Transcripts For BLOOMBERG On The Move 20140506

We are watching Credit Suisse said to be closing a deal with the u. S. To settle a tax evasion probe for more than 1 billion. Same time, we also had. Ome figures in from barclays theyre really trying to its top the exodus of senior dealmakers. Are from 2. 5 . Lets get over to berlin. David, you are watching adidas. Adidas has missed on sales and their net profits. The company is under pressure. One shareholder saying that it is incomprehensible that the ceo term has been extended through 2017. He says later this month, adidas is going to launch the biggest offensive in football ever. All right, we will watch that for a closely. We will get back to you in a couple of seconds. Ryan, we have a lot of Corporate News. We are watching Foreign Exchange , and overall we are watching ukraine, obviously. Particularly in a place yansk. There have been a lot of casualties. The airports in the Donetsk Region have been closed for the next 24 hours. People will recall that is what happened in some lost opal sebastopol. Manus cranny all over the swiss banks. Disappoint in the market to some extent varied london is back online. The ftse 100 is pretty much scared flat. Cac 40 down by about one third of one percent. A little bit of a mix across europe. No real drive, a dominating theme. If you look at volumes, this is what happens when london takes the day off. 64 lower than the average of the last 40 days. Widely down across most of europe. , close to1. 6898 1. 69. 9 30 u. K. Time, we get u. K. Services data. This one matters because it accounts for three quarters of this economy right here. This will just add fuel to the fire over that debate over when the next rate hike comes, francine. It has been a while. It has been a while. Thank you for the right much on the latest of the markets and the Foreign Exchange. Joining us for more perspective is chief Investment Officer at access investments. Ukraine and a lot of the earnings. A lot of them pointing to Foreign Exchange swings. What is the one thing that is worrying you the most . I think the only thing that generally worries us is that we tend to only see amplitude on equities in individual names on an event spaces, whether there is an announcement of activity or and earnings surprise or disappointment. Trend seemsgeneral to be very event driven. Im worried to the extent it may be misleading as to how far equities can go at this point. You would actually evaluate them to the lower side . We have quite a good run on earnings, almost ahead of ourselves. If you look at some lenders, margins are down. The area of danger is where you have the share price activity outstrip earnings expansion. He had a lot of shares that run up well ahead of any hope or expectation of the earnings. That disparity is where the vulnerability is. Those areas are expanding more and more. Youre only getting a little bit of equity uplift on those special circumstances as opposed to more broadly. As a sense of an equity market that is reaching full valuation, priced to perfection. We would expect likely to increase and equities to be very selective in where the money flows. We continue to believe the money coming out of the momentum areas will continue. That is not a surprise to us. We think that there are sectors of the market that remain good value that remain unloved and undervalued. In those areas come i think the money flow will be more positive. Which ones are they . You think taking a cautious stance is smart. You are still stockpicking . Very much. Where i suppose tacticians have denver well. To look forward, we still think tmt. Ifvalue in its fashionable, is going to be a name we will not have. Simple as that. Isit seems that tmt something that is been flagged. Byn we have been taken surprise by the pharmaceutical and tech stories. Sold a little bit early relative to how this merger and acquisition activity has taken shape. We were quite surprised at how highly priced it is now. It probably isnt our choice pick in the sector, but it seems to be the one that everyone seems to go for. Glaxos rate is much lower. Maybe the drug synergy is not there. Maybe they like astrazenecas future in overthecounter drugs. Surprised at how high it is gone so far. Mehta will stay with us. The u. S. Prepares criminal prosecutions for europes banks. Suisse 1ost credit billion. Plus, swing and a miss. Tay with us we are on the move and we are just getting started. I am back into. Two. Welcome back haired im Francine Lacqua. This is on the move. This is the stock that is on the move. It is Construction Company losing some 16. 