Weakness in those currencies are going to hit their sales. A realf a relief after selloff in the shares this year, trading higher today. Thank you. We will have plenty more from inditex shortly. Of a companyhe ceo coming up about 15 minutes from now. They said that improved underlying trading in the second half is what they are expecting, but they are seeing a lot of Foreign Exchange impact. From of these earnings another u. K. Company. Some 4. 8 . P down we have Corporate News and geopolitical tension. We have the u. K. Budget and we have janet yellen. Context for into us. I will give it a go. Futures are mixed or the mornings. It gains yesterday across europe. Today is going to be busy. Bank of england minutes, unemployment data, all dropping at 9 30 u. K. Time. Then you have the small measure of geopolitical risk as well that has not left the radar. Forward guidance is the buzzword. We are pretty much dead flat. Mib up by about. 1 . The ibex up by about. 3 . Theybody is talking about level thating to a it has not seen in 11 months. Thetral bank of Japan Central Bank of china may have widened the trading band, but at the end of the day, every day for the last couple of days, they have been cutting the reference rate. They are guiding this currency laid lower. Why are they doing that . The debate goes on. Joining us with his Investment Strategy is the investment director at london and capital. Great to have you on the program. How much riske of you see in the markets. Certain days, the markets are very complacent. We still have a lot of things they could go badly wrong and yet the market seems to be ignoring it. We have already seen volatility rising compared to last year. Rising all the way through the end of the year. As we come to the end of the tapering, the market will continue to get nervous even though the bank of japan is making up for what the fed is taking away. But i think there will be a lot of volatility as investors get used to the changing environment. We have to wait and see what the ecb will be doing and so on. You are talking about central banks. This is something that was you look at some of the growth figures in some of the economies. In china, we still do not know where Property Developers will go from here. We do not know if they have the situation at hand. We still do not really know what is going on between the ukraine and russia. China, we about always have difficulties understanding the data that comes out of china. There are a lot of other indicators. The stress in the system is already rising. A little bit of a slowdown means that the heavilyborrowed companies are having difficulty financing the capital maturities. There is some tightening. Every time it tightens a little bit, there is a lot of difficulty and so on. Growth. Is to slow the do you think they have this firmly in hand . It is a tightlymanaged economy. Process innage the terms of how the Market Impact comes through. So you are not concerned too much about china . We are concerned in terms of what happens to the people who are the biggest beneficiaries of chinas growth, which is the asian communities and the commodity producers, so on. They will feel the impact. Iesalready sense commodit heavily under pressure and that will continue through this year. We have seen a slowdown in brazil and so on. More importantly, a lot of the Asian Companies were importing were exporting into china. If you look at the percentage of the exports into china compared to the u. S. , many had already surpassed the u. S. Sent to the u. S. China had become a very important export market for a lot of countries and companies. I think they will begin to feel the slow impact in the quarters of the slowdown that china is going through. What is your take on russia and ukraine . Could this develop into something a lot nastier . Ita lot of people are saying can. Nobody wants to have a full out conflict. In that sense, the extreme outcome is off the table. It is a question of increasing sanctions until they begin to bite. In terms of the market if they arenly turned off in the europe, then we have a discussion taking place. When you look at the Global Economy, you are confident but you see risk. You are confident about Global Growth with risks. Correct. The Global Economy is on the mend. But it isspectacular, not bad. On top of that, i think we got very accommodative policies that have kept the risk markets stable. As we go through the year, expect the volatility to keep rising because of where we have come from in the past two years. Markets and the other risk markets have had such a big run and they are no longer as cheap as they were. Slightly pensive, there is no cushion to absorb the volatility. One needs to be more cautious and careful. Still no need to panic. Keep cool. Thank you so much for now. We will come back to you and talk a little about currency swings and the impact they are having on earnings. Here is a look at what else is coming up. Taking her mark. It is Janet Yellens first fed meeting as chair and investors are betting on big changes to Forward Guidance. And inditex sees the slowest Profit Growth in years. , a settlement with the u. S. To end criminal probes. Keep it right here. I am Francine Lacqua in london. Ons is on the move Bloomberg Television, radio, and streaming on your tablet and bloomberg. Com. Stock that is on the move is smiths group. A few talking to the ceo minutes from now. Their figures were not bad at all. Their underlying trading in the second half, they are seeing it to be improved. Impact is quite big on this route. On this group. Jonathan ferro is on central bank watch. Lets kick it off with the fed. What are we expecting . Not so much about tapering anymore. That is a bit 2013 already. Another 10 billion looks to be dead on. It seems like the bar is set very high for them to change direction today. Today is yellens opportunity to put a stamp on things. Forward guidance will be a huge focus. The 6. 