Transcripts For BLOOMBERG The Pulse 20141105

Good morning, everybody. You are watching the pulse. Im guy johnson. Im francine lacqua. We are just getting some breaking data. The services p. M. I. Figures falling for october to 62. 3. What we were estimating is a 62. 4. Pretty much in line with expectsations. We had an encouraging figure from italy. The surprise of the day. P. M. I. Was better than expected. We were expecting a can traction. The number for the whole of the euro area an area of grips at the moment by the debate that seems to be raging within the e. C. B. Were waiting to see what the meeting looks like tomorrow. The news yesterday talking took into account fact that maybe we have a significant refor mario draghi to deal with. Well talk about that issue later on. A revelt about his transparency about his speech. Nevertheless a significant Political Development if you can talk about politics within the e. C. B. Lets take our politics in a different term. Gripping westminster the last couple of weeks if not months. Migrants contributed to 20 billion pound tax boost. The reporter joins us on the phone. Rob, this piece of research that has been done by university college, is interesting because it seems to stand against some of the things we thought were right when it came to migration here in britain, i. E. That may great nation was costing the british economy. That migration was costing the whole british economy according to the latest data, doesnt turn out to be the case. Well, a lort people in the government have never said that. They have always argued that immigration was a good thing for the economy and absolutely backs that up. Migrants from the 10 countries that joined the e. Numbings 2004 accounted for 5 billion of that 20 billion on their own. This is a huge wave of immigration that britain has seen coming in especially from places like poland. The argument has been from eople who oppose it. While it is terrific for people who live in london who can have cheaper restaurants because the waiters are from eastern europe. They can have cheap housekeepers. Cheap clearance or whatever. At it is bad for is native britains who struggled to find work. That is where this debate has this will no change that argument at all. The u. K. Independence patient is opposed to it. It has done well as immigration has risen up the barometer of political issues. I dont think that they will be troubled by anything that is in this report at all. This is an issue that matters a lot in british politics. You were talking about we have the election coming up soon. What is likely to happen . It is now looking as though this election in rochester where the u. K. Independence party is hoping to gain its second elected seat having won one last month and you may recall i think i was on this show. I said it was unlikely they ould win in ratch. That looks wrong. When you go down there, it is very easy to find people who are switching to from both labor and the conservatives. Ople who are ang angry about immigration. They say our jobs are going. Not just the jobs but the country is changing. So ratch is an interesting place. The area around it. It used to be an industrial area. It has docks. He docks have closed down. There is a commuter belt town. Immigration is wrapped up in this change that is happening in the u. K. But one of the crucial questions about all of this data and there was a report that showed immigration is lower than people think it is. Will this change voters minds . And there is this hope from people who put the data out. They say no. Look. Immigration is lower than you thought. Actually there is another study that i would point you to strongly. Great book that has just come out called sex lies and the ballot box. It contains a study of do peoples minds change when they are told that their data is wrong . The scenes no. Not at all. You ask voters what you think the study with International Aid is and they says the x actually no, it is half that. They say well, it is still too high. People that you sort of evidencebased politics is im afraid there is the evidence suggests that voters minds are not changed by data. All right. That is really interesting. Thank you so much. Our u. K. Government reporter joining us on the phone. Ok. Lets continue this conversation now as the debate heats up surrounding europe. The u. K. s secretary has vowed nd said in a speech to diversity in business should labor win in next years election. This subject of diversity. The subject of my zpwration gripping us all right now. It is hard to tease out fact from fiction. From politics. Peoples defections of in business and for man on the street and the woman on the street. Yeah. It is very hard to understand whats going on. Do you think it is business . That the british people are fully aware of the facts . Do you think they are fully aware of the diversity issue that we face and the fact that that is holding us back . Do they understand the impact that my zpwration having on the british economy in real terms or do you think the politics is distorting what we are talking about . I think it is distorget what were talking about. What youre seeing in our country. Were a wonderful country. Great potential. But were going through huge change and were a country of 64 million people. Were facing more International Competition than ever before. China with 1. 3 billion people. Look in the studio. Very exciting. Creates lots of jobs, not just for tv presenters. But in our new Tech Industries and also destroys jobs that people have done for zwren rations and if that context, it is very easy for political people. We see that with right wing populist parties across europe to come into that face is and see the division, fears, rank or despair. Our challenge i think is progressive politicians is to not only reflect and understand peoples worries and address their material needs, which are very difficult in the current economic climate but also to through this. In that context, it is very easy as a populist rivals say your problems. The reason your wages are stagnated, the reason you dont have the opportunities you used to have. All of those problems are down to those people, the other. They are Eastern European immigrants. Im very clear. I want a fair and Firm Immigration policy. Proper controls to who comes in and out. They pay before they take out our benefit system. I do not agree. That to pretend those people over there, all the problems that we have that politicians have failed to deal with over the last few decades is all their fault. The problem is that emotional feeling takes you to lets get out of europe, which i think uld be absolutely disastrous for this for u. K. Economy particularly given we are in the now of a u. K. Trade deficit. The only way were going to be able to deal with that is by trading our way out of it. Look at bloomberg. This massive multinational Media Company choosing to situate here in london. You guys wouldnt be here if we left europe. We dont know that. Talk to us, how do you change the perception . Picking up on something that our reporter was saying. Data is not enough. If i think the others are taking my jobs. They are contribute there 20 billion to tax that im going to change my mind. What will it take to change this . You have to make an emotional argument. One of the things that has made our country great, why we have been a wonderful trading nation