details with caroline hyde. What else did we learn this morning . And tescovestigation will be fully cooperating. We knew that deloitte and fresh field had been assigned to try and get behind, underneath the skin of tesco in terms of overstating that profit. They have been assigned by tesco. We know that the Financial Reporting council, another watchdog in the u. K. , has had its eye on tesco, this is the watchdog that looks at whether companies have to restate the counts. It is the end of a horrendous month. The first month on the job for the chief executive and already he has had overstating the firsthalf profit, suspended four executives, and market data has showed that tesco had its biggest sales decline in two decades. Ura debating whether this is a company that has to sell shares. Off are only two levels junk territory. S p saying, if we see that the governance is weak here, if that is what we uncover, we might have to downgrade the Credit Rating of the company to junk. The share is about 18 . Lets talk about its rival, sainsburys out with numbers. The stock rallied on slightly better than anticipated like for like. Could have been worse. Then they Start Talking about the dividends. It is all about the Balance Sheet. Shares back in the red. We had seen a little relief rally earlier. It wasnt quite as ugly as we had expected. We saw a decrease of like for like sales of 2. 8 . Many analysts thought it would be three point 3 . The language is so ugly. Markets fiercely competitive. They are adding fuel to the fire with that price war in the u. K. They announced that they are going to be lowering base prices on thousands of lines. Warn, the second half is going to be like the first half. We are going to see more pressure and Commodity Prices on the downhill. They are going to see these sorts of tough environments. This is why they are analyzing the strategic view of this company. They have a new chief executive, two months at the help, and he analysts haveany been worrying about cutting capital expenditure. They say the dividend is even under review. Next month is when we get the results. 12 fall in the share price last year. We saw a couple of hedge funds ramping up short positions. Today, shares the lowest since 2008. The Short Interest on the stock is eyepopping in terms of the Short Interest. Sainsburysted, massively shorted. Caroline, thank you very much indeed. We are going to talk about this a little bit more. We are going to talk to gary white. He is going to beginning us his talk on what is happening at sainsbury. He really pointed out the Balance Sheet story. That is front and center for him. Lets turn our attention to hong kong. Protests continued for the six straight day in hong kong as China Marks National Day today. Holiday that commemorates the founding of the peoples republic. Joining me now from hong kong is Bloomberg News reporter andrew davis. Interestingly for protesting and celebrating. What is happening now . There are still thousands of people on the streets. Is still locked in a protest areas. Patrick is traffic is still locked in a protest areas. The crowds were just enormous. The all. The cops have really backed off and the protesters are very well organized. They have always been about civil disobedience. They are not trying to prov oke the police in any way. Given the strategy of both sides, the Police Standing back, the demonstrators being much more peaceful than we have seen in other parts of the world, what are people talking about . It is really unclear. Given the scale of it, it is hard to imagine how they could get these people off the streets unless they left voluntarily. They are in three different parts of the city. They are blocking main roads, disrupting traffic for businesses. We are hearing that restaurants are being supplied by bicycle because they cannot get trucks in. For some people, it is a real inconvenience. There is no way to really get them out of there. They have to find some kind of are that the two positions so diametrically opposed, it is hard to see much room for compromise. The protesters want beijing tabak down on their insistence that candidates for the next chief executive be vetted by a committee that would choose candidates loyal to beijing. They are going to let people vote. But the candidates will be vetted. The outcome wont be that big a surprise. It is hard to imagine beijing reversing that but it is also hard to figure out how they end them. Andrew, always a pleasure. Thank you very much indeed. Lets bring it back to europe. Jonathan hill is bracing for a frosty recession in brussels. He is the u. K. Nominee to be the new Eu Financial Services chief commissioner. Manus cranny joins us now. He goes in front of European Parliament today. Parliament like to give him likely to give him a fairly rough ride. He has been stripped of some of the powers of authority that would have made that a tougher story. Here in the united kingdom, the city of london is one area where they are trying to circumvent those caps. That is what is going on in london. This role, some would say was junckers opportunity to mediate with cameron. Some of the references to lord hill are the fox in the henhouse and the hangman. He is a financial lobby is. He is. He ran a company with Financial Institutions until 2010. I think he is backwards. To understand a little more, perhaps he is not just to the right or antieuro. Perhaps some people want to personify him as that. Back in the 1990s, he was advisor to john major. It was a time when john major was the Prime Minister here, trying to rally the tories, trying to defend the position who wanted looser ties with europe. So he is not without pedigree in terms of comprehension of europe. He was antieuropean . Yes, but he was part of a lobbying campaign under majors government to bring the defectors. That is the point i am making. Shadow banking, regulation benchmarks and structural performance. The opposition is this, we are a country not me, i am irish the u. K. Does not want to join in the Banking Union. The u. K. Doesnt have the euro. The u. K. Is according to the belgians, it is not acceptable that Banking Union goes to someone from a country that would never join the Banking Union. Mark ferber, banking is the main issue because this would give a lot of responsibility for integration. It is interesting that thiser is pushing very hard. Maybe the city would like to embrace that. Anthony ryan said, the market is very important for banks. Thank you very much indeed. Later, we will take a closer look at the challenges for lord hill. We will be joined by the founder and director of the Financial Inclusion center, and james walsh. Two sides to this story and we will debate the issues. What else is on our radar . Adidas shares rallying today. It says it will buy back 1. 