Transcripts For BLOOMBERG The Pulse 20141016

You are watching the pulse. We are right here in london. Nestle, this is the worlds number one food company. The shares are under pressure this morning. Sales of missed estimates. The ceo will be joining us in his very first tv interview of the day. The perfect person to talk about the issues gripping investors right now. Thebusiness has exposure to global slowdown. The standoff of russia, the threat of ebola all on his list for the moment. We will explore all of the angles. Lets start with hans nichols. What have we learned today . We have a sense of how challenging the Global Environment is for them. Take a look at their sales and developing versus developed countries. Developed countries, their sales were only up. 5 . Developing countries, 9. 5 . Then they are hit with a strong swiss franc. In switzerland, exporters have such weight because of the strength of the frank. Of the franc. They still are claiming they are going to get 5 growth. Some analysts dont quite buy that. One thing you need to press the ceo on. How will they get the 5 yearoveryear . Ceo saidhat the earlier today at a press conference in switzerland. That is the issue. No tailwinds. Look at yearoveryear sales. 66 billion. They are down from the year before. This company is looking a lot unileike you know ever ver. Sense later, and this is one thing i am curious on, how much are they heading on prices . Fascinatinghe question. I have seen reports suggesting if you see significant outbreaks in those countries, you could see a doubling of the cocoa prices. That has to be a pretty big headwind. You have Oil Prices Heading lower. More money is ending up in peoples pockets. There are balancing acts in all of this. That is what were driving out driving out. These crosscurrents in the Global Economy, what does it affect consumer facing products like nestle . The strength of the currency to their earnings, down 7. 5 . That was the effect the strong swiss franc had on their bottom line. Nestle is the Perfect Company to talk to this morning. It reports in swiss francs in all of these other eurozone companies their singer currency andand soft and soften. It is the one place it is not quite analogous to say volkswagen is exporting and getting paid back in euros. It will be an interesting conversation. Hans nichols. Ets carry on a conversation the head of swiss equities, good morning to you, john. How big of an issue is the sales miss . How realistic that they will make this 5 number . To be honest, it would be viewed as a shocking mess from nestle. Shocking mess from nestle. Organic sales growth, the mathematics, it it looks like q3 organic sales were close to 4 . 5 . Rket was looking for in food sector terms, this is a dramatic miss. They were talking on the call, i still believe they can reach their 5 organic sales growth target for the year. Traditionally, they have a strong q4. I would not necessarily better against them, that against. Hem, they are already below 5 yourself in the next couple of days getting the pocketbooks out and trimming a little bit more. It will be close to 5 , im sure, but i expect it will be a miss. The world seems to have woken up on these news, lower growth environment, is nestle a stock i want to own in that environment . That is a tough question. We have been discussing it inhouse as well. Our Strategy Team went overweight food and beverages. It is about capital preservation. Weve had a few choppy trading sessions. Nestle has a big Buyback Program going on, about 70 7 . Is slowing down, things are tough in emerging markets, but it produces above 4 organic growth. The flipside, it seems to have been priced for perfection. Proxy. Bit of a bond there is a good dividend yield attached to it. High fromstorically an absolute level and i think the risk is with the market saying how serious the slowdown is across the board for staples companies. Talking about the balance sheet, it is incredibly healthy. You and i were talking offline about where the bond trade, it is amazing. If you look at that fiveyear breakeven rate for the eurozone, 1. 6 . How much money is nestle have to growth ingenerate 45 and four or 5 growth in an environment where we have 1 inflation . We spoke offline. , theond yield on nestles bond of the selloff this morning on a result, but it is trading at barely half a percent yield. It shows you the high level this company is held in. The company is saying, things are tough, they want to keep investing in that business. You will see an increased focus on restructuring. They made some Major Management changes. Overall, you will get the growth going. As a result, it still looks pretty attractive. Are cocoaortant prices in terms of their margins . If we were to see a significant step up in terms of prices, what would that mean in terms of the bottom line . That will hurt them without a doubt. The key point, some of these commodities are reversing direction. Cocoa is the most important. Coffee, milk prices have changed. The companies are finding and pushing through price increases and it is hurting volumes more than they anticipated. This is one of the reason nestee had the miss in q3. What will happen, of course, with cocoa prices going up, they will have to increase prices. They have a very sophisticated hedging program and strategy. Will people just get out of the chocolate category . Will they move more into biscuits . There is that sort of risk. This will have an impact on profitability. Chocolate is about 10 of revenues. That impacting earnings, without a doubt. Always a pleasure to speak with you, john. Forget, we are going to be speaking to nestle ceo. He joins us first. His first tv interview of the day. We will explore some of the issues raised on the call a little bit further. Looking forward to that conversation, just after 10 00 this morning. This fits in to the context of the last 24 hours. The moves yesterday, absolutely eye watering. Stocks tabling stabilizing a little bit this morning. Jonathan ferro has been tracking the action. Every time you get a big selloff, the next day you are looking for the rebound. Just not getting it. I am seeing right across the screen on the periphery. You have an italian yield of 10 basis points this morning. It is still ridiculously low anyway. It is the 2012 trade that has come back into it and has firmed short short italy, go greece. At one point, it was that 10 . Greece is saying to the eurozone, we want to exit the bailout land. Plan. The market is saying to greece, we have a question. Can they fund themselves independent of support