over the century is we have a wonderful approach to world and our diversity ive been talking about diversity in the board room. We should be ensuring that we use as much of the talent of our Community Near britain which have wonderful things, india, africa, china. How do you change that perception . Well, if you take, for example, one place that just had a little election where the populace right party has just won, it is a seaside town called clapton. Clapton has been left behind over the decade. It used to be a center for tourism. That went. Now because we didnt have proper industrial strategy to work out in areas like that what is the new industry going to be there . How is clapton going to take itself into the new error . If you like stagnation that place on the coast massive potential for green renewable energy. There is a small wind farm there. That could be scaled up to create jobs. Who is responsible for that . Government and business. Labor Party Government . Conservative Party Government . I dont see this as a Party Political issue. The solution of course is by politics. If you look in clapton, you a local and Regional Authority there, district and county council. The decline of clapton happened throughout our time in government. We bear some responsibility for that. No one came together and thought how are we going to reboot this and sell it into the modern era . You need government working. We have seen that in china, germany. The u. S. Actually has industrial strategies. Nobody talks about them. You look at apple. Intel. Fedex. These guys started with federal money. A china has a whole other set of problems. Stay right there. Up next, were going to talk about the republicans taking of congress. Well hear from the u. S. And look at what it means for the Global Markets and global businesses. Republicans took control of the u. S. Senate for the first time in a decade after last nights winning races in six battleground states. We have been up all night following the results. How can we expect these results to actually affect us here in europe. Sure. Hi there, francine. Europe is probably not going to be bogged down by every detail to midterm elections. Investors need to know a few key take aways. Number one, the republicans captured control of the senate over the democrats and expanded control of the house. It is still too early to tell the impact this is going to have on europe. Will bit the established republican or the tea party . The republicans perhaps will set the agenda but the president still signs things into law. That said, the worry is that his power may be evaporating, especially if overseas fleersd europe and asia view president obama as essentially a lame duck president with the clock essentially ticking against him. Then you know foreign governments may have a tough time influencing obamas international agenda. The question is how much will obamas domestic issues hurt his focus overseas . Republicans are usually more in favor of trade deals. The u. S. Is currently in negotiations with several Asian Countries including japan and you also have the transatlantic trade partnership. Congress will have to vote on this whether the u. S. Will team one the e. U. There are implications about energy nols the u. S. Which will affect the rest of the world. Lets get back to the business y shadow secretary. Any Lessons Learned . Here we have a clear shift to he right. About whats happening near europe and the u. K. I think the u. K. Is not as polarized thanks to the u. S. I think were going to see further gridlock in the u. S. Definitely our relationship with the u. S. Is incredibly important. Everybody is watching carefully to see the Transatlantic Partnership negotiations. I have some concerns about that at the moment. I think it is incredibly important that the e. U. Is to that agreement. Our relationship, trading relationship is important. I think generally speaking, look, we share the same values as the u. S. The u. K. And the u. S. Have had a special relationship and that, you know, has delivered many, many good things for world over the decade. Im nervous about that situation. Wholl be the democratic nominee . Maybe there will be another clinton bush election. It will be fascinating. And lked about immigration the fact that there is still a chance we go to referendum that the u. K. Will lead the e. U. Is it imaginable that there would be some kind of much stronger ties that would go beyond the ties you have now in trade but Even Economic ties in if the u. K. Were to leave the e. U. . I dont see the u. K. Becoming the 51st state as many on the right of british politics would like. I think it would be disastrous for the u. K. If we left the embs u. Disastrous for our economy. It is our biggest trading partner. It provides market to where our ompanies can scale up. We have to think carefully about this. Im hoping if we win the general election on may 7, 2015, were not going hold this in our referendum. What we want to do is work with our European Partners. We dont want to maintain growth. I do think at a time, wear great country. Huge potential but medium sized in terms of our population. The best way to exercise power, not just economically but politically across the globe is working with likeminded countries similar to ours. Thats what we have in the e. U. To effect change for all of our people. Collaborating and working together. How do you deal, though, if you were to what is the plan for dealing with the issue of migration . This is an issue that is not going away. No. It is an issue that is gaining traction. If you look at you guys have had a significant change in heart in how you are approaching it over the last few weeks. You can look at the policies. You can look at what is being said by your party and there is a clear realization that it not only affects the majority but it can affect your guys as well. How do you deal with what is the plan . Do you have a focus . Do you have an idea of dealing with it . Absolutely. We want to count people in and out of our countries so that we know what the flows are. We want to ensure that we dont have undercutting in our labor market. We have the how about within the e. U. , though . How do you deal with migration in the e. U. . Things people are concerned about, i have spoke on the counterparts in european governments about this. They want to make sure we dont see benefits and welfare systems abused. They dont want to see undercutting in terms of our labor market. They share the same concerns about immigration that we do. I think undoubtedly you cannot have Free Movement of goods and Services Without Free Movement of people but to pretend somehow that having Free Movement when you five, eight members at the stoofert e. U. Juran joushy to where we journey to where we have 28 now. I think it would be rather naive. You to have pree move yfment degrees, movement. Children living in another part of the e. U. , i think that is not acceptable. We need to address that. That is just one example. But there are things that we can do to reform the e. U. I think so that it works better for people and i do believe our European Partners would like to see hange as well. If we want to be competing with them, i think doing so with the e. Sumbings essential. Thank you so much. U. K. Shadow business secretary. Were back in a couple of minutes. Back to the pulse. Just want to get you up to speed. A nice little rebound this morning across all of europe. Gains of 1 here on the dax and in italy as well. Italy and spain delivering some Solid Service sector numbers this morning. It has not been all bad news. Elsewhere, youre looking into the ftse. Big move is for marks spencers. Doing the heavy lifting with the margins. Improving the margin forecast. Where else in the fx market, one pound buys you 5929. Pretty key data comes out in four minutes. U. K. Services p. M. I. Were looking for that to come in 58. 