5 billion euros in stocks over the next three years. The company has been dealing with investor discontent. Bloomberg india has been speaking with the countrys centralbank governor. He is warning that near zero Interest Rates mean distorting asset prices without creating real economic gains. My worry is that we may be in danger of a crisis of overcompensating for deficiencies in other parts of the system. The first u. S. Case of ebola has been confirmed in texas. A man who traveled from liberia and arrived in america began showing signs of the disease four days later. He is being kept in isolation. More on that story later in the program. Also coming up, hong kong protests while china celebrates. We will look at the Economic Impact as the protesters enter their sixth day of their sit in. The nation is celebrating national day. Interesting tension. We will then we will see that story later. Welcome back. The massive protests in hong kong are taking a toll on the markets. The Hong Kong Stock Exchange closed on a losing streak. What happens next . Joining us now with insight on the disruption in hong kong is miranda car, the head of research for north square blue oak. Good morning to you. The next two days are going to be interesting. We have a lot of people on the streets. At this stage, the police have pulled back, the protesters are taking a sit in, not actively goading the police. This looks like it could be quite long. How do investors read the tea leaves . At the moment, it is hard to get a sense of where we go with this. It has reached a bit of a stalemate. The main negative Market Reaction on monday and tuesday was just that we dont know what is going to happen over the national day, whether the protest could escalate. We are going to wait to see what happens. You had a bit of the selloff exaggerated by concerns over what would happen. Now it seems to have settled down. They are not doing any more tear gas. The police arent taking any more reaction. It took more stabilizers. In terms of the long term, it casts a bit of a pall over hong kongs development. How do i price this in real terms . It is hard to see the protesters leaving, hard to see the chinese giving in. This could go on for quite some time. I am the symmetry all all this seems to be lopsided. You could have a longterm protest. You had occupy hong kong under hsbcs building for a long time not making much difference to the business community. If the protests are scaleddown but still remain, the vibrancy of hong kong remains as people go back to doing business. It is only if there is a further crackdown from beijing, and beijing seems to be taking a hands off approach. It continues, there shouldnt be a major threat. Hong kong as a Financial Center has been declining. Other Financial Centers in china are being seen as on the up, hong kong on the down. To what extent will this accelerate the process and what acceleration are we likely to see . There is arguably a greater threat to hong kong from the markets perspective from the Hong Kongshanghai connect. Giving basically Institutional Investors and Retail Investors direct access to shanghai for the first time. Going into hong kong stocks isnt necessarily the only way. Over the next 20 years, hong kongs role as International Gateway will diminish as it will go to shanghai. Underline and bring that question to the four. It threatens hong kong if the protesters threaten the rule of law. It becomes more like a control by beijing. All of that accelerates the process. Talk about taiwan a little bit. In london about what the implications for this are but if you look at what happens, the relationship between these two countries, difficult to see how this there is a positive and a less positive way of looking at it. If chinese authorities cracked down taiwan is going to back off. If we see this longterm drawnout protest, how does taiwan play it . Benefits seen a massive over the past few years of increasing ties area you have some sort of key taiwanese ties. S actively promoting integratione an with china as beneficial for business development. If you get this thing where that is delayed because people are thinking, i am worried about how beijing will treat us, whether we will retain full democracy, makes it much slower and raises the risk of protests in taiwan which we saw earlier this year already. If we end up with the drawnout process and the chinese dont crackdown, how does that does that make it more positive or just leave us where we are . It can leave us where we are. Obviously the risk is increased, the longterm issue which doesnt go away. For hong kongis and taiwan. It does raise those questions. Beijing is not cracking down, nor is it likely to allow full democracy. You can take some steps to get towards that, the protesters arent going to be happy. Ok, maranda, we will leave it there. Come, zalando shares soar on the first day of trading. We will look at the Success Story and a programming note for our viewers out of the u. K. David cameron will address the Party Conference today. We will take that speech live and in full. Timing is a little flexible. We will make sure it happens for you. See you in a moment. Welcome back. You are watching the pulse. We are live on bloomberg tv. We are streaming live. Busy morning. Busy wednesday. Jon ferro. We are looking at the equity markets across the eurozone. The ftse is pulling one direction, down by almost 0. 4 through the morning. Look at the big movers. It is the Corporate News flow driving us lower. Sainsburys down by 3. 4 . Like for like sales dropping by 2. 8 . Dividend will be part of a full cell review. The u. K. Supermarkets under pressure. The regulators here in the u. K. Investigating tesco and that overstatement of profit. Sainsburys down 3. 4 , tesco 3 . Morrisons in a race to the bottom in a sales price war. Elsewhere, eurodollar. Youth of the u. K. Supermarket news wasnt good. Look at german manufacturing data. Contraction territory. Through 1. 26. 1. 2593. Morgan stanley now say 1. 20 is insight. Looking at bond yields as well, yields are down in spain. Everybody is going to be looking at the ecb to do more. When the french are pushing back the budget that is a target, the italians reevaluating growth, how much can draghi do . Pay attention to that as well. Jon, thank you very much indeed. Up next, a marijuana makeover. One start of may have found a way to solve the cannabis dosage debate. See you in a moment. Welcome back. You are watching the pulse. I am guy johnson. These are the Bloomberg Top headlines. The first u. S. Case of ebola has been confirmed in texas according to the center for Disease Control. A man who traveled from liberia and arrived in america on september 20 began showing signs of the disease four days later. He is now in intensive care. The Italian Government has cut its growth forecast for this year and next year. It has pushed back a structural budget target by a year. Thence ministers say that Economic Outlook has greatly deteriorated. The french finance minister is planning 21 billion euros worth of spending cuts in 2015. Wontfirms the deficit fall below 3 until 2017. More details on this. Caroline hyde has been digging through the numbers. The headline this morning says we are refusing to do austerity. Excess of 50 billion euros over the next three years. H 15 promise they will slas billion euros or there about in 2016 and 2017. They are raining back on spending. This is a country that is generous. Digging into some of the things they spend money on, it is quite phenomenal. If you give birth, you are given 900 euros as a thank you. 900 euros every single child. They are proposing a second child only getting 300 euros. That is going to hurt, but still this is a very generous welfare scheme. Makingainful so they are a huge promise in terms of raining back spending. The problem is it is not getting their deficit under control. Gdp. Arget is 3 of they say, sorry, 4. 