tv On the Move Bloomberg July 4, 2014 3:00am-4:01am EDT
>> it is almost the weekend. will you soon be sipping on a flavored beer. the flavors you taste may be from wild flavors. it may be snapped up by archers midland. i will be back for more on the d eal. >> that is what we are watching this morning. european equity markets opening up for the final trading day of the week. without the united states. for thosependence day who celebrate. let's check in with manus cranny. >> the u.s. is on vacation. to liquidity zircon thing these equity markets perhaps a little bit less. equity markets dipping ever so slightly. down. factory orders the dow broke the big psychological level at 17,000.
imf decided to take a viewpoint on france. they downgraded the growth. french banks are all lower this morning along with renault. factory orders are low. we have a little bit of news. we are waiting for the stock market to open. 2014, there is going to be a loss of 1.6 billion. why? it is down to hungary and romania. 40% higher provisions than anticipated. 2.4 billion euros. they are writing down the values of the romanian businesses. gold. the reason why i put gold is because we have traders that are the most bearish in four weeks. we do a bloomberg survey every week. gold after allon
of the data that we had yesterday. nonpharm payrolls. 1.3%.pped 2%.jet up can you get on the seat every time a jet takes off. 92%. that is up from just under the 90% level in the past 12 months. 63.4 company carried million passengers. in currencies. you have the swedish kroner. they surprised by cutting their 50 basis points. one dominant theme.
where does the dollar go next? after those unemployment numbers. 288,000 in nonfarm payrolls. volatility exchange is the lowest since 1992. the question is -- is the dollar, even though it is rising, is it still of funding currency? levellity at the lowest since 1992. the debate is simple -- when will the fed be forced into making its first hike? that is the discussion from the marketplace. ruppilook at the indian because it ties in nicely on the dollar. if you borrow dollars, you are currency.his this currency trumps every other currency in 2014. modi will implement his budget soon. the trajectory on the indian rupee is changing. on where theck up
fed goes next because yesterday we saw the dow going about 17,000 for the first time. it followed positive economic u.s. news that the jobs report expectations and unemployment dropped to the lowest level since 2008. with this is the director of investment and london capital. a leisure to see you. so -- a pleasure to see you. above 17,000. we got better than estimated news out of the united states. why are the markets position to see good news and not start second-guessing the fed? >> if you dig into the employment numbers that came out full-time, they -- employment, and the pickup was in terms of part-time jobs which made it more than the full-time employment. it is not all well. >> the good news was not as good
as it first seemed. >> when you dig inside the numbers. the unemployment rate coming at 6.1%. it takes you into the participating level. because adeclining lot of people have been withdrawing themselves with the job market because they cannot find jobs and they are giving up. all is not good underneath. setting ourselves up for some sort of equity market correction in the second half of this year with these all-time highs? >> that is a very good question. it is very unlikely. the reason is that monetary conditions continue to lose. -- to loosen. year0-year and the 3 coming back. in the mortgage is coming on the back of that. in terms of the disappointment we had on the gdp in the first quarter, the market conditions have actually become a lot easier. the financial markets run on the back of the monetary conditions. if conditions are easing
underneath, then markets will continue to make steady progress. >> is the fed behind the curve? perhaps you do not think so. is it behind the markets in terms of when the expectations for rate rises is? >> i think the market is eager to expect the rate rise to come at an eralier -- an earlier point. uk, we are getting this push back in terms of when the rate rises will take place. flexibleter to be longer to make sure the economy is in the self-sustaining growth pattern before the interest rate start being jacked up. >> you are in the camp that says, wait longer and see what the data tells us. does that mean that we are in danger of stoking some kind of
inflation problem into 2015? >> yeah, i think inflation is a longer-term issue. much morebecomes immediate once banks have been recapitalized and you can see tot lending is beginning rise which is unlikely for a few years. more immediate concern really is the fact that what we're seeing, loose monetary policies. some very large investment funds continue to sell volatility. that is driving it to unsustainable levels. >> a correction in the second half unlikely. thank you very much. here is a look at what else is coming up. draghi's new doctrine. the ecb ledges to publish minutes and hold fewer meanings. publishes to
the day. the company has said that it expects a record loss of 1.4 euro billions. it has had to take some write-downs and charges in relation to its business and romania and hungary. all of that having a negative impact on shares this morning. change at the ecb. it announced the introduction of minutes and the change in the frequency of meetings. historic, or simply catching up with its peers? manus, which is it? >> i think it is a touch of both. getting into sync with the bank of england and the federal reserve and shaking it up. that is what draghi is doing. i was listening to his conversation to news reporters. he said i want to break this relationship between its heavy expectation or this self-fulfilling prophecy of expectation. every time we run up to an ecb
meeting, there is this weight of expectation, something new, new policy, a new way of implement and things. he wants to break that. we're going to a six-week cycle. then when it comes to matters of clarity, this is the interesting thing. for 30 years, it was suggested that they keep minutes. but it was suggested that minutes be locked up for 30 years. the cheap economist said it is absurd that anybody should be deserving of minutes. there is enough transparency. when it comes to the heart of it -- you have got a huge number of people in the central bank, what is good for greece is not necessarily good for germany. we get more insight into the thinking. morgan stanley says it will provide insight. barkley says this is about bringing the european central bank up into a parallel level with its cohorts like the fed in terms of disclosure. have a look at the euro-dollar. it is fascinating. yesterday the euro moved on the