5. A tick down from the previous month. Elsewhere, a quick check on euros session lows. Well talk about the e. C. B. After the break. Welcome back to the pulse live from bloombergs European Headquarters in london. Were just getting breaking news in terms of october services p. M. I. It is still a pretty great number in the scheme of things. Well north of 50 but the estimate was 58. 5. It is the biggest chunk by a country mile. Maybe not as strong as some economists had expected it to be. As a result of that, we have below 160. 159018 where were trading. A little leg lower as a result of the data that are coming out as we speak. Let me run you through the Bloomberg Top headlines. Amongst other things were talking about. Whats happening stateside. Republicans got control of the u. S. Senate gaining control for First Time Since obamas presidency. It also solidifies the majority of the house. Due to ns took over voters being angry at president obamas handling of the economy. Pimcos the from total return fund. That happened in the first five trading days of october. Bank of japans governor said he will do whatever he can to overcome deappalachian. Deflation. The currency has been weakening seasoning the Bodily Injury said last week since the b. O. J. Said last week. Central bankers are planning to challenge Mario Draghis management style. Is this a revolt . Lets find out. Jonathan ferro. I would be surprised when Monetary Policy is stretched to its limits if there wasnt infighting and disagreement at a central bank. I would be worried about its absence. Not too concerned about that. Here is the big concern. Two big draghi moments the last three months moved the dial. One was the jackson hole speech. He would react to that. The second was when we went to the e. C. B. Press conference and suggested they would take the levels back to 2012. They are the two points that people are angry about. They are two very, very important points. It doesnt put him in a great position if it is true. Is there an argument in saying that are these decisions is it going to impact the market . They are complaining about his secretive behavior and erratic behavior. Erratic because these are off the cuff remarks from the Balance Sheet and on inflation. Secretive. Can you blame him . They are leaking stuff to make this story. Can you blame him for keeping stuff to himself . He wants the market impact. Draghi is in a difficult place now. Kuroda at the bank of japan is doing what are they want. He has three phones on his desk. Who is calling those three phones during council meetings. This is the problem. Here you have a currency movement. It is no not like to United States where it is a single state. These are Different Countries and hes trying to corral the countries. They all bring their own views from a National Point of view. It has turned into a over the last 24 hours. Going into the News Conference tomorrow, a lot of people are expecting a borderline News Conference. No big news. Tomorrow just got exciting. Do you think he will get away without load of questions being thrown at him about this . The answers are going to be very he usually is at batting away journalists. Well continue this conversation. A fun conversation. Thank you very much. Jop than ferro. Who on earth is calling mario draghi during a press conference . Who does he pick the phone up to . Is it merkel . Who is it that who is it . And he is picking the phenomenon up to. To. O is he picking up not who is calling. A bunch of people call him. Who does he answer to . Ok. Lets move on. Concerns amid a global glut. Saudi arabia has reduced the cost of crude this as the u. S. Increases supplies from shale. Joining us now discuss how this is affecting markets, not just in the but elsewhere as well. Ryan chilcote. If you look at the shape of the curve, what is it telling us about how low oil could go now . That is a good question. One man to watch for sure is the oil minister of saudi arabia. Obviously it was his decision to cut prices to the United States. To discount, thats what they do. Discount against spot price, the United States that precipitated this most recent fall in brent, w. Timbings. Now he is moving, he is on his way to venezuela, then ghose to mexico and then he is in venezuela. Then in a conference that will be attended by the oil minister. If you think that these three countries, venezuela, mexico crow, saudi arabia all cooperated between 1998 and 2001 to prop up the price of oil. That was when oil was at 10. Yes, i said 10 a barrel. Were not there yet. 82 for brent so that is a long ways off and politics are changed but at a very minimum, while he is in mexico and in venezuela, we got an even chance of hearing from the man because we have heard absolutely nothing from the saudis in last month and a half since we saw this big decline in price of oil. Ryan, thank you so much. Ryan chilcote with the latest on oil prices. Coming up, deciphering crypto currencies. They talk to us in an interview. That is coming up next. Were still going through the regular story process. There is i think some misperception that it is somewhat caught in the middle but that is not the case at all. E. T. S. Is a wronk long process to get approved. Were dealing with a very nnovative product. A digital app that has never been done before. You probably guessed from that interview, discussing the progress of his bitcoin trust. That is taking place at the conference. That is from last night. The u. K. Government has opened a call for information to identify the risks posed by using additional currencies. Lets bring in bitcoins Board Director. First of all, john, you resigned as executive director. Why . I remain as a Board Director on the foundation. I looked at the landscape and i have been able to accomplish what i wanted to at the foundation during the two years that i was there. Now im looking at opportunities in the private sector. Do you think there is enough transparency surrounding bitcoin now . I think one of the big criticisms is there is a lack of understanding of what goes on behind closed doors. For a surgeon si chot that is out there as something that is meant to be transparent, not opaque, do you think that the p. R. Message for that is delivering for you guys now . I think on the trading side, t is very transparent. There is not that much dark pool trading. When you look at the exchanges, there is a noncorrelated asset class. But the organization that surrounds that trading, there is of transparency. There is a we have had guys associated with arrested. We have had concerns about what went on there. One of the things that is Holding Back Bitcoin is that the people fully dont understand at this stage what is going on. The people that control it, the organizations that have an influence over it. Is that fair criticism . It is somewhat fair. Those were early stage institutions. They were not set up like trading houses or