4 this year. It is going to fall by 0. 1 the year after. Clearly this is a country desperately struggling to get it under control, all because of this very weak growth. Are say the deficit cuts giving painfully weak growth. What i love is the jump. 2. 8o from 3. 8 in 2016 to in 2017. That either implies massive cuts or a huge pickup in growth. Still, it shows they are not going to be meeting the eurozone target until 2017. Wishful thinking. There is going to be some flexibility in those numbers. This is a president coming under significant pressure. He gave a stark warning that this will be inevitably painful. Mounting pressure from berlin. Brussels as well. They are just going to have to get more concessions. Twice, they have asked for leniency. They are going to have to ask for it again. Swallow. Tough pill to caroline, thank you very much indeed. Caroline hyde on the french budget. Let me bring you to the u. K. And talk about manufacturing data that came out. It is having an impact on sterling. Was 52. 7. Te that is a weaker than anticipated number. Certainly, the pmi mess is having an impact on the pound. Let me show you the cable rate which has come down a little bit. As you can see, a significant drop. Wantedbut also from happening in the u. K. To what is happening in germany. The vento trading for the first zalando trading for the first time. Hans nichols went to the company. Zalando, germanys Biggest Online retailer is preparing for a different kind of fashion shoot. There is little margin for error. The fashion shoot is everything. It is really important that we have the product, to get the shoot right so that we can present the product to the consumer. Piece ofos offer, a the market for Online Shopping. Zalandos First Six Months of sales increased to almost one billion euros. The cofounders started in 2008 by selling flipflops. It was nurtured by the investors behind rocket internet. Speed and scaling are their trademarks. We are moving through about 1000 products every day. Before an article of clothing is posted online, it needs to be shot. That means model shoots. There are about six different views that each article will get. After that, it gets a still shot and is posted. To fashion and retail, they view themselves as a tech powerhouse, leading berlins startup scene to the frankfurt floor. Are from what you are seeing, the shops, the mobile [indiscernible] with almost 14 million active users, it is not quite alibaba and there is the danger it could fizzle like asos, down this year. For investors intrigued by continental Online Shopping with Gross Profit Margins north of 40 it is a chance to make a european play, even if the models arent that interested in you. Tax company or Fashion Company . It is interesting to see the fact that these guys are employing so many guys doing code. What have we learned . They think they are a retail company, which they are. They think they are a Fashion Company because they have their own labels. They think they are a tech company because they have software engineers. All their payments, all of that is done in an entirely separate location in west germany. They dont even have wifi there. So concerned about security. Another takeaway, you and i wouldnt be in this category but certain shoppers have the ability to predict trends. Zalando has the ability to find those shoppers. They get a little virtual star. They are trendsetters. Whatever that person is buying, they know to preorder a lot of it because others will follow suit. Interesting way to mine all the data. The question is, the stock is up 14 , can they turn that into profit . They had one quarter of profits but that is always a challenge with these online companies. It is. I dont know what you are saying about my fashion sense but we will talk about that offline. Stock will bid this morning. There are curre concerns. What is have to look at happening in the u. K. To put those concerns in reality. The biggest concern that raised flags to me is that in germany where most of their , they are in 15 countries but two thirds of their revenue comes from austria, switzerland and germany. In germany, 50 of packages are sent back. When you look at industry averages, you are in the 30 range. That adds a lot of cost. They need to bring that number down. Customers need to have more satisfaction when they get the products. There maybe need to be higher barriers for sending them back. Here is the thing, german law makes it very easy for you to insist on returns. That is one potential challenge. Other than that, how do they continue to grow and also bring down cost . Investors gave amazon so much time to figure out profits. Zalando is already there. They turned a profit last quarter. They may be a head of amazon in terms of efficiency. My wife calls it unshopping. Online big feature of shopping. How much stuff you get sent back. Shares in the transport companies. We have to leave it there. Thank you very much indeed. Hans nichols on the forefront when it comes to fashion. Medical marijuana is one of the most controversial dougs drugs a doctor can prescribe. Elliott kotkin has more. Lab, a tel aviv drug medical marijuana is getting a makeover. Ground and filtered, it is destined for a 3d puffing device that wont get you high. We have developed the first cannabis inhaler which allows a 100 microgram resolution. All this using the raw cannabis without any chemical alterations. It allows us to penetrate existing regulatory systems. No more clinical trials, no more guessing how much cannabis they need to leave their pain. The devices they are making here are destined for israeli hospitals. They hope the real money spinner will be this, a cannabis inhaler for home use. They hope to have it in israeli homes next year and the American Market the year after. Tothat market could rise more than 10 billion by 2018. Syqe hopes to win about 2 of that. Does the inhaler actually work . A former navy seal injured in netherlands was one of 10 israeli patients to try it. I would spend whatever it takes. It doesnt show everyone else how much i am suffering. It lets me decide how to take care of my health. Thehe doctor overseeing syqe trials says the device could change marijuanas image. Stigma. A because of the need to smoke. I think from now on, once approved, everybody is going to look at it as a medicine as opposed to a substance that people use. With approval in israel 20nent, syqe aims to raise billion to boost production. If all goes well, it plans to apply its technology to other controlled substances such as opium. Science will always find a way. Elliott