Transcripts For BLOOMBERG The Pulse 20141104

We are writer in london. I am guy johnson. I am francine lacqua. Dublin is going digital. The largest tech summit kicks off. 20,000 of the top tech entrepreneurs and celebrities are expected to flock to the 2014 web summit. Caroline hyde is there. She joins us now. Give assistance of the scale of the event. It is phenomenal. In four years, it has gone from 400 people to 20,000. It is warming up now. A few people getting strong coffees after a night on the town. There is a pub summit that goes on as well. Taking in a few whiskeys. They are revving up to network. 80 six different countries. Helping the economy of dublin boosted gigabyte 100 Million Euros in these few days. You have the elite of tech. The peter kilo who founded kiehl, who founded paypal. We are talking to ever note and other celebrities like eva longoria of desperate housewives and she will be taking the stage. So popular is this event that forbes wrote a style profile about what to wear or not to wear. You have to be shabby chic, dressed down, a little bit of letter. A speaker, it is about being right. Glad to see that is happening. Hangovers and what you should or should not be wearing, what are these guys talking about . Your accusations about terrorism and concerns surrounding tax and islands in the tax landscape. What are they talking about, what is number one on the agenda . Having spoken to patty know organized, the media wants to talk about tax in terms of islands. There are managing to close some of the loopholes that had apple under fire. At whatrs are looking is known as the double irish and that is not a whiskey is coffee, it is a way of minimizing your tax as low as 20 . They have close that loophole and they are trying to remain low in terms of corporate tax. Sent if you are intellectual property, the incentivize youtube with the low taxes. Twitter, facebook are expanding. It looks like people are not run for the hills feeling it is not note that tax i would say haven, but tax attraction it used to be. Till very much talking that is number one in terms of what to the ceos and investors are talking about. About menal story those find network and the security spying network. The head of a new the first day of the job, robert hannigan, the Big Tech Companies that need concern, facebook and twitter are in denial about what they are doing to aid terrorism. They are saying they are the central networks, the control networks. How do you fight back . How do you allow Intelligence Services to analyze videos being put on him by Islamic State . That will be a major topic. A former nsa individual will be taking on the states to debate that and will be likely. How they tackle these concerns at how the likes of google and facebook respond to it all. We will be talking about these and ipos. Is your hot or not . What about the slight selloff of ipos . Is youre the place to be in tech we will talk of that would ever note . Will stop stay with us. Note we will talk with ever note. Stay with us. Thank you. You love a list. It is like a digital list that francine gets excited about. Of course, who doesnt love a list . It keeps you out together and focused. Chris anyway, lets move on. Alibaba, 25 billion dollar ipl was the worlds largest. That is old news. They are releasing their first set of earnings and that is the new news. What are we going to expect . Ryan chilcote has been gazing into his crystal ball. And talking to investors. Nobody knows. It is debatable. That is true. It is the first earnings. Is itst important thing is their opportunity to set the tone with investors. Jack ma said investors come third after employees and customers. If youhird so far, invested in alibaba is not that bad. You see 50 return in six weeks. I talked to eileen burbage, she said, another thing to watch is the metrics. Thehe past, people abuse yahoo as a proxy to determine what is going on inside of alibaba. How will alibaba lay out a mattress . That will be interesting. How will alibaba lay out its metrics . Ma going to be on the call . He is a classy guy, so he probably will. What will be the structure of the call and how long will it be . People are looking for every bit of information. And in the future stuff on tuesday, singles day in china, which is ecommerce bonanza of unknown you get deals. sales. Self. Sh ok, i get it. It is massive. It is very important to their earnings. Also the crux of the problem is he does not always show up because he is busy writing content. It is all about how much he spends in hollywood. There are a bunch of issues. A Company Effectively equal to china and it is a china story. One person said it is not the case, that conquered china. Atillion people in china half of those people shopping online at a out of 10 are using alibaba. Content is important. Everybody knows that are trying to the original content to control it like the netflix has done in the past. He already have collaboration with lions gate is where they got hunger games and get exclusive rights. He has the most popular streamside and china which you can use. He spent the last week in hollywood meeting with various executives to see what deals could be done to bring content to china. And perhaps beyond to china. That everybody is watching for and will want to hear more. He was great in ecosystem. He wants to create an ecosystem. Metcom, it wast interesting to speak to the ceo and she that we are getting it wrong. Butle are waiting for china china will end up making a lot of their shells especially the ax factor and in the films they can buy on reality shows. Making a lot of their shells especially shows, actor and thef field they can buy on reality shows. Huku. Is through there will be chinese content and basically joint projects that they can pretend is a Chinese Company is still gather a western context if they team up with western films. For the first time, apple is gearing up for a month is gearing up for a bond offer any europe. It will be for dividends and share back to stop share buyback. The most bunkers story in the world. Probably one of the most bunkers stories. It is up there with the other stories in my mind. A story that comes of capital and cash, 10 of total own nonfinancial Balance Sheets so it does not need the money. It is going out there and borrowing money using the debt market which in some ways is rational, but doing so because they cannot repay trades that cash they have overseas. How screwed up is that . The u. S. Tax is the problem. You can borrow here at supercheap levels. You want to take advantage but the reflection of how bunkers