Transcripts For BLOOMBERG The Pulse 20141114 : comparemela.c

Good morning, everybody. You are watching the pulse. I am guy johnson. Im francine lacqua. We are getting breaking news out of italy. The a thailand economy shrank 0. 1 in the the Italian Economy shrank 0. 1 in the Third Quarter. Countrystory of a struggling to grow. Another recession, here we come. Difficult times for matteo renzi. He tries to figure out exactly what he needs to do to get this story flowing again. Lets go north and talk about where else we are seeing growth or no growth. Half of the euro zone economy, journey germany and france. Not great numbers from either in the Third Quarter. We had updates from the netherlands. Before we get the aggregated number, international correspondent, hans nichols, in berlin. We know a lot of the pieces. And we can deed is from the pieces. The aggregate number is going to come in line with expectations right about 0. 1 growth. Italy looks worth remembering. This is the 13th quarter with negative or zero growth. It is a negative run. We did get some positive numbers out of france on the upside. They came in at 0. 3 . Outputey had negative last quarter. When you look at the german numbers as well, they were positive and they revised upward last quarter, but you look at what drove the German Economy, it was consumer spending, which is a little bit. We have in trying to reconcile all this confusing data out of germany. We may have the beginnings of a final answer. Those numbers continue to be negative for the last six months. Business is less optimistic than the consumer in germany. We do have some positive estimates on how much germans are going to spend on christmas shopping. I think it is 50 euros more this year than last year or so south of 500 euros. When you compare it to the u. S. Or u. K. , much less on consumer spending. Overall, these numbers are not asterisk this is going to cause Difficult Conversations in brisbane. This will be on angela merkel. What can she do to maybe stimulate growth . A lot of pressure coming from the g20. Thanks very much indeed. Leaders from the g20 nations have been arriving in brisbane ahead of this weekends summit. Paul allen is at the venue. Global Economic Growth is top of the agenda. What are the chances of actually talking about new targets and achieving the ones set last time . Im sure they will talk about it, francine. That is what the skeptics often say. There is a great deal of talking but when the rubber meets the road, not a huge amount of action. The australian treasurer is promising that this time it is different. He was proud of the fact that out of the finance ministers meeting in sydney, they got a solid agreement to work on raising Global Growth by two Percentage Points. That adds 2 trillion to the Global Economy. As well as cracking down on tax avoidance and corruption. When the leaders get home, they do have to implement it. It is often difficult to get this things underway. We havent even started yet. The summit begins tomorrow. General spoke to bloomberg. Here is what he had to say. We are in a very sluggish economy. A bright,ct of recovery inth and the mediumlongterm are not there. We really should make it happen. I believe that it is possible that the ground has been prepared here in brisbane. The g20 leaders are trying to stimulate the local economy. 100 million has been spent on security alone. It is difficult to turn a corner without bumping into them. The government has spent 1. 8 million on limousines to ferry the leaders around. Is a heavy security presence here in brisbane. Back to you. Thank you so much, paul allen in brisbane. He will be joining us throughout the morning. The price of Oil Continues to drop. Rent crude now at a fouryear low. The iea has reached a gloomy report highlighting the impact of weakening demand and the strong dollar. Our next guest used to contribute to these reports when he worked for the iea. We are joined by the bnp paribas head of Commodity Markets and strategy, a long title. I know. [laughter] harry. I go by harry t. You sound like a rapper. I dont have the gold though. We can work on that. Lets talk a little bit about the report. As expected,ly it is pretty gloomy. Not so much of a surprise. Iea had already revised downwards in its previous two reports. I think this report is really highlighting the pressures that are building on opec. In particular, in saudi arabia. Saudi has been cryptic in terms of what it intends to do a head the opec november meeting. Obviously everyone is on edge. We are starting to see the longest losing streak since 1986. Are we going to see a shock . That is an interesting question. The Analyst Community is divided in terms of what happens next. It is a binary outcome. Be facetious in saying prices either go up or down. What i mean is that they stay it cant stay at the level it is right now. The divide is whether opec will do something or not. Some people believe that opec wont do anything and will let the price decline. In our opinion, wasting cash reserves, running deficits to shut down u. S. Shale production is futile. Can opec take the pain of having to try to develop this scenario for a period of a year if not more . Our belief is not. They will have to cut and we expect them to do somewhere between one million to 1. 