gotkine reporting from tel aviv. We are going to take a break. When we come back, sainsburys struggling today. Can its new ceo fend off competition and survive the ride . The Balance Sheet is a critical actor in allowing it to do that. Is it Strong Enough . Welcome back. You are watching the pulse. I am guy johnson. A tough year for two of the you ks biggest supermarket chains. Sainsburyslowed at. Full investigation into profit overstatement from tesco is officially underway. Joining us now for a bit of insight, gary white, chief investor at Charles Stanley direct. Lets deal with sainsbury first of all. A lot of challenges. Starting with the top line, that is the problem at the moment. Like for likes, we saw that today. With itsas problems Balance Sheet as well. It may not have the strength to invest in the business. It is all about cash flows. Its cash flows are under attack from every level. We have the discounters nibbling away. We have Marks Spencers at the top end. Also, consumers are switching to internet shopping. The margins on internet shopping are much lower. They are very cagey on releasing the details about how profitable these internet shopping businesses are. If they are profitable at all. You might make a profit this year because it has got to deal with morrisons. Also, with cash flows in the future, Interest Rate are going to rise. The dividend is certainly at risk. Goes onof it investment, yet this is a time when these businesses have to invest. No doubt about that. They are going to benchmark against asked her aster. They are going to have to find some way of getting extra money. It is the dividend which looks at risk. There was no mention of the dividend cut today. We will find out. It is under review. We will find out then. I will be surprised if they dont i just their dividend. Tesco was forced to last month. I think the majority of people own the stock because of the dividend because it was yielding highly. Sharesrt interest in the , lots of people who are now betting on the market to fall because nobody knows what is going to happen. Lets talk about tesco as well. The culture at these businesses has been aggressive. Tesco is the poster boy for having that aggressive culture. When you look at what needs to happen, when you look at the investigation announced today, when you look at how this business is going to change the way it does business, how difficult a challenge is that . It is going to be very difficult. The thing that shows how stubborn the old management were was their refusal to abandon their operating margin target. 5. 2 is very high. It was unachievable. You are not going to maintain that. They refused to abandon it until january of this year. Management is stubborn. But actually, it is the depth of the problem. It goes down to the people at the checkout. The culture is pervasive across tesco. Issue. Ot a management it is how you change culture from top to bottom. That is a much longer, more difficult process. You can change management in a few weeks time. Changing the entire staff is more difficult. You have to change the culture. That is a longterm process. I dont know how long that is going to take. It will take a long time. In terms of what the environment is going to look years,er the next few earlier this week we saw another , sayingcounter, aldi it is going to open 65 more stores. They are aggressively targeting the u. K. , these numbersw coming out of tesco and sainsburys, five years down the road, what is it going to look like . Aldis profits in the u. K. Are lower. The reason why they cant be a discounter is they have a very small range. They cannot open large stores. There is a limit to where these discounters can go. They are going to eat into the business of tesco and sainsbury. They are not going to completely take over. How much of the damage is being done already . How much of the damage is still to be done . As the perimeter gets a little bigger. It depends how the major supermarkets react. They are going to have to take longer but i dont think it is a major issue over the next five years. I dont think business is going to disappear. They have to accept lower Profit Margins and shareholders have to accept lower returns. That is the legacy of the discounters. Thank you very much indeed, gary white. Right. Lets take you to some other company news. Babcock and ea systems have been awarded 3. 2 billion pounds in u. K. Nabel contracts. Contracts will sustain more than 7500 jobs. Cute pictures. A french stateowned Investment Bank is cutting a stake in orange. Bpi france is selling 50 million shares. The banks and the french government will continue to be oranges largest shareholder. Adidas has announced it will start a 1. 5 billion euro Shareholder Return Program. The company has been dealing with investor discontent over its poorly performing share price. Still to come, David Cameron addresses the conservatives. The u. K. Prime minister speaks to the party around 11 30 a. M. We will bring you his speech in full. That is coming up a little bit later on in the morning. Welcome back. You are watching the pulse. We are live on bloomberg television. In todays new energy, the United States and india have agreed on 1 billion of financing from the u. S. Exportimport bank. Controversial institution. The money will be spent on indias Renewable Energy sector. A Solar Installer has 330 million in a u. S. Ipo. The company sold 26 million shares. To 30 ovide customers up in terms of the cut on their current utility rates. And,europ and europes first ecomosque will be billed. It has been designed by the architect of the iconic london eye. To promotened environmental sustainability among other things of course. For those listening on bloomberg radio, the first word is up next. For our viewers, it is a second hour of the pulse. Defiance on chinas national day. Lord hill in the hot seat in brussels. And director of the Financial Inclusion center will be joining us. Sapphires spending cuts. The french have announced fairly big cuts this morning. They are not going to hit any of their financial targets in the near term and they are refusing austerity. Interesting combination. A reminder, you can follow me on twitter. We will take a break. We will leave our radio viewers there. For our viewers, the pulse will be back in a couple minutes time. On chinas national day. Protesters in hong kong as the citys leaders call for calm. France says no to austerity but yes to cuts. The deficit will not be below 3 until 2017. Sainsburys slip. Supermarket shares falling as the dividend is up for review. 