banks. What youre seeing now is the Bitcoin Trading environment. Exchanges are starting to look more and more like banks. This is a business that banks can get into with the k. Y. C. And the a. M. L. Regulations. Youre not seeing the type of institutions that you were previously where they were trading game guards or currency cards. Youre seeing mature institutions such as the ones on your cover here from the United States, you had coin base on here recently. They are starting to look more and more like banks. A lot of people are concerned and said they are not comfortable. Youre skeptical . I wouldnt say im skeptical. You have to go back to beginning. The concept is very interesting. This overcomes the need for a third party to pay for transactions online. Like all things, i think it grows in a way you never expect. Like text on a mobile phone. I think that has happened to bitcoin. It has evolved in way that wasnt expected. The industry having to react to that rather than build a i think that is what were seeing. It is going to be disruptive for pames. Eventually i think it will be disruptive for currencies. I think ultimately, you to see it less of a currency and more of a technology initially. But you have software . You have to that would be a fair comment. You have to give transparency. It is complex. Aately with currencies, trusted network, be a payment provider or elsewhere that is looking after it. I disagree that it is only a technology. The bitcoin monetary unit is essential. If you dont have the bitcoin monetary unit, you would not have the distributed trust ledger with the strength that it has today. Listening to what you just said. I think the point is that there needs to be a translation for real people. Let me get to the translation. Something that is not mumbo jumbo, is the fact that bitcoin is poised to receive its own currency code. Like usg. They will get a code which will be xbt. Once that happens, youll start to see it fitting into Foreign Exchange retail trading platforms as well as wholesale trading platforms. Are you disapointed by the morethat we were expecting a year ago . Bloomberg are quoting it as xtc now. It is starting to catch on. Not everyone has a bloomberg terminal. The person on the street how do you you were saying this could actually replace currencies. It hasnt. Are you disappointed that it has . Ake an step back i dont think it is a step back. Volume has increased. It may have been too much, too fast. If you look at a twoyear time horizon and a fouryear time horizon, bitcoin has done well for such a young currency. The question is where there is that threat. When you have governments that want to look after that currency, you are always going to have that weak point of exchanging bitcoin for fear. Im not going to want to pay flows bitcoin. Dont want to take that risk. There is always going to be that weak point in the exchange. Again, i dont necessarily think you have to see it as a threat. I think what will happen over a long time is that people will look it and other currencies and have to take onboard some of the things they are doing into currency. That could take 1020 years. You talked about myspace of he currency world. I think what i was saying, itverything, sometimes may pave the way for others. Like social networks. There was something called six degrees. I remember getting on that very early on. It can be the thing that paves the way. That someone else can maybe come through and learn from the mistakes and become the dominant force. How much of a danger is that . There is a chance that the myspace that the frontrunner. Bit scoin a little bit different and odd to the traditional Foreign Exchange trade world, which is where i come from. It has a finite predictable supply. It doesnt have a national issuer. It is almost like a nonpolitical monetary unit. Gold and e exmp, x is xau is silver. It can be currency and commodity. That is a challenge for regulators as well. The thing that the great thing that were seeing now is were starting to see the volumes pick up at the exchanges and starting to see derivative products come around. Futures contracts. Swaps, options. Forward contracts. These are allowing bitcoin operators to hedge exposure. Let me throw another thing at you. This is volatility. Is this just a way of trading for the trading sake . Some ways . Is it a way of hedging against something . How should i think about this . Huge amounts of volatility. People got in to trade that volatility. Am i thinking about this is a currency if am i thinking about it as a vehicle i can take advantage of . And that is as far as it goes . Well, i would disagree that is as far as it goes. We are seeing increased volatility. Definitely. That attracts the speculators. A year ago, i had people that know nothing about anything and contacted me what is bitcoin . Should i be getting on it . It is doubling in value in a short matter of weeks. You cant ever think of a urrency in that sense. If youre going to be a currency, you need some stability people having less faith in their own currency are looking toward it. As we see more exchanges pop up around the world in different continents, well start to mitigate that volatility. London and new york are excellent places for building that bitcoin currency. 70 of the market. How if you were at the u. K. Treasury and listening to this conversation now, what do you that the outcome should be over the review that you are conducting . How should you look at bitcoin and try and take advantage of it . Depends on where youre ill take a shot at answering that first. They would need to be properly ectsed on it so they understand at it is they are attempting to look at. The first step would be creating opportunities for the banks. Right now banks are very reluctant to bank any of the bitcoin companies. If you have bit or coin in your name, you struggle getting a bitcoin Operator Bank account in the u. K. And the u. S. So both i think would need to start there. And they already are. They are taking some steps. Beyond that, the opportunity is with the bank as well. A year ago you looked at it as something for nerds. Ow you to take it seriously. You to look at the Way Technology is changing. Guys, thank you so much. The Board Director at the bitcoin. Coming up were going to talk with the c. E. O. Of Virgin Atlantic. That is in the second hour of the pulse. Welcome back. Lets get to new energy headlines. Secretary of state john kerry in the United States says the u. S. And china should take the lead in cutting greenhouse gases. He made the comment in washington before heading to beijing. A series of mysterious drone flights over French Nuclear plants have exposed a security threat. Authorities are scrambling after after seeing unmanned aeroyell vehicles. Finally u. K. Consumers should soon be able to cut their energy bills by up to 1 5 this month. A black backs be l shut your power off at peak times to reduce costs. For our viewers, the second of the pulse is coming up. Were going to be talking to the wave c. E. O. He is coming to us from dublin where Caroline Hyde is. And then we talk to the Virgin Atlantic chief executive officer. That is going to be a fascinating conversation. Not only in terms of what planes they are buying but how the position yourself after we saw them saying it is still a tricky route. What does it mean for Virgin Atlantic . Plus will they be affected by the recent crash . All of that is what were going to be talking about in the second hour. To join the nt conversation, i can be found at guy johnson takeover. And im at flacqua. Well be back in just a couple of minutes. The republicans take control of congress. What this means for Global Markets and global businesses. And exclusive. The ceo of Virgin Atlantic joins us as oil hits a low an Airline Stocks surge. The latest british invasion. Top shop opens on 5th avenue. We will hear from sir philip green about debut. Good morning to our viewers in europe, good evening those in asia, and a very warm welcome to those just waking up in the u. S. Im guy johnson. On francine lacqua. As is the pulse. Live from london. Lets talk about what happened stateside paired republicans taking control of the u. S. Senate. The first time to has happened in a decade. Races in 6 key battleground states. How will the results affect us in europe . The fear is that president obama might be losing power. And perhaps that the u. S. May not have a clear head. That holds true if leaders in europe and asia view president obama as the lameduck president during his last two years. The question is how much will obamas domestic issues hurt his overseas focus . Goldman sachs says Congressional Republicans are more likely to advance legislation that might include legislation like trade and energyrelated issues such as lng export approvals. Side, aegative Republican Senate might mean risk around fiscal deadlines. That could rattled global investors. What is a Republican Senate mean for inversions . The practice as a u. S. Company buying an overseas one and moving its tax domicile to the overseas company, perhaps somewhere in europe democrats have opposed such deals. Republicans arent working on legislation that would lower u. S. Corporate tax rates so u. S. Companies would not view and inversion as attractive. The goal is to stop a number of these deals. Both republicans and democrats want to see tax reform. They had different ways of achieving it. It will be interesting to see how it pans out. The present cons for both. Thank you so much. Theres some drama at the ecb overnight. Dramaernight, but the happened overnight. Eurozone central bankers are planning to challenge mario style. S management lets bring in jonathan ferro. This is a big deal and some ways and not a big deal in other ways. Not unexpected that once you deal with extraordinary Monetary Policy members you need to have a debate. This is about style, not substance. It is not both. The two big talking points are substance. The big point everyone keeps talking about is to get the Balance Sheet activity level weve not seen since the middle of 2010, 1 trillion euros higher than it is now. Andcomplaint in the report at mario draghi is about the remarks and how the members of the Ecb Governing Council did not want to put a number they explicitly said so. For him to come out and do that, two things. If the words are just words and they cannot be backed up by the ecb, then we have a little bit of a problem. At the same time, he is in charge. He has the executive board, six of them. If theres a disagreement with the executive board nevermind the governing council. If he has not got a five people around him on his side, theres a bigger problem. Is this him trying to force the hand . The two big points that move the dial. The jackson hole speech, i have a Inflation Expectations and i will react. The one trillion euro suggestion. Those two things moved the dial. Some ecb members complaining. Maybe it was meant to percent to do something. Which may be smart. Theater could happen tonight. How this plays out i do not know. They sit around the table and mario draghi says what are you doing. Very interesting. We cannot neglect the rumor. It has been around for a number of months. And mario draghi is fed up wants out. Mario draghi himself has not ignored it. A number of months ago, he said there is nothing to this rumor, im serving my fullterm until october 2019. Everybody is talking about that. Adage, no smoke without fire. Who would want the job . Gotets paid less than he paid at bank of italian. Want,ch job would you Central Bank President or president of italy . The food is better. Although you have to be in rome. What i will say is im not surprised there is infighting, but i am surprised it has become public. Can you imagine the nbc turning on Governor Carney . The mpc turning on Governor Carney . If you look at greenspan in the fed, draghi is more akin to the way greenspan operated. Theres a National Element to this. Which i think is something that needs to be taken into consideration. The regional fed officials going to washington is very different from officials coming from Different Countries within the eurozone. Theres a distinction that is going to become important. Particularly in the next few months as we deal with the french budget and problems in italy. The National Story is something that the u. S. Has never had to deal with. Mario draghi is going to struggle. Just by the nature of things and might get interesting. The News Conference tomorrow is just going to be fascinating. How the soap plays out in the q a section. My eyes will be transfixed. It is the face. His facial expressions, not what he says. Youve got to watch it on television. Full coverage. Angela merkel is at her Party Headquarters for a discussion of germanys digital economy. Berlin. Nichols us from economynd the digital what is the message . Good morning. She once the European Union to harmonize laws. Have entire eu laws on Data Protection and the economy. Throughout germany, they say industry 4. 0. There is a recognition from Companies Like siemens that they are going to be in competition google whenes like you talk about home heating and these industries. If theres one thing we know about Angela Merkel, it is something that she does when the companies in her country are pushing them to do that. And she has pressure from axel springer, siemens, deutsche telekom. German companies arent wanting to hold Angela Merkels feet to the fire German Companies to hold Angela Merkels feet to the fire. Last week, she did not give a position on net neutrality. They have got to do a lot on the infrastructure and the Data Protection sides. Merkelsbout angela phone. She had a secure blackberry. What about her relationship with google . Obviously merkels private phone was the one that was tapped by the nsa. Heres what eric schmidt said testifying on capitol hill a couple weeks ago. He said markel raised the issue personally why her phone was being tapped by the u. S. To listen into the phone conversations with her mother. It is personal for her. By merkelsnecdote officials. They said Angela Merkel had no recollection of bringing that up with eric schmidt. Which could add to the distressed, you might say poisonous relationship between u. S. Tech companies and san franciscobased Tech Companies and Angela Merkels government. Some of merkels own companies do not want her to repair that relationship, they want her to be antagonistic. What is the view in germany of the incoming digital commissioner who is taking over the digital. The job . Right man for he has received high marks for the way he handled the energy brief. Agreements with ukraine. He sometimes criticized with his less than solid command of english. I should not be in a position to say anything, my german is where his english is. He is