the tax system is in washington. Coming up, dublin goes digital come the tech world means and the Irish Capital for the highest conference. We willk to talk to the ceo of ever note. We will see you in a moment. Good morning. Welcome back. The dublin web summit, if you are going, shabby chic is the dress code. If you are on stage, bright colors. It is europes largest take event. We have to be there. A key i on the next big thing ye on the next big thing. Caroline hyde joins us. Over to you. Nice pun. Take notes because web ever know take a notebook cousin we have ever take notes because ceo. Ve evernotes you have businesses using it. Tell us about the new product you are unavailing. It is about being able to write the notes and share them with your colleagues. Yes, i think theres been a really good idea of how we work. It has not been challenged. A lot of these ideas are [indiscernible] we want to be the idea of how busy people get things accomplished. You can be oh any device anywhere and you write a note a note and you find the context around it as previous documents that were saved. What is the pickup like . How are businesses responding. Theres at least a enough of the business already that its a great opportunity and we see more companies and people signing up. On an islandk anymore. Everything you do is connected to what you have done and the path and what else exists in the world. It is altogether. We are constantly showing you. Where are you guangzhou graphically . Pretty much everywhere. Isn the things we have found the product worse globally. One of the end we have found is the product that works globally. We tried to work with smart phones and tablets. It is strong as in south america. The growth is pretty much everywhere. Only 25 of users in north america. Continue to be exponential. What is the biggest challenge . Everybody talks about talent. Is it town . Talent is where the biggest competition is. I worry a lot about competition for talent. The other companies that are great places to work and are attractive to engineers. We cannot get enough great people fast enough. The biggest challenge is making the product. Where are you find it surprising called for talent . Sort have a great team in and we opened up an office in france and we have one in the u. S. And all over asia and moscow. There are talented people everywhere and it gives them a sense of purpose and make them feel like they are keeping their interest. I think wouldve done that. It away forg companies to fill small again and want to be the leading example. Hat says the the place to be to work. It feels like a Small Company and everybody has a purpose and we are open ended and openminded about where we higher people from. How do you incentivize . Getting them a way to cling on financially as well. The best people are not motivated by money. You to make sure that everybody has equity. You have to have competitiveness. The best people are not motivated by that. The best people are motivated by working on something that feels important and seeing the results of their work every day. Anytime youre doing anything, you cannot work for two weeks at evernote and not see the results out in the road world. We can be a very attractive place. You are results driven and youve seen huge growth in terms of users. Thus topple by you potentially going public. Are you worried about 2015 . Lets talk about you potentially going public. Do you feel that . We are not going public in 2015. I think we are a couple years away. It is too early for us to think about the timing. The the longterm, open course of decades, the Public Market has been extremely friendly to tech companies. If youre looking at a sixmonth period, things will fluctuate. We are not close enough. Maybe in a year or two, we will start paying attention. 2015 . It is going to be huge year for product. We are coming up go with a bunch wereff focused on what doing. We used to think of ourselves as a very general lifestyle company. We realize that our users to use us for work. 70 of our customers use us at the office. That is the biggest setback. We have to reenergize the company about the bigs impact we have on the world and working smarter and feeling like they are at a Small Company. We are Getting Better and better after that in 2015 will be an exciting year. Great talking to you. , ceo of evernote. Much. Nk you so caroline hyde. An interesting conversation about how people use, it is the bulls we see on the internet and people how many lets do you write every day . Day . Sts do you write every about three. I use them not only for work but my personal life. That is kind of sad. Cracking down. April into currency dealings. We will have that up next. Welcome back. Lets check in on the markets. Jonathan their role joins us. Look at the map. It is green. The ftse 100 is up. Up zero point 5 . The gains of over 1 . Little bank is moving. Percent. X is up 0. 5 really volatile. The index is moving itself. Is hugomover in germany boss. Down by almost 6 . , earnings goods maker miss, a downgrade for the forecast and they say theres been a substantial slowdown in europe. Blame europe. We will look at sterling and five minutes time. We are up 0. 2 . We get Construction Data in four or five minutes. We are looking at 63. 5 on pmi. If it is above 60, pretty darn punchy. Trade, dollar is strong. Five year for the dollar index. As it goes higher, guess what goes lower . Crew. 77 a barrel. Crude. Oil and the dollar are the headline makers today. John, thank you very much. What have we got coming up . World and bmw, said to be stalling. Still going pretty fast. Audi, mercedes, in the Rearview Mirror. A rate hike and we will talk about it when we come back. You can follow both of us at twitter. We are back in a couple of minutes. When the topic to the tourism minister of greece. It is an economy story. We will be talking to the tourism minister of greece. On the move markets today. Equity markets are higher as Jonathan Ferro said. We will see you in a couple of minutes. Welcome back to the pulse. I am francine lacqua. I am guy johnson. The ecb mechanism takes charge of the eurozone biggest institutions today. Will monitoreer capital issuance by banks and process the results of the yearlong asset review. A new bank his supervisor says she is confident that the reason stress arrest stress test results were strenuous and accurate. It has been one of the most challenging in the history of the ecb. One of the main reasons was we were tasked but cost of completion of the assessment. Is preparing its first ever bond offering any euros. On iphone