Transcripts For BLOOMBERG On The Move 20140826

Thanks for that. If you were faced with the prospect of a negative yield on your peanut bond markets, what would you do . Money moving into equities. Volumes yesterday was 63 higher than a normal day. Changing hands on the equity stage. The past 30 days. The question you have to ask yourself is, the negative yield and what does it do . Markets route real equity market rally or valuation . The dax trading at evaluations not seen since 2005. Merkel, putin, and poroshenko what will come out of that . U. S. , durable goods. The housing and little bit disappointing. Adorable good numbers. Good numbers. Going into theg gdp numbers into the payroll numbers. Dollar taking a small a positive for breath after a six a month high. Going back to the equity market. Trading at 16. 8 times its earnings. Y if youx 600 in theor believe evaluation, not only did you see a knockout day in volume but did this trees at 50. 3 times. 15. 3 times. The individual stocks and that are moving. Lets check in. The largest Advertising Company. Mark barton. They come from the minds. Carolina will take you through the numbers. Carolina will take you through the numbers. U. S. Dropped a little bit. We are going on holidays but not in france. No, not in france. One of the Largest Hotel andators there rose by 15 they are going to Digital Solutions as a way of engaging. It is all about Digital Solutions. They dropped. You are seeing a little bit of a juggling act going on. The real guidance was 590 Million Euros by the end of the year. They have trimmed it back. A shade lower on the day. Very interesting guests. Thank you. That is your market open. The ftse is by 0. 5 . Lets get some perspective. We have mark and mark. Thanher, they managed more 2 trillion of assets. Welcome to you both. Good morning. Look at the equity markets, a big rally. The s p 500 as record numbers. Everybody calling dead the most call it in the most unbull market for the is there a reason for it or a reason to love it . The backdrop is pretty challenging. You have tensions. You have europe rumbling on. That paints and under tractive picture but on the other hand you have a discount rate that continues to fall and also the discount rate and therefore it is an ongoing upwards. A pretty challenging. Over the last five years, one strategy, rewarded handsomely whether the u. S. Or europe. Do we need to start thinking more geographically, u. S. Versus europe . Overweight orur european stocks and added to the u. S. Is it that something people should think about . We took down our overweight theurope and moved it to u. S. Things look better on the United States on a couple of dimensions. 4 second quarter, they grew and at the three largest economies in europe failed to grow. In the United States, the earnings were better. We sock Companies Beat expectations. 55 in europe. Third, it is no surprise to people that europe is closer to ukraine and russia than the United States. We have seen that head to things like confidence in germany. What does it me for evaluation . When you tell people stocks are at a record high, and they will save values are. We have longer to go. What is your view . Do you look absolute value. Scope for there is the valuation to run further. We are closer to the top of than the bottom. What has continue to drive is a bonds. With bond deals where they are, investors are looking for an income. Therefore it on the dividend. Relatively attractive. You will get an income from that. It is forcing people to buy equities and what looks like higher. A building on that, should that be the case for europe . You ask many people delivering qe, with the talk about that. Should they be a reason to buy back europe or think about the fundamentals . They really not have in driving the market. Earnings are just not Strong Enough in europe that would like a versus the United States. Overall, we were say there is room to run. What we say is do not fight the facts, the fed, and the flow. In the uniteden states, is not really stretch. It is below 16 times for do not fight the fed. Tapering will be completed, Central Banks are positive. Ourot fight to the flows, clients since the financial crisis have not been moved into equities. Will see and the same levels in cash. We are not seeing the greater rotation. The great rotation has not happened. Well talk with the bond market. Ark haefele and mark burgess they stay with us. What is coming up. Battleground. Double bruce belarus. Tensions flare on the ukraine border. The french government falls apart. Alone and have a progovernment. What ask after the break. Hollande haveent a progovernment. We will ask after the break. Welcome back. This is on the move. Equity markets pulling back a little bit. Playing catchup. A look at the bond market. They are really on the move of across the eurozone. Germany, it is down by one basis point. You have record lows and france and in spain as well. What is going on and the eurozone . Still with us is it mark burgess of ubs and mark haefele wealth management. Lets start with the germany. Year and a the one two year, the bond is negative. Who is buying german debt with a negative yield and why . I can tell you we had an m last week and it was over 4 trillion and none of the cios were buying. We think it is a combination of factors outside of the main Asset Management area. It is focused on this fear of deflation which we