Transcripts For BLOOMBERG The Pulse 20160505

Headquarters. I am francine lacqua. We have to look the markets and this is the picture. Here in europe, we are gaining a touch. I want to show the emerging markets. Ome of the turkish stocks turkish lira against the dollar, 2. 92. Were expecting a conference from the Prime Minister who is expected to resign shortly. This is the picture for brent. 45. 82. Later. Show you a chart lets get to first word news with their change. Nejra a private gauge of services dipped slightly in april. The pmi came in at 51. 8, down from 52. 2 the previous month. Said moree meeting, needs to be done. Philip low will replace Glenn Stevens as governor of the reserve bank of australia for a sevenyear term. He inherits the post after the central bank eased policy to a record low to cushion the end of a Mining Investment boom and combat disinflation. He was appointed in february 2012 when stevens described him as an exceptional economist. The u. K. Is holding a series of elections today on what has been dubbed super thursday. The london mayor is getting much international attention. There are mayoral races in liverpool. There are also parliamentary by elections and sheffield brightside. Global news global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. You can find more stories on the bloomberg at top. Francine. Francine turkeys Prime Minister is expected to step down this month after losing a power struggle with president erdogan. The politics have seemed tricky stock markets. Is that she is meeting with the executive board. Lets speak to jon ferro. He is in charge for all of our government reporting. Great to have you on the program. How worrying should this be . Ohn we saw the biggest drop in the currency since 2008. Nearly if i present drop last night. That shows you how worried investors are. Some of the contract that anyone dogan made erg they have been happy with the policymakers that he has put in charge of the top jobs. Some of his geopolitical conventions are not part of the world. That is what were seeing here. We are seeing the contract coming undone. Francine what are we worried about . The rule of law . Is this a number another symbol of that . Sayinghe Prime Minister i expected to be my own man and this is not happening. You could argue what else the you expect . What else do you expect . Gan is your boss, it is not in his nature to delegate. This is another example of him taking his grip and setting himself up of being the autocrat. His is all perfectly legal no one is suggesting otherwise. There is more and more one person that matters in turkey and that person is erdogan. Know there was a meet things have gotten bad this week. We have seen this huge selloff in turkish stock last night. The Prime Minister went to meet the president. He did not expect the outcome to. E as genetic as dramatic we heard the Prime Minister was planning to tell the president i need to be my own man. You need to give me my own space. Clearly from the outcome, that meeting did not go very well. Francine we do not know whether he is going to resign or announce he will not step up next election. John he might not resign today. He called for this convention in two weeks time. Whatever mechanism it takes, he will be Prime Minister he will not be Prime Minister for much longer. Francine in a couple of weeks it is the ak party the convention. Do we have ripple effects . John it certainly does. He was the respectable face. He was the man the eu felt they could trust. He was the man closely associated with the migrant deal. If youre certain if youre sitting in berlin and looking at turkey now, youre asking yourself who do we talked to . Geopoliticale huge ripple effects. Gan much for your range. With russia, some investors will that sort of restraining hand will be there will not be there anymore. Francine is it to early to talk about possible is it to go early to talk about possible to talkrs too early about possible successors . From the akis talk party, look at the poll numbers. They might be tempted, do not be surprised if you start seeing more before the snap election. The snap election that will give real president ial powers. His real dream is to turn himself into a very strong presidency that he will occupy. Francine watch out for the market fallout. John, thank you so much for coming on today. Now, coming up after the break, we talk about Federal Reserve and we had a great conference in new york. That is the Fund Investor conference. Go short and prepare for trump. That is the big idea from that conference. Sleeping on the factory floor. He will do whatever it takes to ramp up production of the firms latest electric car. That is what Jonathan Ferro does. We will look at what the worlds Company Tells us about china. Francine lets get to the Bloomberg Business flash with nejra cehic. Nejra repsol beat analyst estimates. They compensated for low oil prices. First quarter adjusted net income dropped to 572 Million Euros, down from 928 Million Euros from the yearearlier. Shares behind although repsol is the worst performing european oil stock over the last year. Shares in bpr higher effort after it reported earnings before interest, taxes, depreciation and amortization rose 14 . The figures were bolstered by the acquisition of mobile offerings, britains largest mobile network. The companys finance director told us that it is investing in higherspeed broadband. Unless we got a degree of regulatory uncertainty, we cannot spend that sort of money. I cannot look shareholders in the and say we will invest but were not guaranteeing relationship between investment and regulatory