maker is sitting 150 billion but seeking to give more to shareholders without using overseas cash which would be subject to a repatriation tax in the u. S. Please correct me. Jpmorgan faces a u. S. Criminal investigation into Foreign Exchange dealings. They are cooperating with the department of justice and an inquiry with the europe. It has boosted possible losses from legal cases to 5 billion. They reasonably possible, are saying, yeah it is likely. We are at the point it is certain talking to them regulators and the story on the fx is getting bigger and bigger and criminal critically as well. Right now, it looks like they want to take substantial fines. Every other story seems it is about a bank having to raise money, increase capital base, take a five from a regulator, face criminal probe. Yesterday we had fines. We thought we had dealt with that and moved on. Anybody who thinks we are done with banks is living in la la land. It seems to be getting bigger and bigger. Lets get into bavaria. Growth at bmw, trailing its rivals, audi and mercedes. How were really should the biggest luxury carmaker be in the Rearview Mirror . Nichols joins us now. He knows a scene or two about german carmakers. What is going on . Yes, you look at a quarter on Quarter Sales and that are down a little bit compared to where they were last year and they are growing slower than audi or mercedes. Our he is in second place. The stock is down a little bit. We should not dismiss it. It looked like strong numbers. At iso you are hinting what is their plan for the future . That is a valid question. Looking backwards, and they have done a remarkable job. Their income is higher and the revenues higher than expected. On profit margin, they are at 9. 4 . Audi is my. 2 . Mercedes at 8. 5 . Is at 9. 2 . Bmw will be to turn around and invest in new models. That is the concern. The models they are selling is not the new ones like countries like china and brazil but the older models that is driving growth like s5. And a little bit of headway but these low life remarkably strong numbers. , total us about electric cars. They want all for their version and they will offer their version. Craig you want to let you want to let people know you are driving down. You go with the bmw because of a new model. Mercedes has a stealth approach. They take a tesla engine and battery and put it into the could of her mercedes and call it a mercedes. We have two different approaches. Mercedes has a safe bet. Bmw is going a different direction and invest a lot more and expect to have a bigger payoff. Bmw seems to be more invested in electric. S. Thank you very much, han x7 looks like a tank. They are going hughes on suvs. Hans, thank you. Alibaba has reported numbers. A expected to be the week is year since 2000 and nine. The largest medical maker missed estimates. The very latest. Caroline, talk us through the numbers. They were a disappointment. Yes, you look at Third Quarter growth revenue for lori l was to point lori l loreal was 2. 3 . It is the sluggish environment in europe. As you know, they make a Consumer Product and have brands such as maybelline, gorney a garnier and some Luxury Brands alike yves st. Laurent. Luxury slowdown is impacted and lack of consumer confidence. Youe not very much look at your letter, one of unir you will ever they saw a nurse lowestlever, pace of growth the you look ilever, they saw there is slowest growth. That theirrried forecast for the global Cosmetics Market and they are not expecting it to growth by only 3 this year and will be the slowest pace since 2009 at the second time in two months and are lowering their forecast. With many these types of companies are right now, concerns about china driving it. Are they saying anything about where they see the relation with nestle. People are still talking and do not understand how it will work Going Forward. Some people talked about being a steadystate but no one is convinced. Saying theseal is Capital Gains from the buyback, be thates will actually 2 billion euros and that could benefit loreal Going Forward. It could also benefit from the weaker euro debt is helping competitiveness. If you look at the shares of loreal, their pickup in early september, dev lost more than 6 iseady as some analysts expecting the earnings to fall further. Loreald wants to reassure and sayev they are going to see a wants to loreal reassure her and say they are going to see a pickup. Acquisitions for Beauty Companies and the u. S. One in and one in new york and they just one in l. A. And one in new york and they just had a company in brazil. Thanr, they have done more 5 billion of deals. Thank you for all of that. The very latest on loreal. Makeup isaring the one way to get rid of those dark circles under your eyes, which we all know something about. But nothing beats a good nights sleep. One startup is promising to improve your street sleep. We went out to speak to the ceo. Leap is aance category that is no. We consider ourselves to be the company that invented it. Performance sleep is a category that isnt new. Ive seen copies use cotton and a heavy i have seen Companies Use heavy jersey and more technical products. What we needed to do is find a way to manufacturing these performance fibers into large enough, to cover mattresses. It took us quite some time to work with mills to get fabrics wide enough. What we found challenging as getting retailers to actually take a chance on a new concept, a new category and idl. Instead of us going to the bigbox retailers, we went to the sleep trains. We wanted to find a way to measure every guest, every consumer buys it together. We have people needing to replace the products that one to the most convenient place to purchase down. We are taking it to what we built at we are making it available at bed bath and beyond. We do not want to sell everybody, everything. Realize was how many people it would take to actually make this dream come true. People and we5 literally started with six people in an office. We are not branded driven but culturally driven. We want to be like 007. I am a big james bond film. Todayare two many brands that are more get smart dan 007. Gear. Es bond of bed it is only i know. If we are only that simple, people go to Great Lengths to make sure they have a good nights sleep. Maybe more relaxing. Turn off your phone. And do not have children. We will talk to greeces tourism minister. What is she going to tell us about the bailout and what is happening with greeces Tourism Industry. All of that is coming up next. 45 minutes past the hour. Europes finance ministers having plans to