have not worked through yet in europe. A do you share that . I agree. We would not be in it. It is becoming more of a concern to the central bank. With the level of overhang we have in europe, deflation is a potential killer. Fall, it isues to becoming increasingly. I talked about a resilience deals since then have gone a lower. Everybodys talk about the potential of quantitative easing. Half we got in a little bit too excited about that . Change the day did mario draghi change the game . Europes trying to warm two things was that he hinted at qe. Flirting at that promise without the guarantee. I do notw would be think the germans have the stomach for qe. I think they have gone as far as they prepared to go. Long qe is probably a bridge too far for them. Do the germans capitulate on austerity and the political issues . With unemployment at 10 in france, something has to happen to turn this around. We are all shaking our heads a little bit. Willoughby Monetary Policy or fiscal policy . One of the day mario draghi is trying to do is we do not want to do more of the monetary side, we want more on the fiscal side. We see yields could team with to go south. Wes the incentive continue to see yields go south. What is the incentive . And theyd absolutely have to do something. France is obviously a very large economy. It is a concern for the whole eurozone. Is it a concern right here right now . Or 2017 residential elections . And some party ahead of the polls. How concerned are you . Does is the to a broader sense . Right growth of the far with any europe is not a stabilizing factor at the time. It took a long time to get in this type of situation we are in and he can take and while to get out. What people want to see is that things are heading in the right direction. Even ifw some reforms, it takes some time for it to work out, the market will react positively. How do i play europe . It is hard to understand fundamentals versus where prices are heading. Anywhere in the worlds if politics or the government collapses, you expect yields to go higher. Debt. E trajectory of not what happened yesterday. Europe and isolation. How do you play europe in that sort of context . We are neutral. In part because of the exposure to the we are overweight in u. K. And underweight europe. We think the growth makes european equities less attractive. The earnings season we have seen so far would reinforce that. Aggregates, we of light equities, we have liked more in the past. We think it is relatively attractive. Is is some kind of International Think . The ftse . Not the u. K. Economy. It is growing faster than most other places in of the world. Isis because the valuation attractive. One of the reasons we do not like there is a strong pound and that will hold back earnings. A lot come from abroad. Pivot, if starts to we get to that pivot, are you concerned about the fall out of emerging markets . Do we get to the 2. 0 that we got it last summer . Is that something you are concerned about . Selloff,his recent they did a little bit better. It has us thinking it will be slightly different. Broadly speaking, the way we are position, we are slightly underweight on ems sovereign bonds. We think we could be repeat. Something has to give as the rates goes up. Certainly, all of the fundamentals would support a stronger dollar. They have been supporting a stronger dollar for some time. Going forward, we think the dollar will strengthen. Thats will challenge emerging markets. Very quickly for you, mark. Money potentially moving in the gold pipes. What about janet yellen . Was she more conservative on friday . Wishing she repeated her message that she is going to or we think she repeated her message. It is not like she could went to jackson hole and a bit more dovish. She has been so dovish. Do you agree . Yes, i do. She is walking a fine line. Sending markets a message. And inflation remains a very subdued. There is no outward pressure on interest rates. Muto by geopolitics we will talk about geopolitics will stop mark will talk by geopolitics. Mark haefele and mark hollande. An austerity backlash. And portion go poroshenko meets. We will be live in belarus. We are back in 2. Welcome back to on the the move. I am jonathan ferro. Wpp posted firsthalf sales they beat asked him its after gaining more business entity u. K. , the largest Advertising Company reiterated larger targets. The ceo said in june it slowed in china and brazil. Paying over 900 million in cash. Is one the biggest acquisitions. They are trying to round up. Which gives them an online umitch gives an online for of millions. According to a person with knowledge, [indiscernible] he reportedly made it more than 20 million on a burger king after the Fast Food Company said timas in talks to buy gordons. Still with us for their views on the market is a Mark Burgess Mark Burgess and mark haefele. I want to talk to geopolitics will stop poroshenko is meeting putin. Is this something that keeps you up at night . Something you are watching the headlines for . We do watch it. What we focus on is what is it doing for the oil prices. We think it is a transmission mechanism. Sharply, it starts to bleed through the Global Economy and impact growth globally. Do you look at the oil market and say, it does not matter . I think it to does matter. It is undermining confidence in a European Growth and corporate earnings. One central case is they work it through and