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tv   The Pulse  Bloomberg  October 12, 2015 4:00am-5:01am EDT

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manus: full of energy. eon and rwe, shares a sword the most since 2008 as they pass nuclear stress test. looking for liftoff. the fed vice chair stanley fischer says that 2015 remains in place for a potential rate hike. glencore goes further. the company announces it is selling two copper mines, adding to the $10 billion debt cutting plan. and battling against grexit. the campaign to keep the u.k. in the european union is launched. we will speak to one of the most the sufferer supporters during this hour.
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a warm welcome to "the pulse," live from london. i manus cranny. rwe and eon have soared in frankfurt street this morning as the german economy minister says the country's utility companies have enough funds to pay for the decommissioning of nuclear plants. hunt nichols is standing by in berlin. hans, this has been one of the theseppressive issues on for quite some time, so this is a relief. hans: it is a relief but it doesn't mean the utilities are out of the woods. yes, you see the stocks up over 10%, but when you look at where they are on the year, eon is down 36% and rwe is down almost 36%. these stocks have taken a battering. what they've learned today is
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that their provisions along with another three companies, the 38 billion they have set aside to decommission their power plants, is going to be sufficient. that is according to the economy minister, sigmar gabriel. here's what he said in a statement moments ago. considered scenarios of high provisions improbable." he was referencing a range between 25 an 25 billion euros and 77 billion euros. on the outer and the economy minister is saying it is not likely to be triggered and all the stress test they are running, they think they will be in the middle of the range. the company said that these highly improbable stress tests weren't very realistic. they put out a statement saying that some scenarios are unrealistic and has never been used in any sector. this gives them some breathing room, a chance to make the transition toward renewable by no means will
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be easy. we spent the last nine months talking about greece and syriza, then on refugees. recently we spent a lot of time on the volkswagen scandal. it bears remembering that germany is going through a massive transition. 2022 is when they want to be free of nuclear power. they're big transfer payments could potentially hurt the industry -- there is a lot of concern, and consumers are also paying, needing upgrades to their great, how to get their energy. manus: hans, thank you very much for the update. hans nichols in berlin. let's talk central banks. the federal reserve's vice-chairman stanley fischer says the u.s. economy may be strong enough to warrant in interest-rate increase by the end of the year. he says that as the open market committee's meeting comes toward near september. most participants, myself
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included, anticipate that in achieving these conditions would data an increase in the federal funds rate later this year. of course, the assessment was premised on the assumption of continued solid economic growth and further improvement in the labor market, which are key factors supporting our expectation that inflation will rise to 2% objective. meanwhile, speaking to our very own francine lacqua in an exclusive interview, jean-claude trichet said that he trusts janet yellen and the fomc. >> i have full confidence in the open market, in janet, in all the members of the market committee, to take the right decision. they have the information, they know well what it is about. i trust them. i will not make my own guess. manus: [laughter] let's bring in alberto gallo.
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great to see you this monday morning. a lot to get through. the international voice on the fed, stanley fischer, saying it is very much in play, rate hike for 2015. alberto: but don't believe that. [laughter] albert: i think investors are tired of seeing it denied over and over. we think the fed missed the boat. the economy is still growing, but at a slower pace. risks to theare banking systems from emerging market. the u.s. banks and also u.s. bond markets have in lending a lot. there is now a deeper risk that the china's slowdown will affect other countries. debt,about yen-dollar around 10% of the u.s. market. manus: you said they missed the boat. wirp, that function on bloomberg
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-- october, 10%. christmas, 40%. it, orey really missed do you join the camp that they delay substantially? willto: we think they remain substantially into 2016. for what we need to think about is the inflation target, 2%, is very hard to achieve for structural regions. that changes in the labor markets, there is more ,rioritization of jobs high-paying i.t. jobs and those that work in real estate and construction, which are temporary salaries and jobs. it is very hard to get to 2% for structural reasons. they are using structural tools to fight structural issues and that will not work. but they cannot say that -- they have to say it will work, but the problems are structural. manus: and when it comes to
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facing the headwinds -- you mentioned the chinese. last week, the imf warned on global growth. he wrote a piece this morning which talks about credit. your domain, which is take all of these issues in the commodity market and the crunch going on, and you are taking jobs and credit. wrap that up for me in terms of your perspective. alberto: basically, our view is that over the last 10 years we created an overhang of debt, especially in emerging markets, which are 3/4 of credit creation. we accumulated also an overhang of industrial capacity, which resulted in two a large real estate investment and industrial investment that are not used anymore -- it is very hard to we nowe can again --
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have to shift to a different growth model. it is going to be very hard and it will take a long time. stuck in aare community of very low interest rates, potentially qe for even a longer time. manus: let's delve a little bit into that. mario draghi is saying qe is working, better than expected. are you saying qe infinity ecb or qe infinity from the federal reserve? alberto: in the u.s., we will see probably a few rate hikes last year. in the last few years we could see a slowdown.