outcomes. We will spend the and for structure and by that, improve the quality of the network. Bradford howard will daily they liquidity and not charge a performance fee. The fund is a partnew oa unit. A former ubs executive who joins them in 2016. That is the Bloomberg Business flash. Francine. Francine nejra cehic there. Go short is one of the big ideas of one of the hedge fund industries. Billionaire stander could miller says bull market in stocks is done. Ohfer gold. Go for gold. Borderline phil state fail state. As john kasich follow ted cruz bowing out of the race, jeff gordon lack says prepare for debt. You are going to get a reagan response with donald trump. He promises a wall, ring jobs back bring jobs back, lets face it, trump is extremely comfortable with debt. Lets introduce our guest. Pau great to have you on the program. There are a lot of big ideas. There is uneasiness. Equities need to have a little bit of a correction or he cannot go much further from here. Pau doe you go it hasee back up pau been going up since the 11th of february. At the time when Profit Margins has been disappointing. There is a bit of catch to do. Equity prices need to make sure they wait for those earnings to react. If the margins have been better, the expectations have been disappointing overall, earnings excitations are pretty low. Maybe you see a beating of expectations. Margins will drive what goes on from here. Overall prices correcting markets will have to react and probably they will not a very Strong Quarter in terms of overall price returns. Francine i talked to you a month ago, has anything changed . Ceos seems to be a lot of interested in cost cuts. Cost cuts is something that is still working out. Yourago, price ability to maintain crisis at an environment in which some struggling to maintain the unit labor cost. That is very important. Yet seen in the last few months, how the very Mature Technology is struggling at the time when the most developed consumers are also having problems. This is a tugofwar between higher margins and a Consumer Base which is improving. Cash higher prices overall higher prices overall. Francine by gold. Everyone is telling me by gold for as long as i can remember. Is this the natural hedge . Does it make sense if youre going to go haven to put money into swissie or gold . Pau in practice, it is difficult to implement. Francine why . Pau because gold is negatively correlated. Confident the market feels everybody is realizing low visibility. Their forecast are costly revised. There is a lot of cross currency in the way of thinking. Gold will react to that. , in terms of gold derivatives positioning, and that at the time when maybe we will see helicopter money being discussed. Francine you think helicopter money will be here . Or the japanese government had to go there first. Pau japan is first. Japan has struggled to create a meaningful stimulus. Negative rates are how would markets react to helicopter money . Mean thatdoes not donts will go back to fight the policymakers. The have the ability to exert shortterm easing. Government thats financed from the central bank, it doesnt matter. In the shortterm, people will forget it is the very last markets will react aggressively. Be in 12uestion will months after that, helicopter money goes what now . See the beginning of recession. Francine with those words are not very optimistic, we will come back and talk about what janet yellen can do in june. Up next, it is the worlds biggest Ecommerce Company. s slowingalibaba growth tell us about chinas economy . We are putting a lot of people back to work, but our Economic Growth overall is not climbing fast. That implies we may be in for a slower growth. Slower growth period in the future. How much is just noise in the data . Francine that was minneapolis fed chief talking about what it might mean for the future of policy. We know the fed is watching that, that is china. Alibaba, the Worlds Largest Ecommerce Company reports earnings today. Strongly. Growing the company handles more online sales than amazon and ebay combined. P g tom orlik geithner are they real proxy of the chinese economy . Pau they are. While china has massive debt problems in the corporate sector and the nonperforming default cycle has not been dealt with, the Consumer Base in china is healthy. Policymakers have begun to exert influence in the shortterm. Still, has the ability to generate the kind of turnover numbers that alibaba and the macro figures in terms of sales Like Airlines Airline Tickets or ledger is telling us it is consistent. We are the consumer that is still growing in real terms. That is not too bad. Francine you are the fed and they told us they are looking at china. You would not be too worried unless you thought something would happen with debt . Palko correct. The fed is pau running out of places to hide. The Global Economic conditions set of the u. S. Were mentioned. Conditions within the borders of the u. S. Are reasonably healthy. Growth was disappointing, but the fundamental breakdown of that growth is still healthy. The detractors of growth are temporary, like inventories. Or that have already been dealt with partially, like the Dollar Strength which in the last three months have turned the euro dollar weakness. A very high probability, will have nothing to do but raise rates come june. June do you think if you are a bloomberg user, you can check the w. A. R. P function. W. A. R. P function. Xarkets are mispricing line pau the market is underpricing. Mately francine youre telling me theyre made by the end of year or the next 12 months we will get helicopter money. Why would the u. S. And