Transcripts For BLOOMBERG The Pulse 20151023

Manus im manus cranny. We have got the pmi. We have the composite that comes in better. Germany slow down 54. Francine both manufacturing and services. We are better than expected. Manufacturing unchanged, but the services rising from a year earlier. That is the pmi data. The top story this week being the ecb. Lets take a look at the big market moves following draghis press conference. Ryan interestingly have not seen the euro strengthen very much at all on the back of the pmi reading which beat expectations. This is the euro over the last two days. It was tanking. It tanked for 11. 5 hours after mario draghi started speaking. Everyone anticipating more helicopter money on the way. Its settles a bit now. You look at the options market. Increasingly sense draghi started speaking yesterday, traders are getting more and more bearish on the euro. Lets go and look at the stoxx 600. A second day on fire. It rose 2 yesterday on the comments from mr. Draghi. And it is up again today about 1 . Finally, just because we can, i want to talk about italian yields, which are very interesting. Where have they gone . They have disappeared. The whole story is with the italian yields you look at the two year, they have moved into negative territory. It is Something Like 500 to 1 . They moved out of negative territory. The italians will be delighted, or at least the government will be delighted that borrowing costs have dropped to a record low on the back of mr. Draghis comments. Manus Ryan Chilcote on the markets. We are joined by neptune investment manager and cio. James, great to have you with us this morning. Lets get your perspective. There is so much expectation now. What do you think will deliver the most bang for his verbal book . Buck . James i do not think you will have any problem beating expectations in december. He knows he has to beat in order to get the effect. I think he will pull through. He always says. Francine im actually quite surprised because he has not spent a euro cent yet. Once again he is moving currency. Yields are lower. At what point, does he have to he has delivered so far. But the concern yesterday was actually at some point he is going to have to do something so massive to convince markets that he means business at the Balance Sheet may take a real hit. James i think there will certainly extend the period of the purchases. They might increase the size of the purchases on a monthly basis. He might lower the discount rate. When he speaks, he obviously delivers. Hes sure to deliver in december as well. I think the bulkl of the Market Reaction to what ecb is going to do at this conjunction is still to come. I think euro is going to go beyond parity versus the dollar. Manus thats a heck of a call. The magnitude. 11 straight hours of decline. We have seen this level of verbal intervention on the euro. The euro is critical part of the story. You are parity. What are the ramifications of that you are calling parity. Of 2016 is when we can expect it to hit. The ramifications are huge. This changes the outlook for the fed, because it strengthens the dollar against a very important trading currency. It alsoeds mind, changes the situation for the bank of japan. Will they do more easing of their own . I think yes. Francine we are tracking euro, talking,ems they start which is some kind of the european intervention, at 1. 14. This graphic. Ecb meeting yesterday. Will the fed hike Interest Rates this year . If you look at what draghi is overpromising, it makes no sense for the fed to move. James i think the reason for the fed to go is a Financial Stability reason. Draghis move will find financial conditions in the u. S. Because it will make the dollar that little bit stronger, but interestrate still on the zero bounce, still dangerous for risktaking behavior. So fast over the last year, and you want to deal with this problem early on. Manus i have a little bit of time to think about this overnight. What i would say is that china, weve got through perhaps the biggest double the sears so far with china. We do not know what we are going to get the next couple months. Is there some kind of stability going into the end of the year . You get the bank of japan doing more easing. And you get your cap counterbalance. I think it opens the gate for the fed to take that initiative and get that winter and get it done before the end the year. James i think not so much the ecb part of the argument, but i am entirely with the china part. The fed. The fed is chinadependent today. In fed didnt hike september because of the ramifications for china. The fed just has to wait until china is stable enough for the Global Markets and the economy to stomach a fed hike. The china data, that opens the door. The margin draghi promising a bit more against the fed. On balance, i think december is still the most likely date, which is not consensus in the markets. Manus you arein goldman sachs. Youre ok. It may give them a window but it depends on dollar strength, right . Manus the market was so long into weakens, if the euro the dollar rises. That may make it more difficult for the fed to ask. That argument is absolutely right if what you care about is inflation. But if its Financial Stability that you care about, if youre worried about the bad effects of keeping Interest Rates on zero balance, you need to stop that, the exchanges helps you with that. You need to go on Interest Rates. That is the key point. Manus lets talk about markets because we have seen some syndicate moves. Italian two year bonds a into negative territory for the First Time Ever. Weve seen that in germany. Ping, yields are moving. The momentum he punched into these markets. How do you look at it from a cio perspective . We have had quite a rebound in the first 20 days of this months alone, havent we . James yeah. I quite like on a shortterm basis china exposure right now. Manus brave call. James absolutely. Why . Life is very unfair. Manus, your china, you sneeze and i catch a cold. When it comes to the policy response, youre the only one with a handkerchief in the room. China slowdown has caused a knock on slow down across the Global Economy and we are seeing the ramifications of that in the team in the pmi data. Caning market, gdp, we discuss how much but really and within the bounds of reality, too. China all of a sudden looks like a bastion of bastion of stability. Wow, the world has changed in four weeks. He is staying with us. Manus lets take a look at what else is on our radar. Microsoft shares rose to a 15 tradingh in extended after a Beat Estimates and first corning of a sprintnet income 4. 