Payments to Government Contractors as the slump in oil prices pushes the country into a deficit for the First Time Since 2009. Francine that is according to three people with knowledge of the matter. They say the Infrastructure Projects have been waiting six months for payment as the government seeks to preserve cash. Manus lets get straight to the middle east and bring in our finance reporter, matthew martin. Good day. Let us through what these measures are run us through what these measures are. They say they are delaying paying contractors give us in context. It is important to remember that saudi arabia going into this period of time with very low debt and huge reserves, but as it comes to the realization that the oil price leave staying at this sort of thel for the mediumterm, government is starting to take some measures to try and reduce the spending levels as it starts to work out what sort of Government Spending, what sort of budget it can sustain Going Forward into the future. We have seen the measures we are reporting on today as being 2015,d, the budgets for the Government Departments instructed to try and keep as much cash around as they can and not be spending too much. We have also reported just a few days ago that the government has also frozen any new contractors, no new projects for the rest of this year. There has also been measures to stop spending on things like new furniture, new cars for the Government Departments. There is a real watchful eye from the saudi government now overspending as it tries to adjust to the new reality of the oil price. We have to remember that oil accounts for 80 of government revenue this year. The fact that oil has fallen so much as a big dip in government revenue for saudi arabia. Francine matthew, when i was in lima, a lot of discussions were about saudi arabia and whether the world gives it the capacity to absorb this fiscal shock. Is it social or is it the fact that moneywise they may be in trouble . Think what we are seeing the government do with the measures reported on today is spending around infrastructure and spending around development, economic stimulus is being looked at and reassessed and may be cut back. But spending, the current spending, around government there is alsoses, the war in yemen, this is old much of a ring fence by the government, because cutting that has the potential impact on social stability in the country and there are a lot of people employed within the government sector and saudi arabia. There are a lot of people who rely on Government Spending for their livelihood. Seeing ahy we are relatively sophisticated approach to identifying where are the places that the government can cut costs without creating too much instability in the country. As we go forward into next year, the interesting question is going to be does saudi arabia then look at borrowing from the International Markets so they can avoid running down reserves . This year it is already borrowing around 25 billion from the local currency markets, and increasing expectations that we may see the government do something next year in terms of tapping the dollar markets as well, to diversify its sources of funding. Francine matthew, thank you so much. Matthew martin in dubai. Manus time for a check in with how the chinas day is. Is expanding quicker than forecasted. Gdp rose a slightly ahead of estimates, 6. 9 , but still the lowest quarterly expansion since 2009. How is it playing on the market . A difficult start ryan, how are we looking . Ryan 6. 9 is what we got in the expectation was 6. 8 . That is obviously better than the expectation, but nonetheless it is the worst quarterly growth since the beginning of 2009. If you look at my 15year chart of gdp, in the First Quarter of 2009 he came in at 6. 2 , but we were in the depths of the financial crisis. You have to go all the way back the last millennium to see another quarter with that kind of growth. 7. 5 , and who could forget that we went all the way up to 15 . How did the markets perceive that . This is the shanghai composite, a twoday here. Shanghai composite was up as much as 1 , falling on the news and closing 1 10 of 1 . Not a huge difference, but enough to take off that aid we cant. That eightweek high. We open to down a little on the stoxx 600 but have since turned into positive territory. The european benchmark is up one half of 1 right now, traders looking through this. Back to you. Francine Ryan Chilcote with the very latest. Lets bring in the head of european equities at ubs nick, thank you for coming in. Your job is you look at geopolitics and the fed, you look at the equity markets and m a. Overall, what is your biggest concern . Nick we saw a quite nicely in that chart on china they have been slowing down for five years , emerging markets underperforming, and chinese gdp falling. It is all relative to expectations. The print this morning was not great, but peoples expectations are now very weak. I think the key question is, does the weakness in emerging markets in fact the u. S. And europe, where there is a reasonable recovery . Manus since the start of the Fourth Quarter, this is the conundrum for me and for many in the market you have had this reprieve from china no