chair yellen put herself in a play where investors play the divergence card . Pau because it is all about credibility. What they are panicking about his being a behind the curve. Yes they know it big policy mistake will be to raise rates when the economy is not able to do so but they also know that if they have been telling the market that it is outside the u. S. Were worried about and the last three months we have seen nothing but better news, then people will start to question, wait, why are you not raising rates . The fed will be the last bank done with this. The japanese story followed by the european story. Etc. E flaring and ishink looking at the data important but also looking at how they try to manage Market Perception about being behind the curve. Francine and 10 seconds, the dollar can only go up. Palko the Market Expectations have been reduced. Yes,. Francine powell, thank you so much. We will bring you more of the alibaba story in 20 minutes. Up next, how is middle east weathering depressing storm . Speak to the set to open later this year. It is big. Exactly the size of 50 football fields. If youre wanting to find an ice cream if you are in that mall, it is going to be a great conversation. That is coming up next. Show me movies with romance. Show me more like this. Show me previously watched. Whats recommended for me. X1 makes it easy to find what you love. Call or go online and switch to x1. Only with xfinity. Show show me more like this. S. Show me previously watched. Whats recommended for me. X1 makes it easy to find what blows you away. Call or go online and switch to x1. Only with xfinity. Francine welcome to the pulse live from bloombergs European Headquarters in london. Im francine lacqua. We are getting breaking news in terms of the u. K. April services pmi. It fell to 52. 3. We were expecting a figure of 53. 5. Still growing because any figure above 50 means expansionary mode. 51. 9site pmi falling to and services falling to 52. 3. Theres concern about brexit. Maybe some investment project being held back until we have that referendum on june 23. Lets get to the bloomberg first word news with nejra cehic. Nejra private gauge of services in china slips. 51. 8, downe in at month. 2 the previous the council said more needed to e to promote private investment growth. Lowe inherits the post with diminished Interest Rate ammunition after the Central Banks east policy to a record low to cushion the end of a Mining Investment boom. Lowe was appointed Deputy Governor in 2012 when siemens described him as an exceptionally economist. The u. K. Is Holding Elections today in what has been dubbed super thursday. The election of a new london mayor is Getting International attention. On top of that, votes are taking place for the scottish parliament, National Assembly of wales, Northern Ireland assembly, and 124 councils in england. Global news 24 hours a day covered by our 2400 journalists in more than 150 news euros around the world and you can find more stories on the bloomberg at top. Francine nejra cehic there. Lets head to the bloomberg with mark barton for your asset check. Mark stocks in europe rising for the first day in five, longest losing run since the end of march. Thought week kickoff with earnings from bt group. Profit beating expectations thanks to its acquisition of mobile operator ee in january. It grounds out bts consumer business. A growing portfolio of entertainment. That is a big industry right now with the likes of sky, which is adding its own Telephone Services as well. Bt shares are up by 3. 25 today. It has been a busy couple of weeks for the oil industry. Sol reporting profit that beat estimates. The Chemicals Division compensating for low oil prices. This company is cutting staff, seeking to divest assets to whether the slump in crude. Ol have been made worse by an acquisition is made in may, of talisman, which burdened it with debts and extra assets to offload. Repsol in february announced it will slash its dividend. These are the Major Oil Companies in 2016. Total, bp, and eni are up. The best are up by between 10 and 12 . All the oil majors are trading higher. Biggest, the u. K. s supplier of energy says it is 350 million shares to institutional shareholders. The placing amounts to about 7 of the companys issued share capital. It will accelerate what it calls two prioritized acquisitions. Aat includes a deal to buy dutch energy trader. It wants to expand and complement its own activities in the european power market. Centrica shares getting hammered , down by over 8. 5 . Turn to a big moving currency in the last three days, yesterday we had the dollar sore against the turkish lira. The twoday move for present, and the 1. 6 , was the biggest since 2008. Weve got this intensifying power struggle between the president and Prime Minister. In does seem as if according to a person familiar with the matter that the ak party, davutoglus party, will hold a leadership contest within about 15 days and the Prime Minister wont be a candidate. That ourhes lost struggle with president erdogan. The dollar is falling a little bit against the lira today. Over three days, the dollar has risen by 4 . Markets do not like power struggles between president s and Prime Ministers. Francine they certainly dont. The president probably will end up having more power and be less influenced either eu. Oil advancing a second day after u. S. Production fell the most in eight months. Barrel,de around 45 a how are middle east Oil Exporters planning for the future . Lets get the view of rony mourani. Just picture this. The mall will cover an area the size of 50 football field. Great to have you on the program. I dont even know how you get around. What if im looking for something do people walk or take cars . Rony of course they walk, but we will provide transportation as well. We will have small taxis and golf carts inside the mall. Francine it is more like a village. When are you expecting it to open . 