back of the payroll numbers. two occasions during the news conference referred to the exchange rate as important and a problem. manus, how much more to we know about the funding for banks? devilk, it's still the in the details. the banks in europe have the facility up to one trillion euro s, if it decides to ask for those funds. it will happen later in the year. for those banks that are lending, this is an opportunity for them to know their portfolios or maintain him. we were at a conference last night in berlin. that was his message. particular, the structure is even better cash the program is attractive for dynamic
lending performance. think much more important point is this -- essentially what these targeted ltro's, if you lend more, you can hold onto the funds. it is to those banks who are reducing balance sheet, who are reducing the leverage on balance sheets, the message is much stronger for them because what the european central bank is saying, look, if you just pause. andou stop deleveraging reducing the amount of loans you are making, then you can access this funding. process through april, two thousand 15, and begin to stabilize, i think that is the nuance of what yesterday's message on this e special lending measures were. >> let's get our guest's take on this.
ashok, what do you make of the ecb? do you think it is significant what they are doing and releasing minutes? was that a significant step? >> not really. many months ago it had been flagged as they were considering it from a market point of view. it's falling in line with the other central bankers. >> it could make it easier to work out where the central bank is going. so says the research. it's not important for you as an investor? >> not really. if you look at the last six months, various members of the ecb have been making statements. so the news is already coming to the marketplace. now it will come in a more formalized sense. way, it does not change
anything. >> let's talk about the ecb and the conduct -- the context of risk. one of the key risks you mentioned was a policy mistake in europe. >> i think the mistake is not giving enough help quick enough. if you look at what the other id, theybankers d started acting faster and harder when the inflation rate went below 1%. r error forfo deflation is that much less. they need to be harder in terms of the help they put on the table. the other couple of measures that the ecb is not thinking of, the asset backed security purchase program and the real quantitative easing, i think they need to be brought into play well before the end of the year. >> the forward guidance from the ecb is still there. they are talking about low rates for an extended period.
does that comfort you in terms of them making a policy mistake? >> i think the chances are that they will avoid making a policy mistake because they understand that they have been too late in terms of the help they have been putting on the table. now i think there is an awareness that they do need to put a lot more ammunition -- where the cost of capital is very high. it is not really flowing into the economy to really then create the growth. remember, the employment growth is going to come from smaller midsized enterprises and not large companies. those have been starved of credit. >> i saw some data that said in pril, companies have been paying higher rates of interest rather than lower in comparison to the previous 12
months. let's stay with banking and continue our conversation about financials because the italian banking associations as the counterpart slanders are able to fill potential capital gaps. the head of the group spoke to bloomberg in an exclusive interview. >> we do not expect that on ofrage major shortfall capital will emerge from the asset exercise. >> he is saying that he does not expect the asset quality reviews will reveal a rate shortfall of capital. are you concerned about the banking sector in europe, that we could cbs a quality review revealing a shortfall in their capital? a qualityld see review revealing a shortfall in their capital? >> all of the health coming from the ecb is going to be good for banks. with interest rates already beginning to come down, this is positive for banks. the fax that angst have been holding large quantities and increase the exposure to underlying -- the fact that
banks have been holding large quantities and increase the exposure to capital gains. of theuation in terms monetary condition continues to be liberalized and become a much more flexible which is very positive for the whole of the financial sector. >> looking at your strategy, you're still overweight equities. you are suggesting that is a good idea, even though you do not think they are a bargain anymore. so what is it that you are a big fan of at the moment? differentinue to, in areas we are looking for different things. for example, in the case of the u.s., we are looking for companies that can give you some economic export in terms of the growth in the next two years. in europe where are looking for a more stable balance sheet and not too much volatility. east, case of the far japanese companies, we are looking for those that can
benefit from the japanese yen. i think the emphasis shifts. >> you are looking for dividends. continue to focus on companies that have a very strong balance sheet. then looking at companies that can generate good cashflow, and get dividends that will increase over the next few years. i think we will be in a world of low interest for a number of years. interest cannot be raised anywhere in the world because the amount of total debt in the system is still rising. that means that really in order to stop any default cycles from starting, interest rates have to be kept at low levels. assets,e, the especially the equities that rise with dividends, are going to be very attractive as time goes by. >> thank you for joining us today.