62 billion. Pr ceo focused on omoting Cloud Services as the pc market continues to slump it francine amazons 30 quarter topped estimates. The company turned a surprise profit of 79 million. Amazon shares surged in afterhours trading. Manus net data, net profit Beat Estimates. We will be speaking a squeezable speaking exclusively to cfo at 9 30. Francine mario draghi evokes the old days with talk of fresh stimulus. What it means percent of bank to versions. Diversions. Albank manus welcome back to the pulse l ive on bloomberg tv, radio, streaming on bloomberg. Com, your tablet and are from. Atectrolux, Third Quarter be estimates. It expects appliance market in the u. S. To beat. Very welcome to the pulse. When a look at the guidance you have given to the market, your upping global expectations for the u. S. Flat in europe. You are warning on all of those emerging markets you are in. Question to you is this how robust is your 2016 outlook when you really see so much uncertainty in front of you in these emerging markets . Yes. Not actually given out 2016 expectations for market demand by region. But to your point, in general it is the opposite of what everybody was talking about a few years ago. Right now the strength in demand for appliances is primarily in the large, developed markets. So, western europe, north america, australasia and the weakness, of course, is in those Macro Economic environments that are having difficulty like brazil, russia, china. So, it is actually the inverse of that now. When does results on around . It does not look like a turns around soon to us. Russia, they have low visibility in terms of what is happening there. China probably turns back sooner. Theis not down as much as others and probably comes back sooner. But it is a different picture than a few years ago, as you know. Manus when i was reading through the various oneliners we printed on your report, what struck me was this the ecb is telling us that bank lending is getting better, things are getting better. We have more q. E. On the way. The consumer is not paying as much in oil prices. Why am i not seeing a stronger read in terms of europe here in the lines in your report . So, that is a good question. The reason why you cannot see it is you have to separate western europe from Eastern Europe. So, when you look at total europe, its trading flat and we are expecting 1 to 2 . Western europe is up 5 , which is very strong. In Eastern Europe is down 15 . So, that is why you do not see it when you look at total europe, but western europe is up quite a bit. Manus what is a chance of raising prices . If we look at the core of europe, things are better. Everybody else has disinflation all over i t. We are in that same boat. Appliances is still a deflationary market in western europe, in europe in total. So, i think, you know, it is coming off a 2006 peak down 20 . So, although there has been good improvement recently, in the last six of several quarters, we probably need another year or so before you get the asset utilization back to the point where you will not be in a deflationary market. Manus so, lets get to the big elephant in the room, then. Youre trying to get g. E. Electronics and get this deal done before the end of the year. Said you you you are prepared to sell certain assets to get this deal done. You have got to try to help me here. What are the assets . Give us some indication of what is up for grabs to get the deal done. Are in thee, we middle of litigation and remedy settlements with the department of justice. Cannot answer i that question specifically, but we are in fact pursuing parallel paths. We are preparing to go to trial in november and to, were quite confident that we will be successful on the merits of the case. At the same time, there is an opportunity to settle this thing with the doj out of court. Where pursuing that passes well. So, were confident we will get this deal done. Exactly how it gets done manus let me ask. I understand the restrictions. 1 billion youre prepared to sell . Is it 1. 5 billion . What size of revenue are you prepared to give away to get that size and scale that you need in the United States of america . What were doing as we are talking to the doj about a settlement and the best assures that address the dives titures that address challenges they raced with their objection. That is a settlement offer we have on the table. That the volkswagen saga theave been reporting on, issues raised at volkswagen have been about honesty, integrity, product, marketing, messaging. Im curious, have you started an audit at electrolux . Ar eyou looking at what you are telling the consumer about your product . What has the volkswagen experience evoked for you as a ceo . You taking any actions internally as a result of the volkswagen debacle . Have been andy continue to make sure that what we are reporting and what we are saying is correct. Situation,lkswagen of course, i would guess that every manufacture, including us, is making sure that what they have out there can be supported 100 . Of course, we are ensuring, but we have not found any situations there. The other thing we have in our industry is it is a little bit self policing because all of the competitors check all your claims. Its hard to be off for too long. Of course, we are paying attention, of course we are ensuring that what we have and what we are communicating can be 100 substantiated. Manus keith mclachlan, ceo of elektra looks. Wish you well on the deal and the doj. Francine can e. U. Leaders solve the differences with another summit . We go to berlin for the latest on the on the escalating refugee crisis. Francine welcome back to the ande live on bloomberg tv radio and streaming on your tablet and phone on bloomberg. Com. Angela merkel has called for solidarity admits the escalating refugee crisis p ritchie spoke in an address to the European Peoples Party in brussels she spoke. Chancellor merkel we are going to face it with solidarity. We must continue to keep talking. We must not work in isolation. Europe can do this together. I am completely convinced of that. Francine hans nichols is in berlin with the latest. E. U. Leaders increasingly strained. Will Angela Merkel be able to rally them effectively . John heilemann she is going ans Jeanclaude Juncker also speaking yesterday. Says she will not have resolution, not have a solution to this crisis by christmas heard this is going to be here for as long as leaders can foresee. The responses to hold another summit. An emergency summit on sunday will be the 20th of the year. When we look back on previous years, youve got maybe 8,9 summits. When there is a crisis here, european leaders want to get to brussels. There hasnt been a motto product progress. The last one ended in a stamina. An indicated that the very stake of europe is what they are debating. Issueminister orban this will determine the future of our political family. We are in a deep trouble. The migration crisis is able to destabilize governments, countries and the whole european continent. Strong, clearcut answer, timetable, and action plan. I heard froms chancellor merkel last night is that she was open to a European Border force. A further erosion of sovereignty. Trying toe control the borders, trying to increase controlled the influx of refugees. There is a new poll. The level of concern of German Society that this inflow and of f migration, how it will change society. 76 say it will change society. 