2 . All, it expects a 30 Million Pounds shortfall in the u. K. Construction business in 2014. He ceo also quit Andrew Mcnaughton has stepped down as ceo with immediate effect. Steve marshall will take over as chairman until a successor is appointed. It is one of the biggest stocks that is losing today. Aboutan ferro, we talked this is aehta, problem that is specific to ball balfour to balfour beatty. There a lot of extensions that are positive for the overall environment. Clearly, they have a managerial issue. Dev internal issues. If you look at the share price and the history of the last five or six years, they have a tendency to have accident prone characteristics to its share prices. Every so often it misses badly and disappoint in a huge way. It is one of those shares and one of those companies that has the characteristics of an extreme Price Movement every so often there it it generally does not do too badly in the long run. I would probably go back and study it quite carefully to see if theres anything that constitutes a blackhole that we should be worried about from an impropriety basis. As long as we can rule that out, it wouldnt be a bad place to look now at this price. At the moment, it is down 16 . Lets get onto the banks and firstquarter profit at ubs which beat profit estimates. They rose 6. 7 from the year earlier. Our markets editor joins us now from zurich with the very latest. It is about the numbers and the strategy. It is about both of those facets. The Investment Bank down over 50 . The numbers actually beat. It is a number of the strategy that trumps everything else. Return on equity, sticking to the 15 . Even though the regulator said put aside extra capital, theyre y. Theng to the stor third most important thing is capital. They promised us that they would keep it over 13 . Theyre broken through that. That brings us to the promised land, which is about returning equity to you, the shareholder. That is the patience of the market. 25 through a special holding company. Remember the 10,000 jobs that they promised to cut . They are moving away from banner headlines like 10,000 real people losing your job to the quality of cost cuts. The issue for us, per se, reducing headcount, is not a target, per se. The proxy of your Cost Initiative is one of the most painful exercises to go through. We dont want the debates to be about headcount reduction, we wanted to be about the fact that part of oureved target in Cost Reduction in the last 18 months or so. We will continue with a further 2. 1 billion to reduce our cost base. Cuts, thee cost target is to get over 2 billion swiss francs out of the business. 1. 4 billion of that by the end of 2015. Not to go into the long grass, but when you stress test this bank, theyre still hoping to have a buffer of capital of about 10 . To us a little bit about Credit Suisse, manus. You said they are said to be nearing a u. S. Tax deal. This is actually huge deal and it has huge implications for the sector. It is indeed, francine. Ubs crossed that rubicon years ago. We understand that Credit Suisse could be close to selling their Financial Issues settling ther Financial Issues with justice department. So far, they have set aside 700 million. Still a bit of room to go there. This is where theyre going to house all their accounts they are involved in in america. You have active and dormant accounts. Say,in many ways, people is about protecting Credit Suisse if they have to go with this guilty plea. Of course, this would be a very big issue for Credit Suisse. For one. Get two manus, thank you so much. Manus cranny with the very latest on ubs and Credit Suisse. Financials, johnny, you are stockpicking. Anything to be done with financials . It seems that some of the problems are being settled, but we still dont know the exact figure. Were three months away from the quality review by the ecb. Should we just wait . I have been very uninspired by Investment Banking models past and present. I have not seen anything Going Forward that would lead me to really change that few. We have stayed very clear of Investment Banks for quite a while. I dont see that changing just yet. Inre are some sparks of life the Asset Management side, because i see that as a fairly tidy business. Right now we dont have any because they have not met any of our valuation metrics. Going forward, i would look at cases where there is a bit more selfhelp, where i can see some strategic turnaround. It is all furry well for the doj, but that does not change the Business Model very a lot of investors are actually looking at Spanish Banks to my right . Plan at least banking on is the Investment Banking model generally that is really badly ruptured. Income streams that they relied on in the past at the sec, although streams have been shattered. There is no theres a way that they value these things Going Forward. The only shift that we have seen that is supportive of banks in general is when they try to move the Revenue Streams from the the but i dont see earnings justify todays valuations. The only way we will fix the ang sector is if we see bank that is run so badly or in such a distorted fashion that maybe therell be a breakup or some sort of corporate activity that will release value. There are things happening in the space that we are looking at , but this is really a negative angle to take the banks. Ive not seen anything that really gives me a bounce of enthusiasm. Currently, we dont have any. Johnny, thank you very much. Adidas. Turn to th this is the worlds secondbiggest sports maker is in difficulties. Is a little price changed at the moment. We will talk about that a little bit later, but i think it is interesting when you consider that the shares have dropped 17 so far this year, significantly underperforming on the dax index. What is happening is their earnings targets were missed, the mr. Net income estimates come also the sales estimates. One of