tv On the Move Bloomberg November 5, 2014 3:00am-4:01am EST
record profit for a second year as the bottom line is it boosted by a weaker currency. they are the three big things we will watch to the morning. futures are indeed higher. 5100, futures up 35 points. dax futures of 60 points. after two days of losses, we could be on the rebound. >> the whole conflict between that man there, between draghi and kuroda is who is going to the mandate that the bank of japan has is resolute. it is very exacting and going to get bigger according to rdc. we had confirmation that it would be higher. there is dollar-yen. we are hitting levels we have not seen in seven years. the momentum behind the currency, rbc. they say get ready for this kind of level.
you are looking at 120, possibly 125 on dollar-yen over the next 18 months. that is a pretty big call by rbc, but it is not that outlandish. markets are rebounded from two days of losses. republicans take the senate. lame duck president is what you hear a lot about. will there be a contest against mariota draghi -- mario draghi? the a look at some of equity markets in the u.k. us go for oil. gold is declining this morning. down by more than 3.35%. marks and spencer's, this is an interesting report in that general merchandise decline. non-food sales dropped by 4%. rse than the
market estimate. pretext profitability is up. 260 million pounds. that beat analyst estimates because they are not discounting. margin is king in retail. you saw supergroup and next warning in terms of profitability. marks and spencer said our margins are intact. our gross margins will be the basis points, 150-200, or 1.5%-2%. that is almost double the original guidance. stocks falling. 404.7. it could be a moment of reprieve for the ceo. trom sold their energy division ii ge now it is all about trains. the market not happy with what it is seeing. bp -- nothing ever does what you
wanted to do. oil, brent and crude. ryan will talk about this later. brent hitting a four-year low. crude hitting a three-year low. is that a tax cut? probably in the states, but not in europe as they like tax in this country. up .3% on bp. keep an eye on oil. they dragged it down european industries recently. >> london up 37% at the open. a higher open in europe. i will take you back in time. i will take you back to the september fourth meetings at the european central bank and the news conference that took place. take a listen to this. >> the second aim is to stir significantly stir, the size of our balance sheet towards the dimensions they used to have at the beginning of 2012. >> has that comment landed mario
draghi in hot water with his colleagues at the european central bank? that theeporting national central bank is set to overenge the ecb president secretive management styles and erratic medication. let's bring in bill. you listen to those comments. you think back to that one trillion euro commitment on september 4. >> one trillion euros. this would not matter so much -- you expect infighting, disagreement. this was one of the big comments that really moved the dial from stimulus from the ecb. >> i suspect there is a little bit of a storm in a teacup being made here. i think everyone who was waiting for the ecb to announce what they were going to do is start familiar with what mario draghi is doing. is in know how limited he his communication options. we all know how limited he is in terms of policy action.
it needs to be done within the context of forcing a reluctant ecb board to follow him. when you mix perhaps a minor gaffe in courting a number, when we know that getting to the number was the kind of instrument study was targeting i think the markets are more willing to give him the space. then perhaps his colleagues in the ecb, who since a little bit of weakness. >> tonight is the informal meeting at the european central bank, before the decision tomorrow. will be somehere kind of conversation about his communication style. when you look at the two points under the magnifying glass, the jackson hole comment off the cuff, you look at the inflation expectations, you will react to that. second, the comment on the size of the ecb's balance sheet. those two things, the complaints are reportedly are, this is our back.
>> these comments are typical mario draghi.- they put down roots that their national governments are not invited to. these are perfect comments that have steered the market and have mario draghi playing his usual trick of getting the market to do what he wants. it has been market-friendly, which is good for the ecb. has opened him up to political weakness, which could ultimately be a massive problem because we know the big crisis within europe is europe is not a single country. it is however many different national persuasions and the reason i don't use that is because some countries are five or six different persuasions. >> the news conference at the ecb, it turns it into a bit of a soap opera. i matching questions will be asked about this. when you compare and contrast forlimitations of the ecb,
the bank of japan and mr. kuroda, who overnight is saying we will do whatever we can to tackle deflation, he is matching words with actions. it is very different. >> i think this is the problem that europe, this conglomerate, how would you collect, a consortium country, a consortium central bank. it is trying hard whereas kuroda abe werethey -- and able to throw the kitchen's link and and go all in. this man is betting with single-dollar chips. >> we will talk about the politics of europe, as ever. as we head to the break, you're the pmi readings this morn. if i miss, we will kick off with pmi from spain. italy at a: 45. fivee after, germany minutes later. we will bring in the headlines as they cross. a quick look at one of the stocks on the moves this one.