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. We are live from london. Lets get to our top story. Straightin the 6th day in hong kong as China Marks National Day. A major Public Holiday that celebrates the founding of the peoples republic. Joining me from hong kong is the ceo of gm securities ge osecurities. Seems like this is a stalemate. How does this end . Withdrawn, the protesters are staging a sit in and not provoking the police. What happens next . We dont know. We are in uncharted territory right now. The students are demanding the impossible. They willnese side, not budge. They will not negotiate. They are not going to replace cy leung. Going to resign. They are not going to change the political arrangement already made. You have a Unstoppable Force versus the immovable object. What we have is usually a sure what we have is mutually assured destruction. How does that work out . What is the spark that moves the story forward . What will happen, hong kong will become like thailand. You will have paralysis for six months or one year. Confidence will be gone. The city will slowly sink. I think thats the worst scenario. I just dont see any way out of the current stalemate. It is an impasse. Known is willing to give an inch. Theres no chance of any kind of settlement. Or even any negotiations to start with. The city is slowly going to sink. What would your advice be to businesses that have assets in hong kong at the moment and ceos thinking of investing there . Weve had this problem before. The most serious was 1967, when we had street riots. Untilong did not recover Something Like 1972 or 1973. Term, invest in the long you still can have faith in hong kong. If you are in hong kong for the short term for shortterm profit , the advice is take your profit and run. It is not as easy as that. You cannot just sell off and go away. A Property Developers and the retailers in hong kong, theyre going to suffer, i think. It will be some time before they get above water. As hong kong shutters, the shanghai shine is this part theparcel of process . The authorities want shanghai to shine, maybe this is part of the strategy. For shanghai to renminbiu have to have become a convertible currency and movement of capital funds. China is still a restricted currency. No way for shanghai to take over from hong kong for the shortterm. Intou try to make renminbi a convertible currency, and time, shanghai can and will replace hong kong. Interesting that so many young people are protesting. Do you think they are aware of the longterm risks they face . Dont think so. Im old enough to live through the rise of china and the communist rule. And known the atrocities the movement and ups and downs. Is 65 year history, it is oneparty rule. It is totalitarianism. A dictatorship cannot negotiate with you to talk about implementing democracy. You are asking for the Chinese Government to commit suicide. There is no chance of negotiation whatsoever. Students are a for theit naive to ask impossible. Democracy and communism, what you will get his share democracy is sham democracy. Like singapore. I think that is the best you can hope for. I take your point. Thank you for your time. To france, the finance minister sapin planning spending cuts after 2015. Years budgetxt and confirmed the deficit will not be below 3 until 2017. The frenchion government saying the french people will not have further effort demanded of them. The government needs to put the country on the right track. It is refusing austerity and at the same time announcing significant cuts. Thats the story coming off the french government. The germans are not going to be happy with these numbers. In terms of when the budget deficit will fall below the 3 level, 2017. 2. 8 in 2017. That implies a massive pickup in growth or cut in spending. They are not detailing the growth that far. More on that later. Lets turn to another story were watching. A torrid month for the new tesco ceo. The u. K. Regulators will investigate the companys overstatement of its profits. Sainsburys is out with numbers, horrible as well. Our European Business correspondents take. Tesco shares under pressure. The financial kind of authority ways in. Having told tesco they will be conducting an investigation into the overstatement of profits. Firsthalf profits were overstated to the tune of. 25 billion pounds, that is what the chief executive dave lewis had to unveil his first month in the job. What a month has been. Having to unveil that and suspend 4 executives. Having to react to the fact that tesco suffered its biggest sales decline in 2 decades. Very difficult times. We understand he has tough decisions with respect to looking to sell or close off blink box, streaming of music and films. Tesco wouldwhether have to raise money in terms of a share sale to try to get a grip of their debt levels. That could be cut to a junk rating, their credit risk could be deemed more risky by the likes of Standard Poors and moodys because of their if we see the leadership is why we saw the overstatement and profits. Fascinating things. Interesting that certain people are betting this could be a turnaround story once dave lewis is under the seat a little bit longer. Under the desk, should i say. That weionaire betting will see tesco shares improved. Jeffreys, taking on the ceo of tesco is like becoming the england football manager. A mission that may end in failure, but what englishmen could refuse it . Deloitte brought in to investigate by tesco. An institution that must be defended at all costs. Thank you very much indeed. We will talk about sainsburys later. I want to talk about ebola. The first case confirmed in dallas, texas according to the centers for Disease Control and prevention. Liberia showing signs of the disease. Joining us is sam fa zeli from bloomberg intelligence. Good morning. A broad breadth of coverage. Got a guy who arrived in the country from liberia. This was inevitably going to happen. The fact that he was not diagnosed until he got into the country after more than 4 days is significant. With disease is this, you get a few aches and pains, you brush it off as maybe a cold. Two days or three days later you realize you have the flu. It is the same situation with a more serious disease. To get fully diagnosed, you need to have the right symptoms. Until the symptoms show, you cannot diagnose them. You cannot put everyone who has a viral infection and say this could be ebola. It appears that the individual had not been directly from one of the countries affected. It seems that he or she had traveled from another country. It is difficult to control. The u. S. Is very good and most of western europe is too and responding rapidly to controlling this. They have hopefully all the data to know who he has been untouched with to contain it. This is what the cdc does. This is their bread and butter. The authorities will put pressure on washington to do push forwarder with the vaccine and accelerate what already is a fairly active story. Three or four companies are vying for the vaccine. Glaxosmithkline is in the league. They talked about the number of 10,000 toanuary, 50,000 doses. Johnson johnson is talking about having one million doses in 2015. What we need to do is be prepared, except the risks that a vaccine has not been broadly tested will have. In this case, they will judge that the benefits outweigh the risks. That is what we talked about before. This needs to be about containment. The vaccine will be used for containment. Thank you very much indeed. Eli, European Research at bloomberg intelligence. Back in a couple minutes. Good morning. 