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in the eurozone, we have definitely averted the worst-case scenario, but it is not sufficient for a recovery. we have a whatever it takes impetus, but without reforms, this is petering out. it is whatever it takes. manus: i think we packed a lot in, in terms of credit perspective. alberto gallo. here's a look at what else is on our radar on the "the pulse." sell to intends to copper mines, one in australia and one in chile, adding to the planned to cut $10 billion after commodity prices plunged. the move comes after the company said that it has received a number of unsolicited it russians of interest for the mines. dell will announce today that it is acquiring emc.
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the deal would create a corporate computing giant in the largest ever technology merger. turkey has buried the first victims of a twin bombing, weren't over 90 people died. -- where over 90 people died. it is still not known who carried out the attacks, which hit a march calling for peace. again after the head of opec said that demand will grow and supply will contract -- a perfect situation. qatar's energy minister thinks the prices have bottomed out and says there are signs of recovery in 2016. the global oversupply set prices down over the past 12 months. to keep the u.k. in the eu launches today under the
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banner of "britain is stronger in europe." leader of the campaign has rebutted claims that it will be a patriotic course for written to withdraw. other backers include a baroness, lord sainsbury, and lord mandelson. what is up next? commodities, of course, and the crunch ahead of copper. warns that hedge funds are playing a dangerous game with prices. here are exclusive interview, next. ♪
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manus: welcome back to "the pulse," streaming on glencore, never far from a news line. it is to start the process of selling copper mines in australia and chile after receiving a number of unsolicited expressions of in addition to a plan to cut their debt by $10 billion in the wake of falling commodity prices -- who else do want to talk to? $2 billion worth of additional sales. it is unsolicited invitations. just to be clear, the asset sales, previously $2 billion, that did not include these
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copper mines we heard about today. previously those talks about precious metals, this agricultural unit. today, we now hear there is a bit of a surprise, that they are looking to sell to copper mines. glencore's line is that these were unsolicited approaches. in terms of the context of global copper mines, not terribly significant, but they are interesting nonetheless. manus: this is not a good time anye selling metal by stretch of the imagination, whether you are pimco at the bottom or goldman sachs. this is a tough time to sell assets. is there an appetite for copper? jesse: it is definitely not a thet time to be selling -- price of copper for years ago was at a record and today we are at half of it. copper definitely has a more bullish outlook than other
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commodities, much more positive than others. a major copper miner recently sold for $300 million in cash. we have had some analysts come out today saying that based on those asset sales, they could achieve thia a similar price. an unexpected positive if they get a good price. manus: i have written down here -- there are a couple interesting things. in the background doing other deals in the asset space. yet the names, do we know yet who might be interested, in terms of the glencore?mplexion for this is just one piece of the very big jigsaw of convincing the market they have a handle. jesse: there was a copper mine
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in australia -- that would probably include the company there. they are looking at acquisitions. in south america, private equity firms are still crawling over south america for copper assets. there is definitely appetite for copper. manus: well, they have to negotiate without ivan klassen berg. thank you very much. let's move it along and talk hedge funds -- they are betting that comparable drop further, and if they are, they are playing a very dangerous game with prices. that is according to the head of copper at rio tinto, the world's second-biggest mining company. it has lost more than 40% of its value since 2011. speaking to jonathan ferro, they said that short-sellers should beware. today we copper space, are not trading on fundamentals. i think one good example is
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there are lots of shorts and copper. we see the pickup in terms of shortselling copper. toyou remember, they decided change the rules in relation to the equity market, where people were no longer authorized to short sell. therefore what we have experienced is a series of players in the marketplace that use copper as a proxy for the chinese economy and started to short sell. today, if you were to look at look the price is, if you where prices are compared to the previous year, there is something that doesn't stack up. the said, we believe that series of players in the marketplace which are using copper as a proxy for the general chinese economy are therefore taking some position. it could be a very dangerous game in the medium and long-term, because at some stage we expect the copper market to go into a deficit, and you don't
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want a short position -- jonathan: so the question is how long do you think it will take for that process to shake out, the supply demand fundamentals? >> i hope that in the next two to three years, we move back into a deficit position, and we enjoy a more formal type of context. copper and iron ore dominated by one buyer -- copper. it is 40% of china. does that concern you in any way, at a time when people are so bearish on china? and the question -- if i can read through china -- companies via the official data -- how were you seeing china? >> we are not concerned about china's. as you said, china accounts for
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more than 40% of the copper consumption. but remember, there are new mines in mongolia, in copper trade with china. do have problems in china today? no. when i look at my customer in china, do they have issues raising credit? all the business we are doingn in china is based on credit -- no. we had a concern a year ago. but today, as we are having this conversation, i'm not concerned. all this comes as mining executives and ambassadors gather for the annual conference, the london metal exchange, with bloomberg commodities index off 12% already this year, attendees will be looking at 2016 and hoping it brings better things for the mental sector. our chief energy correspondent is here.