5 unemployment threshold that nobody seems to care about tweake, how does one Forward Guidance and change that altogether . They may even take it back to oldschool central banking. Also look out for the feds forecast not just for growth and inflation, but where each policymaker believes the first rate hike will come. That is where the story might be. Big changes on the bank of england. The Strategic Review has been unveiled. Mark carney laid out a vision not just looking at one thing, the inflation target and price stability, he basically laid out his vision. He did. Lets listen to the man himself. The initial focus obviously made sense. The greatest challenges of macroeconomic policy in the late 1970s and into the 1980s was the fight against deflation. In theght culminated adoption of an inflation target which helped secure 15 years of price stability and sustained economic growth. It has to be said that, with became aealthy focus dangerous distraction. Very 1980s. S, conscious about price stability and Financial Stability as well. And the relationship between the crossover between the two and the personnel changes that have been announced that the bank of england are a reflection of that. Mark carney and the bank of england want a central bank. Much. Nk you very Jonathan Ferro with the latest on the central bank. We are also getting some live pictures or sound from the ukraine prime minister. He is attending a cabinet ministers meeting. We will be on top of that and bring you anything out of that briefing he is having with the government. George osborne is set to unveil the u. K. Budget later today. Guy johnson is in westminster. Lots of politics today. Not a lot of economics. This is a big political set piece that is all about the narrative running into the 2015 general election here in the united kingdom. The chancellor will be able to deliver some good news. The british economy is pretty much back to where it was in 2008. Unemployment is falling. We will get the data at 9 30. And inflation is ready much in check. That is good news. For the first time in a number of years, we will see wages rising faster than inflation. Everything is pretty much on track. Politics, we have a general election coming up. George osborne is a tactician. He will want to position his party for the run at that election. That is what this will be all about. He will be talking very much about the situation of trying to improve the Living Standards. He is not going to make the same mistake he made when he came to lowering the tax band for the higher earners. This is going to be about trying to remove some of the political ground from the labour party, which is very much focused on the story surrounding the cost of living. That is going to be the story and the focus. There will be a few political giveaways. It may be net neutral and might be a little bit easier on the british economy. Central banking is going to be, you know what, the recovery is on track, but it is still fragile so we cannot trust it to the labour party. George osborne actually tweeting a picture of himself. Yeah. That tells you an awful lot about what this budget is about. It is not going to deliver anything economically. The fact that we are getting a new onepound coin tells you a lot about what is going on. Yes, it is going to be harder to forge. Onepound coins is apparently big business. We will get a new coin and it will look more like the predecimal currency we had pre 1971. A little bit of history for the chancellor to talk about as well. Looking forward to it. Guy johnson will be live from westminster all day. U. K. Viewers can watch George Osborne deliver his budget live and in full from 12 30 london time on bloomberg tv. Still with us is the investment director at london and capital. Let me get your take on u. K. Equities. U. K. Growth is not bad. A lot of countries around the world would kill to have this kind of growth. This is ae time, little bit of an erratic economy. We do not know how strong it is, especially when you look at the retail figures. Om what we had was a minibo that has been engineered with the house prices being inflated. That has created a feelgood factor which has improved the spending cycle. We are getting some very good growth numbers. The underlying trends in terms of the deficit reduction, we are still running more than 5. 5 on budget deficit. That means the economy is still getting a lot of fiscal stimulus. It is basically electioneering here. The numbers remain quite buoyant. Next year and the year after that, we still have to get into the deficit funds. It will reduce the growth rate back to subpart trajectory. In terms of what has happened right here and now, the strongest growth has had an impact on the sterling. We do not know how long the strong sterling is going to remain. We are at the top end of this band. That means it is probably getting overpriced, but it may remain so for a quarter or two before it comes down. It will create a lot of noise in terms of the Company Earnings coming through. The impact on the equity market is obviously positive as the growth rate is good. Because of a large percentage of the ftse 100 earnings, nonsterling earnings because they come from around the world. And the impact of the currency swings is probably the biggest risk to ceos right now. It is. Because the sterling has moved quite a lot in the short term, Many Companies probably do not always do affects hedging. There is always some going on. Expect some damage in terms of the earnings. The underlying volume growth will be ok and will be fine. The margins are stable as well. Those who can take a mediumterm view can look to this fx swing. One would expect the sterling, a year from now, to have calmed down. We are almost out of time because we have our next test in the wings. It is the ceo of smiths group, one of your favorite equities. This appointed in the figures today . A little bit. There is a little bit of a slowdown in spending, which they were depending on in terms of the scandals and everything