hard landing all the things that held the Federal Reserve on the bridal, so to speak, from moving. Relief does this create a scenario where december comes more into play, in terms of Interest Rate hikes . Ck i would think so. And i dont think it is too bad. I think some modest rate hikes from the u. S. Would be good. It would be suggesting that we are starting to normalize. Strong enough for us to bear it. When you start at these low levels of Interest Rates, equities tended to do better, multiples tend to expand. Francine nick, on gdp in china, are you not skeptical that the numbers dont tell us the full story . If you look at domestic demand growth, at a nominal pays, it has gone from 20 in 2011 to just 5 . Are you certain that we arent seeing a hard landing disguised as Something Else . Nick everyone is skeptical of chinese data. You have tax revenue improving, and property sales improving, and you have a few other things going on in the background that suggested is not just the gdp headline numbers. Growth seems to be stabilizing. It is seeming to have a positive effect. Areunderlying numbers probably lower, but the stimulus is still going back up. Manus nick, the one thing in my mirror our european equities cheap . I am looking at the start of the Fourth Quarter oil and gas up, some healthy retracement. Wire they cheap . Are cheap if you look at adjusted earnings. 14 to 15 times pe and that is not. Cheap but we have seen no Earnings Growth for five years. And if you believe there is an Economic Cycle and you believe profits will rise, which we think they will, financially that multiple is quite attractive. Midcycle pe on depressed earnings. Francine what about m a . We have had huge m a over the past few weeks will it hold . Is there a risk that we are doing too many megamergers . Ack if you look at m a, really accelerated last year. At the end of 2014, the gap between u. S. M a and europes was the biggest in 16 years. Europe is now playing catchup. These megadeals, the hundreds of billions, money is cheap and companies should either pay out dividends or maybe, where appropriate, do m a. I think it will continue. Manus nick, thanks for the roundup. Nick nelson. Francine heres is a look at what else is on our radar. Deutsche bank is clearing the dax under a new coceo. We will see the managers who helped to build it, leaving or removed to other divisions. Costs, of plans to cut it will abolish its 19 Member Executive Committee and 10 of its 16 management or commissions. Manus the European Union needs to strengthen its ties to turkey and return the country to a path of membership. That is according to rehn, the top eu official. He spoke to bloomberg in an exclusive interview. I believe that we should, in the coming days and weeks, work hard in order to get an mitigate thehow to problems in turkey. , work on rebuilding the euturkey relationships. Francine the Global Financial hub voting to leave the european financial union, according to a Senior Member of hsbc. Europes biggest bank could relocate its headquarters from london to dusseldorf. Maybe it is just wishful thinking. Manus tickets for the new star today twos go on sale months before it hits theaters. Awakens is the first in a series since disney acquired the franchise for 4 billion back in 2012. The film is expected to be one of the top grossing pictures of the year. Obiwan kenobi, eh . Francine next, the Deutsche Bank shakeup and how it affects the german economy. Manus welcome back to the pulse, live on bloomberg. Lets get a little bit more now on the Major Management shakeup taking place at Deutsche Bank. The new coceo is scaling back the trading empire established under his predecessor. We are joined now by the deputy head of german capital in frankfurt. Thank you for joining us. When you look at these changes, we see this is him putting his stamp on the organization. Are you impressed by splitting the company . Further any surprises in the rises and fallers in terms of the retake . Think this is part of a process that has started when john became the coceo in july. We already had the profit warning last week which gave very strong hints that they are going to downsize the investment bank, and especially the fixed income and trading business. We now have these Management Changes in the reorganization of the investment bank. Probably not really a surprise when you look at it but it is very important for investors to see that nobody from the old army is still on board, that it is a very clear sign of where the bank is heading. Francine dirk, what do you mean . Is this a clear way of getting rid of managers that were closely associated to him, or is this putting managers in place that have a new Risk Assessment . Think it is putting managers in place to have a different business. The people who have been running from the executive committee and not from the board, the people who have now been promoted to the board are all equities people, advisory people, and nobody from the fixed income crowd. I think it is very good for investors to see that the bank is now finally responding to the challenges that markets have put to them. Francine so these are people, you are saying, that will be just as compliant court focused on