the world's biggest corn crusher, archer daniels midland, is said to be closing in on switzerland's wild flavors. is this all about our desire to eat natural foods? >> it is. it is about our attention to think that we are putting good things in our body. we want to think that flavors, that ingredients are coming from natural forces. this is what wild flavors provides. not always to the most natural of drinks, because you find these flavors in beer. not health food but vitamin waters. you see them everywhere. tea infusion drinks as well. this is hitting a real trend for the consumer. now provides to 30 different countries. therefore, it has a nice price tag.
this is why archer daniels midland is paying 66% more than the company was valued at akin january. we -- back in january. the owners of wild flavors were thinking strategically. a few players got involved and started eyeing. there was archer daniels midland, but there was also a japanese company. they were eyeing up the company, as was another european competitor. no, it looks as though archer daniels midland has won out the day. billion euros. thisho -- who owns this? >> is a private company. very little we can look at. its whole history is steeped with capri sun.
they made that a worldwide phenomenon, the biggest selling drink in europe. even though it is difficult to open. capri sun. mohammed ali used to advertise it in the 1970's saying after he had done boxing, capri sun was going to be the greatest in the world. it is owned by hand peter wild. -- hans peter wild. the 526th wealthiest billionaire. i'll take that. he has got $3 billion. he owns the majority of wild flavors. but also kpr. we know that there are $2 trillion of deals have gone out. kkr owns 35%. >> thank you. as russian equities rally from losses earlier in the year, m&a falls to a four-year low. we will have more on russia's deals after the break.
>> welcome back to "on the move ." 14%.s are down more than the australian bank says it will have a record loss on write-downs in its hungarian and romanian businesses. we are joined on the phone from vienna. thank you for joining us. they are taking some more provisions that have not been foreseen. fees ins areoound loan their eastern european operations. >> there are two main aspects. one is hungry where the parliament is today going to approve new rules that will force banks, not just erste, but
everything to refund borrowers with fees the government deems unfair. that part has been expected because that law has been in the making. analystsew and what were surprised about was the big write-down on romania. where erste has a lot of bad debt like every bank. 20% oft in rumania is outstanding loans. the bank is cleaning its books. and it is writing down other assets. bank is not alone in being a western european bank that has gone looking for growth in eastern europe as it felt its home market was becoming saturated. e other banks that are operating in the eastern european space? >> definitely.
erste is the third biggest bank in eastern europe. , whichgest is unicredit is also active in hungary and romania. the second-biggest is another austrian bank. every bank has a slightly different loan book. so not everybody will have the same charges. but the pressure from bad debt and fund in hungry will hit every bank. >> thank you for joining us. joining us on the phone from vienna. these are the top headlines this hour. jpmorgan may have helped bnp hide transitions -- . transactions bnp hid billions of dollars in transactions involving sudan. the money was transferred to jpmorgan without any mention of the country. jpmorgan has not been accused of wrongdoing.