question mark support . We have president ial elections coming up and there are question marks about whether we need to have elections before those president ial elections . We all know they have some interesting ideas about what to do with greek debt. This is the conundrum they face, the french face. This is happening across the eurozone. The bond market, this is not 2012. If you think it is 2012, you forgot about 2012 quickly. The divergence would italy and spain against germany, that continues. F this continues q a very much. Thank you very much. We will talk about the greek story later on. Shire keeps slumping. Abbvies board told shareholders to vote against the takeover. Welcome back. Greece back on the radar, the country may be at risk again. The selloff in greek securities triggered concerns about the countrys bailout asset plan. Lets go to athens and figure out what is going on. Good morning to you. Gracee not talked about on the International Greece on the International Stage for quite some time. Was yesterday a wakeup call . The market moves over the reflecteral days ,ncreasing market uncertainty the current imf program. Requirementlook the of the country for the next two years. This would amount to 12. 5 billion euros. As for the latest imf estimates. An early exit from the imf program would add another 12. 5 billion euros in terms of additional net borrowing. The markets are wondering how the company will cover this amount. There are some there could be includingable funds, funds remaining apparently, greece we need to maintain market access. Ok. Is the fear of early elections forcing the government to make this decision on a possible early exit from the program . Political situation is another source of concern. Situation with the borrowing needs of the country. The president ial election, investors wonder how the government will manage to requiredheir 180 votes to have their own candidate elected. If that does not happen, we marketituation that the does not want to see. He is ahead in the polls at the moment. How difficult doesnt get for investors doesnt get for investors looking at this market . Investors require more clarity on two fronts. Kind monetaryhe fundingms and arrangement to replace the potential exit from the imf. They also want to see more clarity in regards to the situation following the president ial elections. In many ways, the Greek Economy has been ignored. He below not focused on what has been happening people of not focused on what has been happening. In terms of progress since 2012, in terms of tax collection, in terms of all of the issues we were worrying about, how much progress has been made . When the spotlight comes back, how big of a problem could this be . Made hask the progress been quite significant on many fronts. There are areas the progress has been rather uneven. On the fiscal front, the improvement has been huge. An adjustment in the primary since 2009. E to 20 gdp growth, according to our estimates, shifted into positive territory in q3 of 2014. The economy grew by 1 . The latest up evil is happening heaviel we need to see clarity. Precautionary arrangement that will effectively replace the imf program. Investors to basically following the latest decline in the domestic equity markets. Thank you for your thoughts this morning and for taking the time to talk to us. We will take a break. The effects of ebola, fears of exposure to the deadly virus continues to rise. Does the price of cocoa continue to soar customer we are talking about continue to soar . We are talking about nestle. Good morning. Welcome back. We are live on bloomberg tv, on the radio, streaming on your tablet and your phone. The markets, what can i say . It was a crazy 24 hours yesterday for these markets. In biggest oneday loss three years on the stoxx 600. You expect a rebound. Rebound is not the word. Stabilization is the word. Dead flat on the dax open in frankfurt. Ibex down over 1. 5 . Ftse down almost 1 . The divergence between the periphery and what is going on in the core of europe. Come on over to the bond market. When people talk about 2012, it was a very rough period. We were talking about exit risk in the eurozone. Europeanay bet in the bond market is not playing out right now. Look at the moves on the periphery. Italian bonfield up by 12 bond yields up by 12 basis points. Up 12 basis points on the day. It is a big flashing signal. 5 8. 5 . A the market is concerned about the politics as well. S a picture of a new ipad. Was that a mistake . Or was it a stunt . Welcome back. Bloombergsrom European Headquarters here in london. These are the top headlines. Nestle posted nine months sales that missed estimates. Revenue at the worlds Biggest Food Company rose 4. 5 . The company said it is still aiming for organic growth of around 5 for the full year. Q4 usually tough usually strong for the firm. We will be speaking with the firms co just after 10 00 london time. Looking forward to that. Greece lance to exit the biggest bailout lands to exit the biggest bailout in history. The political risks the country currently faces, president ial elections could lead to part commentary elections. Hong kongs leader says his government is ready to meet with student leaders and that will happen in the next week. An effort to end the threeweek long standoff with the protesters. Pictures all over the internet on that one. In the meantime, let me talk about a win for washington. Abbvies board is recommending that the board vote against the takeover deal. Matt campbell joins us with the details. Does there happen to be some other avenue to get this done . There does not seem to be. The language from abbvie was pretty final. Shires shares falling once again. There does not mean there could be other deals. The pharma sector is hot. Big strategic discussions going on pretty much all the time. Washington doing victory laps. This is a victory for obama and the u. S. Treasury department, who have tried to put a stop to these inversion deals. The u. S. Would over time lose a significant part of its Corporate Tax base as these Large American Companies we domicile abroad we domicile abroad. I think they have to be pretty satisfied with how this has gone. Thisat this level does level the Playing Field a little bit . U. S. Companies have been at the advantage. Does this mean european deals will become more likely . I think thats a very interesting question. U. S. Companies can afford to pay little bit more because they can work into their model this tax advantage, this extra push. If you look at the abbvie Statement Last