risk. Well, hopefully they will also be able to generate sufficient revenue. But i think Deutsche Bank put moreore they into their fixed income business and probably too many resources compared to the revenue they could generate. What we will see his fewer revenues, fewer earnings, but also fewer equity and Balance Sheets if needed. It is becoming a smaller bank, and hopefully a bank that can generate higher returns and is more efficient. Manus some people would say that the former equity Business Manager being promoted sends a clear signal that this is a bank that will focus on equities. Lets talk about the tough decisions we originally had the speculation of a thousand job cuts, speculation about dividends, speculation about capital raising. What should he do in europe . Should he go to the market, raise capital, and we done . Or should he try and see that with a dividend cut . Can, hethink if he could try to see it out with the dividend cut. We will have probably two or three really bad years for Deutsche Bank, because this transformation will cost time and money. The first phase of the transformation has successfully a 6 billiond, loss and still enough capital without the need to raise fresh capital. Hopefully next year will be more or less the same, earnings will be used to pay for the transformation so they can keep the capital at the current level, do it without raising new capital. This would be a great achievement for Deutsche Bank. Manus dirk, thank you very much. The deputy head of german research. Francine stay with bloomberg. Our banking coverage continues with an interview of the jpmorgan ceo, an exclusive interview around 2 20 p. M. London time. , londons latest skyscraper officially opens. We talked to the chairman of the insurance giants, one of its first tenants. Francine welcome back to the pulse, live on bloomberg. Gets its newest skyscraper today, the cheese grater opens for business. The 46story tower which is 225 meters high is expected to have up to 5000 workers. In is eon, moving up relocating from chicago to london. We are joined from the building by their chairman. Great to have you on the program. Relocation to london that doesnt happen every day. What is the reasoning behind it . Good morning. If i could say, huge congratulations to british Lands End Properties were developing this fantastic building. It is a great honor to be one of the significant tenants of the building. When we thought about where we to to be, we it was be, it was in the heart of london. This is one of the overriding principles of how we thought we would be based in this wonderful new, contemporary, iconic building. You are right it is an iconic building right in the heart of the insurance district. But this is a big commitment, isnt it . This is committing to london in the eye of quite a big discussion around our position in europe. How much risk do you think there is to your business from brexit . Did that come into the discussions when you made these Big Decisions . Do, as you maye know, specializing in risk understanding. We researched a closely. In the heart of london, we have been active here in 300 years. It is the Principal Center for insurance activity. We are delighted to be so close. We have sizable trading relationships with lloyds and other insurers. London is central to our activity and central to our understanding of transaction risks and always will remain so. Francine center matter what happens to the u. K. , even if this country decides to leave the eu, it makes no real difference to you because of the insurance and reinsurance presence in london. Is our you are saying . Is that what you are saying . Dominc i cant quite hear that could you repeat it . You seemed toncine th be intimating that no matter what happens to brexit, whether it decides to leave the eu or not, it makes no difference to your commitment to the city. Our commitment to the Insurance Community globally is unchanged in terms of our desire to do better work for our clients. We are committed wholly to londons activity we have enormous trading relationships throughout the s and whenfices we think about london and where london is, we transact 10 billion locally this month, and we look to do much more of that. We are very proud of lloyds association, and all the competitors around the world. Building, are those that are trading with us around where we have 500 visitors per day. From there, it is other countries looking to trade further with our community here. Many our existing clients and many are looking to do more business. That is one of the reasons we have this iconic building, to attract people to this particular part of our activity, to attract people to transact insurance in this community, to bring people into a building where there is an indelible memory. We wish you well, dominic christiansen, chairman of aon in london. Francine we are also seeing tonights pictures of michael bloomberg, speaking to the mayor of London Boris Johnson at the city summit. We are back in two. Francine welcome back to the pulse, live from london. Manus here are our top headlines. Saudi arabia is delaying payments to government intractors, after the slump oil prices pushes the country into a deficit for the