fell more than economists expected in may. recent surveys suggest tensions between russia and ukraine have increased uncertainty. theme, on the russian the country is being warned. barack obama and angela merkel have agreed to coordinate more costs against the nation if it is not the escalate in ukraine. it did not list the potential costs. mycex has regained losses from the start, dealmaking has dropped to 2010 lows in russia. as russia struggles to boost its $2 trillion economy. so matt, thank you for joining us. is this to do with ukraine or is this a broader story? >> this is a broader story. before the ukraine crisis flared
up, which was of course just after the sochi olympics, the russian economy was already in serious trouble. this is a country with enormous structural challenges be they ound infrastructure, bureaucracy, regulation. there was this great boon in 20 07 around there. that seems to have slowed down as russia reaches the limits of this commodity power growth. in that environment, the uncertainty of ukraine and direct sanctions have taken a hammer to the dealmaking world. >> yes. i was going to ask you how cut off is russia from international financial markets? that is the answer. it could change any week. depending how the crisis progresses. >> it is interesting. markets can move quickly. we have had a few examples in the last couple weeks of euro bonds being sold by russian
companies. on the equity side, there is nothing going on. we have not seen a russian ipo in london in a long time. let alone in moscow. >> there was a time when there were a lot of those happening. ofwe had a huge number russian companies looking to tap western capital markets. these have stopped. whether they do come back depends on what happens next in ukraine and also depends on what the next round of sanctions, if they do come, looks like. >> what happens if we get more sanctions from the west? it is not clear whether europe is speaking with one voice on this, but it is a possibility. >> the u.s. remains further down this track than europe. that is probably become the u.s. -- because the u.s. has very little direct trade with russia and they can afford to take a stand. it would be more painful in germany or france. so far sanctions have targeted individuals and individuals who are close to vladimir putin. the next phase up the ratchet or two phases is targeting sectors,
technology, things like that. if we see that coming in, targeting the financial sector and targeting the ability of russian firms to make transactions in u.s. dollars, this gets very serious indeed. >> what danger is there that this starts to hurt the west? we talked to a lot of businesses in italy that had been raising flags and saying they do not want sanctions on russia because they get their business there. >> this is a two-way street. if you look at the countries who have been totally cut off in the past by sanctions, north korea, losing the north korean market, not a big problem. the same for burma. even riairan does not have strog business links. but russia is deep li integrated with the european economy. you name a big german company, they operate there. italian and austrian. these are all countries who have put lots of money into russia and have investments they want to protect.
actticians of a balancing between punishing vladimir putin and not punishing themselves. >> thank you. now let's turn to the world cup. as it enters the quarterfinal stage, corruption allegations follow the governing body fifa. is fighting claims that qatar bribed officials to host the 2022 world cup. we spoke exclusively to a member of the governance committee about the scandal. >> how would you describe the current culture? >> the culture was one of, they themselves of a family. and families do not like other people interfering in what they do. they think they know best. i think at a time when fifa did not have such a sway in the world as it has today. it now produces an income over one dollars billion from a single product which is all they have got. they are fated as world leaders -- they are feted as were
leaders. their culture was not modern or transparent. fifae allegations are that is mired in corruption. we have seen scandal after scandal. having worked with them, what do you say to that? >> you cannot deny it is an extraordinary state of affairs when you find a number of members of their own executive committee have to leave office because of allegations of corruption or of being involved behavior.opriate they really did have to change for the question is -- have they done it? the president said he was setting out to reform fifa. he said he wanted to leave a legacy of a clean fifa behind him, but there is a long way to go, not least because they have not demonstrated that they have got the cultural willingness to to embrace this change. >> do you think the president is willing to take the changes
needed to clean up fifa? or do you think he needs to step down? >> i have avoided until now commenting on that, but there is something that the president said a week or so ago was really shocked me. when the allegations were english in its newspaper about what had been happening in qatar, his published response was to say that it was a racist allegation, because it was directed against leaders of the african associations. that really is not taking this seriously at all. to try and dismiss this -- i have nothing to do with the material there -- to dismiss is on the basis on the fact that it is racist does not demonstrate the commitment you would expect from the top man in an important organization which has to demonstrate it is ethical. >> that was olivia sterns speaking to a member of the independent governance committee. coming up, the chancellor has to
david tweed joins us from hong kong. angela merkel is heading to the capital of the szechuan province. why is she heading there? chinary time she comes to , she goes to a separate provincial city. this time the city is in the szechuan province. even though it is not a state visit, it is treated like a state visit with all of the protocol. this time it is interesting that she has chosen this city because you can see it, it is considered to be in the western part of china. president is trying to encourage investment in th einner partst of in china. most of the economic growth has been focused on the coastal areas. which isgh chengdu, considered a second tier city, with 14 million people, it is at
the top of the secondary ones, even though it is considered to be, such a large city, it is still considered to be underdeveloped. it is interesting that even though we do not expect to see ere, angela merkel is going there with the head of volkswagen. wel and of siemens as she is going to visit a volkswagenl. plants. there are some german companies there and she will be looking at the training part of this volkswagen plant. ping almost a favor to that she shows that she is interested in looking at these western cities in the inner part of china. >> if she is sensible, she will sample some from their. some of the food is a little bit spicy. does she like that? >> the szechuan cuisine is delicious. it is my favorite cuisine. it has got chilies and pepper.