15 minutes past the hour. You are watching the pulse. Appears before the eu parliament. He has to convince them he is the right pick for the Financial Services job in brussels. Heres a look at the hearing with the founder and director of the financial includes an of the Financial Inclusion center. James is from the National Association of Pension Funds. A lot of people in brussels are scratching their heads about why this man should be given this job at this time. How much do we know about lord hill and his ability to conduct a pretty big job in brussels. Capital markets union, juncker wants that. The Banking Union, juncker wants that. The city of london once its rights protected. What can he do . Lord hill is well known in the city of london. As a financial lobbyist. Hes wellknown. The most important thing is not lord hills appointments, it is the creation of the Financial Services commission. Bringing this together will make it more efficient. That is the important thing, not the appointment of a particular individual. City lobbyists were cheering when they heard the appointment. The consumer groups were quite worried because of his background. Are not to judge a guy by his background. Juncker has given him a strong mandate and told the man what to do. He has the skill set and knowledge to deliver. Hes a very experienced guy. Juncker has made clear what he expects out of the Financial Services commission. Not hisdge by results, background. You think the industry will give him the fair chance . A lot of people in london cheering, he is going to fight our corner and we will get what we want. Upyou think he could end disappointing those in london more than those in brussels . He has a fine line to tread. The worst thing would be to start off looking like he is serving the interest of london. Hes got to build up credibility solidvidencebased, policymaking. Hell be going out of his way to demonstrate he is going about the job in an evenhanded way. Actionople see him in they will see he is a very experienced guy. Hes worked at a very senior level in government and business. Hes been a cabinet minister. , a successfultor commissioner and the European Commission is all that building alliances and getting peoples confidence. I reckon he is the sort of guy with the skills to do that. People have questioned whether he has the skill set. If you do not, do you end up becoming more vulnerable to the lobbyists . Hethat is right, but i think has the skill sets. It is a mistake to think just because he does not have a high profile he does not have the skills. He has worked behind the scenes. Hes had an impressive and successful business career. Lets give him a chance. Aboutinteresting point the lobbyists. The big test for lord hill will be how he stands up to the lobbyists. Spend 120 Million Euros a year lobbying. They outspend Civil Society 301 in terms of lobbying resources. Theyve had about seven times as many meetings with policymakers and decisionmakers as Silver Society groups over the past year. Lord hills challenge will be to demonstrate hes independent of the powerful Financial Services lobby. Towas a smart for juncker take away the issue of remuneration . It frees him from some of the shackles. That was always in the cards. This that was always planned. This is a bit of a nonstory. The most important thing is to recognize whats at stake here. The financial industry nearly european economy. It actually was not doing a very good job in the first lace in terms of helping firms get access to capital or helping retirement. For it is clear what lord hill has to do. Hes got to continue to restore and maintain Financial Stability and rebuild our Financial Institutions in case theres another crisis. There will be another crisis. He asked to make markets work for society and for the real economy. Juncker has been clear on the priority. Ive heard juncker talk more about the Capital Markets union that i have heard him talk about the Banking Union. In some ways, london will benefit. When you look at the biggest pool of liquidity in europe, london could benefit. Some people in london are looking at this from the wrong end of the telescope. How big a challenge . You look at the pension industry, how big a challenge is it to get the markets to function more efficiently . The regulatory story until now has been very Rearview Mirror stuff. Were going to fix the problems that cost the last crisis. How easy is it going to be to look forward . Juncker is talking about growth. He has an opportunity to do that. Regulation to address the crisis has largely been done. Now, the way is clear for the tocker commission and hill go for the growth and investment agenda. That is something where the european agenda and the british agenda are really well aligned. Much more so than people think. Hill has a Good Opportunity to build that positive agenda. Are going toere we disagree. One of the other priorities for lord hill and for juncker is to cut the waste in the financial sector, particularly in Investment Banking and Asset Management. One of the Biggest Barriers to longterm growth is the failure of the Asset Management industry and Pension Funds to allocate resources to the most efficient productive uses in the real economy. They have really failed at doing that. As a result is that regulation . What it is down to is sheer inefficiency in the Asset Management and Investment Banking industry. If they want to make the market work for the real economy, strip out all the ways. , the unionhe things europe fromto stop using capital and use the Financial Markets industry to raise capital as they do in the u. S. We have a fragmented european Capital Markets sector. , were halfway through the process of making the system safer. The other priority must be about making the system more efficient and allocating resources. That is a job now. We will leave it there. Thank you very much. Institutionancial center and the National Association of Pension Funds. Well take a break. Welcome back. We are going to see the german bund auction, the yield could be low 1 . Pmi number did this to the euro, send it below 1. 26. Came through at 49. 9, well below estimates. Were going to take a break. Continue in all few minutes time. Welcome back. Youre watching the pulse. Live from london. Im guy johnson. These are the Bloomberg Top headlines. The first u. S. Case of ebola has been confirmed in dallas, texas, according to the center for Disease Control and prevention. A man who traveled from library and arrived in America September 20th began showing signs of the disease 4 days later. Hes now in isolation in intensive care. Italys government has cut its growth forecast for this year and next year. It has pushed back a structural balancedbudget target by one year. The nations finance minister said the Economic Outlook has greatly deteriorated. Thousands of catalan nationalists have taken to the eets, urging reasonable urging the regional president to press on with his plan to hold a vote for independence from spain in defiance of the countrys constitutional court. Two jonathan ferro. Standing right on top of the ftse in london. A percent. Of u. K. Manufacturing pmi slipped to a low we havent seen since april 2013. It is the retailers that are pushing it down. Sainsburys driving distance down by 4 . They come down with Quarterly Sales numbers that beat estimates. Like for like sales slipped by 2. 