are not agreeing. situation -- it is a situation --to know what you want. >> that was the mayor of barcelona speaking in an therview with bloomberg on november 9 referendum on catalan independence nears. i love this quote. france is on the verge of recession. germany is trying to swim through outright deflation. forget anyone who says it is getting better in spain or even greece. the political threats are rising. if that referendum in spain
speak to this kind of thing? >> we are not really concerned with the referendum. the critical word there is unofficial, which means it will go back and continue to wobble around and at some stage, they might get the privilege of having a scottish referendum with some carefully defined question. a more important thing in spain is the rise of the we can movement, because they are more popular than government. they are attracting enormous support from the disenchanted young people of the country. last time i was over there watching, very polite and very youngsting meetings of people talking about their futures and concern for their futures. they don't want to spend their future being able wrist up -- be ing a barista. they want to see profits in spain. you have got to see political change, but it is going to be groundswell movements like this
that are going to appeal to local politicians as we are seeing in greece, with the extreme left-wing movement. it has morphed from being absolute looney-left the extremists into becoming a that aal party selectable and will go in with a clear european growth strategy. this is the political change were seen. the end result will not be revolution on the street, but will be a move away from austerity which is going to cause a rift with europe. that is what i mean by political problems. >> what does it mean for the bond market? it has been completely insulated to the political noise ever since mario draghi said we are here and ready. >> the bond market will buy eurobonds because they are going to remain very low interest rates. unless something fundamentally splits, he will continue to see the promise. the key thing if you are investing in euros is going to
be the ongoing weakness of the euro. we think that is going to become one of the big themes going forward. they will do anything they can to bring the euro lower. >> i'm looking at apple. casting their vote on the euro-denominated debt mark. >> that was a classic example. >> may have issued 2.8 billion euros of notes yesterday. bill, this is the best year since 2007. >> it is the classic carry trade. raise cash in euros. very low interest rate. currency expected to weaken, and by u.s. dollar assets. easy. >> this is is easy for apple, that can borrow a yield at 1.082%, lower than what they got in april. great for them. is a great for people holding the stuff? >> if you are apple, clearly a strong company. i don't think you are going to
be at default risk with apple. are you going to be at risk at some point in the future if there are problems in euros? yes, you are. is the euro ever going to crash out of bed? no. it will be very well supported. it will be managed to lower. you are taking currency risk, but that is not an issue if you are a euro investor. apple is the name you want in your portfolio if you believe in apple. that is a different question. >> let's talk spain quickly because spanish services are crossing the wires right now. pmi comes in at 55.9. survey was 55.3. this is better than the survey. this is better than the previous number of 55.8. are people saying despite the fact you say the political noise is on the rise, there is a recovery in spain. >> this is one of the other issues we have to consider. spain has done the right things. spain deserves to see its numbers improving and quite rightly.