5 Million Barrels a day. The internal politics is interesting as well. Whether the producers say, we are just going to reduce production or others are being forced in as well. That is the crux of the matter. The reason the saudis have been delaying their attentions is they dont want to be the only ones to cut production. In essence, the longer the price remains where it is, the more you incentivize other opec producers to join in. What saudi wants is collective action. It will be most more forceful on the market. One possible scenario for a cut would be saudi cutting maybe 500,000 barrels a day. Would be spread out over the remainder of opec. That is a plausible scenario. The whole thing is that saudi does not want to be the sole producer to adjust. Even if it is, it wont have a choice but to adjust. It is a game of chicken, really. In essence, most opec countries are going to be fiscally challenged by this price environment. According to surveys, you have a rough consensus at below 100. All of opec is fiscally challenged. Is that really true . It depends how you come to the price estimate. There is a bit of variability as to what the price level is. So a lot of people argue that while they are prepared to live with lower oil prices, they could run deficits, but in the end, why burn your cash reserves in a futile attempt to bring down u. S. Shale Oil Production . What would a Million Barrels out of the market due to the price . Hopefully it will bounce back. I think we could gain within the next two to three weeks at least five dollars, six dollars, and see if we could aim higher and get brent back closer to 90. I think if they dont do anything, the potential for the downside is even greater. Believesence, if you they do nothing, it is a good time to start buying puts on oil and even put spreads. Otherwise, you are looking at a volatility game. The prices go either way. This is where it becomes interesting. Opec have never said what kind of price of oil they are targeting. 90 seems the fair option . It is a shifting target. Every time the price goes up, opec seems to say that is a fair price. The latest official pronouncements were 100. A couple months ago, in bahrain, saudi officials said 90 was more like the floor. That ande are below that is a reasonable target. How tight is the v on the straddle . The risk is asymmetric. I think if nothing happens, prices could move lower quicker. But the straddle is really playing a binary outcome. You do expect the price to move. What saudi and opec does or doesnt do, the price has to move in one direction or another. That is interesting, looking at the price and implied volatility. What you are saying intimates that once they cut a million, they have to continue cutting. Absolutely. Depending on your forecast and your assumption on supply and demand, how far is opec production from the call on opec oil, the amount of oil opec must produce to have zero changes in price . Currently, they are above that level for the Fourth Quarter by 700 barrels 700,000 barrels a day. One Million Barrels a day in the First Quarter of next year . You need at least an initial Million Barrels a day cut so that markets are reassured they are acting, and potentially add to that. All right, thank you so much for all of that. Harry t. To his friends. Thats move on and find out what else is on our radar. The investigator who led the probe into the world cup said the decision is to keep russia and qatar as hosts. Summary released yesterday includes incomplete and erroneous interpretations. Earlier this month, emirates became the first major sponsor to drop fifa. Twitter shares fell nearly 6 after Standard Poors gave the company a Credit Rating of double d. That is three levels below investment grade. S p said that twitters financial risk was significant. Twitter has been under pressure because of slowing user growth and management turnover. Alibaba is trying to raise a billion dollars in its third u. S. Bond sale. They say the sale could take place as soon as next week. The Worlds Largest Ecommerce Company will use the proceeds to refinance its credit facilities. Coming, cautious about christmas. We will get the asda ceos views. That is an exclusive interview. A new report shows that only one in 10 hr leaders think that email during meetings is acceptable. If you have ever been to a meeting with francine lacqua, you will know who started the trend. If you want to join in this conversation, should you be able to email during we forgot. If you want to join in the conversation. Dont do this in a meeting. Welcome back. I think we should say it together. I will carry on. Thank you. This is the pulse. We are on the radio. And we are streaming on bloomberg. Com. We are even on your phone. We have everything covered. The battle between british retailers continues to rage says the ceo of one of the u. K. s biggest players. We sat down for an exclusive interview with andy clark. He gave us his perspective on the future of the industry. Shortterm have some drive traffic, but as we said earlier on to day, it is a form of quantitative easing. At some point, you have to change. Printing five pound vouchers is a shortterm proposition. Somebody has to pay for it. What do you feel like about the u. K. Economy . Are things going to improve . The economy is in a growth position. That is good to see. Customers see the u. K. Starting to have green shoes of recovery. Unemployment levels are at an alltime low. It is good for the country, good for the economy. Perspective, back to one of your earlier points, there are businesses that will win and businesses that will lose. I huge piece of change next year with a general election. Publict the general will vote with their feet in terms of which way they want to go. We will see how the economy continues. European Business Correspondent Caroline Hyde is here with more now. Caroline, great to have you here. He was talking about challenges in the runup to christmas. Exactly, it is not going to get any easier. The bigthe only one of four players managing to increase market share. It is still seeing like for like shares down 6 . He says the battle continues to rage. He called the last quarter a shock wave to the industry. He said he they got it right to years ago. They cut prices. They have seen copycats since then. You have seen