First Time Since 2009. That Companies Working on Infrastructure Projects have been waiting for six months or more for payments as the government seeks to preserve cash. Francine china is expanding quicker than forecast. Gdp rose slightly ahead of estimates at six. 9 , the slowest quarterly expansion since the first three months of 2009. Manus meanwhile, the u. K. Is rolling out the red carpet for chinese president xi jingping as he makes his first state visit to britain. He will have lunch with the queen at Buckingham Palace before talking trade with david cameron. He will also address the houses of parliament. Chinese Officials Say the value of the deal he will announce is expected to be huge. Francine Deutsche Bank is clearing the decks under the new coceo. Senior managers who helped build the Security Unit and reorganize the Money Management business will be moved or relieved. As part of plans to cut costs, it will abolish its 19 Member Executive Committee as well as 10 of its 16 Management Board committees. Manus lets get a quick check of European Equity markets and check in with ryan. Ryan it is an update for european equities take a look at the stoxx 600. This is a twoday graph. It shot up almost immediately the third day the stoxx 600 is on the rise. It was up at one point as much as 8 10 of 1 . Wwhy . Part of it is because of what has been happening at Deutsche Bank. We got news over the weekend that the ceo is clearing the deck and getting rid of some of his predecessors deputies, including the cohead of the investment bank. Deutsche bank is up as much as 3. 5 , to really on a roll. He will do his big strategy announcement in 10 days time. 10 days ago we learned that Deutsche Bank may scrap their dividend altogether, all part of his efforts to make the mark at the bank. Finally, one of the reasons why 600 openese stoxx isn, albeit very briefly, right here this is the gdp growth for china. This is the 15 year. Heres where canaan in at 6. 9 through september. Is, or was, was that it would be at 6. 8 , so it outperforms that. Nonetheless, people were focusing on how it was the worst quarterly growth since 2009, when we were in the depths of the financial crisis. I would point out that it is the worst, with the exception of that one quarter, in at least 15 years. You have to go all the way back to the last millennium to see China Growing at less than 7. 5 . That is what investors are focused on this morning. Francine thank you so much. Britain will roll out the red carpet for xi jingping this week on his first state visit to the u. K. Bloomberg looks at the grand welcome being prepared for the chinese leader, and what britain is hoping to get out of the visit. Ngs hostsnt xi jingpi are laying on some lavish hospitalitys. He will die with the queen at Buckingham Palace, address the houses of parliament, and even take a ride in a royal carriage. Forfivestar treatment chinas leading trade partner in europe. Vest 25rrently in billion pounds of u. K. And britain wanted to hit 100 billion by 2025. Of their investment is a Nuclear Power plant, and they are also offering 12 billion pounds in a contract for the rail scheme. Chinese are also said to be eyeing further investments, and london could become the first overseas Financial Center to open a market for chinese sovereign debt issued. Little wonder both sides are hailing this as a golden era. Lets bring in our hong kong reporter at large, david tweed. Great to see you. We are all getting ready for this visit it has been everywhere. How has it in for trade in china . David everywhere pretrade in the chinese press. Last friday the front page was in a complete royal swoon. It went into minute detail about exactly what would take place at Buckingham Palace, about the state carriage, about which corridor door xi jingping and Queen Elizabeth ii would walk down before they got there. They would set at a horseshoe table and today, i will show you it today. We have a story that is talking about all the stops being pulled out in terms of decoration in chinatown. There is a campaign. Theyhinese side of it do mention the economics, but for them it seems to be so much more important exactly what sort of honors are being afforded to xi jingping. Francine and this is why . Because it is looking at chinas status in the world . They are extremely attracted and wants that state is globally why does china put so much energy into this relationship . David you have absolutely had the nail on the head. This is absolutely key. Faith toives absolute the respect that the Chinese Communist party craves. What is important for them is that they can buttress a hint in as a leader of an emerging superpower, which is getting the big respect. And lets face it, who in the world commands more trustees and the queen of england more prestige than the queen of england . It is part of the narrative, part of the story that the Chinese Communist party wants to sell at home. Lenny remind you, during the visits to the united states, there was barely any potion about the rival, the pe. Frenzy almost overshadowed what he was doing in the united states. This time, it doesnt look like you will have any competition whatsoever. Manus when it comes to these kinds of huge