the problem is, do you invest in spain on the basis that they have done all the right things when the rest of europe has not? do you invest in spain on the political risk being higher there that it is in other economies that have done absolutely nothing? that is part of the balance you are always having to make. >> that is what we talk about the likes of italy and france. were looking to forecast that yesterday. growth there, next to no growth for france for the coming year. a question mark over there budget deficit. the subliminal noise and the wrangling between the likes of france and the austerity-led drive from germany, does that move along? >> we will have a fundamental division in europe from what germany wants and what the rest of the unit would like to have, which is having countries going back to borrow as much as they want so they can porkbarrel their economies. is that going to happen? it is pretty likely that france
will get told, you naughty boys, for being over your debt target. europe has a new bogeyman. it is david cameron, whose refusing to pay his fine. we have juncker saying prime ministers of set me. >> we will leave it there. bill blaine, strategist. we will check in on european equities. we opened higher in london after two days of losses. we stay higher. a stock on the move is marks and spencer. it is another case of a slight brain the weather -- blame the weather for some of the retail sections in the u.k.. the market likes that. marks and spencer is over 6% so far this morning. ♪ -- i want to check in with the european business correspondent carolyn hyde who is at the dublin web summit. what have you got this morning? have been speaking to all
of these founders of companies that are now worth billions of dollars. dropbox reportedly worth $10 billion. we have been speaking to oculus, which sold for $2 billion to facebook. who better to speak to than the former ceo of apple and pepsico, john's girly. he is up next talking about how to build a lien dollar companies. that is utopia. join me after the break. ♪
>> welcome back to on the move live from the city of london. let's bring you up to speed with toyota predicting record profit for a second year. yen helpedeaker boost profit. it may reach seven point -- a $70.5 billion. the yen has been driven down to a seven-year low and it is boosting their bottom line. labarre says growth in a mooching -- in emerging market have helped a slump in their home market of france. they matched estimate for profit in the third quarter. aftermissed estimates being dragged down by a construction slump in spain and france. will make the final repayment of state aid on a friday and and a six-year government bailout. alsoargest dutch lender
posted third-quarter profits of 928 million euros, up from just 128 a year ago. still, the number missed analyst estimates. orders doubled in the first half at alstrom. the french company says sales will not -- will grow in the single high digits. of its energy assets to general electric for more than 12 billion euros. shareholders will vote on the deal on december 19. same-store sales at marks and merchandise unit fell 4% in the second quarter, worse than analyst expectations. the retailer's first-half profit beat estimates and shares are getting a nice little lift for the open. joining us now is charles allen. of, butthe weather kind a lot of, but a lot of attention on the profit margins this morning. >> we knew about the weather. they contributed 2.5% in the quarter for a week september
which is in line with everyone else. gross margin in general merchandise of 150 basis points. most of that down to better buying. a little bit too reduced markdowns, which is also important because getting off the discounting drug is important. exceptay be, but they do that the weather has had a role in lower sales at retail. how do they keep that higher when have to cut prices as well? >> what is becoming more apparent is that it was just an awful lot of inefficiency in their commercial terms. they were not -- despite being the biggest, they were not buying best. they got 120 basis points in this half just from going back to their suppliers and saying how can we do with you better and get a lower buying price in the same selling price? >> where does the ceo said here? is the pressure still on him? is if you have
beaten expectations and managed to read your guidance on margins, it takes some of the pressure that may have been there off. it is becoming apparent is that under his watch, many of the things that should have been done 10 or 15 years ago are finally being done. that is the investments in technology, distribution. thing -- who would've thought that marks and spencer could go out and get an a for point, or more than extra point of general merchandise just from dealing with its suppliers better? >> talk to me about distribution. when i put out these never's on twitter, someone reached out to me straight away and complained about their online shopping is very straight and it was not as responsive as some of the other retailers. are they doing anything about this? >> they put a warehouse down in donning to and that has taken a long time to get going. down oversales were
6.5%, although it was improving. they're finally getting to the next day delivery, although it is still on the 5:00. they are missing the evening shopping for pickup and store. it is getting better. that is one part of it. there is also the bigger part of their distribution. they have been stuck in the history and legacy of 100 warehouse is in the north of england for far too long. >> we have spent so much time talking about clothing. we have not talked about food. a lot of people watching this were shocked at marks and spencer's food. how well is that particular division performing? >> great. sales are up 1%. a green fall for most of the sector at the moment. the slight problem for m and s is more people are shopping it simply food stores. they are getting traffic for food, but it is not enabling people to shop for clothing. >> let's throw a curveball out