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your invitation box runneth over for lme. how down, how depressed are the middle traders? this must be one of the worst environments since the financial crisis began. javier: it is. tradersooks for some even worse than the financial crisis for one reason. in 2008-2009, everyone had the hope -- and it happened -- chinese government delivered . now they are doubting that beijing will be able to stabilize the situation, and for the first time in 20, 25 years, it is happening here in london with the prospect -- and maybe it is remote -- that china may be -- that is a spooky -- manus: there was a great story -- a great deal of agreement of
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the premium that is going to be had of these commodities. these conversations set the template for pricing. this is a big copper producer set to shave the premium. we are already seeing the reality of the slow down, and are there any bulls at this conference? who are they? glassenberg, that is a big bowl. the other one is goldman sachs. glencore is really talking up the market, cutting production to try and move prices higher. goldman sachs is really negative. but they are signaling that there is a 20% reduction on copper premiums, a sign that there is a lot of copper supply out there. the market doesn't look like it will rally.
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there was a discussion where we have seen the bottom in few people think we will go significantly below current level, but no one sees a big rally in the next few months. an executive from rio tinto -- if i have to think about what wedo on day one of lme, probably need to wait another few years before we see metal prices rise. manus: we may still be in that same marketplace. what is the hottest ticket to have four lme week? javier: there are many events but one that i like every year dnesday, the intercontinental in mayfair. manus: can mayor plus one? -- and i your plus one? javier: absolutely. manus: now, the largest ever tech merger could be announced later today. dell is planning to pay $33 per
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share for the data storage provider emc. caroline hyde has the details. this comes, it will be a beltre. caroline: it will be a juicy price tag. more than $60 billion for the data storage company. an 18% premium above where the share prices grilli trading. but it is a, kate a deal. you have to get the nuts and bolts of it. we understand that there is a $25 price in terms of cash that could go up to $27. but just over $25 is what our sources have been telling us. but there is a new security being formed, the so-called collar, a way of protecting the sellers from big fluctuations in price, $88 for vmware. that is a software provider that is controlled i emc. it helps run your software more efficiently on storage and networks and servers, and it is controlled. therefore we see a little bit more complexity.
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is all of this complexity trying to soothe one key investor, one key activist investor, elliott management, who has been trying to push for emc to split itself up and create more value. let's have a look at what value it brings to dell. two years ago it took itself private to do exactly this, to come away from the glare of shareholders, to be able to restructure itself, to reset itself or purpose in a new technology ecosystem. michael dell and silver lak e made the company ofvate, so what is to become hewlett-packard and ibm? they could give them a run for their money to become one of the biggest providers in the enterprises computing products. dell already has a software and i.t. services. indeed, the servers. but with this, it adds a storage.
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there are challenges, and this is what's going to become interesting -- how they finance the deal. could they really afford more than $60 billion? they will have to raise money to get $40 billion, but that is high-yield. we are seeing a bit of a drying up in the high-yield market. so that is what the banks will be considering. on the other asset class is emc. i am sure we will see a pop in emc shares later today, but what about the bonds? they have been falling and they are worried that they will be lower. the debt.r meanwhile, there is a report that there could be a shot provision, maybe 60 days, and emc could loom or in other buyers to get a better price tag.