hinting that hes a little bit more antigoogle than his predecessor. We will see whether not this gets confused with google politics. Popsicles with the latest on with the hans nichols latest on germany. Up next, talking tech. As the Largest Technology event in europe enters its second day, we go there and are talking to the ceo of waze. Welcome back. Is the online capital of the world this week as the largest tech event in europe enters its second day. Caroline hyde joins us with a special guest. Thank you. Im joined by cofounder and ceo of waze. Out byartups get bought Companies Like google. That is what waze did. Im joined by noam bardin. Your views and your focus changed since being absorbed into google . It was an interesting experience to go from a Small Company into a company of 50,000. Quite an experience. To getare going acquired, google is the best company to get acquired by. It has been a positive experience. One of the things we can do now is invest in public good type of things. We started partnering with governments and sharing data with governments. Trying to improve traffic situations. Something you might not be able to do as a starter. With google we can take a longterm view. Crowd sources data on traffic. I can see how the route is. Elyrlotte google sur google once to see revenue. How are you driving revenue . Waze optimizes the commute. We try to find the best route. We save them five minutes on the way to work. We help show them where theyre different locations of are on the way. We have a locationbased advertising platform that is successful. Riving business into stores you could be commuting by a store and never know it is there because it is two blocks off of your route. Advertising. Bile who else is killing it when it comes to offering great mobile advertising . What are the brands saying when they come to you . We love what these companies are doing to drive traffic . , wehe top brands in europe are getting these brands coming to us because they want to invest in mobile. There are not that many options to invest in mobile today if you do not want to do banner ads. Make sense ads that to the context of the location, there are few companies that do that. Facebook is doing that, twitter. There is not much scale. That puts us in a unique position. A growth region. You are huge in the u. S. What other countries are demanding the growth in mobile . Ccess or wanting to use waze duis is our largest market. Europe is our second largest. Brazil is our second largest company. Latin america is seeing Phenomenal Growth. In asia, indonesia and malaysia. There is traffic in london and new york. In jakarta, that is traffic. In brazil, that is traffic. Is an order provide of 92 we are seeing Phenomenal Growth in. Everyone talks about smartphones in the emerging markets. Are they willing to go for Internet Access compared to us, we are still on our pcs. They are leapfrogging us. The average young person in the developing world, the first time they will meet the internet is on the mobile phone. They will never meet the internet on the pc. For them, internet is mobile. They push the boundaries further and spend more time on it. They have no legacy. Talk to me about your challenges. You are what every start a up wants. You up at night . Our challenges being able to talent weetain want. Any Technology Company trying to scale it runs into that. We are based in a larger market. We have challenges around hiring enough engineers in this market. That is the question that all the startups are going to have to ask themselves. Your startup might be successful out of dublin but can you achieve the scale you are to need to become a Global Player . Can you . Are you going to have to admit that your base has to move to america . Trying not to. Israel has talented engineers. Build future to generations. We are taking a long view of the market, which google allows us to do. How do we bring the next 200 engineers to years from now. A startup thinks two days from now. Thank you so much. Best of luck with sizzling the growth at waze. Best of luck with fulfilling the growth at waze. Of waze. In, ceo back to you in the studio. Thank you. Interesting interview. We are going to take a break. We will see you in a couple minutes. Britains latest invasion. Top shop has a new store on 5th avenue. Olivia sterns set down with sir philip green about the opening and the u. S. Business climate. This is one of the 100 meter stretches. Be in this to business, you want a store on this street. Are flagships profitable or is this for marketable . We are not into marketing tools. Trading with three times the space here. It is a landmark store. We achieved 250 Million Dollars in revenue. Are opening a flagship in manhattan and by the end of 2015 you will have nine stores in the u. S. . 8. Why are you bullish on the u. S. . We are encouraged that weve had a good quarter. Nordstrom is working well. That, year on year, is building better. We are pleased with that. This is a market where we should be able to do good business. What is your outlook for the holidays . Who knows. Who knows. The people that work for you know. I always say christmas is going to come on the 25th of december, we know that. Theres going to the business, theres always business. America is a slightly different trend because of thanksgiving and how itriday flows. In england, it else. We build all the way to the end. How important is fast fashion . I think it is different. Everybody uses this term loosely. A fashionista customer, a fashion follower wants to find new trends. Newness. In model of speed of a price terms of supply chain. We have flexibility. The discount environment in the u. S. Is different. In the u. S. , consumers expect discounts. I would not say that. Everywhere there is a lot of activity. Yesterday id to me do not see a celestica. Exactly, that is my point. Living in london versus living in new york. There is always a sales rack. It a different strategy. You set your style out. I do not want to be in that market if we can avoid it. You assume you are going to have to marked on your product more in the u. S. . One thing i learned early on. We did a lot more research. Retailers doopean than ourtighter stocks counterparts here run. Traditionallyeks,. And we run this business pretty tight. Every time i ask you about coming into china, you say you are not in a hurry. Have you changed your timetable . We Just Launched online. Months and three review that. I had a conversation, it was a very Big Shopping Center developer. There are people coming to see me from china. Will haveou think we the first brick and mortar top shop in china . Here. Hoping the next sir philip green with olivia sterns. Bloomberg exclusive. We talk to the ceo of Virgin Atlantic. The oil price, ebola, the new dreamliner. Coming up. Craig krieger on the pulse. Follow us on twitter. Guy is guyjohnsontv, i am flacqua. Welcome back to the pulse. Live from bloombergs European Headquarters in line. In london. Im francine lacqua. Im guy johnson. Republicans have gained a majority for the first time during president obamas presidency. The republican solidified its majority in the house. Republicans won voters angry about obamas handling of the economy. Russias Central Bank Says it will conduct interventions to ward off threats. Extend the currency supply once a day rather than on limited occasions. The bank of japans governor says he will do whatever he can deflation, pushing the to a sevenyear low. To aha hing the sevenyear low. 787ersion atlantic buying dreamliners. Virgin atlantic ceo Craig Kreeger joins us. An exclusive interview. Good morning. Thiseed to be profitable year. You said you are going to be profitable. Impact is the lower jet fuel price going to have on your bottom line . Jet fuel remains a big part of our cost structure. Lower jet fuel is very welcome. That does not change our commitment to rolling out more fuelefficient and environmentally friendly aircraft like the 787. Absolutely. 