there. spin off the phone division -- food division? >> i don't think they can. it is too integrated. >> we have to leave it there. charles alley in, thank you very much. it was a cheeky last question. call it the kuroda effect. for the boja boost as the company protects a record profit for the year. more on that story after the break. a quick check in on european equities. we have two days of losses. really big start, picking up tomorrow. the bank of england, european central bank, and friday, first friday of the month. payrolls from the u.s.. we will bring you that. we will own that for you this coming friday. you can follow me on twitter. ♪
the nonfood sales in focus. we have seen a worsening drop in nonfood sales in the past quarter. worse than a drop of 3.5% that was expected by analysts, but on the upsite, pretax profit was better than estimates and they were able to upgrade expectations for full year profits. that is behind some of the boost here. still not much they can do about the weather. they spent the last five years trying to taken to rivals. not much they can do about the weather. e warm weather we have had hurting sales. probably only one of a handful of people pleased about the cold weather we're experiencing now in november. electricity generator and distributor. part owned by n.l. they con firled this morning that the stock offering they are doing, they are placing some of
heir shares in endesa. this is part of an already announced reorganization product that they have going on. this one is an interesting one. if mario draghi is listening. up 7.6% this morning. this is an industrial and specialty chemical maker. than eported better estimate. they are confirming their forecast as long as there is no major change in euro/dollar. we'll see if draghi is they also expect growth in all relevant performers. up 7.6%. >> stocks to watch here. the top headlines this morning. in the u.s., midterm elections. republicans have taken control
of the senate for the first time in 10 years and won a series of governor races in crucial battleground states. the result ensures the republican also control both chambers of congress for the remainder of president obama's term. and angela merkel said the election in the ukraine's rebel-held eastern regions was "illegal." her comments came amid warnings that russia is amissing militaryry vehicles in the region. and crude continues to decline. three-year lows. supply will outpace growth and demand as production in the u.s. is forecast to grow for a fifth straight week and saudi arabia cut its costs. the cost of brent is also falling this morning. japanese automaker. let's talk cars. toyota forecast a record profit
for the year boosted by a weaker yen. the g us now for more is enior consultants. they are going produce 10 million cars this year. strong growth in north america. more stimulus from the bank of japan. happy days for toyota? >> yes and no. in the short-term it looks good for them but let's not forget that north america and europe are established markets. they have not performed as well in emerging markets. key erformed poorly in a market major. the key market they should be performing in but apparently not. all of this talk of lowered sales in 2015. yes, it looks good for them now but in the long-term, i would like to wait and watch. >> talk to me about china and the political relations there
and how it is impacting sales for toyota. what is happening now? >> they have had three months of positive growth. they are the largest selling manufacturer right now after nissan and honda. they are seeing an upswing in china. it is not as good as they would want it to be. china was wants to sell five million hybrid cars by 2020. there is a lot of focus on them to move and grow. statwant to talk about the that came out from toyota. a lot of yen. does that still stand? >> yes. mft, there was another set of numbers that came out. for every one drop in yen against the dollar, lexus increased $100 million. that is another number that came
out. they are selling a lot in north america. it is a flag ship brand in north america. obviously they make a lot more oney with the yen now. for first time, they are a recall. sold more cars than the cam rhode island. there is a lot of focus on s.u.v.'s. >> talk to me about south korea. if you're the bank of korea, you don't like -- what happens for those producers? >> they are seeing hard times. hyundai and kia. they are having bad press in the united states overstating fuel economy and figures with the e.p.a. they have had that setback and there have been issues of recalls as well in the u.s. and on the back of that, they are competing against japanese makers. car makers in the u.s. producing cars in japan and selling them
in the u.s. as a consequence, they are being hit hard way in pressure. that is another effect that they are having. all in all not a good time. >> here in europe, as ever, it pessimism swinging into optimism. is that going hold up? >> again, yes. right now, it is positive. we have seen car sales grow across all the leading european car countries. but what we have also seen? s a drop in manufacturing. a shrink in manufacturing in the largest country of automakers which is germany. b.m.w. downgraded their growth from significant to strong. there is somefect they are feeling. volings wagen is -- they have had record growth as well. they are growing in china and the u.s. a lot of growth outside. to be more