out. Is pretty unpalatable. I spoke to a guest if this beast to the Global Growth story as well. Growth,d robust global it would not be geopolitics. Have thatseem to right now. Shouldnt oil be higher if we had a significant recovery in the u. S. And u. K. . Would this be to a slowdown in china as well . Another manifestation that Global Growth has been disappointing in many places to u. S. Accepted. Reduction in demand and has lowered the price. Growthainly, global isnt going gang busters. Weston a lot happen on the supply side. Iraq is still supported pumping and libya. On gold. To talk two years ago, i had a guest that talked about gold and that would not shut up. Nobody talks about gold anymore. What is happening to the gold price . Why does it keep going galore . What should we do . Everything has been thrown at it on the geopolitical front. , gold has not moved off. We do not really like it and we think it will fall. Function ofs a three things. The dollar being strong against a weaker dollar. Inflation is nonexistent. And with a fallen abundant yields. Looking for yield and assets and its not that. Im sure a lot of your clients talk about gold. Why do they still like it . We have a very interesting set of clients. We have two billionaires. Some of them have been with us 30 years. They take a different view. It is interesting. They askedk to them, if that kilograms gold i have, i can always write a check against a to pay bills and things like that. They see it as an insurance policy. That is different from the average investor, you and me. Destructive governments. We have a couple of minutes left. I want to gauge something ucs the biggest a risk or opportunity for this year. Take your pick. We have been talking about france for a while. It remains front and center. It is a really big economy. And i think, the latest political fallout is a matter of no growth or unrest. Has the potential to destabilize the euro further from here. We have all made to this bet that we think centralbank stimulation is going to keep the inflationtrack and rate on track. If we were to see real deflation or rise in inflation, the central bank lost control, it would be a real concern. I will leave it there. Mark burgess and mark haefele. Thank you very much. France gets a new government geder president hollande pur his worst critics. Stay with us. You can follow me on twitter ferrotv. Break, this the what equities looked like in europe. Dax lower after the big gains. The ftse 500 is playing catchup. Will be back in two. Stay with us. Welcome back to on the the move. I am jonathan ferro. Equities ainto your day. You have the dax lower by 0. 4 . A big move higher. European equities market. Why is the ftse higher . But because everybody here in the city of london, were off today. Little bit of catchup. Manus cranny at the touch screen with three stocks to watch. He has me very excited. P on outsourcing and engineering. They reorganize their debt. And theyhaving a are selling and driving the price. We like it. A bit of a percentage. Wvp doing quite well. The mines. That is a brilliant personification of what it is at that wvp do. They tell you what to do with your information and then a make fit percent of their money from emerging markets. Evenue beat what you have is the u. K. Rav aged, that is the word used, oh ravaged the numbers. The office space you want on it. Around the world again. Bane. Ng is the sterling will be the hallmark. Usa 42 percent of their business,s from the states. Back to you. I will talk to the man. Three headlines for you. A televised debate between alex salmond and Alistair Darling has declared salmond the winner. 71 believed salmond made a stronger point for independence. Vote is an opportunity to themselves as independents. And in the process which has been agreed and consented. An opportunity which may not come our way again. The president s of ukraine and russia meeting in a summit. No separatist discussions are expected between Petro Poroshenko and vladimir putin. Poroshenko called for snap elections. Another government in disarray, the french government and the french president hollande will members. Which is\against a a wider rift which is against german led austerity. The government asking for 147 days. Less than five months. Clash between the different members of the socialist party a president hollande. The economy minister who was responsible for this cabinet affle said of france sad france needed to do more. France needed to do more. He said the austerity measures were going in the wrong direction. You may be surprised that president hollande. Since the beginning of this year , tax cuts for companies and not so much for households. He is planning 50 billion euros by the end of this monday. View,ur point of andonsible for frigid gdp it has not grown at all for the past two quarters. He wanted to offer another alternative. Responsibility as economy minister is to propose alternative solutions. Yes, another path exists. I been past two years, fighting to convince a french president hollande. Letters withotes, private and public messages to the head of the incentives to try to convince hollande. I implored the president to refuse the measures that risk of damaging and weakening our economy. More than just a cabinet shuffle, it is a whole ideological debate taking place not only in france about across europe. Thehen you look at government and the announcement