displays of geopolitics relationships, the backdrop is one of trade. Camerons ambition was to be brought back in from the cold. He has achieved that. The quid pro quo is that xi will announce some substantial relationship developments, and that is critical. David it is critical, because this is what it is critical to the united kingdom, because they sell what happened to them when they were left out in the cold. The u. K. , for example, out of the five biggest nations in the European Union, has the biggest trade deficit with china. The uks trade penetration into china, only 5 of exports go to china compared to 12 from germany, and in foreign investment, the u. K. Is not really getting so much out of the relationship as they had hoped, which is why you wont hear any mention, certainly from u. K. Politicians and from david cameron, about the dalai lama. There is also an asymmetric relationship that china has with the u. K. The u. K. Is just a middle power these days. President obama at the beginning of this year met with the dalai lama, and xi jingping continued with the state visit. He would not have done that if we had seen that support for the dalai lama coming from cameron now, which is why you are seeing osborne in china saying we will not engage in the megaphone diplomacy, and lets face it, for the u. K. It looks like it is stayin paying off. Francine david, our hong kong reporter at large. We are hearing great things about his visit to london. I urge you to read on bloomberg. Com. Manus coming up, we will speak novae ceo of live ia during its debut on the nasdaq. Stay with us. Francine welcome back to the pulse, live from london. New medical Device Company livanova begins trading on the nasdaq and the London Stock Exchange today. Borne byany was a merger. It is hoped that they will make hospital contracts more competitive. We are joined now by thank you for giving us the time. It seems like it is usually collocated and messy, as yet to speak to different investors. Diverse,vestor base is and we have a lot of european investors, and we have a lot of u. S. Investors. We chose to list in london and on the nasdaq to serve that, these two categories of investors. Manus when we look at your footprint, it will increase we were playing a hold piece on china and what i want to know i know what you do, pacemakers, china fit where does in . Where does that growth story fit for you . Andremichel china today is an emerging country for medical technologies in general, and in particular for our type of technologies. We are leaders in cardiac surgery, and the ratio of cardiac surgery per million inhabitants in china is 1 10 of what it is in europe. The Growth Potential in china is enormous, and china has been rolling on this wave for the last few years and will continue for the for siebel future. We have a joint venture in china with a Chinese Company to manufacture and develop pacemakers for the chinese market. It is a great opportunity for livanova. Francine what are the things being done in the u. K. . This country is about to vote on whether it wants to stay in the eu. Why is now the right time . Andremichel livanova is a Global Company we have 40 of our revenue in europe, 40 in the u. S. , and 10 in emerging countries. We are looking for a global base for our business, in london is a great base. Second, we are going to be trading, so it makes a lot of sense for us to be based in london. We are very pleased to be no longer near yes, it will create a stronger medical devices company, but do you feel that you have potentially by doing this said that you will be subject to a takeover bid . I know it is just the start of your journey, but you are a very attractive proposition . Andremichel thank you. [laughter] manus according to research. Andremichel as the ceo, i goal is to build longterm shareholder value and that is what we will do. We have so many opportunities to invent, to invest in additional Growth Opportunities. There are so many unmet clinical needs in cardiovascular disease and epilepsy. There are opportunities in brazil, india. We are going to be very busy running the company for long term shareholder value. Francine i understand you dont want understan talk about if yoe a target, of finding an attractive proposition in the emerging market that would make me stronger. Bothmichel puls companies have a history of being very selective in their investments. We typically do investments in technologies because there are Great Companies out there on leadingedge technologies to create cardiovascular disease and epilepsy. This is what we focus on. Opportunities to do bigger operations, but the main focus is going to be on accelerating growth through technology. Manus accelerating growth through Technology Revenues at 1. 