2 engines, more efficient, getting rid of the inefficient 340s. Know. Rious to youve made a commitment to be profitable. A lot of that is down to the arrangement you have with alta, which allows you to scale the business more. Is it going to be a delta arrangement or jet fuel that does it . What has moved the dial in 2014 has been a commendation of three things. One of them is the low price of jet fuel. The second has been more customers. Partly that as a result of having delta on the u. S. Side. Part of it has been the british economy stronger this year than the previous year. You int you where are terms of your profit by the end of the year . Are you sticking to that profit target . We are confident we will get there. We have been very focused on making it happen this year. And taking the actions during the course of this year to adjust our course is necessary. The result has been that we continue to be on top of the servicen our customer ratings. We have a plan to improve Customer Service over the next few years and we are on track. We talked about jet fuel. Talk about the threat of ebola. Last in the news that was a couple weeks ago. Is it a threat in terms of bookings for companies such as yourself . What i would say about ebola i will make a general observation. Pretty much every day i can pick up a newspaper and on the front that isl be something going to have a big impact or potentially big impact on our business. Often negative. Anything that changes peoples propensity to travel, whether it is an economic downturn or even perfectly in the case of ebola can be an issue that can affect our business. Our goal from a human and business perspective is to see ebola contained. We have not seen an incredible impact on our business from it yet. We do not know what is going to happen. Can i take you back to the new airplanes you are going to get to the you profitability goal francine was talking about . , 4engine airplanes of no use to a business such as yours . Something youre not interested in. I do not think you can make a black and white conclusion. As tempting as it is to take the point that 2 engines are good and 4 engines are bad. It is not that simple. We will continue to fly for the next five years our 747 400 fleet out of gatwick in our leisure markets. That aircraft really is a good Economic Impact because of the number of seats it has. In marketsan engine with enough demand, it can make sense. More of our markets will be more effectively served and economically served with a two engine aircraft that is more fuelefficient. We are embarking on a big thing. I do not know how Many Airlines have replaced 60 of their fleet in a 4. 5 year period. By this time in 2018, the majority will be 787s and the dash nines, which will be very good. At the threatsk that your business faces right now, you talked about ebola and jet fuel. If i talked to live sans up if i talked to left hands up ori talked to lufthansa other companies, they are talking about the threat of the gulf carriers. Is pushing aggressively. When you look at the economics of the airline industry, how do you compete with such competitors . How does the Business Model need to change . Carved a niche that began with richards premise how do we find a way to do better for customers . That niche, style, and personality has served us well. Think about our business strategy, we are a u. K. Based places whereting u. K. Customers want to go anywhere nonstop service is valued. As a result, a lot of our flights go across the atlantic, betweenere is no hub us. Mostly there is water. The other markets, places like hong kong and shanghai and dehli and johannesburg and delhi and johannesburg are where a nonstop flight is valued. If we pick the right places, we can compete effectively. Of the do you make figures last week . Given the lack of Growth Opportunity at heathrow, how are you positioning for the British Public . We offer a different style of service and a different personality. Our people really make the difference for our customers. A consequence of that, for many years and in the future , British Airways is a Great British institution. We had a product and service and a way of delivering it that customers truly value. As a result, we get ranked top of the table in transatlantic Customer Service. Our goal is to keep moving not up. If we can do so, you do not lose by offering great quality. Are you going to be able to hang onto that distinctive gin has always had . Willie walsh says you are now delta. You might as well rebrand airplanes. I can assure you that Virgin Atlantic will always remain Virgin Atlantic. The thing that makes is able to compete successfully cannot ever be last in a transition. We love having delta as a partner. We think theyre frequent flyers value a Virgin Atlantic experience. That enables us. Delta needs us to compete with British Airways. We need the same thing. I have no qualms that he Virgin Atlantic style for brand is in any threat. Walshs words are willing watchs words but i am focusing on this company. You operate out of gatwick and heathrow. Says there is no Business Case for a second runway at gatwick. Do you agree with him on that . Back. Me step the one thing i feel very passionate about is that the u. K. Truly needs to invest in a worldclass competitive hub. Of thetake advantage combination of connecting customers and local customers that fly in the nonstop market to offer new services to new places. I believe that he drilled is the best positioned and economically i believe that heathrow is the best positioned and economically viable to solve that. Gatwick is a different question. We are willing to look at the proposal gatwick has made. I do not think it addresses the fundamental issue, which is the need for more hub capacity in this country. Just to pin you down a little bit further. It sounds like you need to spend more time at that link and spend more time talking to god. Youve invested it sounds like you need to spend more time at gatwick and spend more time talking to gatwick. Youve invested a lot in terminal three. Can you see yourself making the similar investment at gatwick if ist is where capacity expanded . It would be premature to give you an answer. Gatwick is a great airport and it works fantastic for the leisure markets. A heck, they have done of a job making the Customer Experience quite exceptional. This is not a commentary as gatwick as a future part of our network. It would be pretty iffy to think that we would be growing our andick presence in ways markets that we operate out of heathrow because of the addition of a runway. Unless customer preferences change, heathrow will be a focus for us. A lotally, we talk about digital and the way we travel. What is the one thing that changed the most and surprised you the most in the last four or five years . It seems like we travel