you eat it, and your mouth goes numb. this is the whole idea behind this cuisine. there is a particular dish i have heard that angela merkel is going to be taught how to make. it is called kung pow chicken. all mixed in with roasted chilies and pepper. i wonder if she is going to get marked on her dish. on monday, maybe we will be able to see some of these pictures of her cooking up a storm in china. >> angela merkel does "master chef." afterwards, there is diplomacy as well. angela merkel will be meeting with xi jinping. what will be on the agenda? >> tand the premier. on monday morning there will be a news conference and they will get an idea of what sort of deals are being signed because it's traditional every time you see these semi-state visits.
interestingtically, because one of the things angela merkel is going to be interested in is this rapprochement we are seeing between russia and china. so i am sure she is going to be very interested in asking xi jinping precisely about what sort of relationship they head withgoing a russia, particularly as russia seems to be pushed into the arms of the chinese because of the ukraine situation. >> thank you very much for joining us. david tweed from hong kong. for more on the german chancellor visit to china, let's fellown an associate from chatham house. let's talk about this visit. it is the seventh visit. interesting that david was pointing out how she will be focusing on the west of the
country, the less developed part of china or the chinese government wants to push development. >> it is about trade and technology. chengdu is an aspiring hub for technological development. it is the base for a joint venture. so the government is trying to push more and more investments into central and western china. and to make it a technological hub. there are a number of challenges associated with infrastructure development and the spicy cuisine. but beyond that, it is very much about increasing germany's very strong foothold in the chinese economy and helping the chinese industry move up in terms of r&d. in beijing, she will likely give a speech at a university, the chinese mit. >> the focus on technology. and the focus on technology could take them into
environmental policy. the leadership there has stated recently that they will not -- no longer pursue growth at any cost. how is germany's prominence in that sort of type of engineering, how is that going to feature? >> that will be one of the main deliverables we will see in the talks. r&ds about cooperation in and manufacturing. it is not just about renewable energy. it is about more efficient manufacturing where germany has a clear edge. german manufacturers will try to press upon the chinese that intellectual property has to andove so that european western firms feel comfortable investing in china. i think german companies should start focusing more on just as much of the software and the hardware management, compliance and helping the chinese government implement their energy-efficient technologies, not just selling them know how. >> trade deals seem to be very
much en vogue. we have got the transpacific partnership. the transatlantic trade and investment. ar army going to add a chinese version? -- are we going to add the chinese version? >> they are looking at this trend of trade deals and they do not want to be left out. they could find themselves out of a huge market share that will impact their economic growth and their viability. so they certainly want to push forward and get angela merkel's support for the bilateral investment treaty. but for europe, that comes at a second priority after ttip, after the deal with the u.s. >> what about the growth picture for china? 7.5% is the target this year. do you think that will be achievable when the premier was in london recently, he was
pledging that there was not going to be a hard landing for the chinese economy. has that message got out there? no hard landing? >> there are still concerns in the marketplace about debts and shadow banking that the government is committed to supporting the kind of growth. it has the tools to reach it. there are possible default. shouldrall, the economy be. supported by this infrastructure growth the is hampering it now is government's own anticorruption campaign that is making officials worried about all the scrutiny they are going to get from investment deals. it is about the government signaling it is ok to invest and ok to grow to its own constituents. having angela merkel go to cheng du will support that. >> is urbanization one of the more long-term drivers of the growth trend in china? has that got a long way to go?
it is only half the population of china live in cities. which if it were to follow a western example would suggest that that urbanization process has further to run. >> it has a long way to run with the amount of people that need to be urbanized and just the potential for infrastructure buildout, houses, the whole gamut. scope for european know-how, not just on the hardware but on the software of managing urban development where china would edit it from european-style, more efficient china would benefit from the european-style more efficient cities. >> great to get your thoughts. coming up on the program, ofding the perfect cup coffee. it is no easy feat. why this luxury coffee maker is using cats to process the been. ♪
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it is like anything in life. we know we have got something quirky. we have something different. it is something very special, just like fois grois, champagne, caviar. this is the caviar of sumatra. >> yes, the difference being the finest champagne has not been through a cat. 300 pounds for a cup of coffee is a step too far for me. we will leave you with a quick thought on the market. trading weaker on equity markets, down by .2% on the euro stocks. u.s. had a good day, over 17,000 on the dow jones at the end of the trading day on the back of those better-than-expected jobs numbers coming through from the u.s. economy. europe factor that in yesterday and the u.s. is closed today. so europe looking a touch weaker but nothing too negative. stay with bloomberg television. olivia sterns is up with "the pulse."