29, 2016. Ber we are at the last quarter of the last hundred meters of the run of the marathon that we years back and we are all excited for the opening. All the efforts are now focusing on this opening. Hopefully we will have a successful opening. Francine this is a pretty impressive operation. We are looking at simulation pictures. There are other large malls opening in doha at a time when Economic Growth has slowed a little bit. Are you concerned about the demand that will be consumption in your mall . Rony not really, not to that extent. Statistics,t the qatar is already having now, you see the growth is still going on. It is slower than it used to be but still on an average of 6 . We have the highest gdp per capita in the world and still growing as well. All these signs give the indication that we are on the positive track. Sector,at the tourist this is where we focus a lot. Francine the oil price slowdown hasnt really impractical impacted your projections . Have there been shops that wanted to be in your law that had to pull out or offer discounts . Rony not pull out. The market is still hungry for retail space. There will be two or three major shopping malls that will be coming in the market which will add another one million square meters of retail space, but the market needs that space. International brands are looking for space they cannot find. Thee new models providing opportunity for all these International Brands to enter a successful market. Francine argue in coronation with the other malls are you in competition with the other malls to attract the best brands . Rony it depends on the strategy of each brand. Definitely we are looking forward to have all the brands. Im trying to picture it. Rony all the brands you can imagine. Is approximately 90 complete. We are very happy with the results. Francine what kind of shops . Is it some of the Famous Brands we can expect here in the u k . Is it more highend than i would expect . Rony it is a net of everything. It is the superregional mall that caters to every segment from society. The brands you will find are the most popular and famous all around the world. It varies from the ultraluxury down to the bridge and middle market and value even. Francine what surprised you the most as you were putting this huge project together . I imagine there is a lot of demand for restaurants. Is there something you werent expecting it to go this way . Is it that more restaurants wanted to come into the space . Mix the whole tenant inside the law has changed in recent years. You pointed correctly to restaurants and food and beverage industry, which is taking a large percentage of every shopping mall. Francine how much . Rony now it is approximately 20 . If you asked the same question five years back, i would have said 5 . Times the number of food and beverage. The demand has forced us to increase the segment of food and beverage. Incredible. I hope you have a couple ice cream shops. I will bring the team there. Thank you so much, rony mourani. Now, stay with us for more middle east coverage. We have our newly launched Bloomberg Markets middle east from 5 00 a. M. To 6 00 a. M. U. K. Time. Elon musk just took the most ambitious project and moved it up two years. Francine this is the pulse. Lets get straight to the Bloomberg Business flash went nejra cehic. Sol commentated for lower oil prices. First quarter adjusted net income dropped to 572 Million Euros, down from 928 Million Euros a year earlier. Shares are higher this morning ol is thereps worstperforming major european oil stock. Chairs at bp are higher. The former telecommunications monopoly said earnings before. Axes rose 14 the figures were bolstered by the acquisition of mobile which bt acquired at the end of january. The companys finance director told us it is investing in higher speed broadband. Unless weve got a degree of regulatory certainty, we cant really spend that sort of money. I cant look shareholders in the eye and say we are going to invest but we cant guarantee returns and outcomes. What we are looking to do is spend in the infrastructure. We are going to improve the quality of the network. Credit suisse is carrying out a fresh round of cuts in london. Two people familiar with the matter say about 180 jobs are going this week. Weve been told a further round of cuts is planned for next month. Credit suisse has said it would eliminate around 6000 positions globally this year. Brandon howard Asset Management is raising cash. According to a person with knowledge of the manner, they will offer daily liquidity. The person says the funds are part of a new unit led by the former ubs executive who joined in 2014. The firm diversified into hedge fund business. That is the Bloomberg Business flash. Francine thank you, nejra cehic. Tesla has revealed plans to accelerate vehicle production. Elon musk wants to see a tenfold increase in the number of electric cars it makes by 20 18. Ryan chilcote is here to talk us through the numbers. This could change the car market. Ryan the original plan was rather ambitious. It was the most aggressive production timeline ever in the history of the car industry. Since the introduction of the model t. What he did yesterday was say, i want to be more ambitious. Originally the plan was producing 500,000 cars a year by 2020. Now he wants to do that by 