night, they dont see they dont say the deal was the wrong deal. They say it was impossible at the evaluation they agreed to. It all has to do with price and what you are prepared to pay. We could see more intrigue europe consolidation intraeurope consolidation. Always a pleasure, to buy very much. Thank you very much. Bskyb has posted a gain in firstquarter sales. These the companys final results. It recently bought to expand its reach across europe. Paul sweeney joins us now. These are solid numbers. Is a pretty solid quarter for them. Investors will feel happy about some of the metrics, subscriber growth. We still saw some very good subscriber gains, i think it will give the company an opportunity to shift its focus to where some of the better Growth Opportunities might be, like germany and italy. People are looking at markets like germany and italy and single or penetration rates and they feel very and seeing the lower penetration rates and they feel very confident. What does the Competitive Landscape look like . The boundary between what is a mobile company, broadcast company that is a reflection of how Consumer Habits are changing. Consumers are consuming video on all types of devices. Mobile companies are getting into the business. The folks whining in this game winning in this game are the hollywood studios. The folks that put out the programming. More and more players looking to buy their content. That was the big story. Lets talk about netflix. Not a great day. It was a tough day for netflix shareholders. This is a stock that has been driven by the momentum of the subscriber growth. This is focused on subscriber numbers. The company came out with numbers that missed expectations and the outlook is not much better. At the same time, hbo said for the first time it is going to bring hbo to the north American Market over the internet in direct competition to netflix. You were talking about the fact that this is a company not geared to its earnings because the numbers delivered. It is the subscriber story. We are very early in the stages of consumers consuming content directly over the internet. Companies like netflix and hbo recognize that we are in the very early innings of the growth of over the top video. Netflix and investors are saying it is all about growing our subscriber base. In the u. S. , they are very profitable. It takes a while to break even in International Markets. You. Ce to see ill sweeney paul sweeney. Over the top, a nice shiny brandnew ipad. A sneak peek of that yesterday. Out of thesetures devices on its own website. Devotedtire website is to the sub there are entire websites devoted to the subject. Was it a stunt or a mistake . Biggest i have no insight on whether or not apple intentionally did this. They do need to increase ipad sales, down 9 quarter over quarter. What we learned from this is not that much new. These new ipads will have the touch id and read your fingerprint and they will have an improved camera. Look at ipad sales, a lot of apple products, they have a couple of quarters where they are good and then they taper off. Theyre releasing this new one just in time for the holiday season. 33 billion this season and the number one item that people will buy, tablets. We could see tablets take off. 10 million of the new iphones were sold the first weekend. Are they replacing laptops . That is the big question at the moment. There talking about a really big one that could be more of an enterprise product. Take a look at some of these numbers. These are projections that say 2013, 19 million tablets are sold. To 101 expected to grow million in five years. If that does take off Enterprise Company start buying tablets, they will take it away from pcs. This is a pc story as much as the tablet story. Applecahn thinks if chooses their ipad sales juices their ipad sales, you could end up seeing a stock trade at 200. He certainly sees a lot of value to be unlocked in investing more in tablets. He has some skin in the game as well. Thank you very much. Were coming up against the announcement of the confirmation, the release of the apple pay story as well. Lets take you to hong kong. The government is ready to meet with student leaders and that will happen next week. An effort to end the standoff with the protesters. What is the reaction to the latest offer . The students have not said much yet. They will meet to discuss it. I suspect they are eager to find a way out of this as well. Their fundamental demand that china dropped its insistence on vetting candidates for the election for the chief executive in 2017 is off the table. The conditions are stark for the students. The politicians are saying, 2017 is a starting point. We should be looking beyond 2017. The system can change. Whether that will be enough to placate the students after three weeks on the street remains to be seen. Social media has played a big part in this. The pictures that were sent around over the last 24 hours of the guy that was beaten by the police, the story surrounding Excessive Force really gaining traction. American and having demonstrations in europe that were pretty violent, i am pretty used to seeing police use Excessive Force when they deal with aggressive protesters. Here, it struck a chord. They are not used to seeing. Olice use violence the public has a pretty Good Relationship with the police. It is one of the safest cities in the world. To see these images of the police really beating and kicking a protester shocked a lot of people. Very strucky a chord. We saw the numbers of the protesters grow again last night. People andpsets affects them this early to see this kind of violence. It is not something they expect. Or is this fear that these are the tactics of china. What they are seeing is the future of hong kong. That scares a lot of people. Great reporting. During us from hong kong. Thats joining us from hong kong. A voice for the millennials as the one young world summit continues. We will talk to the companys ceo. We will see you in a moment. The hour. Tes past welcome back. Lets take you to the one young world event taking place in london in dublin. A new survey shows future leaders very much tuned in to world issues and they are pretty optimistic about the future. 