21 say it will not change society. It will strongly impact society. The poll did not ask the respondents what they thought. They asked whether he will change society. Many expect that it will. Francine thank you so much. Hans nichols in berlin. Manus we still have james dowty, chief Investment Officer at neptune. This throws up a huge number of questions for visas for the opening of the german borders. Your perspective in terms of the refugee crisis amid economics perspective . This is very complicated. But i think the big point we should not lose sight of is that this is a great Economic Opportunity for europe. Whats one of the big challenges europe faces . Its the aging of the population, the shaking of the workforce. Francine as long as you can integrate them properly. James 3 4 say will change society. Of course it will change society. Look at the United States, a rapidly changing society. The most Successful Society and economy in the world. Manus thank you very much. James is going to stay with us. We get into tech after the break. It is super thursday. Francine we had amazon, microsoft, google shares surging atter earnings need be expectations. Manus join us on twitter while we save fran with a glass of water. Francine the tech has got me in a twist. We are back in two. Francine welcome back to the pulse live in london. Im Francine Lacqua. Manus our top headlines on the pulse. Chinese house prices rose in september and more than hlaf of 70 majorf of the cities. New home prices rose and 39 cities compared with 35 in august. The recovery extended to a larger number of small cities. Rate cuts and an easing of buying researchers. Riseine maersk shares this morning. It put the profit warning down to a weaker container market. Manus london for an Company Talktalk has been hacked. Email a just as details may have been compromised. The stock dropped. We are down 9. 25 at this stage. Francine of course, it is all about that draghi promise. You can see stocks gaining some 1 . Stocks advance in europe, they advance in asia. As riskier assets soared on the prospect of more stimulus from the European Central bank. We had better than expected u. S. Technology earnings. And chinese home prices. Centralbank largesse. Manus lets have a look at the foreignexchange markets. What you have got here at the bottom of your screen you have Italian Government bond yields. They were in negative territory for the First Time Ever on record. So the prospect of the european bonds, bank buying more going more negative and Interest Rates all adding to the momentum in the bond markets. So you are seeing german Government Bond yields, 10year up ever so slight. Francine positive news from the technology sector. The positiveon news. Run me through this. Three weeks ago we were worried about valuations. Now shares are soaring 10 . Nejra a big beat for big tech. Im going to start with amazon. What we saw is Third Quarter sales beating estimates. A surprise profit to the company that was driven by fastgrowing Cloud Computing, a boost from july prime day and them keeping a watchful eye on spending. The rally in shares in afterhours trading means that jeff a sows is the bezos is the third richest man in america. He is happy about that. Shares up 82 yeartodate. Moving onto google, or i should really say alpha but. That is the Holding Company that is going to include the Main Business of google and a lot of other businesses within it. What we saw today is the last time we are seeing the earnings reported this way. Third Quarter Sales and profits Beat Estimates. Up 23 . S total there was robust web traffic, and they also managed to keep costs under control. Costs worth the make him up a lot of secondquarter earnings as well. Investors we warning that Technology Companies that were managing to keep costs under control and boost their profitability that white. And for the First Time Ever,. 1ogle also announced a 5 billion share buyback. I can tell you that is not the precise amount of that buyback. The amount is the square root of 26. Why . Because there are 26 in the alphabet. Now, finally moving on to microsoft. Fiscal firstquarter profit, that Beat Estimates. This, too,. Wasabout the growth and Cloud Services. They also announced that more job expo after revealing those job cuts in july. Manus we have got a great title on our bloomberg. Com article which is the cloud is raining down on all these tech companies. Talk to us about that in terms of the boost it has given to these companies. Cloud growthost in was the theme that sort of unify the earnings story around microsoft, google, and amazon overnight. Basically these three companies are becoming sellers of Computing Power to a growing number of other companies who are looking for lower costs. What we have seen are Companies Like this kind of increase the gap between those that are a bit ke. Wer on the cloud upta we are seeing that shift from hardware into the cloud. The effect of that, if we are talking about share prices, together these three Companies Added more than 90 billion to their market cap in afterhours off the back of these earnings. What a staggering figure. Francine thank you so much. Later. Have more on tech we will talk to steve ballmer, the former ceo microsoft at 1 00. Has just run nejra us through the top lines. There are some of magnificent moves for amazon, and alphabet. When you look at the news flow. Buyback, probability of amazon, these are quite significant moments in these brand names. James yeah. I think specifically on the cloud issue, that is absolutely right. That is the unifying theme. There is a great mirror between the cloud theme and the news of talk talk being hacked overnight. Than storingr internally. And a lot of people did not get this early on, but it is absolutely crucial. Google, amazon, microsoft, there antihacker teams are better. Cloud is safer. Francine when you look at these company, youre saying that cloud is making extra cash for the likes of amazon, google, and microsoft, it means it is taking market share from companies that havent gotten this. Who are going to be the big losers if we saw the big winners yesterday . James yeah. This is a key point for the next years. There is a dark side of tech, and it is across every sector. Technology innovation over the next decade is going to be very fast in a historical perspective. It means Business Models of established businesses that you and i love are going to be ripped apart. Profits are going to be taken from the. Stock Market Indices will have their hearts ripped out by the disruption from these manus these are quite dramatic calls. I get the disruption. We talk about that all the time of bloomberg. So, how do i position . What stocks to our short . Prophetic calls on markets falling apart. Lets back them up in terms of the size and scale of markets. The names you would drop in how you position for that. The energy market. The oil prices have fallen so far over the last 18 months. We think it is going to fall a lot further still. We are getting to the point where electric vehicles are becoming better and cheaper tahn fossil fuel than fossil fuel based vehicles. That is going to decimate auto