allow greece to exit their bailout plan. What kind of plan will we discussed . You never know. Tourism is a big part of the greek economy. It employs one in five residents. We are joined by greeces tourism minister. Good morning. Will talk about the bailout in a moment. Greece had a huge opportunity, Tourism Industry is massive and has been taxed heavily and maybe not given the opportunity it it needs to develop fully. What are you doing right now and that is going to make greece a Better Destination Going Forward with more value added and more people . First of all, let me remind you that 2013 was a record year for greece tourism. Record ofe beat our 2013. We have back to that record years every year so that means greece tourism is back on track and we see that this growth will continue in 2015 here in london mb, the International Meeting for tourism and the message for greek tourism. It is very positive. It means we will be continuing to grow next year and more visitors, but also more revenue for the greek state. Since wouldve reinstated the ministry of tourism and 2012, the situation in greece was not at his best, we have been working on a specific, Strategic Plan to promote greece as a tour resume destination but improve infrastructure and services and attract investment. Right now, we have a competitive framework for attracting to resume investment and theres a lot of interest from foreign funds and greek investors to invest. At how muchlook tourism contributes to gdp, it is impressive. At the same time, a lot of companies today saying they are worried about the situation in western europe and that has been over the past couple of quarters. Will impact the it how people travel and destination places such as greece next year . There are always challenges. What we have seen is tourism is a resilient sector in greece is a very attractive destination and provides a good value for money in recent years and something that we realize. Industryry competitive and industry that is how open and the recovery of greek economy. The prime may, minister said the biggest challenge is to reduce taxes. Unexpectedly high. Some have come down. Fact thatabout the there needs to be more. Needs more. Stry what is happening. Was 23 lowered to 13 which made it more competitive. We have lower accommodation. Rall, the tourism is quite are there more taxes coming down . The aim is to reduce taxes in tourism for the whole of the package and the, more competitive and of the, become more competitive and attractive. The options are offered. Will it be stepped up . Are you discussing with your colleagues . Tourism should be where the place is not touched it with your bigs assets . It is one of the biggest assets and not only revenue but the global and a job creator. This is especially important in greece with high Unemployment Rate and especially the customer resume can provide for young people to be involved employed and start businesses in tourism sector. Are trying to support startups in the tourism sector. Has the Prime Minister agreed to no further tax increases . And that is something that is not on the table and we will not have increases in the tax. It will gethat better and we will bid to reduce some of the taxes. Greece,a big fan of fantastic and i love its rustic charm. Strikeshe things that me as a bigger opportunity to raise the value added and i look at what is happening with the old airport just outside athens. Waterfront,at highvalue added, casinos. It does not seem to happen quickly enough. Where are we with the project at how we you encourage more value added . The old airport is one of the it is a big one. Fritz it is. That isect is one transforming the beach area and at the same time there are other areas that are being constructed right now in athens and also at the same time, the government is going to have with Regional Airports when it comes to infrastructure. It also, for the marina. One can understand it is a huge competitive advantage for greece with the sea and islands. These are part of the provisions of the government, which is currently under longer runways would be fantastic. We want to talk about the bailout. Greece will need more credit after the bailout ends. What is the talk in a government . What is your take . Lets see what is going to happen because i cannot comment on something we do not have the table yet. Greek government would be willing to accept are you ready . It is something that will be ascertained when all the controls are made. Do your colleagues feel like its the right time . Theres a lot of concern about greece. Is it the right time or is it driven by concerns about what it will be doing . The truth is it just the heart of society. The greek people have been under a lot of pressure. We have been in a recession for six consecutive years. The First Quarter wouldve had a we had agrowth, balanced budget this year. A surplus and we are expecting to have a surplus next year. And a growth of 2. 9 . Positive all very reviews, but we understand that the greek government has to go ahead with the Structural Reforms which are necessary in order for the economy to really be able to not get back but to have a sustainable future. It is the most important thing for greece to have a sustainable future. Thank you for joining us. The tourism minister, olga kefalogianni. We will be back in two. In todays new energy, novartis said Global Warming may fuel global disease. And extreme weather may increase costs. Bank of america is leading underwriters of the green of bonds. Bank of america retains the position at the biggest underwriter of Corporate Green of bonds as well. That is all we halftime for. A second hour of the pulse is coming up. The criminal crackdown a jpmorgan. Fire. H firms under a top intelligence official accuses companies of aiding terrorism. Ceo Allison Cooper weighs in the ecigarette Company Tobacco industry. Good morning, everybody. Guy johnson. This is the pulse. We are getting breaking news. This is important. The eu has cut its euro area growth forecast. It has also cut its inflation forecast for this year and next year. We had a lot of companies saying they were very concerned about the situation in europe. The other concern is disinflation that could lead to deflation. This is a worrying sign that the eu has cut its inflation forecast for 2014 and 2015. The bad news just keeps coming. That brings the official line in line with where the market expectation was. An ongoing story, a difficult dilemma for mario draghi. He needs the fiscal story to develop a little bit further. Running out of road on the monetary front