8 . The analysts call, the dividends on a full sale review. Sales were not return to growth this year. The numbers here today the numbers your today, sainsburys down almost 30 5 . Tesco approaching losses of almost 50 . Euro land, euro dropping through 1. 26, down by. 2 . Data at aufacturing big disappointment. As we havent seen since june ractionont territory. Witness across the eurozone. Ness across the eurozone. Money going into everything. Spanish yields lower. When he pulled up, down 3 basis points. Approaching 2 on the spanish ten year. The french kicking back their italiansficit target, reevaluating growth. Everybody looking for the ecb to do more. Bund auction, do we have the results . Not yet. See if we will get below the 1 . Big data. Off to italy tomorrow. Down to the pizza capital of europe. A big day for the ecb. What happens next . Will the bundesbank pushed back . In the meantime, we five minutes until surveillance with tom keene. Tom, talk to me about the ebola story. It has gripped the nation. We saw that in the evening last night. Every newspaper has on the front page. Of the space to two nations authorities on the virology of ebola. Aidsny with policy work on at nih. We travel to baylor university, near dallas, where the Critical Condition patient is. Ofspeak to peter, head tropical medicine at baylor university. Looking forward to informed people on this very important case of ebola. The first case in the u. S. We look at the emerging markets. Markets on the move. 1. 10 on yen. 1. 25 on euro. Jeffrey from ubs, we speak about the emerging market knock on. Lots of reporting this morning from hong kong as well. Looking forward to it. Tom keene out of new york. Added germany right now, germany has just sold bunds, 10 year bonds with yields below 1 . That is the first time we have seen this. The curve continues to flatten out. The rest of the curve continues to flatten out. Seeing that now in germany. The country can now sell 10 year paper at less than 1 . Why dont you invest . Some people will be trying to make that argument. Interesting to see what the pressure will be from other governments as a result. The ecb meets tomorrow. The german data is not particularly rosy. The pmi data for Manufacturing Sector is below 50. That sends the euro lower. Germany selling ten year bunds with a yell below 1 . See the shape of the curve changing. Lets move on. Talk about a complete difference. Medical cannabis. You did not expect that after the bund. One of the most controversial doctor can prescribe. One israeli startup might revolutionize the way patients take this for severe pain. Ellie Elliott Gotkine has a report. In tel aviv, medical marijuana is getting a makeover. A 3d printed pot printing device that will not get you high. The first metered dose cannabis inhaler that allows 100 microgram resolution while using raw cannabis. It allows us to penetrate existing regulatory systems. Trials,pensive clinical no more guessing how much cannabis the patient needs to relieve pain. The devices they are making are destined for israeli hospitals. They hope the real money spinner will be this. A cannabis inhaler for home use. They hope to have it in israeli homes next year and in the American Market the year after. That market is worth 1. 4 billion and could rise to 10 billion in 2018. They hope to win about 2 of that, 200 million. Does the inhaler work . Seal injuredvy in lebanon was one of the first to try. Not show everyone else how much i am suffering or what i am using. It lets me decide how to take care of my health and be more lax. More relaxed. The doctor overseeing the trial says the device could change marijuanas image. Doctors were reluctant to prescribe cannabis because of gma and the need to smoke. Once approved, everybody is going to look at it as a medicine as opposed to a substance that people use. With approval in israel imminent, they plan to raise 20 boost production. It plans to apply technology to other controlled substances like opium. Elliott gotkine, bloomberg, tel aviv. Wielding the ax. Plans to cutes 21 billion euros in spending. It is refusing to do austerity. How does that make sense yet but we discuss it, after the break. Welcome back. Youre watching the pulse. Live from london on bloomberg television. The french finance minister michel sapin is planning 21 billion euros of spending cuts in 2015. Lets get the details. Caroline hyde . Three years, cutting spending by 50 billion euros. Tony one billion euros in 2015 21 billion euros in the 15 and 15 early in euros 21 billion euros in 2015 and 15 twoion euros each in the following years. In a pretty giving welfare state, people are processing. Still not managing to get in line with budget calls for the eurozone. Wants all eurozone members to deficit budget compared to their gp. They do not meet the target. According to their estimates, until 2017. Its by taking a chunk off in 2016. In one year. 2. 8 some optimistic hopes. This is a government that is not growing fast enough. This is the reason they are struggling. They have said the pace of deficit cut is adopted to the this year. , 0. 4 next year, 1 . Political pressure is coming not only from the opposition parties to hollande. Seeing the senate being a majority of the centerright opposition party. He has political pressure and pressure from the public. Strikes in reaction to some of the steps. Particularly trying to ease up the labor laws and trying to reduce monopolies among pharmacists and the like. Few words being whispered from germany behindthescenes. They want reforms within the budget assumes they can. This will get reviewed in brussels in a few weeks time. Thank you very much indeed. Lets talk to Global Fund Manager at bcs Asset Management. Im scratching my head about what is happening in france. Iss are coming through, this one of the lines from the french statement. Efforts will be demanded from the french because the government needed to put the country on the right track. We are not doing further austerity but we have to have cuts. Or, we are not going to play ball and we do not think austerity is the way forward. It is smoke and mirrors. Austerity is making cuts. They are making cuts. Bear in mind what the starting point is. Public spending at a percentage. 5 , one ofomy, 56 the highest levels in the eu. They have a lot to cut. They need to get going faster than what theyre going to do. Isnt about cuts are about efficiency . Every other large economy in europe manages to function on the public site without as many Civil Servants as the french have. 25 of the French Labor Force is a civil servant. Germany or the u. K. Or other countries, they function with a lot fewer Civil Servants and things do not fall apart. It takes until 2017 to get below the 3 budget target. This is a relationship with gdp. 2. 