firms and the oil industry. We are going to see a radically different production base. I would say in five years time from now. If you bought your car recently, a diesel may not buy car ever again. You might be an electric vehicle. Francine we did speak explicitly to the oil refinerys chief financial officer. The degree of Monetary Policy will need to be reexamined at our december meeting. Ew Macro Economic projections will be available. The governing council is willing and able to act by using all the instruments available within its mandate, further lowering of the deposit rate was discussed. And it is one of the instruments of Monetary Policy that i referred to when i said all instruments have been discussed. There were few members of the evident counsel which hinted at the possibility of acting today. But i would not say it was a prevailing theme of our discussion today. Manus those with the highlights from armio Mario Draghis News Conference in malta. Headline. Ne after red within the first minute, three or four headlines in terms of what he did to move. We have got a cracking graphic in terms of his verbal intervention. We are little bit lower this morning. For 11 straight hours. Francine the story we did have red headlines. It is amazing, he has not spent anything and he managed to move euro. Italian yields, two year negative for the First Time Ever yesterday on the back of that ecb News Conference. As manus was saying, we talk a onlybout euro, about q. E. Have an impact on currencies. What kind of level are they targeting for euro . This is what they think we thin k. It may be the 1. 14 level. Manus we have got bloomberg first word that collates what the market is saying. You have bnp paribas and Deutsche Bank seiner best Case Scenario is december. The base case is this you will get a further cut in the deposit rate,. 2 . You will get more on that plus additional quantitative easing. Goldman sachs says, and this goes back to what we were chatting about earlier, if the fed goes, that will be their best case and are. If the fed raises rates, that takes a stronger dollar, that takes away the pressure which is different to my personal perception. That gives and more space them more space. The hedge funds are building up their downside positions on the euro dollar. Francine so the ecb Rate Decision december3. And the possible fed hike is two weeks after that ecb meeting. Interesting timing. An interesting december is what were going to have. Manus a little bit of volatility never bad. Twitters ceo is giving a third companytock to the employees. Jack dorsey announced the move in a tweet just two weeks after he officially took charge of the social networking site. The shares amount to 1 of the company and are worth more than 200 million. Francine Lloyds Banking group will take a further one billion pound charge for wrongly sold insurance. The charge undermines efforts to clean up the bank, as the u. K. Government prepares to cells shares sell shares. Manus Hillary Clinton has defended yourself in congress about whether her department provided security to diplomats and you in libya. She was being questioned over the 2012 terrorist attacks that killed the ambassador and three other americans and benghazi accepted she responsibility for what happened. Mrs. Clinton i would imagine i thought more about what happened than all of you put together. I have lost more sleep than all of you put together. I have been racking my brain about what more could have been done or should of been done. Francine now, the volkswagen scandal could cost germany 3. 4 billion in tax shortfalls as three towns put the brakes on their budgets. Lets go to hans nichols in berlin for a breakdown. How will local governments be affected . Hans local governments will be hit on two fronts. One, they could lose revenues based on what volkswagen sales do. And a lot of revenue comes in from Corporate Tax as well as land tax. Two, if there are playoffs, theyll a, have to spend more for unemployment benefits, but b, they will have less receipts on the employee side of things. You take a look at a couple of these towns. There are three towns that are almost volkswagen central. 125,000, there they have about 60,000 employees in the town. Million is trimming 19 and budget projects from an ice skating rink to building new roads. Then you go down to the south and the very. An audio town in bavaria. They have got 40,000 employees that work at the audi factory. That could be affected. Other towns as well affected. When you take a look at the numbers of employees that just work on diesel engines, it is 75,000. They say, and this is from the label ministry, they say they dont expect job losses just yet. Number wee time, the are getting is coming from the German Economic Research Institute is a 3 billion euro shortfall based on tax receipts, and part of that is based on fewer cars being sold and potentially some flails some playoffs. Layoffs. Manus lets talk about the proposition so far. We are waiting for exact details on how volkswagen is going to fix this. I have Read Everything from they are going to have popup mechanic shops. They are going to have to implement a program on a global basis. Are we any further on in terms of the infrastructure that is going to be needed and the cost associated with that for volkswagen . Hans no. In some ways, we are further behind than where we thought we were a couple weeks ago. A couple weeks ago we thought they could have a potential software fix for the 2 liter eng ine. It turns out you are going to have to reengineer them as new hardware. Now volkswagen, this is what they announced yesterday they are going to look at another engines toatch of see whether or not there were software installed on them that could override or potentially affect performance or emissions readings. In some ways, volkswagen needs to get to the bottom and the depths of the scandal before they can come up with an accurate cost. Theyve always said the initial 6 billion they set aside a couple weeks ago is not going to be enough. Guys . Manus thank you very much. Hans nichols in berlin. Francine up next, growing in all categories. We will hear from a ceo and see whos losing in the battle of luxury brands. Manus welcome back to the pulse live on bloomberg television, radio, and streaming on your phone, tablet, and bloomberg. Com. Fendi is growing in all categories in all regions according to the ceo pietro beccari. But its doing well when it comes to mens fashion. We are having growth in a category. There is not a category growing more than others. We are quite balance. Have strongeh momentum in men, which was a category which was a little bit underestimated at fendi. We more than tripled and you will see more coming. Francine he also said that longterm andsia making snap decision based on shortterm volatility was not the right strategy. Pietro i think the changing strategy monthtomonth is not the right move. I think we are here for the long term. So, thats not typical of fendi, image brand asr far as item. The market is big. The demand is big. So, we need to steal