maybe. And little bit of volatility in this space as well. This. Ch of a reaction to topets get straight to our corporate story. Jpmorgan faces a u. S. Come in all investigation into its Foreign Exchange dealings. They have boosted maximum estimate for reasonably possible losses on legal cases. That they are actually predicting this will happen or is this a safeguard . They are preparing. Whether or not that is a prediction or a signal to the department of justice that they are ready to settle and be in that position to settle, we just dont know. Abouts startling to me these numbers is just how much today increased across the entire banking your. Sector. We are talking about potential criminality. Signal ahree bank chewing through reports that they face criminal probes into Foreign Exchange. There are still the other outstanding exchanges out there. Clearing upche bank that they are close to an agreement on their probe. No one knows how big the fine is going to be, if and when there is a settlement or criminal charges brought up. What we have from jpmorgan is they expect their litigation provision to be about 5. 9 billion. From citigroup, 5. 6 billion. Barclays expect another 0. 5 billion euros to be set aside. It is a great deal of unknown, a great deal of uncertainty. It is hard to make the math workout. Jpmorgan paid 23 billion last year to resolve litigation costs and they still dont know what for theis going to be Foreign Exchange probe. This is a remarkable story and the is not going aways and. All of us need to dig deeper into what is happening at the department of justice in the u. S. And how close they are. Thank you very much indeed. Lets talk tech. Ipo. Aba, the largest the Company Released its first set of earnings since going public. What are the expectations . One of the most important things investors are expecting is simply for the company to set the tone with investors. In the same way that they were looking for that for facebook and twitter. When we get the Conference Call at 1230, it is going to be key for that. On the ma going to be Conference Call . He does not have to be on the call. How much of the call will he occupy . People are really going to analyze this. Revenue, profit are huge expectations. One investor said they do not beat, expect the shares to fall. They have had such a great rally, 50 since the ipo. People are going to be looking at the forecast for the rest of the year, particularly single day. That is the chinese equivalent of valentines day. It is hard to overstate the importance of this day. Alibaba saw 6 billion worth of sales on that day. They offer what appeared to be sales. Year might be tougher from a regulation perspective. Fourg said that, this is times bigger than black friday, to put this in perspective. Investors are wanting to hear about the plan outside of china. China has one point 4 billion people, 700 million on the internet, half of those people shopping online. Babasut of 10 on ali site. They pretty much already conquered china. Is talking about expansion. They want to hear what he is going to do outside china. Content, very quickly. He was in hollywood last week. He already has a deal, that is how they got the rights to hunger games in china. Deal with lions gate. Theyre looking to control original content with exclusivity. Thank you so much. Lets go back to some breaking news from europe. I want to get back into this news from the European Commission. We have the commissioner talking at the moment in brussels. We have details coming up from france as well. It is interesting to see exactly the tone that is being pushed. It feels fairly antifrench. Yields are declining. The line about frances quite interesting. The eu see friends gdp going and and 1. 5 in 2016. We do see the step up in 2016. Let me get back to the right page. Can i talk about inflation . Yes. The Eu Commission is forecasting inflation and 0. 8 at 2015, that is less than half the ecb prediction of just under 2 . So much is hinging on inflation and there were so much hope that we will not fall into deflation, japanesestyle loss for 10 years. That is what we are watching out for. It is also interesting on the french that they are saying some of the spending cuts are insufficiently specified. That is interesting given what was happening with the budget. I was going to the fiveyear break evens as well. I was going to see if anything was moving there. In 2015. At a 1. 8 yes. 1. 82 from here. But if you look at current eu break evens, they have the rate lower than that at the moment. The market is lower than where the ecb is. I wants to see were Inflation Expectations are five years out. The market is ahead of him. Maybe the eu is coming more and line with the market and the ecb is a little behind. Maybe a little bit like an outlier. It will be interesting to see changeorces draghi to the ecb forecast since they are so far behind at the moment. We will continue to watch this and analyze this. Dublin is going digital. Buts look at tech. Lets look at tech. 20,000 of the worlds tech entrepreneurs are expected to flock to the 2014 web summit. Is there to talk to them. Give us a sense of the scale of the event. 20,000 people flooding into dublin from 86 different countries. Last night, hundreds spilled out to the pubs, there was an organized pub crawl. The founder of uber met one of his key investors a couple of years ago and signed the documents there and then. People are pitching away. Last year, there were startups again. They are on this trajectory of harnessing some of the elite of technology. You have facebook, Twitter Holding vip parties here. Paypal has flown in the coop. You have the Founders Fund taking to the stage. Over to about to run the center stage for the founder of oculus is talking. Im going to sit down and talk with him after that. It is getting up and running in dublin right now. In terms of the main talking points and what has got trapping, ist of it what is happening with the Big Companies and how they are spending money . Is it how you attract talent . Is there a concern that the industry is not good enough in dealing with security concerns . What is everybody talking about . That is a fascinating story of course that was breaking on the Financial Times yesterday. The Security Services and the u. K. Are pointing the finger at twitter, add youtube, add google, saying the tech china are not doing enough to help battle terrorism giants are not doing enough to help battle terrorism and that they are in denial about their role. That is going to be a key point at the summit. A man who calls himself nsas top lawyer