today and we are expecting a new want to be announced, do we have any names at all . Here ande a few hints there that we hear different people speaking on the radio. This morning, for example, the people may join is the former paris mayor. The advantage of being very popular among the french and the former head of eads, now airbus forp, who was responsible the report that france could be part of a new government. People definitely out is the education minister. He said he was looking for a new job. Carolina, great work. Looking as great in london as paris. From france to belarus. Ukrainian and friends russian president meeting. Kiev said tanks entered from russia. For the latest, lets bring in hans nichols. He joins us live. What are you hearing on the ground right now . Jon, the table is set for peace talks. It is a great possibility for two sides to come together. The question is, will they do so . Does either side have an appetite for peace talks . As you mentioned, the tension on the ground is escalating and the rhetoric is escalating. Theres no separate meeting between poroshenko and putin. Yes, they will meet in a couple of hours and then they will have an early working dinner. Where they will tell about trade and a variety of issues. Everybody is gather for the Eurasian Customs Union including the former soviet country. , there was aoting whole move toward the eu from the ukraine destined off the protests and the debate in the first point which led to the conflict in the eastern part of the country. One quick note of the snap elections, a big question ,anging over the new elections how can you have elections in easter ukraine when there is finally go on . Mr. Poroshenko thinks he needs a new government and that is why ofcalled it for the end october. It still looks Like Fighting will be going on at the ground when the elections are called. Quickly, which voices should i trust . Which voices should i listen to . I was watching news on the invasion. The ukrainians were saying they allow demand to avoid provocation and the next, it was an invasion. Which one is it . Well, it seems clear from the nato standpoint if you have any inal entry of troops coming it is an invasion. They ukraine has been saying very clearly that russia has been sending convoys of weapons, convoys of troops, and a lot of support both logistical and practical. One final note do not look at what is who is saying cold, look at the schedule. Peace talks may be on track. I will look on the schedule as much as the statements. Gate great work, hans. Hans nichols live. Only a few days ago, the head of wwp was warning about geopolitical tensions in russia and the slow. A europe. Wpp continues to show growth. With more of the largest Advertising Company is caroline hyde. You look at the results, what stood out for you . The effect of the british pound. This is a company that shown a real resilience. It is showing growth. Wpp is huge. It has a 3000 offices and it owns ogilvy group. Countless Advertising Companies and media groups. Sales up 2. 7 . 5 billion pounds. That is the beat. If you strip out the pound been so strong, it was up 11 . The growth is across the board. The united kingdom, stand out. Up 17 . Asia, latin america, africa saw strength. 50 15 gain. They award by softness. Worried aboute softness. Russia is still strong. They say a very challenged macro point of view. Strip out the good stuff unless a been a mess. What are the big concerns . Profit being hit by the pound. We saw perfect profit come down a bit. They went into great detail. Swan andren gray they named six. They are worried about the performance of a germany and italy. Middle eastern concerns. China. C could be thebri hard landing. And they are worried about the u. S. Deficit. It is 16 trillion and they are saying, what are they going to do about it . Do not forgetg about the u. K. And even you. Risksare two key tensionsthey have between japan and china. Secondly, conflicts in the ukraine and they talk about iraq and gaza. They are saying that these geopolitical tensions could hit us going forward. And maybeabout russia the second half of the year where well see impact on the sanctions. How much risk . Not as pessimistic. They would be extremely cautious on the growth outlook. Nothing quite as negative as that. Thank you very much. Levitating speakers that cut out the friction. Stay with us. We are on the move. Welcome back to on the the move. 8 45. We just released earnings. It is up over 8 . Profit is flat. Uponoined by the company stress founder. Are you happy with the numbers this morning . Yes, good performance. At constant currency. Not as good as the currency. Brand and the sterling effect. How do you look at it . It is something you have to work through . And balances itself out. We are reinvesting. Almost all of our cash flow into the countries we have the cash flow from. The only translation is into the dividend. The rest is already invested. Putting money into growth and adding costs, what makes you so confident right now . More more companies are changed inFlexible Work. It is cheaper and what employees want. As to product tiffany. Adds to productivity. Talk about labor dynamics. We have seen a boom in the south employment. Is it a plus plus . It is definitely a plus plus. E do very flexible offerings you can take a day or in our. Generally people, you can start off in your bedroom. That is ok. It is much better to meet