market share from competitors. For that, there is room in every season of the year, in every situation. Manus lets bring in our european luxury goods reporter Andrew Roberts standing by in our paris studio. Looking at this fendi store. It is succeeding while others are struggling with this china slow down. What are they doing right . Is it products, is it price . What have they got that the others havent . Andrew one is scale. Fendi is a sub 1 billion euro business, and that gives a lot more room to maneuver and markers that are perhaps less saturated than some of its peers. If you look at gucci that is four times the size. Of exposure it is much more invested in china, especially in hong kong where demand has gone through the floor. At the same time, fendi is doing something right in terms of how it is managing its product. It is very much focused on its best sellers. It is also targeting a younger consumer. It introduced ecommerce earlier this year. And it is also playing up some of its more affordable products, such as pom pom but you might attach tos a handbag. Compared to00 euros a handbag that could cost three or four times that price. It is about giving people an entry point to the brand and trying to communicate to them in bes that they may seek to shopping, and at the same time it is also to do with exposure to certain markets. And fendi certainly has a lower exposure to some of these more difficult markets than others. It is perhaps more exciting for consumers on the ground as they shop overseas. Francine bag pom pomgs. Called a fendi bug. Pumad a Trading Update did not due too badly. They seem to be bucking the trend. Ndrew there are two things going on. Betterthanexpected sales. Saint laurent is a similar story to fendi. It has a superstar designer running it. Hes made the brand exciting. It is the hottest brand of the moment. That comes out to the numbers, 20 comparable sales in the quarter. Which is extorted. When you look at it across other brands which is extraordinary. Also, what is going on here is gucci. Gucci numbers were down in the quarter. What the market is excited about this morning is what the company had to say about the new collection. He is the new designer. His david collection hit stores amonth ago. It is already in a few sotres, stores, but the responses good. Upes of his hand bags are doubledigit. That bodes extremely well for the fourth quarter. I think the market is anticipating quite a strong rebound in organic growth in 2016. As those products have more stores and more of his collections flow through. Thank you so much. Andrew roberts on the latest in the Luxury Fashion world. Kering gaining 7. 2 . Manus i want to know which pompoms . 800 euros on francine you have one that looks like carl lego felt. Agarfeld. Us listening on Bloomberg Radio, the first word is up next. For viewers, surveillance we have a great entry will. We will talk about negative yields in europe. We will also be talking about james bond. Because the premier is here in london on monday. We have an exclusive. The largest cinema chain outside the u. S. Are you a star wars man or james bond . Manus i am a james bond. Tech titans try up. Surging in afterhours trading. Draghi delivers. Global stocks rally as he hints at more stimulus before the end of the year. Negative yields on the euro f all. Good morning. This is bloomberg surveillance. Im Francine Lacqua in london with tom keene in new york. Apart from your brandnew suit, draghi will, mario do more by the end of the year. Tom absolutely. Witnessing a and i 3. 8 standard deviation move on the german twoyear. Look where the euro is this morning. You can afford your weekend soiree in spain, right . I can can francine now. At some point, mario draghi will have to spend some money. New economic figures out this morning. According to the firm market forwardlooking indicators point to the risk of a slowdown. Ecb president mario draghi suggested more stimulus may be needed by the end of the year. It is being called the worst Road Accident in france in three decades. It tok hit a bus, causing burst into flames. At least 42 people were killed. On capitol hill, the vote counting is a formality. The next bigger of the house will be paul ryan speaker of the house will be paul ryan. Nextmal vote will be taken week. One. Irst job will be a big there has been another shooting on a college campus. One person has died and two people have been wounded on Tennessee State university. Quality ise, the air approaching the very unhealthy range. The pollution has occasionally forced schools to shut down and Outdoor Events have been canceled. That is the news. Futures up after a big day. European equities up as the punch bowl refill by mr. Draghi. The 10 year yield in the u. S. , 2. 04 . I noticed brent crude very quickly or rather, nymex crude. Lets go right over to the mac monitor and take a gander at what changed yesterday. This got ever steeper. Dos is what the euro will and all you need to know is this is a lot of one way bet toward parity. That was reaffirmed yesterday. Francine interesting. Taking it down in the immediate term. Tom a weaker euro. The outcome of some of the quantitative easing. Sets up thes order debate through surveillance this morning. Francine given what we know about the ecb and given what mario draghi intimated yesterday , what did it mean for the timing . Hostng us now as our guest for the hour, antonio pascual. Great to have you on the program. You thatised were mario draghi actually managed to move the markets so much . He gave essentially the same News Conference as last week. Antonio i think this time, it signaling thaty they will reexamine at the next meeting. When they really want to drive a point they use very particular language and they did. It is a bit of a doubleedged sword. Failure to deliver can create disappointed on the markets. Generally, he has a good track record of not under delivering. It was a strong record. More qe is coming. And it opened the door to a rate cut, which is aggressive. Francine we have a great chart. If you speak to officials like we do on a regular basis, they never say they are targeting the euro, which is the only thing qe can move on. It seems like every time it goes above 1. 14, one of the councilmembers tries to talk it back. Antonio if you look at the , it has moved one by 9 . That is the one that worries them for real. That is the one that will get the inflation rate down. Exports. Urt their net they are naturally concerned. That is more of a bellwether. I think once they are heading above 1. 15 or toward 1. 2 zero, that is a reason for concern. , i look at all of the festivities yesterday with the 3. 