75 feel like they are not having their voices heard. Good morning to you. What is the message you will deliver today . Of the lead up to one young world, the messages, young people from around the world are interested in the same issues. Poverty, education, social mobility. Their digitally engaged and active. They do not believe they are being heard on a national or international level. How do we change that . What do we need to do as the people trying to help them . What do we need to do . The first thing we recognize as the technology is the key. Of 18 tois group 30yearolds have a smart phone. They are finding the people do need to influence and local authority and government dont seem to be engaging. We have to think about how we can bring the political debate, the social debate alive in a way that engages them properly. Our generation that needs to be, more tech savvy. Become more tech savvy. Correct. We are an Analog Society which has the young generation who are Digital Natives and worried about the same thing and and dishes about the future. We are not harnessing and ambitious about the future. We are not harnessing their ambition. We need to make sure we are giving our young people the opportunity to make a difference they believe they can make. What does that mean for your business . Us, we are active all across europe and latin america, we want to put the tools into the hands of those young people. Allowing young people to have active opportunities to put their skills in place and become young entrepreneurs, change the way things are done. Giving them the tools to make a difference, giving them mentoring support and access to technology. We live in interesting times. You live in an incredibly dynamic world. Netflix absolutely battered. Ee is going to become a broadcaster. How do you keep up with this . The key for us is to make sure we are relevant to customers in this case. So much content out there, the big issue is the fear of missing out. Where do i dive in . Will i be able to get what im interested in . Curating of resources kobe very important. Of resources will be very important. In a way we can select the best of the best. That is the role we will want to play. Sayingare on record as we need to see consolidation. Are you frustrated that we are not seen it happen more quickly . Seeing it happen more quickly . One of the challenges we see in markets like the u. S. , real economies of scale. Europe is not punching its weight these days. Our view is we should have changes in the Regulatory Environment to allow the development of proper european champions. And to compete on the world stage. The pace of that is far too slow. Concern, the last 24 hours have seen incredible volatility. Deflation, low growth, stagnant stories. Do you see that as a guy running a big company, how do you address that kind of issue . Are you seeing that issue . The concern for business like mine, which is a consumer business, is ensuring that consumers have confidence. Theyre working that brands theyre working with brands they can trust. Making sure we focus on the small things. The current environment is difficult for making longterm business decisions, but the trick is not to lose sight of customers. Focus on the customer daytoday and work with government and others to make sure we have the right sort of platform for longterm investment. It looks really interesting thank you for taking the time to talk to us. We will take a break, back in a couple of minutes. Welcome back. Scientists are developing a way of turning eventual waste into bio plastics. I am the coordinator. Material. Ing on new interesting stuff. For our viewers, the pulse continues. We will be live with the ceo of nestle. He will be joining us for his first interview of the day. Slowing Global Growth takes a bite out of nestle. Sales missed estimates. , joins usaul bulcke right here on the pulse. Washington wins. Abbvies board has recommended shareholders vote against the shire deal. In europe stabilizing. A tabular 24 hours for european equities. Looking for direction. Greece and focus again. So, good morning to our viewers in europe, good evening those in asia, and a very warm welcome to those just waking up in the u. S. Im guy johnson. This is the pulse, here in london. A busy 24 hours. It does not stop there. Lets talk a lot our big focus. The worlds number one food company, nestle, shares under pressure. Sales missed estimates. Its ceo joins us live in 15 minutes for his first tv interview of the day. Paul bulcke is the perfect person to talk about the issues gripping investors. His business has exposure to the global slowdown. The deflation risk in europe, the standoff with russia, the threat of ebola. We will explore those angles. Lets start with our International Correspondent hans nichols. What do we get from nestle today . Their ninemonth numbers. We got them sticking to their full year projection of 5 Revenue Growth. Even though, for the first nine months, they missed estimates. At 4. 5 percent Revenue Growth. The expectation was 4. 7 . How difficult of the currency situation is. Of revenue. Or 7. 5 global challenges across the board. Particularly in developed markets. Growth of. 5 . The ceo and a press conference tried to put a brave face on. Heres what he said. In a volatile Global Trading environment where there are no tailwinds, we achieved good, broadbased growth. If there are no tell vince for the first nine months of the year, where does he think talent are going to be for the next three months . How can i going to achieve that 5 target. Down. Sales are a slight mist from the estimates. Currency is a huge question. Ebola is a huge question. In any drink nescafe moment other than when nothing is open . Is it is anescafe emergency drink. Saw you as the italian sitting on the riviera with espresso. That has been shattered. Is 4 00 in the morning and you have got to get up in a hotel room. You have two options, t r nescafe. You are staying in the wrong hotel. You have to upgrade. The nice ones have espresso machines. Clearly we are off course. Him whatyou to ask cocoa prices are doing and to what extent nestle is bracing about ebola. Coast, whichory produces a majority of the worlds cocoa. To thet that does International Market and their basic ingredient costs. Of those things are part of the conversation. Thank you very much indeed. We will talk offline about hotels. Concern. Hans nichols, our International Correspondent. We are going to speak to nestles ceo very shortly from vevey on the shores of lake geneva. Paul bulcke, coming up. They markets are extremely turbulent. We have had a balance in european equities. Yesterday, i watering. Global growth concerns on the front foot and everybodys minds. Hosea is the director of Monetary Affairs at the imf. He joins us in his first interview of the day. Good morning. Global investors seem to have to theking up belatedly slowdown globally. How much do they have to worry about . What is your sense of what is happening in the Global Growth story . Good morning. The Global Growth story is not as good as we went like. One should not be too pessimistic. We are forecasting that this ands growth will be 3. 