3 billion, give us what is achievable. What is realistically achievable in terms of sales. Are you doing it via cost cuts, synergies . Andremichel the Growth Strategies are to focus on our base business. We have Global Leadership positions in surgery and in epilepsy. The Business Needs to grow in the midsingledigit range. We have Growth Opportunities to accelerate in technology and in emerging markets. We are still at the point where we will give guidance to the market this will come soon but we are excited by the opportunity. As you mentioned, there are opportunities for mergers we have said publicly that we will drive 18 million by 2018 of free tax synergies because of the mergers. There are opportunities on top and bottom. Francine you were talking about epilepsy you have a lot of products in the pipeline that will be if not blocked, very buster, and very close to it. Isremichel one of ours treating patients who are drug resistant and dont get treated with drugs for epilepsy. Epilepsy is a terrible disease that affects the lives of patients, of families across the world. Through no stimulation and new modality, we can have patience live a better life and reduce the number of seizures they have. Today, we have a Great Technology just now testing in the u. S. , taking speed as we speak. Manus sometimes when we talk to people in the usbased reachers research and development, it is important to focus on what you are willing to spend. Give me a sense in terms of the overall budget a percentage of revenue, of cost, in terms of what you are prepared to do . Where will that be centered andremichel rmb is key to our longterm strategy. We are going to spend as livanova 40 of revenue in r d, million. 60 there are more opportunities that we can tackle and we have there areiplined, but great opportunities with a top line of products that will potentially change the way cardiovascular disease is treated. By me take one example. Sleep apnea terrible condition that affects the sleep of millions of people in europe and in the u. S. There is no good treatment for half of these patients. We are developing such a treatment in Clinical Trials and early commercialization. It is coming out of r d. It is going to save the lives of millions of people. So great opportunities. Francine we hope it does. Rank you so much. Andremichel. Livanova is trading at 2 30 london time. Manus coming up next, feeling the force. Warstickets are going on sale two months before it hits the screens. Francine welcome back to the pulse, life on bloomberg. Manus here are some of our top headlines. Amazon has filed a lawsuit against more than 1000 unidentified people. It says they posted fake reviews on their website. The company says that they reviews that tarnish the brands and the website. Francine asking prices have surged by 10,000 pounds as sellers take advantage of a housing shortage. The values have increased one point 6 from september to just over 630,000 pounds. The number of properties coming to the market has fallen more than 16 in the past year, depriving buyers of negotiating power. Manus tickets for the new Star Wars Film go on sale today, two months before it hits theaters. Is the firstakens in a series since disney acquired the franchise for 4 billion in 2012. The film is expected to be one of the top grossing pictures of the year. Francine i am so excited. For the first time in the competitions history, the Rugby World Cup semifinalists are all from the southern hemisphere. Francis suffered a crushing defeat against new zealand, can now go on to fight south africa. The winner of that match will face either australia or argentina. To a coach spoke about the strengths and weaknesses of the team. He also talked about who he would like to see in the grand final. I think australia should play in the final, if i had to pick right now. Who knows . It is going to be huge. The australians have improved a lot. They have played each other twice this year, 11 in sydney. 101 in auckland. Where of the key point in the game . Well, i think it will be tricky. The australians have always been a bit questionable and they have turned that around. They have dominated wales and england. I think they are looking for whelinchy right now. That could be a factor. It is a psychological thing. You can get dominance there, and you can see that from the australians. Wales did make the decision they tried to play a power game. It was in that sharp. They played well against england, so they are looking good. Oilbacks will get better they came through a poor round, and when you get a win you are not quite right mental it because now they are playing in the finals and they will be on the edge. They will fight well. Knows . Oilbacks by three. Manus as someone who is not taking part of this years world cup, he is recovering from injuries. Has hisus he also favorites for the grand final. Biased, but i would love to see new zealandaustralia final. I think that will be pretty cool. The england final would be pretty special, especially with the host nation being here in england. But that hasnt turned out i think. Is some great rugby to be played. Francine for those listening on bloomberg radio, the first word is up next. On surveillance, china. And the ferrari ipo they will start trading on tuesday and wednesday and tom will talk about the dow jones. Manus you have some great guests. Larry hathaway. Alberto gallo. That will be a great surveillance. Francine in the meantime, you can follow us on twitter. We will see you in a couple minutes. The slump in oil prices bites into the budget. Chinas gdp grows by that of an better than expected. Good morning. This is surveillance. Join me from new york is tom keene