takes to the stage. He will be saying the nsa should do more about analyzing our own data, should be tapping into our phone calls because we need to fight fire with fire, when you have the likes of the Islamic State voting terrorist films on the internet. How do we tackle that . That is a huge talking point, as his corporate tax, closing loopholes is not as attractive as it used to be. Also a key talking point was cash to slash. These Big Tech Companies have billions of cash dollars to put to work. What is next . That is what everybody is going to be talking about for the next few days. Now, i am running off to see oculus. Back to you guys. Or not. Caroline, thank you very much indeed. Having fun. Yes, no. We take a look at the ecommerce giants craving for content ahead of its first public earnings report. We will have more on the eu coming. Cutting inflation outlook in the near term. Outlook medium term looks more aligned with what the ecb as saying. We will figure out the Market Reaction. That is coming up right here on the pulse. Welcome back. Lets talk about what the currency Market Reaction is to the data out of the eu and more specifically out of the commission. There has been a cut to Inflation Expectations in the near term. The ecb will probably cut its forecast very soon as well. Not a great deal of a reaction in eurodollar. Dollar strength is the big story right now. Activity is around the 1. 25 level today. To be an interesting story working its way forward from here. The longer we spend and the more with a lower expectations within the market, the pressure on the ecb to do more and more is going to be greater and greater. It is. Sometimes the market shrugs off these forecasts. Stocks did kind of reactive the top of the hour. I want to look at the two big 8 economies, france and germany. To theck a month announcement from the German Economy ministry who were looking at gdp growth of 1. 2 . Perhaps the germans are out. The inflation outlook is confirming what they knew. There is a line about countries that should be using fiscal space a little more aggressively, which is clearly back to the fact that germany has a take on spending roles. Rules. 1. 5 in 2015, 1. 6 in 2016. He would take that as a big win. But those numbers are still below where they have them penciled in. The commission will look at it eyesgh the commissions rather than through the french, which is a significant distinction. This is way below the target that the ecb has of 2 , but above the 1. 1 target. Will it have to go back in line . Inwe get another one december. We will look at the projections from that. The picture in eurozone is not crispy. You confirm what everybody already knows. What are the politics of this . That is really interesting. You look at the french forecast for growth. When your forecasts are more optimistic than the european imagine this will snowball. What about the u. K. . The u. K. , the forecast are being raised. We have been talking a lot about politics. Does the bill get bigger as a result of this . Everybody knows apart from the pm, he will beat last like last time. Yes. [laughter] that is the picture on the currencies. We will have some fun with this still. French politics is going to be an interesting story working forward. We will be back in a couple of minutes. Welcome back. You are watching the pulse. Lets talk about alibaba. They are making deals with hollywood heavyweights. Andy, this is a big deal. These guys have a lot of capital now and content is very much in target for them. Walk us through the arguments and how big an impression they are going to make in the content world. Theyre going to make a huge impression in the content world and we can see as soon as that it cedets ipo funders wereed straightaway seeking to buy and wound up buying one of the biggest properties in hollywood at 1. 2 billion billiones 1. 2 properties. Alibaba is going to make a big purchase and it could possibly be sony and this is really going to affect the content that goes only 80 films a year are allowed to enter china. The opportunity that ali baba will create, they are not going to need to be in the chinese quota system. It will be a chineseamerican hollywood hybrid funded by china delivered to that huge audience. Give us a sense, you are talking about the quotas and the fact that they cant show more than 30 of the films or content that is foreign. 30 has to be limited to foreign films. Bigd you expect to acquisitions will they be buying up content . The danger for the hollywood thatos would be to think they are catering for chinese tastes when they might turn around and want to make their own things. I think what we are going to see if we look at say transformers 4 you increasingly see this type of cultural hybrid in these things, in these whole movies. The content is going to be a global content. And theese audience american audience and the european audience. This is what they are investing in. They are not going to be buying up just the rights, they are looking at the format, the company itself, the infrastructure, they are moving for all of it. You will see these deals. I think the whole lot is going to be chinese owned in the next 10 years. Western Format Companies or western content companies are being super slow in this, have we not figured out the opportunity that exists in china as a result of what we are seeing now with ali baba . I think this is the best time. Theyre getting involved are properly licensed or authorized to work within the chinese system. This is an opportunity for companies in europe and america to get in. Is thathappening now to dealingpened up with corruption and copyright breaches and so forth and Chinese Companies are looking to work internationally much more on a level Playing Field in a profession where they can bring their product to the rest of the asld and not be viewed breaching copyright and so forth and being dodgy and this sort of thing. Nice to see you. Thank you so much. Right. Coming up, a bloomberg exclusive. Affected. Welcome back to the pulse. Jpmorgan is cooperating with the u. S. Department of justice and has boosted its maximum estimate for reasonably possible losses to 5. 9 billion. The European Commission has cut its growth forecast and its inflation forecast for the eurozone. The former french finance minister. Economiess largest are struggling to put the debt crisis behind them after two recessions in six years. France is not managed too well. The u. K. Has definitely got a thumbs up. The german chancellor Angela Merkel says the debate between austerity is misleading. Ferro is never misleading. Lets talk to him. Thats very kind of you guy johnson. They downgrade forecasts for inflation this year and next. Equity markets reacted a little bit to that. Dax is coming off session highs. Italy just about to turn negative, and then it goes positive on me. Gdp forecasted growth of 1. 