3 next year, 3. 8 . Growth is going up. Going up by less than we were forecasting a few months ago. The second thing is that it is true that there has been a disconnect between economic prospects, which are not great, and markets, which have become very turbulent. That at one point or another there will be thenciliation between excesses that are taking place theinancial markets and lower growth picture. I do not think this is something that is unexpected. When was it going to happen, now we are going to see it. Does Monetary Policy ride to the rescue once again . My terror policy is the only game policy is the only game in town. This is not right. Monetary policy is doing all it can, certainly in places like europe and japan. The u. S. Is now going to do less because the economy is doing better. Monetary policy is not the best tool to remedy problems. It needs to be there but you need other policies. Without Structural Reforms in europe or smart fiscal policies,hich can help potential growth you are not going to achieve that much. It is very important that the nonMonetary Policy plays an important role. In the last couple days, the 6. 5k 10 year has gone from to 8. 5 . 200 basis point move. In only a matter of a few training sessions. A few trading sessions. Its imfreece be exiting program . This is a decision for greek authorities. What is clear is that the markets are not taking a favorable view of greece exiting at this time. In terms of how the ecb should handle the Greek Economy, we are looking at the ecb launching an assetbacked Program Designed to boost banks and give more credit to small and Mediumsized Companies that are the lifeblood of these economies. How do you think the ecb should treat the credit story increase . Ecb needs to do the Monetary Policy, which is a proper one for the euro area. The ecb should not care policies to the situation of any specific country. Should continue doing what it is doing. Which is trying to buy as many as these assetbacked securities and covered bonds in order to try to restart the flow of credit to small and mediumsized enterprises, the bulk of job creation. That is what it should be doing. Greek issues are for greek authorities to continue battling. Greece has made an important terms of the past in improving it economic policies, getting its fiscal house in order. The greek government needs to continue with measures of structural reform that increases the potential of growth in the economy. This is very much in the hands of the greek authorities. It is not in the hands of the ecb. The ecb is doing with Monetary Policy what europe needs. Europe is reliant on the banking channel. We may see banks team required to carry even more capital. E we seeing too much tension between the desire to and with too big to fail the issue of Balance Sheets for sovereigns and getting credit flowing again . How do we deal with the tension . Think there are a number of reasons behind the low flow of credit to the real economy, which is key in europe and the euro area. A very bankbased economy. You need the flow of credit. There are two things behind the lack of credit. One is lack of confidence in the future. You have to have solvent credit firms, onthe part of the part of households. If there is no confidence, if there is no expectations on the part of firms that sales are going to be higher in the future, i think that is going to reduce the incentive for firms to invest and demand credit. The demand issue on for credit side. You have in issue on the supply of credit side. We have looked at european banks. What we find is that european banks, although they are safe in terms of capital, they do not to supportgor the recovery through the provision of credit. Need to do a lot in terms of adopting the Business Models to better adjust to the post crisis business realities. We will watch to see what the s deliver from the euro zone from the ecb. Thank you, an interesting conversation. Imf director of Monetary Affairs, jose vinals. We will be back with the British Bankers Association later. The corrective deflation taking nestle. Ut of sales miss estimates. We are about to speak to the ceo. His first interview of the day is coming up after the break. It is quarter past the hour. You are watching the pulse. Live from bloombergs European Headquarters in london. In me take you to vevey switzerland. The last 24 hours have seen some violent market moves. Investors around the world growthg to global worries. Nestles ceo saying he saw no talents for his company. Plenty of headwinds deflation, ebola, stagnating wage growth. The firm missed thirdquarter estimates. Joining us in his first tv interview of the day is the company ceo, paul bulcke. Thank you for taking the time to be with us today. Is Global Growth is slowing . That is what you hear it all over. That is what we feel. Really rethink growth as we would have expected or would have wished. Emerging markets start to be affected also. Theemerging markets and developed world after the crisis are slowing down. To a certain extent, it was to be expected. Growth projected is 3 or 3. 5 . Is Global Growth is slowing, i appreciate that you do not sell gdp, how will you make your 5 target year end . In europe. Rowing we have seen figures there. Growth lineleft the in developed markets. In spite of the downturn, nestle has embraced the developed markets. Is thanks to innovation and increasing Value Creation for consumers. Product and reinventing offerings. That is what we have to do. Been growing. Pe there is innovation relevant to peoples lives. God is what we are about is what we do and that is what we want that is what we are about. That is what we want to do. Ot seeing a lot of tailwinds that was what got eye. You talk about europe. If you look at the Financial Markets five years out, investors are pricing inflation at 1. 