8 in 2017. O how realistic . Its at the mercy of the gods and at the mercy of growth. Which, at the moment, will not be generated domestically. It will be about what the World Economy does. The World Economy will either drag friends along or not. Drag france along. The weaker euro will help. Angela merkel is being pushed to change policy. Shes is starting to take a slightly harder line when it comes to the rest of the eurozone. How will the relationship work with these kinds of numbers over the next few years . She will have to tread carefully. There will be a french president ial election in 2017. There will be the fight between right and left. She will want to stay away from that. She has this year and maybe into next year to exert influence. The Franco German act is still primordial, she will not want to threaten that. She will want to exert pressure. I think she will be unsuccessful. We have a long road ahead of to reform and terms of supplyside reform and reducing Civil Servants and the economy. And improving the lot of the entrepreneur. Theres a duration problem here. Its going to take a long time. Period for theet eurozone. You get the sense that that is not going to last that long. Draghi is struggling to make policy were. He is struggling to get Monetary Policy to deliver work in the eurozone. Juncker wants growth out of brussels. None of these things fit together. Draghi is fighting the story now, the french are fighting at five years down the road. They are at the mercy of the bond markets. They will be borrowing more. 10year french bond yields are 30 basis points above germans. Germany, this morning, was able to borrow at 1 . So france can borrow at 1. 3 . No pressure on the france to perform faster. As long as that stays the case, why should the french worry . Do you think it will last . No. Isnt going to be something that happens this year or five years down the road . People scratch their heads about the french government. How spending and earning balance out. The bond market is taking the strain. At some point, maybe that changes. Look to italy first. Whatever you say about france, italy is in worse condition. They have a larger mass of debt. Trillionll have 2 euros, italy has a bigger bond market to deal with. They have no growth, they have had no growth even before the crisis. Watch italy first. The italian yields start to blowout, then worry about france. Do you think hollande is underestimating the french peoples acknowledgment that there needs to be changed . No. Hes incapable of making decisions. His popularity is already at a record low. Postwar president in france has ever had a popularity level as low as hollande, which incited sarkozy to start a comeback. Way away. A long if the situation deteriorates, i am wondering the french government backs down when it starts seeing strikes. We saw a large strike in france for slightly different reasons. The government stays out of it. An interesting turning point in the psychology of the way the french premises industry. It says to the unions, you have got to solve this. To the management at air france to get going on reforms and start making changes. Air france has to. If you talk about domestic airlines, there is no choice. With the pressure of local airlines like easyjet and ryan air becoming more important in france, they will never make money is the message starting to change for hollande . There is a growing understanding within the authorities and within the government that they need to instill reform and maybe that there is an appetite for reform . Absolutely. On the finance side and the shift the cabinet. The way he reshuffled, it was a shift the right. Away from the leftwing policies theyve had up to now. Theyve moved to the center with valls as Prime Minister. How far can you shift a supertanker and a short space of time . We will leave it there. Thank you very much indeed. Lets get you other company news. Adidas is one of the biggest gainers on the stoxx 600. It will start a Shareholder Return Program in the fourth quarter. Shares surging 14 on its trading debut in frankfurt. Europes Largest Online fashion retailer trading under the Ticker Symbol zalgy. Catchy. Sainsbury shales slept. A returnt will not see to sales growth this year. Battling the impact of discount stores. Price deflation. The cfo says the dividend policy is under review. No decision on whether to cut it right now. We will learn about that next month. David cameron addresses the conservative party. The Prime Minister speaks to his party at 11 30. Were going to bring you that speech live and in full here on bloomberg television. Welcome back. You are watching the pulse on bloomberg television. We are on your tablet and bloomberg. Com. Lets check out the currency markets. German manufacturing data getting worse. That is what the data to earlier, sub 50 for the flash number. 126. 10 is where we are trading. We have had a german bund auction. Neverhan 1 , weve seen that. The curve continues to flatten. Driving the flattening story. Amazing to watch. How much is their silicon how much is there still to come . Jon ferro joins us. German bund auction, amazing. Incredibly. Ilias priced office. Pressure to balance the budget. Or not. Depends if you are french or not. Another talking point. Interesting to see what he says tomorrow. Pizza, to naples, eat talk about whether we get an abs program. Wants todraghi expand the Balance Sheet by one trillion euros. Is he going to do that . A weaker set of securities to expand the available pool of assets. Cameron is coming up shortly. Politicizing the recovery on both sides of the spectrum. The conservative party saying theyve been a success and they are generating strong growth. Everybody else is looking at the budget deficit. We have a higher budget deficit than the french. The labour party are trying to politicize the economy. Saying it is not happening to the guy on the street. That militant forgot about the budget deficit. Ed miliband forgot about the budget deficit in his speech. Lord hill is coming up. He has a lot of work to do. It sounds like a big coup. We find out he might lose powers on remuneration. He will be pushing the n, that markets unio could be a benefit to london and something that should not be ignored. When we talk to jon about what is happening tomorrow. Ceos coming out at the car show on the pulse. Surveillance is next. That is it for the pulse. A national day in china. Hong kongs chief executive is jeered by protesters. They call for happy disobedience, he calls for universal suffrage. A man in Critical Condition with ebola in dallas. We speak to an expert on tropical medicine. And dont blame wall street for the crisis. America. N failed good morning, everyone. This is bloomberg surveillance, live from our headquarters in new york. It is wednesday, october 1. Im tom keene. Joining me, scarlet fu and adam johnson. October 1, amazing. The year marches forward. We have some action in the currency markets. The yen weakening for the first time in august of 2008. That is significant. The euro, by the way, briefly 1. 26 for the First Time Since 2012. Was it 3 00 a. M. Or earlier than