else. The underlying businesses are very good. I think the business is looking quite good. I think it is slightly undervalued right now. For a mediumterm investor, it is still very good. The precash flow generation is still very good. Reasonably good and rising over the mediumterm. Thank you so much for joining us today. , theg up on the program chief executive of smiths group joins us. We will look at his companys latest on agile results. Stay with us. We are on the move. Welcome back to on the move. I am Francine Lacqua here in london. Engineering Company Smiths Group , the companys revenue fell 2 during its first half, missing estimates. Lets get more on the results from the chief executive officer, philip bowman. We had an asset manager on before and he was very complimentary of smiths group and he said this is all being overshadowed by fx trading, which is hitting a lot of other companies as well. What can you do to protect yourself . The first one is clearly Foreign Exchange. We are essentially a u. S. Dollar denominated business. 4 of our revenues come from sterling. The u. S. S to the dollar translates into less sterling. , we haved thing is significant exposure to governments around the world. That has been a major headwind for the last ever years and it continues. That is true in the medical sector, security, and the military sector. All of those have made a quite difficult first half, but there is some Strong Performance from the oil and gas side. Can you hedge against currency swings . No one is expecting the dollar to remain weak, especially as they are tightening policies. In terms of transactions, we are buying things in u. S. Dollars and we do head forward about hedge or word about 12 months. The results are simply the translation and that is expensive and something that we do not do and very few other companies do. Give me a sense of how long it will take for the fx story to take place . A lot depends on the Exchange Rate going forward. If they remain roughly at the level that they are, by the time we cycled back into 912 months time, the headwind will disappear. Are you concerned about geopolitical concerns . Like you, i am surprised that the u. S. Dollar has remained as weak as it has. At some point, that clearly must reverse. The u. S. Is very wellpositioned. Lowcost energy will transform the u. S. Economy. I think we will be a beneficiary. Talk to me about the various divisions. Some of talking about the divisions and which one will be the strongest. Where is the growth going to come from . The business is performing well and the margins are continuing to grow. Where is demand coming from . Broadly around the world, except for europe. Positive trends in places like the middle east. The are continuing to see positive trends in the u. S. The other area that is performing well for us, we are exposed to both marshall and to both commercial and military aerospace. There is a pickup in construction and that has been helpful. If i look at the other businesses, in the case of detection, there is a lot of activity in terms of tenders, but commitments tend to be deferred to government funding. The same thing we see in interconnect, where the military side of the business has been under significant pressure. I think that will stabilize. I was going to ask you that. When do you expect it to stabilize . The next couple of months . Is our products that get delayed until they are approved by the government. I think they will be delayed for more than a couple of months. As we get into fy15, it will be a more stable environment. Looking at the details of the latest appropriations, we are beginning to see not growth, but at least the demand stabilizing. When you were talking about you crane, you said received a demand across the world except for europe. Yet we have so many stories saying that europe is slowly coming back on track. In terms of oil and gas, it is an interesting question because energy costs in europe are so much higher than other parts of the world. Taxes make it less competitive to manufacture. There is a real challenge for european politicians. What we see in most of our European Businesses is still pronounced weakness. That is still true on the healthcare side, where procedure numbers continue to be sluggish. And this is because of governmentfunded medical procedures . Yes. It is much more in terms of governmentfunded ones than on the private side. Even in the u. S. , when the economy is picking up, or cedar numbers are relatively static. We have not seen a strong procedure numbers are relatively static. We have not seen a strong rebound yet. The peripheral entries are trying to get more cash in their coffers. I think that is right. I think it will be a difficult period in europe. The politicians in brussels and countries have a large amount to consider. Does your medical unit need a fresh approach . We have changed our leadership at the medical unit at the beginning of this month. I think that was an appropriate decision to make. We are investing heavily in repositioning that business. The story, we are very dependent on developed markets, primarily in the west. We have been investing. A 20 Million Pound investment 18 months ago in emerging markets. We have continued to increase our spend on new product development. Is it part of a longterm investment to reposition the business. Under new leadership, that will give it a bit of extra stimulus as well. But it is not or sale. There were failed bids. Did you talk to anyone else . We said in august that we were not actively seeking to sell the business. The approach did not come to anything. Noting the results today, i would say that clearly approaches like that do cause a significant disruption and that is one of the reasons i think our performance in the first half was a bit weaker than otherwise might have been. Give us a nice snapshot of the business. Talk to me about the Global Economy. How concerned are you about china . If china growth is that 5 rather than 7. 5 , it