6 . If you are going to carry on delivering the kind of Revenue Growth you are delivering, how much money are you going to have to invest in the kind of innovation you are talking about . You have a great balance sheet. I am curious what the innovation story is going to cost. Innovation, the biggest part of our growth. That is in ongoing investment and we are not going to stop. My focus this morning was also saying this shortterm intensity to deliver growth is not getting is not giving for free. You have to go after it in a more intensive way. You have to keep investing for the long term. That is return on development and share acquisitions. Also, the building of new platforms. We have brought in someone to build our growth sector. We are growing very nicely. That Strategic Direction , that is or you growth what we call wise resource allocation. You are investing for growth can we talk about the Global Economy . People talk about deflation. When you look at the world and you look at your investment programs and think about how you. Re going to balance the two are we in a deflationary environment . Paul. Have lost can you still hear me . We seem to have lost paul. We will figure out what is going on there. Clearly one of the threats we have is what is happening with ebola. If we see a huge jump were to see that shifting focus and getting into the ivory coast. One of the threats he faces is what is happening in the currency markets. Significantanc is a story for nestle. You can see across their numbers. Yeardollar one of the things we are focusing on, 1. 2801. The euro part and parcel with the story we have been talking about ever the last couple days. AndGreek Economy front center. People are watching that. Turbulence on the periphery of europe. Year, lets show you the chart. I think it really tells you the story of the problems we are facing here. This goes to the conversation weve been talking to paul it out. What is happening in europe . Cant you continue to see growth . We are going to fix our line to vevey and carry on our conversation with paul bulcke. We will see you in a moment. We will take a short break. Still trying to fix the technical issue down to vevey. We are back and reconnected. With the ceo of nestle, paul bulcke. Paul, can you hear me . I hear you. Excellent. Technology will not get in our way. Great news. You talked about the fact that you do not see much in the way company. Nds for your the headwinds are there. Give me your expectations for a way you see cocoa prices and Raw Material Prices going . If we were to see ebola impacting the ivory coast, we could see prices double. What are your thoughts on what is happening surrounding ebola and a key resource for your business . We had a basket of raw materials. Coffee, cocoa, milk, etc. We have to see how the basket evolves. We have to act accordingly. Coffee and cocoa went up lately. Milk prices internationally have been down. Also, oil. That is the hedge we have. , if ebolapecifically or to move into ivory coast, that would have an impact. We are part of society. That is a priority. Bridging of stocks in cocoa. We may take some corrective action or distributive actions. It is clear that it is going to have a major impact. We have a bridge, we had a buffer that goes quite long into next year. Will have to see. These are even two alleys you cannot really organize these are even to out is ities. Are eventualt we can anticipate and act accordingly. We are going to keep this interview a final question. November 30, we are going to cd the vote in switzerland on immigration. What are your thoughts on this . How big the problem could this be for nestle . For thea problem countrys relationship with the eu . I also believe deeply in the wisdom of the people to find a way to learn that. It is important. For us, nationally, two thirds of our people working for us are people coming from all over the world. We brought talent from all over the world. I am confident that they are going to do it the right way. If not, our r d people and our scientists are not going to lose jobs. Switzerland might lose some science and some research. Act, we are a global company. We will do the right things to keep our success. I am confident this country is going to find the right ways with immigration. Innovation is pivotal to the future of nestle. You need science and you need to make it work. We apologize for the technical difficulties. Thank you very much indeed for taking the time to talk with us today. He ceo of nestle, paul bulcke talk about thend other news out of switzerland. Reaching thirdquarter sales ahead of estimates. A boost from sales of its new medicine. The Company Confirms it sees its low to mid Single Digits Sales Forecast for the full year. We spoke to the ceo about the Business Environment in europe. Healthee pressure and care. Theres an enormous pressure on prices for medicine. Privileged position. Highly Innovative Medicine that make a significant difference for patients. We are less exposed to price pressure. Prcoming up on the pulse, stunts or disastrous stumble . Apple has released pictures of its new ipad ahead of the reveal. We will discuss it later. If you want to join the conversation, please do. On twitter. Nsontv see you after a short break. Will come back. You are watching the pulse. Im guy johnson. These are the top headlines. Greeces plan to exit the biggest bailout in history is at risk of falling apart. A monthlong selloff in equities and bonds pushing yields to a level that could see greece cut. Ffs from the market hong kongs ceo says the government is ready to meet with student leaders. In effort to and the three weeklong standoff. Following public outrage after the alleged beating of a demonstrator by police. Growingabout ebola after a Second Health care worker in texas tested positive. U. S. Officials are contacting 150 people who work on the womans flight a few days before she was diagnosed. The infected worker did alert u. S. Health officials to her elevated temperature prior to taking the flight. The temperature was below the fever threshold. They might be reconsidering that protocol. Markets are the focus. The move in european government yield spectacular. Lets get the detail. Markets, gravity. For the bond market, divergence. You see the versions and the equity markets as well. Ftse down 1 . Dax down 1 . Ibex, losses of over 2 . Bond market are remarkable. Stunning moves increase over the last month. And aggressive move higher in bond yields. On the 10 year around september 5, a yield of about 5. 5 . 8. 66 . That is a move higher of over 18 basis points. Greece is on the radar. The government looking to exit the bailout plan early. Finance ministers thinking that is a bad idea. Elsewhere in the bond market, here is the divergence. Money into spain and italy. Money into bunds, 0. 73. My out of spain and italy. Debt, aissued miss. Remember the last time that happen. Spanish yields popping higher. Yield for spain. Oneday moves have been remarkable. One of the most liquid markets in the world, treasury. Yields at 2. 