the big issues is russia. It has affected the ruble which has declined against the euro. Thirdlargestdas market. The question is how that market will evolve given what is happening in the east ukraine. Will they be able to meet their 2015 targets . Their operating they are asrating on target margins high as nine percent. That is why theyre under a lot of pressure from shareholders. Unit investment, just as we coming out and saying just this week coming out and saying it is incomprehensible that his Management Contract was extended through 2015. They keptyou said their 2014 profit goals. Hardly going to keep those . It is all to do with the world cup. Said. What Herbert Heine they will unleash the largest foot wall offensive ever going into the world cup. The energy and intensity of this campaign and the product a clear will be statement and a sign of things to come. Products thatr added us next thursday. Adidas next thursday. Ot does hinge on that. We have been to the banks and where you see value. What is your take on retailers . It seems a tough environment no matter how you slice it. Are adidas, how do you proceed. . In a decentas is position. Although there is an execution risk, clearly, because it is a oneoff event. It will have a Material Impact on the future. The share price seems to have fallen back on russia and sanctions and how their emerging markets business is going to be shaping up Going Forward. I dont think that is such a big risk. There is more of a timing issue here. The sentiment issue with the market in general. If the Geopolitical Market starts to stabilize, they are set up for a good recovery. Thank you for staying with us today, johnny. Were back in just a couple of minutes. Theelcome back to on move. Im Francine Lacqua here in london. We are watching bmw after firstquarter profits the estimates, rising suv sales helped offset expansion costs. And 4 x 4s here in europe. We need to get that straight. To recall them suvs or 4 x 4s . I think you go off roads, francine except for posh weekends on your estates in the cotswolds or something. There are two numbers that jumped out at me year. 1, 25 increase of sales in china. The store in china is an suv story. Auto market may be coming back just a little bit here in europe during through the clear beat by some 50 million. Is a keyt margin metric. It is at 9. 5 on the quarter, compare that with mercedes which got hit on this last quarter with just seven percent. Audi is still in first place with 10. 1 . I went to give you quick graphic. Take a look at suv sales in 2009 very 27 of the market. In 20 13 they were up to 30 . In just a couple of years theyre going to be 40 of the market. That is for in every 10 drivers. Of course, we have to factor out your lack of a drivers license. One of these days, you will get your license, francine. I am quite proud of you. Hans nichols with the very latest on cars. We will return with a look at the big banks. Credit suisse could be shelling out more than 1 billion to settle with the u. S. More on all three stories is coming up next. Keep it right here with on the move. On theme back to move. Im Francine Lacqua at bloombergs European Headquarters in london. Lets see how things are shaping up on trading day. Are gaining indices ground. The cac 40 gained 0. 2 . The dax and ibex gaining between 0. 3 and 0. 4 . Overall, bmw beating s limits beating estimates. Bank of england and ecb will meet. And pharaoh is that the touchscreen with three stocks to watch. As you know, it is Corporate News dominated by the banks morning. Barclays down, ubs is up. Higher profit, a plan for special payout. The market likes it. Barclays is down 3. 5 . Ae Investment Bank revenue concern for many people. Down 3. 6 . That is the biggest fall are on the ftse 100. Tty downe, balfour bea 16. 1 . All right, jonathan ferro. Thank you so much. These are the Bloomberg Top headlines. U. S. Attorney general eric holder says no company is too big to jail. He made the comments as prosecutors move closer to bringing criminal charges against Credit Suisse and bnp isba. The eu will urged turkey to reduce its current deficit and give its Monetary Policy on inflation prospects. Turkeys efforts to join that you have stagnated since 2005 very that the nation has made it one 35th of the way through a required for membership. Asaine has testified Government Troops try to regain ground from prorussian militants. That dozens ofs civilians were looted. Security forces have often been sent to the black sea city of odessa. For more on the latest out of ukraine, lets get more lets get directly to ryan chilcote. What are we seeing in russia . It is down about 8. 