8 standard deviation move and it still comes back to the real economy. What will get the european real economy going . Antonio that is the good question. Monetary policy can help and it is helping. Pmi became reasonably strong. The way Monetary Policy is helping is by putting money in the pockets of household firms. Mortgages are posting close to zero. That is money that goes to the pocket. Tom lincoln the equity call to europe and what we witnessed link in the equity call to europe and what we witnessed yesterday . Antonio clearly, there is more qe with the data we have seen in pmis supports that. One has to distinguish by sectors, but for the euro more broadly, there is clearly upside. I dont know if it plays out in the United States, but the markets are a check and balance of what a politician can do. The fact that these yields keep on going down, the italian twoyear yield touched negative yesterday. There is a concern that it does not put enough pressure on politicians to deliver. Tom i totally agree that the is that thee politicians can delay. Francine how much does that were you . That it will have to come through painful structural reforms. This is clearly a concern. Andsmeeting, mr. Draghi sayingying ends with state public that is very high, growth is low, inflation is low. Favorable is under monetary conditions, but longterm, there is a key condition. When the next shock comes, there will not be policy space to deal with it. Francine you say that the next shock will come. Are we talking six months down the line and where will it come from . Is it banking . Is it yields . Antonio for now, not to be overly pessimistic, but domestic demand continues to drive the markets, it is net exports, and it is china where there is a worry. We saw the data in china disappointing. Tom did barclays change their euro call yesterday . A number of houses notched down. Antonio we have been actually quite aggressive precisely on this call. We expect the ecb to do more before year end. By year end, we have the eurozone moving toward parity. By the next six months, we are at parity, actually. Basically on the behavior of the ecb and the fed. Tom still quite a move. We have the markets adjusting to what we saw. On Bloomberg Radio this morning, Daniel Gergen will join us. He is the author of the prize. A conversation with Daniel Yergin later this morning. Stay with us. Bloomberg surveillance. Tom a big baseball game tonight. The blue jays play the royals. Net orange sunrise. In america, we are excited about baseball. The new york mets in the national league. Here is a bloomberg lusive. Lance breaksc they will not play the boston red sox. Chinas economy is slowing down and maersk has cut its profit outlook. Jack dorsey has donated a third stock. Ters they will go into an equity pool for twitter employees. Profits are now getting to be a habit at amazon. Shares of the largest Internet Retailer are rising in the free market. Their strong Cloud Computing sales, the prime day promotion, and a tighter outlook on spending. Jeff bezos added 5 billion to his fortune. He is now worth 55 billion. Francine i find the story absolutely amazing. Microsoft, google, and amazon added 90 billion on market cap. Here in europe, we keep talking about valuations. Amazon is our morning mustread. If the Company Posts an operating loss, investors pat if you report a dinky report, wall street is shocked. We have seen this from amazon, google, and microsoft, francine. We have the core business which is doing ok and then the cloud which gives you the huge multiple. They are all in their own separate areas. Ecommerce. Tom let me go off the bloomberg is thel to what i think top line of the Balance Sheet. 48, 61, 74, 89 106, 127. That is the massive revenue billed of amazon. That yourggest morning mustread is dead on, but it is less about income statement about amazon capturing market share. It is amazing, their dominance. Francine when we have ceos in europe and they are asked to is the person you admire most and what company are you most scared of, it is always amazon. It goes to the heart of retailers. It goes to the heart of postal services. They are all concerned when amazon becomes more competitive. Tom theyre are doubling revenue every four years. 48 billion. 61 billion. The projection out is 106 billion. Vonnie amazon was the golden eggs that got laid. Tom we have got to do a Technology Shout out or technologist of the year. From morgan stanley. Im sorry, francine. She is not getting nearly enough credit for being the adult in the room. You wonder if every Single Company is going to copy this and get a hardnosed, tough, sob cfo. Do you like those algorithms . Sob cfo . Francine she is the adult in the room. Jack dorsey said, i want to boost morale among employees. Francine Everybody Knows tom Everybody Knows im a big supporter of twitter. Everyone knows wonders what is the game plan toward the end of the year. A little bit of technology. Nextll redux this in the hour with paul sweeney of bloomberg intelligence. Also next hour, what a treat, alan ruskin will join us at 6 00 a. M. And we will talk to him about the bombshell that was mr. Draghi straightening out the markets. Menu ofoking for a full options. Our full menu includes alan ruskin. Good morning. Francine this is bloomberg surveillance. Im Francine Lacqua in london. Tom keene in new york. It is not raining in london, so we will take what we can. Mario draghi says new stimulus could be on the way. Lets get over to hans nichols in berlin. In terms of what the pmi data tells us, falling prices, week growth, that is kind of it. Hans that is it. We see a china effect in here, at least in germany. Manufacturing came down a little bit worse than estimated. Services came in better. Actually surprised on the upside. It was a little bit better than expected. It looks like we have some moderate growth in france. We have to remember the baseline. Francine when you look at yields. We had that italian 2year note negative for the first time. Switzerland, germany, netherlands, france they are all in negative territory. Hans buy real estate, that is my advice. There is the talk of a german housing bubble. I look at what the 10 year arm aboutgermany and it is at 1. 2 5 . It is remarkable. Even tom can find himself a villa may be up north. Remarkable rates in italy, as well. Lower yields filtering into the housing market, as well. Are we going to have a german housing bubble . Francine right. Then when you look at the refugee crisis, it is getting worse. Angela merkel calling another summit on sunday. Can she get everyone on board . Hans i think she will likely have the same problem as at the last summit two weeks ago. Im not quite sure what her goals are. Jeanclaude juncker said, you are not going to have a solution by christmas, you were going to have a long fight with trying to get Eastern European companies countries to be more european, as merkel would say. Francine antonio, when you look at the refugee crisis and it is a human story and we must never forget that for the economies, difficult to understand whether it will be a net benefit or this is a concern because inflation is going nowhere. We have the output gap and high levels of unemployment. How do you insert the refugees . Antonio sure. The countries that are doing better offer a lot more scope. Germany is key. They do have space. They are operating above potential gdp already. Unemployment is over historical lows. They do have capacity. This has to be turned into an opportunity. The