2018. Last year, they produced just over 50,000 cars. The plan is to hit 200,000 net steer. This is why people are joking that he has a sleeping bag in a Conference Room adjacent to the production line. He has to keep making sure they can pull this off. Francine i am by no means the expert on cars. 500,000, does he need to buy more factories . Does he need to ramp up production . Ryan he needs more money. He said hes almost certainly going to need to raise more capital. Yesterday they announced they are getting rid of their forecast for profit this year. The plan was to be profitable by the fourth quarter. They need to spend double the money they announced earlier. He has a battery factory that he needs to get online. That is still under construction in nevada. He needs talent inhouse in terms of production. Two of his production leaders left yesterday. Ill that of come together. Not least, he has to actually get these cars online. Everybody is waiting for the model three. He says it is going to come and the end of next year. If you look at the history of when these cars come out, is usually behind his target six to 18 months. Francine hes behind the targets and the share price hasnt been doing great so hes thinking it is important to ramp up to get shareholders behind him or is it first mover advantage . Ryan share price this year is down about 7 . Fiat chrysler is down about 14 . Nobody is too excited about the car market right now because of concerns around emissions. Hes not doing that bad relative to the industry. It has already been given a valuation like the big carmakers. It is a sexy stock to own. Hes a visionary guy. It is not clear at what point investors will start to punish him if he doesnt deliver on target. Francine Ryan Chilcote with the latest on this amazing story. You can follow ryan on twitter, but also go on the website. We have a great story front page on tesla and young mosque and elon musk. Next, alibaba has lost a third of its value since its ipo. We will ask why, next. Alibaba reports earnings before todays u. S. Open. Lets get the latest from selena wang in shanghai. What are investors going to be looking for from alibabas numbers . Investors are going to care the most about its core ecommerce business. They are looking for a comeback in revenue growth, which has slowed considerably. Theyre going to be watching for gross margins. They are going to be interesting in seeing how acquisitions may have impacted their bottom line. Francine why has alibaba performed poorly despite Earnings Growth . Dalai lama has more than hasled profit alibaba more than doubled profit in the span of a year. Alibaba cant really control what is going on its stock. Investors see alibaba as a stock a proxy for the chinese economy. Francine what do investors actually want to see from alibabas International Business . Investors are going to want to see expansion in these faster growing Southeast Asian markets. A said that he wants to get more than half of his sales internationally. Revenue from out of china has been falling for three successive quarters. The recent deal is great because it gives them a foothold in southeast asia. In the shortterm, investors are concerned about how that might impact margins. Francine thank you so much. We will be following those figures closely from alibaba when they come out. Stay with bloomberg. Here are some highlights. The polls are open for the london Mayoral Election as well as elections across the u. K. Time, initial jobless data in the u. S. After that, shinzo abe is scheduled to discuss european relations in london. The Prime Minister is just joining us for 24 hours, but maybe a little bit longer. European stocks, they opened a little bit lower. Now they are gaining a touch. This was the first time in the week that european stocks are gaining some 0. 6 . Gained for everyone that declined on the stoxx 600. Crude rallied. U. S. Output fell the most in eight months. We had some wildfires in canada disrupting some Oil Production there. Nickel dropping some 2 , leading some of the declines amongst industrial metals. The aussie dollar advancing against some of its g 10 counterparts against better than expected retail sales and trade figures while we have south africas rand and the turkish lira recouping some losses for the week. This is the picture for the ftse, gaining 0. 5 . The dax gaining 0. 8 . This is one of the main things we and watching. If you are a bloomberg user, i urge you to check out some of the headlines that have been coming from the Hedge Fund Conference in new york. This is what we will be talking next. Tom keene will be joining me from new york. We kick off a conversation with Standard Poors asiapacific chief economist. We will be asking him about turkey. He will also be asking about some of those Big Hedge Fund managers calling for not only buying gold because of all the turmoil in the markets, but making predictions in terms of the model that donald trump will follow. Bondve a great the guru. I dont know why i said it in german, but what hes saying is if you look at the rhetoric donald trump has been saying, he wants to create jobs. He was also saying last night that he wants to build a wall. What this means is he probably wont be focused on debt in the u. S. And it may spiral out of control. Watch out for those comments. We will be watching currencies and bring you a very big update on turkey. All of that is coming up next. Turbulence. He currency plunges the cost of trump. He says be prepared for a debt field presidency as the billionaire takes the reins of the republican party. Hit the brakes . His is bloomberg surveillance i am francine