cautious. businesses seem to be buying more cars than personal use. a lot of businesses and fleets held on to cars from the crisis. and now this is it is time for them to turn that around and buy ew cars and more fleets. >> how long does that sweet spot lasts for the business leases? >> it is short-term again. maybe a year or so. but not as much as you would expect for rebound or the auto motor vehicle market to grow. >> we have seen car sales pick up month on month on month. a lot of people celebrate that fact. that is pure car sales. look at the value of the coarse being sold. how much discounting is going on now? >> a lot of cars being sold. b.m.w. has sold more s.u.v.'s this year than ever. the more s.u.v.'s and larger cars they sell the more profit
margins they make. on the sales side with the discount, we have a seen a push to sell these cars but there is a bit of cautious optimism today in the markets. that is teeling we get in europe. >> cautious optimism is probably a good thing. a lot of people would take that. thank you very much. senior consultant at frost and sullivan. coming up on "on the move", the former executive who led apple through the early years. john skully is up next. we'll be back after the short break. ♪
europe's largest tech conference continues in dublin. caroline hyde is at the event. what is the latest from the summit? >> the latest is some heavy heads coming in. a night on the town had by many. how i do get my staff up to scale? how i do make it a billion dollar company? who better to speak to than a man who took a company from 800 to billions. company happens to be apple and that man is john sculley.
wonderful to speak to you. you wrote a book about how to build billion dollar businesses. >> we're at an extraordinary moment in technology. we're seeing a power shift in the market from producers of companies that have had long relationships with commerce. that power is shifting and the customer is in control and the customer is paying more attention to better information. they are also paying more attention to other customers. they get it on their mobile device. other customers, once they like something, that says if you have exceptional experience you get what you call the network effect. other customers and all of a sudden you see these businesses that start within just a few years, they have extraordinary scale. that's why there has never another time. great customer experience. disrupted prices and it all is
done with the commod tiesation of technologies. that is why i wrote the book. is this the time for the old generation? arguably apple is an old generation. >> apple is clearly a big part of it. their tremendous success with the i sfone one of the foundation blocks for this whole global transformation that we're seeing. apple has a long run ahead of it just filling demand for the iphone for at least the next several years. they have great leadership under tim cook. the prospect for apple to be part of the future are very high. >> at the moment you're looking at building businesses yourself. you're giving advice to others. you have got -- making phones at the moment. you have a company that is looking at the cheaper types of phones going into the emerging markets. how are you listening to your own advice growing this particular company?
>> it all goes back to the same principles that i was talking about in my book. first of all, technology has commodityized so much that it is now possible to build high quality smart phones and to be able to sell them if you use the frugal expense model that asian companies have. we have about a billion dollar supply chain that we can take our experience from. expense ld a very -- odel business. commodize technology that get from china. i brought together the former head of apple's design. robert was there when i was there at apple. i brought together the chief marketing officer of apple. i tried to bring a silicon valley point of view in terms of design and consumer marketing with our experience in emerging
markets that will be everywhere except china. we don't know enough how the market against a company like -- in china. they are doing a spectacular job and others there as well. if we take market where is we , we focus on price points targeted at very young people. teenage rs. people in their early 20's who might love to have an iphone but it is hundreds of dollars out of reach for them and we can deliver them a really good product at a different price point. we're not in competition with apple. we're going after an untapped market that international great brands don't have any advantage in. >> people are now getting worried about evaluations. you have seen facebook snap up -- not just $2 billion but $19 billion. like whatsap? is the amount of cash out there
driving the evaluations too high? >> you never know until the evaluations go away. but the reality is that if you do a close look at whatsap, you just mentioned that, it was an extraordinary transaction. the company was less than five years old. 56 employees. the end cost for facebook was over $20 billion. and people said why would they pay such a crazy number for a company with no profits? 564 swer is they have million users, commerce out there on the product. they love the service. it is growing like crazy. it is another example of the network effect. happy customers tell other customers why they are happy and people listen to what other customers have to say. it is called the network effect. before until ed
recent times. it is the basis on which new companies can be created whether it is watts a&p, facebook, twitter, uber. mobile. we have four consumer healthcare companies. doing really well. a razor company. we're selling razors at discounting prices and we have exceptional customer experience. you can go industry after industry and there are 15 companies following these same principles around the world. >> if you just have one line to an entrepreneur down there now,? >> well, i would say take a lesson from steve jobs. steve jobs said it was all about focus and all about urgency. anyone who is coming placents. they have the financial resources but they take a long time to make decisions. they give feem authority to say no. not the authority to say yes.