0 whipsawed yesterday. Maybe. Ction of 2012, moves something to talk about. Plenty of traders watching what was going on. Jon ferro taking us through the market. Top banking regulator has closed a loophole on rules relating to bonuses. Cracking down on allowances rulesed to circumvent the on. El barnier by british banks playing the rules . Absolutely. Were looking at different themes. In terms of bonuses, the were approved by regulators. There is a disagreement on that. Important thing to remember is the change in banker pay since 2007. Most of it is deferred to cash bonuses, and extraordinary change in a short amount of time. Banks are keen to make sure their income it is a volatile industry it is important to cut their pay bill in down times. They need to retain as much flux billion as possible. They need to retain flexibility. What your expectation be that now the allowances loophole has been closed, there has been another way to maintain variable pay for key parts of businesses that are exposed to market volatility . We do not know what is going to happen. The guidance that came from the european banking authorities is binding on the u. K. We need to wait to see how the regulators respond. We have seen the guidance be thatour sense would we need to maintain some degree of variable pay. That needs to be part and parcel. It is a security valve for the Banking Industry and needs to be maintained. It is important in down times for banks to cut their pay bill. Remain stablehat organizations in a volatile industry. That is why we have always said you need to have flexibility in pay. Theres also a principle here. Aligned with the u. K. Government and regulators. We support their stance. Principles should be up to shareholders who own companies. To decidenagement, how much people are paid. Should not be up to european politicians to set pay levels through physical means. Through fiscal means. Lets talk about the Senior Management regime, seems to be ruffling feathers. Endanger of seeing a mass exodus from banking as a result of the new rules . The new rules are being negotiated. They have not been finalized. Been some concern the industry about it. It is part of a broader theme today that we are talking about. Trying to set out the banks, not just what we do not want. But what do we want banks to do we want stable banks that are competitive nationally and globally. Be aware of unintended consequences. This comes back to comments about the senior managers regime. Youve got to make sure regulation does not stop banks playing a central role in terms of feeling Economic Growth and allowing businesses to raise finance. Helping people buy homes. Globally, one of the things we is the scalet here of fines imposed on banks, particularly from u. S. Authorities, and the impact that has on derisking. Moving away from certain sectors that might open them to the risk of getting these fines. That is bad not just for banks, it is bad for the Global Economy. Is that the issue at the moment . We are devising a real book we are devising a rulebook. Can talk about it through fines or different prisms. The issue managers have, they understand the rules but they do not understand the way the rules are applied. Is it more about understanding the way the rules are applied then the rules themselves . That seems to be where the variability lies. What is needed is clarity and certainty. They banks need to know what the rules are and how they are interpreted and what they need to do to update the rules. That applies across the piece. You asked me about bonuses and dies regulations. How is that going to play out . The end ofg towards the year. Banks need to know when they are hiring people what they can say to them about how they are going to be paid. There is real confusion. Helpful for banks trying to do their jobs. Same with senior managers. With this need , where is coming in it all going to land . To get someo know regulatory certainty so they can do their job financing business and helping people buy homes and helping buy goods. Thank you for your time, anthony browne, ceo of the British Bankers Association. We are going to take a break. What have we got next . Abbviesps pumping board, telling shareholders to vote against the takeover. People in washington doing victory laps. We will talk about that story, coming back. Welcome back. You are watching the pulse. I want to flag what is happening in European Equity markets. Another significant leg lower for european equities. Looks like we were stabilizing but that is not the case. The stoxx 600 is down over 2 . Peripheral markets falling further. Spanish market down 3 . The italian market is down numeral 3 . Looks like stabilization is not the story. Looks like we are seeing another leg in the selloff. Back to the markets. We will keep you up to speed. Lets talk about the market of particular, shire shares falling again. The market story, abbvie confirming it is recommending the shareholders reject the takeover deal. Matt campbell joins us with details. Gap lower, at the the market is pricing this deal as dead. Seem to have does concluded that this deal is dead. There has to be a shareholder vote by at the investors but that is pretty much a formality. Abbvies lord has said they are recommending against this transaction. This would be the largest u. S. This year. Europe now almost certain to go away. A highprofile victim of the american crackdown on tax inversion. You are another ceo, another bank adviser looking at pushing and conversion. You look at guys in washington doing victory laps. Can you assume you are not going to be able to push these into the ceos inbox anytime soon . The level of skepticism has gone up around these deals vary significantly. The two highest profile attendant inversions, pfizer, after zeneca, and now abbvieshire. They have failed. Astrazeneca it was more about political opposition in the u. K. It is hard to do these. There have been successful in versions at the smaller end. Are proving hard to execute. Very much indeed. Matt campbell on the latest surrounding the shire story, the abbvie story. Part and parcel to the drop we are seeing in the markets. A big blow to the deal taking place. Thank you. One stock that did do well was bskyb, a gain in First Quarter scales. Now moving a little lower. Results were solid. The last time we will see it as a u. K. Only broadcaster. The Company Recently bought sky deutschland and sky italian. Looking at low penetration reach. Us now. Eney joins these are good numbers. Pretty solid numbers out of bskyb. What has become a more competitive market in