differently. I dont know that i would say the our surprises. I would say that there are continuing evolutions. It starts with the basic thing what is the best way to help customers get from point a to point b in the most comfortable and best way. If you keep asking yourself that question, you can see continued evolution. Evolution on connectedness of customers throughout their journey is one thing that has begun and still has a ways to go as we think about a longterm future. The more we can do to connect Virgin Atlantic with customers as part of that process offers us a great chance for the future and making things better. Great to have you, Craig Kreeger, ceo of Virgin Atlantic. We are going to take a break. Closer toa step trading freely. What is happening at the russian sensual think and how it is impacting the currency. It will all become clear when we come back. Theets check in on markets. Jonathan ferro joins us. A busy morning. A sea of green peering gains of 1 on theftse, over dax. Fairlynd italy, some solid numbers out of those two countries. Everybody is talking about the eurozone pmi. Looking at the new orders index, a low we havent seen since 2013. Plenty of talk about Companies Cutting prices to try to stimulate demands. If you look at the green and the analyst notes, you start to build up. Despite the risk of the ecb, expectations starting to build for a dovish ecb meeting tomorrow. Brings in the News Conference will be interesting. Somewhere else with data outcome of the u. K. Pmi comes out at 56. 2. Inwere looking out for 58. 7 september. There was a drop and a miss in sterling you saw what happened, 1. 5886. A new low for the year. The theme is dollar strong, dollar up against every single major currency, ever e. Gg10. Dollar strong and weaker oil. Brent down by 5 . 82 a barrel on brent. The dollar strong, commodities are week. That is the story. Thank you very much indeed. Lets get details on what has been happening visavis russian central bank. Ryan chilcote joins us. Weve seen the ruble moving on the back of the announcement we had. Explain what the announcement is. The central bank has announced they are going to do two things. Limit their rulesbased interventions on the market to 350 million per day. One intervention per day. They used to do these interventions, you could have several a day. They were telegraphed. They would move the band by fice kopecks forever 350 million. They have said we reserve the right to move the market at any time. That is not rulesbased. They can move in when they want. Weve been talking about the possible freefloating of the ruble. Is that blown out of the water . Most people seem to agree that we are moving closer to a free float in their policy. The central bank is sort of telegraphing they are willing to speculators. Goldman sachs thinks the ruble is going to stabilize. They think this introduces necessary applicability. Capital economics says the declines of the ruble should halt soon. Another group says it should go to 48. 50. It is a battle between speculators and the central bank. An analyst from Standard Bank makes a good point. The issue in russia is not a speculators, it is the fundamentals. Are choosings who to take their rubles and put them into dollars or other foreign currencies. That is not going to be addressed by speculators. They do not care to what extent the central bank is prepared to go. That thes indication rules are not working . We had the 150 basis point hike friday that did nothing to support the ruble. There sayeople out what russia needs to do, in addition to taking measures to reduce capital flight and encourage confidence in currency is to hike rates further. That would be very unpopular. The benchmark rate is nine point five percent already. Ryan chilcote with the latest on the ruble. Coming up, is tesla on track . s target of selling 35,000 cars worldwide. Good morning. You are watching the pulse. Lets talk about the british pound. Service sector pmi data that are not as strong as the markets or the economists had anticipated. You can see the effect on the pound, dropping it down below the 59 level, 5891 is where we are trading. The bank of englands Monetary Policy committee has started its twoday meeting. The Service Sector is the bulk of the british economy. On focus has been domestically driven growth. Maybe we are getting evidence that is starting to slow. Push the increasingly first rate hike from the bank of england further out into 2015 . The currency markets seem to be suggesting that. In tact. Loudske to sound ca founder. Weve signed a Licensing Agreement with soun Warner Music Group. All artists on Warner Music Group are benefiting from this deal. It means that they are able to program, ourdcloud revenue sharing program. We are looking for to becoming a significant revenue generator for one or in the future. What incentivized this deal . By artists toed feel that they were seeing some benefits, some money benefits, from the fact that their music is Available Online and being streamed. As yet, they have not seen royalties from soundcloud. Weve been on a journey from starting by creating a 12 for a tool for artists. Looking to build a larger audience. Our second phase was about building a large scale. We recently reached over 175 million unique listeners every month. We are entering phase three. August, itunched in is essentially about revenue sharing and earning revenue and earning a living with being on soundcloud. Are is kind of the phase we in. Warner is not part of that program. Founderwas soundclouds speaking to Caroline Hyde. What is in front of us . Tesla has its numbers a little later on. Elon musk convinced hes going to be making all of this targets, pushing on with this business. Makingthey footprints it big footprints in china. Maybe we will hear about the gig a factory. A lot of people will want to hear about the timing of when he will launch his model x. The next one, tomorrows ecb day. Tonight they have an informal meeting. There is going to be a little bit of flak going on mario draghi. He has not been as transparent as certain members would want. This as members of the Government Council of the ecb meeting tonight. They will be having dinner. Tomorrow, they had the meeting. Will they be able to iron out their differences before the meeting . That is it for the pulse. Surveillance is up next, live from new york with tom keene and his team. See you guys tomorrow. Have a great afternoon. It is being called the republican wave of 2014, the largest House Majority since 1948. There will be a republican governor in maryland. The president looks for accommodation on issues of mutual interests. Mcconnell and boehner call for an end to perpetual conflict. In 2016 maybeck and spoke parties go in search of votes from the middle class, solon, sour, and angry. Good morning, this is bloomberg surveillance. We are like from our World Headquarters in new york. Fum tom keene with scarlet and brendan greeley. Lets get right to important top headlines. Recapping, it could not have gone much better for republicans last night, picking up at least seven seats in the senate to regain majority for the first time in eight years. There will be a runoff next month in louisiana. For his final two years in office, president obama will face a congress controlled by republicans. The new Senate Majority leader is likely to be Mitch Mcconnell of kentucky who was reelected last night