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interesting to see where the final price will be. manus: thank you. we will see what news comes later in the day. still to come, the campaign to remain. ♪ the only way to get better is to challenge yourself,
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we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. pulse echo --." we are live from bloomberg in london. the federal reserve vice chairman says the u.s. economy maybe strong enough to merit an interest rate increase by the end of the year. he cautioned that policymakers are monitoring slower domestic jobs growth and international developments as they decide the precise timing. glencore is selling to copper mines. are seen commodity prices
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plunge. they have received unsolicited expressions of interest from various mine buyers. it dmc.acquiring the deal would create a corporate commuting -- computing giant in the largest ever community -- technology merger. let's get a update. mark: again is again. a nine-day stretch is the best since february. take a look at the shanghai copper. this is a 2015 chart. the index is up 3.3%. got export data and consumer price data on tuesday. the hope is they will be further
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rate increases from the bank of china. in --might be deductions this is absolutely nothing it to the dollar. he paved the way for another rates hike in the u.s. this year. he joins another number of fed officials since the september meeting. the dollar is down for the third day last week. the dollar had its worst week since june. i've done it barriers for all of last week. this was the worst week since judah. is convinced there's going to be a hike this year. the odds of a hike are 39%. a month ago, they were 59%. the big gainer is rwe across europe. government announced that utilities in europe's
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economy have enough funds to pay for the shutdown and the clean up of nuclear power plants last month. shares plummeted by the most since 1999. the decommissioning of power plants may prove to be insufficient. this is a huge sigh of relief for rwe shareholders. thes: today, this marks start of five days for the london metal exchange. aspectswill discuss the of markers with the collapse of the commodity rices. bleakre painting a picture for mining stocks. to of the analysts is here talk to us. welcome. we talked about glencore. when i look at the turnaround in the metals and mining market, we've got notes from pimco.
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it's up 26%. longest winning streak since the year 2000. you would pretend that margins are going to be the key part of why i get involved in this sector. ofl: we've seen a number other analysts, with some constructive notes. over the last month, people been looking at the amount of distress in the industry and said what are the signs? the signs for the bottom of the cycle are me get to glencore selling assets and teck resources selling streams in their assets in chile. they are looking to the level the balance sheet. when we look at margins in particular, the price of these commodities bounces around hugely. what's more stable than that is the actual margin the companies need to generate over the cycle. we are really at historically
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low levels, almost unprecedentedly low levels. hit indicates a would you those down cycles, we tend to see a recovery. capacity is taken out of the market. at the same time, the low commodity prices can act as a stimulant to demand on the upside. is starting to be reflected in equities now. manus: i think what happened the other day is a defining moment. producer tofor one irrevocably change the price of zinc. it rose the most ever on a record. company necessarily the but the margin in the commodity that i have to focus on. it's typically much more in porton from a margin perspective and that's the critical thing. take me through your thinking. : if we look at the commodities that have
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industries like copper, iron ore, these have always been very good businesses to be in. they have also been hugely cyclical. large, they tend to move on the commodities. it's the choice of commodity and the choice of asset within that commodity class that determines the ability of these companies to generate crash for shareholders. manus: when you see glencore chile, is its in going to be easy for them? are you surprised its copper assets they are selling? this is an additional $2 billion of assets. paul: the first of which, if we look at where people have private equity players looking, copper is very high on the list of commodities. they know the fundamentals in the industry. these are wasting assets.
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development is increasingly hard to finance. of producing assets now, this is at the bottom of the cycle. it's very attractive for them. i would not be surprised to see. a have the precedent with billion dollars for interest that. that would catch glencore's interest. paul, i wish we had longer this morning. leave with that thought in your mind. gates, thank you very much. still to come, what is the future for the energy industry as the bloomberg summit kicks off in london? ♪
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manus: welcome back to "the pulse." bloombergs future of energy summit is being held its week in london. portugal is here. edp holds interesting gas operations in england.
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it's great to have you in. as we get this conference underway, how do you see where the imf is downgrading? you are a global player. give me the ceo take. antonio: energy demand is growing where it's difficult to do business. in asia, africa, even latin america. where it'srowing easy to invest. when you see headlines, we see a big move. since 2008.the most these big moments in terms of utilities, germany made huge decisions. these of the actual consequences coming to bear. give me your perspective. antonio: governments have made it on investable. the biggest loser was not the
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financial sector, but the utility sector. governments and regulators tend to take free rides whenever they don't need you to invest. because of the reduced demand with the crisis, governments and regulators thought they could squeeze the sector basically. the news of today is that people were anticipating even worse. they are saying the $44 billion that they set aside for nuclear, people rest. newse have additional bad of the denial phase of the government? they need to have a visible, stable and rules for investment in the sector that needs to .2 trillion until 2030 to keep going. manus: what is going to be the catalyst and to make your
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industry more investment. commodity prices are on the floor. antonio: commodity price is not good news. basically, you need new investment. this comes with the energy and climate agenda. you see every country like england, whenever you need new capacity because you are shutting down old ones, you need to give the right incentives to that section of the economy. that is the key variable in europe. for this, you need to lose the idea that energy markets alone will work. you need capacity payments, you need a contractual differences. you need the new rules of the game. you need holistic market design.