people in better surroundings. We are talking about a future business, is this going to happen . A company will say i do not want an office for a year. Large companies have embraced the change and that is what is really driving our growth. We see large corporations turning to Flexible Work for sizable minorities. Is one. Ks that is really what is fueling demand. Startups and had of a larger companies. Is that the difference between now and 2000 . , when itcom bubble burst, we saw what happened. It did affect your company. Is your copy more diversified . Company more diversified . We are entirely different. In those days we had 20,000 customers and now 2 million. It is usually diversified. Have small products that are very flexible and the sort of things people do not take away or lose in a recession. Customers. C the Health Structure of the companiese are in 105 and not just focus on u. S. Tech. It is very diverse. Talk to me about the London Property market. Youhe residential side, if want to a dinner party, everything around the table was tugged about the residential side. The commercial side. Do we see similar kind of price gains . The same extent. Office prices in london have become quite high again. You are seeing a record rents being achieved in the west end of the city. What that is doing for us is dropping more people to look to how they may be in london and how do we need to be in london . Do need to be an office for a year or do we take it on the days we need it . Much more efficient use of space. One other thing tied to residential is a more more Office Buildings have been reused as residential to be convert it and that has taken down the amount of Office Available in a london which has driven price. If i look at the London Property markets on the commercial side and think i will work from home. I will have a video conference. Where does it leave your company . A good place. That is our marketplace. More and more companies are doing just of that. They are saying, lets allow people to work close to where they live and come into london when they need to. A platform that allows you to do that. More and more companies are doing that. Costsve 70 80 of your and everybody is happy. , you arenal question always at the front line of startups, people creating businesses. People do more of that and it will give you more. If you look at the likes of the eurozone, you your politician and central bankers talking about reforms. What kind reforms that need to happen to get the businesses to open more quickly . The administration and take away the barriers. That is it. The entrepreneurs are there. Tapetheres too much red that slows things down. And, i think there is less respect for startup businesses in europe then perhaps and the u. K. Or u. S. Would congratulate you for having a profession, congratulate you less for starting up your own business. Will it change . Act in the beginning and then it will change. Mark dixon. We have some big things to talk about. We will talk about markets and friends. Ulse, guy johnson would do the same. You see the big story. What is happening in paris. Huge implications. Onwill talk to get a take what the story looks like out of paris. Absolutely colossal. Socialistm a french mp. What she thinks about the story and what is happening in belarus. We are going to get a Fund Managers take investing in russia. We will get his take on what is happening here. How should we be viewing putin . Are we miss reading as investors . Looking increasingly concerned about the story and nato talking about these convoys could be a distraction and an opportunity for the military to make headway. Well talk about all of that. Big story and you cannot wear them. Well talk about volvo. They are taken over. Looking forward to that. On the french issue, is it right here or right now concerns heading into 2017 . To farink the 2017 is away. I think the will be in the next few months when france returns from holiday. It will be interesting to see. You could wait until 2017 but if you waited the eurozone will have problems and you will need to fix it. The question is, with the political process we have in france and the president ial story, how do you make a happen given the restraints . 2017 is too far away. Thank you, guy johnson. France is a big issue. Back in two. Is this is the first levitating speaker made in california and it works using the power of magnetism. Levitation is accomplished because of there are two magnets. A music playero through bluetooth, the company said at the quality is better than regular compact speakers because it does not lose sound through friction and vibration. The sound is cleaner. We can get more audio. This is just a prototype. To use the plans proceeds of a Crowdfunding Campaign to massproduce of the speakers. 0k and oured 17 original goal was 100. They have raised more than 500,000 and expects to start shipping speakers and in the end of the year. Perhaps 2015 could be the year instead of flying cars, we will see flying speakers. Equity markets also levitating. Equity markets in london, ftse 100 higher. The pulse is next. A meeting. President s putin and poroshenko are set for talks as tensions flare on the ukrainian border. Cabinet chaos. French president hollande is expected to announce a new team. The second in six months. The final showdown. Overrs side with salmond scotlands independence. Good morning. You are watching the pulse