3 in germany, that is more optimistic than the German Economy ministry. They forecast the french deficit is 4. 7 of gdp in 2016. Youdont need me to remind that that needs to come down to about 3 . How do they do that . That debate is really starting to heat up. Up 0. 2 . Construction data comes in with a big mess. Miss. The housing activity index drops also. That is the pessimistic stuff. And 18th consecutive month of expansion and we are still above pmi. P. M. I 60 for oil is the only mover. 76. 99 per barrel. I know that this will start a whole load of conspiracy theories about what saudi arabia is doing. They are maintaining market share. Maybe they are just sick to death of being the swing producer. Thank you very much. And about 25 minutes, it is surveillance. Tom, i know you are on central bank watch. We are. Economyynthesizing the and what we see in the markets. Mentionedthe oil move and that will be part of our discussion. Much more, it is election day in the United States. Midterm elections, Bloomberg Television beginning as coverage will go for the next 18 hours. Frankel, ak to adam former speechwriter for president obama. The democrats are scheduled to take some challenging losses tonight. That is typical within a u. S. Midterm election, you see the incumbent party see some losses and the party on the outside doing better than good. We will look at the interstate market and how that fulton to investment. , we will get some perspective from a great friend to bloomberg surveillance. Absolutely superb about the cynicism in washington and on capitol hill. Ofnow there would be none that in london. There is no cynicism in london. We own that in the United States of america. I know. Settle at all. No iron he, no wit. We will look for that tonight in the concession speeches. Seriously, republicans look to take some real victories tonight. I look forward to the conversation. Surveillance in 25 minutes. Imperial tobacco posted profits that dropped. The company says it expects Market Conditions to remain tough even from here. Anna edwards has been out allison to the ceo cooper. I think the biggest factor looking at the industry would be much more on the economic environment in the last few years and affordability issues for consumers and a number of markets around the globe. Im talking emerging as well. Russia has the additional factor of both some economic concerns because of the fiscal situation. It is that say having an impact on the market currently. Russia is moving very quickly on regulation and that is a key factor impacting the market. You talk about trading conditions being tough. How much of it is that cyclical story and how much is that the structural story around recent regulation . Quite biased to some of the markets that are highly regulated. It is probably more cyclical. In emerging markets where regulation is moving faster, than i think there are structural impacts as well. We are more biased. Russia is one of those. We see opportunities. We have clearly got some nice exposure in mature markets. Those are more cyclical we would anticipate. Say it is picking up that fast at the moment, the recovery. Weakness inbout australia and malaysia because of cheaper brands. Is that something you are excited to get into . Is definitely a factor across the industry in several markets. Australia, very much so. It has clearly been exacerbated by increases by the government. It is the only market in the world with plain packaging. Impressions on the consumer and we have to be on job with our portfolio and with some offerings. You have been buying some assets or you are in the process of buying assets in the u. S. One of the things you are buying is an ecigarette brand. Are you worried in the face of increasing regulation around that sector . Besome governments seem to quite favorably disposed and take a more kneejerk reaction and do not evaluated properly. Have or what we will have is blu, probably the key brand in the u. S. So far and the u. K. It is excellent equity. They have r d in Silicon Valley and in beijing. We are in the process of licensing with various cigarettes now. It at anre in exciting time. Where will it fall, this regulation . Some seem to be taking the view that this is the way of getting people off cigarettes and others see this as encouraging cigarettes . What do you think will win out . I think the key point is that what we have to focus on is the consumer experience, the science aspects of it. There will be a patchwork of different regulation around the globe. U. S. He fda does in the clearly it is a matter for review and debate. Areasare a number of where we could find a good, consistent approaches. You. U mentioned that you you are u. K. Based but you operate globally. Do you have any thoughts on the elections coming and what that might mean for the u. K. s membership in the eu . Does the business have a strategy for tackling that . We are very clear that we dont take political sides. We dont have any political strategies in that regard. We do evaluate what it means to be in or out of the eu. We dont think of any particular significance issues, but therally in terms of governments, we are very active in that regard. Are you expecting higher taxation in the u. K. . Is any of that being talked about . It was more a windfall type of approach. Talked about in terms of tobacco. Thatiew on that would be it is something to think about around that particular agenda. Have quitent that we a significant Illicit Trade program happening, there are thoughts about additional taxes. That was the Imperial Tobacco ceo speaking to an edwards. Road ahead forhe continental, the tire manufacturer. We will be speaking with the cfo. Good morning. Welcome back. How worried should the worlds biggest luxury carmaker be about its rivals chasing it hard in its review mirror . Lets find out. It depends on just how much you think bmw will be able to reinvent their profits. Revenues, they beat on earnings before taxes, they got a onetime tax charge. A much they can reinvent their profits into new models. Take a look at Profit Margins for bmw, audi, and mercedes. Themes of the is at 9. 4 . For savings if all the way 5 . Bmw is that. 4 . 9. 4 . 8. 