6 versus the dollar. , you lookt concern is at all the emergingmarket currencies that we track. His is just out see the argentine peso. The issue is, up until now, the big issue has been capital outflows. The First Quarter they are just over 50 billion worse versus 60 billion for the entirety of last year. Now you basically get inflation coming up, as people have to pay more for goods in the store. That could erode consumer demand and that could hurt an economy which the imf says is already technically in a recession. As acapital outflows problem. You can see that on the mikes. Down more than 13 this year. How we have this added risk for the russian economy which is a declining ruble. Ryan, what is the latest on the ground in ukraine . Looking at what is happening on the ruble, looking at what is ining on the ukraine the field. Return to another top story beat analystnk estimates for the First Quarter. They are also sticking with their possibility targets. We do continue to believe that our 15 targets with the itl of the additional is an achievable target. We say that most likely without the removal of that ad on, it would only happen in 2016. We do believe our business mix and our for the reduction in assets and Balance Sheet will eligible forly this kind of return. Staying with banks, barclays has also reported this morning pretax rockets. This comes ahead of the Bank Strategy update later this week. We are expecting to hear about scaling back, its Investment Bank. Now is heath johnson. Great to have you on the program. In terms of results, they were a bit of a mixed bag. Business islying slightly ahead. 16 commodities and currency down 41 over the last year. I also commented that april was pretty much the same. There is a very big issue about how quickly the environment is shrinking. Revenue pool just cant cut costs fast enough at this point. Pastant just cant see the issue. It is because of the fixed income . Is one thing we should be focused on. Housing on Investment Bank wearing . How is the Investment Bank faring . South africa looks good. U. K. Retails going well. As i say, unfortunately you cant see past the elephant in the room. We know it is tough. If you cant cut costs fast what are you going to do . What about Capital Position . Is going the right way. Free . The basel it is not such a glaring issue as it was a year or two ago where there was concerned that they wouldnt able to help capital fast not to offset the changes in rules. Give me a sense. It seems the ceo has been getting a lot of flak. Basically, he is paid higher bonuses. He was meant to be down will reach a guy that was going to shoot barclays to someplace i was more people friendly. To have any indication whether he is in it for the long run or whether there will be shareholders fighting back yet . Is, if you issue look at the ratio, it has risen from 41 to 46 of revenues. A lot of that is function of revenues. There are target to deliver 17. 5 aliens in cost. Theyre doing a great job of ifting absolute costs, but you look at ratio come unfortunately, you that. Itk we have to seems like barclays, no matter how much to get it right, they always get caught up in the world windows of bad news. Onet probably goes back to of the most aggressive building out campaigns. They had an incredibly ambitious quarterly revenue rate. The Investment Bank is not even doing half of that out. Despite that, they still talk about wanting to be one third Investment Bank, two thirds of the weight i the business is shrinking at the moment. It may not be as difficult to achieve. All right, jonathan shared we will keep a close fly out. Up in on the move, shoppingoins up with carts. The ceo joins us next. Welcome back. Im Francine Lacqua here in london. This is on the move. Dear betting on shopping. Any service that allows you to buy products on amazon even tweets. Tech entrepreneur and twitter skeptic dan wagner joins us now. Dan, great to have you on the program. I was come away with a better view of the world of tech. First of all, what to make of these two giants . Coming together, amazon and twitter, basically by putting whenever im looking at, i get to buy directly. Nothing for all other retailers other than amazon, again, this demonstrates how amazon keeps pushing the boundaries of technology to make things easier for consumers. I think other retailers who have suffered for 15 years at the hands of amazons fantastic growth now have an opportunity with our tag to fight back. Tag to fight back. Identifying and being able to buy it straight. What we have done is taken a number of different triggers that allow a mobile phone to buy what caesar what it hears. If youre watching tv him a you can hold your phone up and buy the product that is on your screen. Are at the dentist and you see an ad of a product you like, you can buy that straight up the page. We transform advertising and real world physical products and media into purchase opportunities. What we have found over the last few months phase we had 240 brands with us, including rent like universal music and adidas. ,ow we have other major brands all taking on this technology. What is happening now is the balance is shifting. From being a standalone platform that made it easy for people to buy stuff to everybody else now having something to compete with. I think the announcement today is the way theyre starting to see the competitive situation being a bit more aggressive. Hop orton isnt to team up with one of the huge names . And a lot of magazines are using the technology. You look at a magazine and say you want to buy this. On the digital app you can buy directly. How important is it to have a name such as twitter or amazon isached to a . Amazon competing with all the other guys. Twitter is a platform. Is a broad audience there. If you can capture that audience and help them buy more effectively, that is a