the u. K. Subscriber numbers were pretty strong. To raise prices fairly well. During the quarter. We saw decent results. Even though it is a competitive market, sky did pretty well as it starts to look outside the u. K. What is the best metric to judge by . When you look at paytv operators, you want to see them as subscribers add subscribers willing to pay. You look at growth, revenue per user, and churn. Are they losing subscribers . Churn number came in and line. I think the market will say pretty decent results. Lets think about where the opportunities are in germany and italy. Good got good products and content. They have a roku box that allows you to stream content via the internet. How important are those kinds of innovations in germany and italy . Innovation is really the name of the game for a lot of these paytv operators around the world. Consumers have more choice about how they consume media. They can consume it on their tablets, their phones. The paytv operators have to make sure they follow their Consumer Habits of their subscribers. You are seeing a lot of these companies thrive innovation. The drivers of consolidation we are seeing in europe and the u. K. John malone and Liberty Media conning and making acquisitions. Sky expanding its focus into germany and italy. Function of the growth and consolidation of this business. A tough day for netflix yesterday. They had a double when a double whammy. They disappointed investors with their growth and subscriber metrics. The primary metric that drives the stock. They missed estimates. At the same time, hbo came out with a very big announcement that said for the first time, hbo will go over the top and americansumers in north hbo over the internet. You do not have to get it via ap tv package. Netflix model works. How far ahead, in terms of the business model, theyve been doing this longer. Are they ahead of hbo . They are ahead in the u. S. , they have 36 lien subscribers versus 30 million subscribers. Netflix has been growing so much faster than hbo. Hbo finally got to the Tipping Point here when they said it we have to go where our consumers are going. We have to expand our model and go direct. At the risk of maybe upsetting some of our paytv partners, that is where consumers are going. You see that with netflix and we need to be there too. Thank you for taking the time. Paul sweeney from bloomberg intelligence. , a pr stunt or something of a stumble . Apple has released pictures of the new ipad ahead of the revealed later today. How did that happen . Was it intentional or did some of the press the wrong button . We will be talking about what is happening with crude. Continuing to get crushed. Down as investors worry about the outlook for the Global Growth story. Lastean equities in the hour have taken a tumble to the downside. That is nymex. We are going to get through we thought we were going to get to 80 yesterday. Interesting to see how it trades today. A move lower. In many ways, High Oil Prices are a tax on Global Growth. Lower oil prices should mean a boost for Global Growth. That could be a good thing. Lets hope it is a good thing. See you in a moment. Good morning. You are watching the pulse. Lower thisuities morning. Not sure what is driving it. Maybe it is risk officers tapping people on the shoulder. Maybe it is margin calls. Whenever it is, European Equity selling off again. European stocks across the peace selling. Bid only today. Story. Developing an interesting afternoon. On markets in focus. The real focus in many ways. Yesterday, the greek 10 year look at this chart. Parabolic on the righthand side. Up at 8. 80 . The dash for cash is on. If you think about where you want to be, bid big liquid faitn. Faith. Thats the 10year over 3 months, 73 basis points. The currency story is less dramatic right now. This is the move we have seen in eurodollar, 1. 2794. And equities that are seeing the action. Inflation expectation in the europe dropping. Ts a story for the rest of the day. What else are we watching . Hans nichols is paying attention to what we are watching with apple later on today. On itspany put out website pictures of its new product. Pr stunt or mistake . Hans nichols . I make if the mistakes claim were intentional. We will never know. Maybe tim cook will come clean. We found out what the new ipads are going to look like. Sales were down last quarter, down 9 percent. Only 13 Million Units shipped. We get a better camera and we get the id, the some id the thumb id. The question with tablets, will be Holiday Spending for consumers and business spending by customers and governments, will the ipad replace . You have 19 million annual sales in 2013 of tablets to the government. It is expected to be 101 million and five years. It is a remarkable story. We will see if the other side is true, if pp sales are hurt. Big expectations. What does it do to the top line . You release the products and get an instant bump in the top line . We always see that with the iphone. They shipped 10 million iphones in the First Quarter. The ifo numbers are so big, it shows up in macro government data. We will see if that happens with the ipad. Carl icahn clearly thinks the stock is worth around 200, double the price. He wants to unlock value by focusing on ipad and tablet sales. We will see what the product looks like and what demand looks like. This company is saying all kinds of things. The pace stuff is coming out soon. How big is that . That could be huge. If you unlock the credit card, the pay industry, and your phone becomes your wallet, that is a massive market. In germany, everyone likes to pay. Some Thieves Robbed the apple store, they got a lot of cash. Watch the markets. The big story for surveillance. Up next from new york. Going to be an interesting day. This is bloomberg surveillance. One hour 45 minutes from cleveland to dallas. Fear of ebola at epidemic proportions in america. Janet yellen voices confidence in american Economic Growth. Not possibly be like yesterday in the bond market wrong. Reports, possibly with fewer adjustments than bank of america. This is bloomberg surveillance , live from new york. Thursday, october 16. Im tom keene. Joining me, scarlet fu and adam johnson. Markets on the move. Top news. Another day in the red for equities following a wild ride on wall street. European stocks extending their selloff to an eight day. The longest losing streak in 11 years. Asian stocks were lower. Indicates. , futures stocks will open lower. Futures overnight and this morning. We have taken another leg down and come up off the lows. And a lot of