5 . Es is at remember when we spoke to the ceo of rollsroyce and various, he said the russians are buying rollsroyce is with their rubles. These are hard assets. Are they heading toward russia . Much indeed. Y from cars to the wheels that run them. Continental has reported results. The largest tire manufacturer is Standing Firm on its profit forecasts as rubber prices hit a fiveyear low. Joining us now is the companys chief Financial Officer. Thank you so much for joining us. First of all, give us your overall view about how concerned you are about demand. That is something we have been talking about. A lot of growth forecasts are going down. Will it impact your bottom line . Actually, we dont see eye sideways development in europe. This is not so different what we had expected already a quarter or two quarters ago. What we have seen for the Third Quarter, sideways to the second quarter, we see for the fourth quarter. It looks like we are continuing on this path and probably even continuing in the beginning of next year, sideways development in europe. Hopefully your tires dont go sideways or at least they do so very nicely with great grip, but are we seeing customers trading down to lower cost models . Or margins going to suffer . How does Margin Development look Going Forward . On the tire business, we have a trend in europe to bigger rim tires. The higher population of suvs on the streets which have bigger pureires and it is a design trend. People might downsize their cars, but they still want to make sure it looks nice and tire size is a big portion of this. We do see a trend toward bigger rim tires and bigger rim tires are the more attractive for us as the tire maker. That is interesting. Francine mentioned the week growth story we are seeing in europe. That is affecting asset prices. We are seeing lower oil at the moment. Does that have an impact on your targets Going Forward . Could you give us a sense of where you guys are pricing the euro into your expectations and your models right now . Actually, the oil price in more a. Is probably factor which determines how many miles people drive and if they drive more, this is positive. Our overall cost of continental are somewhat affected by oil prices. The bigger effect is a net rubber prices, which we had tale wins this year, which we had to pass on to the consumers. Give us a sense of how disappointed you are by the growth of electric cars. This was the one thing that people thought would really take off two or three years ago. A lot of people have had to revise back forecasts. Is this just postponed or will demand flag overall . Conviction is that it is postponed. Unfortunately, it is postponed again and again and again. But with the new emissions 2021, the car and fleets have to be with more electric vehicles to meet the regulatory requirements. Growth,see a stronger but until then we still expect some growth, but we really do only expect the real stronger growth to be in probably five years from now. Piecere is an interesting in the Financial Times talking about the fact that the car sector is going to be able to take advantage of the aging baby boomer generation and that that could be a real benefit for the car sector. Do you agree with that . Do you think that will be a real benefit coming through to older drivers . If that is the case, how do you take advantage of it . Well, all the drivers will appreciate more the advanced driving systems in 10 years from now. The fully automatic autonomously driving car in 10 years. We are the one who is delivering many of the systems and will help to supply the car with this functionality of more and more assisted systems. We will profit, definitely profit from it. Ofcan you give us a sense the kind of scale of what is that going to look like . Road, what arehe your financial numbers going to look like in terms of now versus then . How big a benefit are you going to get . Not giving our guidance for 2015, so im a little hesitant about our guidance for 2020 [laughter]. Fair enough. Isour method to the market that we can outgrow the market by 3 or 4 . You make math out of it and there is quite some growth to come over the next few years. We will be much bigger. Getting back to the driverless cars, you say you are in the position to take advantage of this. Does the tire have to be phenomenally different to what we are seeing now because of safety and security . What do you think wendy you think we will see the first real driverless car . We expect the first real driverless car starting to be in mass production 2025 to be on the road. Dont expect it to sit there suddenly and everybody is massively surprised. The cars will very soon be ready to drive, already highly automatically on highways, where there are easy traffic situations. In 2025, the cars can do it completely on its own. It is a process constantly involving in that direction. Do you think that will change the holden amick of car ownership . When the car is autonomous, i can have it when i need it and not when i dont need it. Do you think that will change the whole model of the car business significantly . Own your want to mobility or do you want to rent your mobility . There is definitely a trend in cities and the urban areas toward less owning and more renting. This may not have a the mileage person is not purpose affected. Rented mobility may be used more than your own owned car, which means the cars have to be replaced earlier than before. We should not be affected by that trend. Joining you so much for us. The chief Financial Officer at continental. We are back in a couple of minutes. Welcome back. The euro is gaining today which is ironic considering that the commission downgraded inflation. You thought currency would be negative. The commission downgraded beecasts, which could particularly problematic for france, of which im sure he is particularly well aware. Francois hollande is already at a record low in terms of approval rating. That is it for the pulse. Keep it right here on bloomberg tv. Surveillance is up next. You can follow us on twitter. We will see you tomorrow. It is election day. A leading democrat compares i was to tell us what. It is an exclusive, voters really do not care. They are self. They dont care about this election. Good morning, this is bloomberg surveillance. Our worlde from headquarters in new york. It is election day, tuesday, november 4, i am tom keene with scarlet fu and brendan greeley. We will commute to 18 hours of election coverage we welcome you to 18 hours of election coverage. John heilemann was up all night. This is the moment he is been waiting for. Republicans on the verge. Will the end of taking over the senate . The gop needs six seats to retake the majority