great thing. Amazons announcement is a good thing. Is not exclusive to amazon. Anyone can leverage that technology. What we are doing with power tag is leapfrogging the capabilities of retailers and brands to allow consumers to buy much easier from them. What is your biggest challenge . Yourselves a much more stuff otherwise, am i right . Retailers want to sell directly themselves. There are retailers who fear amazon. Amazon has been making things easier for consumers and other retailers want to try to keep hold of their customers, they dont want to lose them. What are you going to roll this out . I am rolling out now. But properly. This is a soft launch, right . Take six months to a year to really get things rolling. Italy take seven days or so to integrate power tag. The big launch is, we have 35 brands going live in june. In september there will be about 600 brands live. Over christmas. In europe and in the united states, it will be the way that people will buy. Christmas time is crunch time. I be addicted to it . Youll see everywhere by christmas. This is just for the u. K. At the moment . No. It is for everywhere. What is different about the way that we shop here in the u. K. As opposed to france and germany . We are in a Global Village today. Particularly when it comes to internet and online purchasing. The Playing Field has been leveled a lot from an international perspective. Consumers are more familiar with using their mobile phones as devices to find things. Now they will be able to buy things much easier. Think there will be a backlash to buying things online . No, i dont. I would put that as an analogy ofsay oh, we are bored getting on a plane or train or car rather than walking. Is a benefit to mankind. Will it the fashionable . I think it will be universal. I dont think theres any one category that is better than another. Are you going to be on wearable tech . Have loaded wristbands at concerts with power tag on it so you can buy in stadiums. Is echoed to be the most exciting . What is the most exciting . Something the speed and convenience of being able to buy what i see when i see it. That changes the game. I dont need to go to a store or my pc to make a purchase. If i see something i like, i hold my phone up and buy it on the spot. Thank you so much for coming on. Here are some companies on the move. Carriersecondlargest with an operating loss of 245 Million Euros from 359 a year earlier. French president Francois Hollande says ges did for is notd for alstom enough. Named a panel to investigate ges offer. The chief executive is adding mines at a time when his peers are shutting down operations. Finally, cocacola plans to thethe comp controversial additive from its drink. Bv oh. Redient is it is used as a stabilizer in drinks to prevent other ingredients from separating. Coming up in just over a month, the entire world will be watching one specially crafted ball. Who will have a look inside the german the operation and how they manufacture a world cup football. Welcome back to on the move. This is what we are watching. One stock that is on the move is adidas. The strength of the euro impacted sales. Meanwhile, rival nike has been making inroads in western europe area and adidas is the official partner of the world cup. With less than one month left until the start, we were shown how to build a ball worthy of the worlds biggest sporting event. World cup also very personal and very emotional. It is a symbol of the event area lets talk about the official match ball of the fee for 2014 uca. We testedraz it with over 600 players in 10 countries with 26 different teams. Panels, one six panel shape. It is the first time weve ever done that. When the ball is flying it has a very nice, consistent rotation. Tests. Variety of we want to make sure the ball keeps its shape and doesnt hold water. The rebound must be consistent over the course of the game. Is howthe most important layers feel about it. The compliment you received were very consistent, very predictable, very playable. The method we used to create the ball is something we really perfected. To have very ball low water uptake. From the first minute to the 90th minute the ball is very consistent has a very good shape as well. It has excellent playability. Every player touches it. It is in every game. It doesnt win or lose. We are looking forward to the start of the world cup. Spanish Services Rose to a sevenyear high. Italy also beat economists estimates. Look at the euro, the atodollar is currently 1. 3920. This is what mario draghi is watching closely. A lot of Industry Leaders and ceos are now asking the ecb to try to lower the euro because they say at 1. 40 and 1. 45 it will start hurting. Rising overall. As the first time in three days that we have had a lot of Companies Including ubs and bmw reporting profits that beat estimates. For fx, but also for some the commodities. Stay with bloomberg tv. Guy johnson and i are back with the pulse. Was big to the chief Financial Officer in his first interview of the day. I am back in just a couple of minutes. . Profits dropped more than expected. A concession that the bank may be guilty. On acceptable. President says that the that it must improve. Good morning. Welcome. You are watching the polls. Pulse