morrisons, sainsburys as well. He really talks about the tactics being used by the other players. Morrisons giving a five pound voucher for fruits and vegetables, he says that is panic tactics. In the longterm, that is not going to win anything. Quantitative easing, that is not the longterm strategy. Price,etting the right being able to fight against the discounters that are coming in. Also, trying to focus on new innovations, trying to draw in the audience. What does he think happens next . He talks about the fact that tesco, we are waiting to see what they will deliver. The operating environment to get worse . I think so. Says there wont be for big players in 5, 10 years time. He thinks some of the players will die over the next five to 10 years. You are not focused on trust and consistency and loyalty exactly. Overall, he is saying the economy is improving but it is not making shoppers spend. Caroline, thank you so much. Great interview with Caroline Hyde speaking to the asda ceo exclusively. Bugatti plans to take on luxury goods. Would you have a bugatti handbag . We are going to hear from the boss of this business. He is joining us after the break. Welcome back, everyone. You are watching the pulse. We are on the markets and we are on swiss watch. A taking story. Jon ferro, over to you. You have to wait for that. I am going to start with the equity markets first. Im standing on unchanged moves in the dax. The ftse 100 down by 0. 2 . Let me give you three big headlines. Germany avoids recession. The bar is low for france, they did not trip. Italy, the economy contracts again. The last time the economy delivered any growth was back in 2011. Last 13 quarters, the economy has contracted. That tells you how good or not good things are in europe. Eurodollar, people trimming their calls for next year. 1. 15 against the euro next year. Right now, this is what im watching, the euro i guess the swiss franc. Dropped to 1. 20 this morning. Lower ishis one any like putting your hand in a blender. I dont know what is going on in europe but i am glued to that charge. Like putting your hand in a blender. It can be very messy. Ining up, from the iphone your pocket to your personnel uber driver, we will talk about how the United States put germany in this years soft power service. Will come back to the pulse im francine lacqua. A slow recovery has taken hold in the region. The German Economy narrowly avoided recession and thirdquarter gdp rose 0. 1 while the French Economy grew better than expected. Global Economic Growth will be at the top of the agenda in the g20 summit. Leaders have been arriving in brisbane ahead of the talks. Russia, ukraine, that is a story. Tax will also be a feature. British Prime Minister David Cameron has announced legislation intended to stop Islamic State is streaming from returning extremists from returning to britain. Authorities would be allowed to seize passports of people suspected of planning to travel to syria or iraq to fight. Company news, airbus reported thirdquarter results. The aircraft manufacturer beat profit estimates. Joining us with more is caroline con on. What do you make of the numbers . Good morning, francine. The Third Quarter Beat Estimates for airbus. They had 821 Million Euros of profit outside of interest tax. One thing analysts are looking at is the positive cash flow they generated this quarter, 180 Million Euros when they had negative cash flow last year. That is pretty positive. Shares reacting well this morning. What happened in the Third Quarter is they delivered higher value planes including the a3 80, the biggest airplane on the market. At 414ne is priced million. For the rest of 2014, they are that revenue will be stable compared to last year. Shouldy their deliveries also be at the same level as 626 when they delivered planes. However, net orders will be higher than these deliveries. Already, they have net orders of nearly 800 aircraft in the first nine months of the year. Especially coming from the new neo, their bestselling aircraft so far. They had just this month a 10 billion order from china and a 25 billion order last month from india. What are the main challenges for airbus Going Forward . If you look at the shares this morning, they are rising. Since the beginning of the year, they have lost nearly 15 . There are some challenges. They have to deliver their next generation of aircraft. 50. Upcoming one is the a3 they are set to deliver the first two Qatar Airways by next month. There has been some delay. The head of airbus this morning said that the Program Remains challenging and you have the Defense Division cutting 6000 jobs and having some delays as well on the military plane. Caroline, on a completely different story, but it has a little bit of excitement just outside paris, where are we with the tiger search . Know, a tiger has been loose in the suburbs of paris, near disneyland. Is still going on at the moment. The latest is that the tiger may have been seen at a gas station near a highway going from paris to police are advising drivers on this highway to drive very carefully. They are advising people who live in the area to remain at and not go by foot or go in the forest. There is a big forest near this highway where the hunt may get trickier. Caroline, thank you so much. Amazing story. He got out of a circus and we heard from the circus master yesterday, at some point he will get hungry. Please stay inside. If you see the tiger, dont move. That was the main point. On the have an update tiger situation through the morning. [laughter] sorry, im just laughing at this. Lets go from the fast lane to the runway. Road, mayben that bugatti is the car to be driving. Bugatti is changing its spot. Nowt it was a car company, it is becoming a lifestyle company. It expands its reach beyond the original bran