problem is if this is politically missed managed mismanaged. If you allow the populist parties to campaign against it, that hurt. Tom really to both of you, but let me start with you, antonio, which institution defines fair in europe . That is a very good question. I would hope that the European Commission would have a say in that. The heads of state should be the platform for that. Finding an agreement. Fairness is a subjective term. Francine it is Angela Merkel. Angela merkel is trying to make this fair, i would argue. We will get back to antonio very shortly. Tom very good. Coming up on republican politics, dr. Ben carson and all dueruz will join respect this evening. Stay with us. Tom good morning, everyone. First word news. Here is vonnie quinn here is ndersoncurtis gra quinn. Vonnie thanks, tom. Forward indicators point to the risk of a slowdown. Mario draghi suggested more stimulus may be needed by the end of the year. At least 42 people were killed in france when a truck collided with a bus near the city of bordeaux. The Obama Administration is debating ways to protect syrians caught in the middle of the countrys civil war. The government is considering whether the military should establish nofly zones and safe havens in syria. The white house is said to be deeply skeptical of the idea. A 19yearold man was killed in an argument over a dice game at Tennessee State university. Three female students passing by were wounded. Congressman paul ryan is on his way to becoming the next speaker of the house. He has support from all different factions of the republican party. Congress has to raise the debt limit or face a possible default. Them 72 hours, pretty good. What an interesting ballet. I would suggest it was in an original ballet. It may show a new to the pull rarity of gridlock. There is gridlock at the theaters. A few large movies out. Vonniefrancine this is the balt between star wars and james bond. Foret sales broke records movie. Ar wars few blockbuster releases enough to carry traditional cinema through the year . Of thehards is the ceo largest cinema group outside of the u. S. I have to get this out of the way. James bond or star wars fan . Youve missed hunger games, as well. Between the two of them, james bond, incredible film. It is going to be equal for me. This filters through your bottom line vonnie this francine this filters through your bottom line. Do i go see both if they are big successes and films are great . With the studios have done is they have programmed the films so they dont cannibalize on each other. Released ong monday. Star wars is coming out on december 17th. Hunger games is coming out after that. It is not an accident. The films have dated they have dated their films through 2027. Questions,ne of the has the subscription model, is it a real threat to theater viewing . Not at all. That as feed see inhome entertainment. Netflix has been disruptive to everything at home. Modelok at the great, new. Beast of no nation is a great new movie. The opportunity cost of selling it through the subscription model they have left a lot of money on the table with that film. Tim, what you need between release me and Second Screen viewing to make a profit . How long do you need between the release time and viewing on a Second Screen via netflix or traditional models for you to make a profit . That is really a window. Windows, the average tends to be three months. Internationally, it tends to be four months. That has been pretty set in stone. That has not really moved in the last few years. Vonnie it will move and are you comfortable with that coming down to a period of weeks . That is actually not happening in the u. S. , either. You are seeing three months as the average. Those numbers are being released by the National Organization in the u. S. That has not moved that much in the last few years. Market,ionally, in some it is actually statutory. Paramount is releasing a couple of movies with amc in the u. S. And with cineplex in canada. That does have a builtin mechanism whereby they would release it on a slightly shorter basis. That has not been picked up by any other exhibitors in north america. ,rancine what are you seeing antonio . I think tom is going to hunger games. Antonio definitely, james bond. Francine how good is this james bond . Critically, it has been getting five stars by everyone. The demand for it is outpacing sky fall. And that was the highest grossing film in the u. K. Ever. It was also the highest in the franchise. Over 1 billion worldwide. We are outpacing that now. The potential we see is huge. Francine what happens if they change james bond . If you watched the interview with daniel craig and he was starting to hedge his bets a little more. My bet is he is back for one more, at least. Francine the future is immersive cinema. Do you have to spend a lot more to give the multisensory experience . Something to provide exciting for our customers. We have to constantly keep that in mind. It is almost back to basics with exhibitors. You are seeing an emphasis on seats and sound systems and screens, particularly with laser projection being produced. Getting lazy boy type right now. Ur cinemas that is a bit of a game changer. It is a talking point. Fully reclining and looking at a screen, you will have to come back and give us details there. Antonio stays with us and we will be talking about more negative yields next. On Bloomberg Radio later on, we have ken burns. We are streaming on your tablet, your phone, and bloomberg. Com. Tom good morning, everyone. Bloomberg surveillance from london, from new york city. We welcome all of you right now. Francine lacqua is in london. Francine thank you, tom. Have been talking about mario draghi and the promisee has given to the central banks. Does the promise of mario draghi, of doing more qe, of protecting the euro mean for the fed and the boj . We have announcements from them expected next week. Antonio it certainly has currency implications. Fed and theces the doj boj decision. Concerns have been highlighted by the fomc. March is oneat in they will start. Influence prices, we believe it will be a bit strange for the fed to go and do the liftoff. As for the boj, we think they will probably lag to the Monetary Policy. It is a very close call. We think theyll will go with more purchases and more etf. They will probably double with the etf purchases. Francine how much will the fed look at what mario draghi is delivering . Antonio i think it does matter again. Mentioned a rate cut. That would put pressure on the dollar. A little bithances. F the talk tom i look at all of this discussion and i understand it is a dance. What does this discussion on a friday morning mean for the people of japan, the people of europe, or the people of america . I dont understand how these good efforts are imputed over to the real economy. Do you observe that . Antonio it is, in a way. Inflation is one of the most important variables for anybody and everybody anywhere. It influence real wages. It influence disposable income. It influences money in your pocket. It is critical in