so entrepreneurs have a big curiosity. find a focus on something that you believe in. then be urgent about it. be willing to make mistakes. you're a always doing with going to make mistakes if you're taking risks. it is ok. have i made a lot of them and so have other entrepreneurs. >> it has been great having you on, john sculley. thank you very much indeed. the former c.e.o. of apple, pepsi co-and he has many fingers in many pies building many companies and giving advice to the next billion dollar companies out there. >> great work there. just going to bring you some breaking news out of italy. the services p.m.i. number comes in at 50.8. expansion territory. we were looking for 49.4. they joined spain with some solid service sector numbers this morning. big for both.
50.1 versus a 49.8 reading for september. the reading on both of those indexes, the highest since july 2014. it reverses the trend of contraction. to say the last hour, we have had some solid numbers from spain and italy. let's get over to what's coming one "the pulse." >> imzpwration the number one subject in the u.k. sfrernl a political point of view. -- certainly from a political point of view. the migration data ke have been getting for the last day or so, really casting an interesting light on that. last night took -- the business secretary gave a speech talking about diversity in the board room. we're going to talk about the issues. we're going to talk about whether the british people have been given the right information when it comes to the subject of migration. this is having a significant impact on the relationship with
the e.u. and angela merkel now. we'll talk about all of this with the u.k. shadow business secretary. later on, we're going to be we go into to c.e.o. of virgin atlantic. we'll talk to him about his business. we'll talk to him about his brand. is his brand impacted by what just happened with virgin galactic? we'll talk to him about that and his relationship with delta as well. all of that coming up in the second hour of "the pulse". >> busy show. we will continue our conversation on oil. the big question, how low can it o? we're over 20% lower than the highs hit earlier this year. "on the move" will be back in two.
>> we are still talking about oil. i'm looking at w.t.i. brent. a move lower again. let's bring in ryan chilcote. the move lower continues. it goes on and on. w.t.i. below $30 a barrel now. >> the saudis are discounting their prices to the u.s. market. that's where this began two days ago. it has continued. in addition to that, people
think the inventories in the united states, we'll get that number later today, are higher than they were. it indicates a surplusor oil on the market. what i would suggest is also follow the movements of the oil minister of saudi arabia. he is on his way to argentina. then he is going to go -- excuse me. venezuela. then he is going to go to mexico. these three country,, the saudis, the mexicans and the venezuelans all cooperated in 2001 when oil in december of 1998 hit $10 a barrel. i'm not saying that $82 or $81, where we are now with brentz is $10 but it is interesting to watch what happens between those three countries and whether they are willing to cooperate. the other thing worth watching is when gets to venezuela, does he say anything about the price of oil? despite the fact that the saudis just discounting oil to the
united states, they have said nothing in last month and a half about what he thinks about the price of oil. if he speaks, that will move the price of oil. >> there is the question of whether we will get any cooperation. the saudis trying to maintain market share on the one side. on the other side, maybe they are sick of being a producer. what -- when are you on? 20 minutes? >> in a half-hour exactly. as we head to a break, equities open higher. they stayed higher. solid numbers from italy and spain. u.k. ssts p.m.i., that is the one to watch at 9:30 u.k. time. we will bring you that number at it crosses. that is it for "on the move." if you wanted to talk markets you know where i am. i'm on 2013 at ferro tv. "the pulse" is up next. good luck for the rest of your day. ♪
>> the republicans take control of congress. what this means for global markets and business. >> rare and exclusive. the c.e.o. of virgin atlantic joins us as oil hits a four-year low and oil stocks surge. >> shadow business secretary joins us to talk about the hot political issue in the u.k. right now. he will be with us shortly.