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give ayou are going to keynote speech, what is going to be the main message from you as one week the players in this western mark --? antonio: don't put your head in the sand. we need to recognize that things have not been working. you really need to understand that going from a variable to a fixed cost, you need new rules. you need a good market that is recognizing changes. manus: i wish you well and i hope the conference is well attended. of portugal. these are top headlines. we kick it off with credit squeeze area where the plans to
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cut 10%? that is a report from a swiss newspaper. this translate into a reduction of 2.1 billion dollars. this may it include job losses. meanwhile, twitter's new ceo jack dorsey has a plan to boost efficiency. this includes some job losses. that cuts will affect all departments, although twitter has declined to comment. employeesy has 4000 and has been re-in the -- reorganizing its energy -- engineering department. deutsche bank is selling the unit that helps pension funds affect themselves against the risk of members living longer than expected.
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it may fetch as much as 3 billion. politics, the campaign to keep the u.k. in the eu launches today. organized.n is being it's great to have you with us. thank you for joining me. this campaign, the sunday programs were a gog with your campaign. written is stronger in europe. you've got party support across the benches. what is the key message? economics. it stands to reason geographically. we are right by the continent. that is why 45% of our trade is there.
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we have exports every year. when you look at the benefit we get from the market, it's been estimated around 90 billion it. whichever way you cut it, it's hugely beneficial to us. the benefit we get compared to net contributions is 10 to one. economic arguments are hugely in our favor. manus: my role here is not to pander to yours. the sunday programs were very much saying that exports have grown above that level that we send to europe. the u.k. could grow stronger and be more robust if you're outside the free trade zones. roland: i don't think it makes any economic sense. we want to trade more everywhere with every country. the idea that we can trade more outside eu with other countries is for the birds. there is no statistic that
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underlines that. it just makes sense. we would lose things and influence. manus: is there a certain layer of miss representation? business pretty good if you were relieved from your eu membership, would it change your cost structure in the business? roland: not one penny. there are businesses were it might make a difference. the problem is when they would lose out on the bigger picture. the net contribution, when you say eight alien, that sounds like a lot. -- billion, that sounds like a lot. this is the benefit we get from the single market. we've got to get these numbers accurately right. the campaign has been a little bit naughty and class and loose.
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-- fast and loose. ignores the money we get back from the eu. there are certain regions in the u.k.. manus: you can understand the moments at play here. we have a heightened perspective on the refugee debate, the global refugees from the middle east. perhaps by thees british public will view what cameron achieves in change within it europe. that's going to be critically important. roland, let's model asylum-seekers where is rightly doing its part and should do its part. there is public support for that. migration, being outside the eu and trading with eu does not mean you have to what's absolute fortress
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countries, not allowing anybody in. that is not what happens in norway or switzerland. manus: you can see where this is, merkel opened pandora's box in many ways. she is a proper states woman and said come here. you are asylum-seekers. response was a lot more cautious and some would say rightly so. britain has been instrumental in assuring the european union invests in the areas where there is a problem. you have to get to the source of the problem and help those countries that are sending thousands of people over to europe. unless you invest in those countries, you can't do that. you are in a stronger position to do that as 28 countries.
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i think he will call it when he's got the reforms he wants to get. i suspect that that will be next year. manus: the telegraph said he's only going after london. he's not going to achieve any real change. roland: he's already got good reforms. we've got the double majority vote in and out. that's a very important symbolic think. he's got reform and he will get more and he will get reform making it that much more attractive. that is a very tangible type of reform. is changing.u this is the liberal europe that has been arguing for. i think it will get there. manus: thank you for joining us on that subject.
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finsbury.founder of up, tom keene is here for the launch of the global surveillance. details on the show coming up next. ♪
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manus: welcome back.
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we're live on bloomberg television. we are streaming on your tablet and your phone. bloomberg first word up next for our viewers here. he is in the house. it's tom keene. tom: we used to do this all the time. as you know, we are the global network. we're going to emphasize that i moving bodies around. we are over here for the week and i went to the tower of london yesterday. manus: we laid a lot of the roads. i just had a conversation. the context, globally, does the american
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public even know we are having a debate? tom: it is tangential. it is front and center. luke will join us to get us going. jeffrey you'll will join us. we will talk to him about the markets. part of that is in the brexit, the animal spirit. manus: he was the international component of the fed. tom: we took to alan greenspan six weeks ago. the tone was wait for the data and it still not there. for decembering and into next year. the guy from lse from citigroup said we are in global recession. this is a fad that will delay. manus: this is going to be global fund. we beat the french in rugby over the weekend and that was fun. tom: i can afford the
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dorchester. ring the bell. tom: i had francine's american express card. ♪
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