an interconnected world. Currencies influence inflation and inflation influence is everyone of us. Thatwould you suggest without what we saw from mario draghi yesterday, a good part of the developed world would be in true recession . Mean,o well, i currencies matter. Policies become more complicated because there are less and less countries that you can bet on. In a way, it is true that you can only force Exchange Rates so much when Global Growth is weaker, when emerging markets are weakening. Perhaps there are a few exceptions and those are developed markets. Tom francine, you and i have the celebratory beverage at the cigar bar, but this is getting old. That is how i felt yesterday watching the mario draghi news,. We have been doing this for eight years. Francine andy at the markets took another view. And that is where the story lies. We have been talking about it for eight years. Mario draghi gave a not dissimilar News Conference 10 days ago and yet, yesterday, the markets took it as a huge sign of confidence. Is that the markets that are wrong . Think they are looking at the issues of low growth and low inflation. I think this measure goes a little bit. It is true that we are not we areanding well why not seeing more recovery at this stage of the crisis. Why we are not seeing a little bit more inflation. Been looking at it, not just the central banks. There are some missing answers. I do believe that Mario Draghis response was necessary to deal with the low inflation. Quickly as a final question out of left field, how will the Swiss National bank have to adapt to what we saw yesterday from the ecb . Antonio that is an important with really critical implications no doubt. It will very much depend on the negative to positive rates. If the ecb work to pull the trigger of a negative deposit rate, you will see real action and that will clearly get the currency going. Tom thank you so much. Greatly appreciated. Thisll continue here in next hour of surveillance. Alan ruskin will join us in the next hour. A bombshell from mario draghi. Vonnie quinn and tom keene in new york. London. Lacqua in we welcome you this morning. Bloomberg surveillance. Tom good evening, hong kong. That is my Robin Williams imitation. We say, good morning to all of you in asia. Here is vonnie quinn. Beate microsoft estimates. Ceo Satya Nadella has been focused on selling Cloud Services. The u. S. Government has given approval to driven drill for oil in an area previously offlimits in the alaskan arctic. Closed down 14 . The state of oregon sued the company. Lawsuit that oregons does not have any merits. Francine thank you so much. Erickson shares missed analyst estimates. Spending in china slowed. Ceo froms now is the stockholm. A microcosm of what we are seeing in the world economy. I want to get your thoughts on how concerned you are with china and that we are expecting them to reduce spending. Stilln i look at china, i see a heavy dependence on 4g networks. Of the that is part mobility in china. You have to be put in a relative term. Is that the online demand for more people getting , the macroeconomics, the infrastructure is so important. What about russia and brazil . They have been keeping up their investment for a while. It is a little bit harder when it comes to investment in networks. Of course, the purchasing power is going down for them. We have seen some signs of that in the Third Quarter. On the other hand, we see markets like india, sub sahara, Southeast Asia continue the growth. It is a little bit mixed. It is not equal through. The discussion needs to be a little bit more surgical. Francine we looked at equity markets on the rise. We looked at a lot of m a companies or companies that are unexpected. Companies trying to combine in the last couple weeks. Are you looking at m and i or are you concerned about m a or are you concerned about market volatility . We have had the same strategy for a couple of years. In our core business, we deploy preferred to deploy our organic resources. We have acquired a lot of companies. I think we have not changed the planning. I just went through a crosssection of your competitors worldwide. The margin is 13 or . 14 on dollar. What is the pressure on the board to increase your margins down the income statement . Where is that going to be in one year . We are actually gradually improving our margins. We have also said that we are on a program of 9 billion swedish krona. Tom when you look at cisco, oracle, or what we saw on the cloud from amazon, google, or cloudoft, how is ericsson going to compete when you are under these immense pressures to improve margins . We are working in different clouds to be honest. We are working to virtualize the Telecom Cloud. Over time, we are going to connect the clouds with amazons of the world to bring out new services to the market. We are in the Telecom Cloud where we are leading that transformation and virtualizing the product. We are in the beginning. Billionpart of our 5 to do this every year. Francine thank you so much. The ceo of ericsson. Antonio, thank you so much for sticking around. We were talking about growth in europe. We talked about growth in china. They are scaling back on their 4g networks. And youre any company are doing business with china at the moment and im thinking of all the commodities how concerned should you be . That plays into the macroeconomics themes we have been talking about. Estimating the q3 data that was released earlier this week with growth, slow income, just very mildly, the effect of growth that we have been estimating, it is 1. 7 less. Affected anden the the official reporting is not just wide, it has been widening. I think it is a concern. His production coming with is production coming with . Consumption is ok. The others are on the good side. Tom where is the bundesbank in all of this . What is the drama we observed one we saw markets react . Where is the bundesbank within the draghi ecb . Antonio it is there. It is part of the council. Mr. Draghi has to set policy for the euro area as a whole. Weaker. Was a little bit inflation in other countries was much higher than inflation in germany. Now there is sensitivity the other way around. Europe and the euro area has to set policy for the whole zone. Tom thank you so much. Antonio pascual with barclays. Coming up, a hardnosed conversation with alan ruskin. We will talk about the drama from draghi. And the view forward on the markets. Vix, 14 point 45. That is stunning. Francine lacqua in london. Im tom keene in london. Stay with us for another hour of bloomberg surveillance. Tom punch bowl. To the brim. Global stocks higher. You are in the cloud or not. Here is a partial score. We need a friday update on where are we . Watching royalsblue jays baseball. Alan ruskin does not know anything about baseball. He is with us. It is friday, october 23. I am tom keene. With me, vonnie quinn. Teamine, it is baseball here in america. Francine i love baseball. If you are talking about the draghi baseball. He said i am ready here for cutie. It goes back to what we are trying to focus on yesterday