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tv   Bloomberg Best  Bloomberg  May 28, 2016 8:00am-9:01am EDT

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♪ coming up on "bloomberg best, the stories that shaped the week around the world. the monsanto merger, rarely do you see such a friendly rejection. >> does deutsche bank deserve more credit for its comeback efforts? has greece turned the corner in its debt debacle? high-profile leaders said share high-level insights. figure the regulators what was to be a level playing field. >> with all these changes -- >> what can expected findings in the financial markets.
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david: it is all straight ahead on "bloomberg best." ♪ hello and welcome i am david gura. this is bloomberg best, the most important analysis of business news from around the world. two giant chemical companies took over the headlines. scarlet: buyer is proposing a blockbuster deal that would create the largest supply of farm chemicals and genetically modified seed. they want to buy monsanto for $62 billion in cash. it would be the biggest takeover ever by a german company. thehey actually reject
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offer, do you have a capacity to increase the author? >> we are totally convinced about the effectiveness of our offer. the share price of may 9, that is a big thing for monsanto shareholders. convinced that it for highly effective thing monsanto. offer?e: is it your best werner: we are waiting for the offer from the shareholders of monsanto. 31%, that tells us investors are convinced? >> no. >> that hundred $22 a share is
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-- $122 a share is not right. david: there is potential financing and regulatory accusation risks. that they would sell at a price and be prepared to pay that price? >> and really seen a rejection from a company. but wervalues risk, really respect the buyer and see that rationale for the deal. so it is very obviously invited to them with a higher price. buyer has to ask itself if we are going to stretch the balance sheet, do we want to raise equity, sell assets? if any company does not table the first offer first, there is room to bump. the dow up 200 points, u.s. stocks closing, joining a rally we saw in european markets. if you break the s&p 500 into 24 interest groups,
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everyone climbed. the worst performer was energy. .lix: if you look a risk on day -- it feels like a risk on day. this really started overnight, risk on through the whole day. >> definitely helps when you open the day with european indexes across the board, on the other side of the pond, trading two times as high as they normally close. it definitely helps. you had some company specific news, a good day from apple again. nice to see that back in the mix. biggest day in three months. scarlet: and really amazing new home sales. it will be paid back down the road with the momentum. greece's creditors have reached momentum that will receive 10 billion euros in aid.
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this also takes away from the 321 euro debt -- billion euro debt. they softened their hard-line stance, what will be the political impact of this? >> there were three main headlines really last night. there was the payoff on the 3 billion euros to greece. the result of the agreement to look at debt relief in the future. details are still to come. we have to work that out. and it will continue to participate in the greek rescue. that is important for germany going into the real elections next year. -- federal elections next year. so the prime minister of greece in germany, angela merkel going into those elections. more than anything, from sense of calm, sense of debt relief has been pushed until 2018. for details and
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struggling to find them. it is reminiscent of where we were before. particularly reminiscent of all we have seen the greek saga the last five or six years ago. is this principle agreement to keep everybody happy, but in the end, nobody is happy and all blows up again. there are options on debt relief after 2018, that is when the bailout program finishes. there is no hoping measures. >> brent crude back above $50 a barrel for the first time in several months. thek -- stockpiles spurring latest rise. etc. , nigeria, talk about why this could go higher. >> the catalyst the stockpile data from the u.s. showing a much higher than expected cut in stockpiles, something like 4 million barrels, and we have
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production outages in venezuela, nigeria and turmoil, and lingering effects from wildfires in canada. all of those one offs seemed to be combining to give oil a bit of a skirt at the moment. -- spur at the moment. bloomberg is reporting today in the pre-opec meeting there was no discussion on opec officials of a production cut. at least from the gulf side, we are seeing a of the strategy of maintaining market share. >> now we want to go to japan where world leaders tangled over how to push the global economy toward growth. there was language in the communique saying we need to get growth going, but they did not go as far as prime minister on big wanted to go -- prime minister abe wanted to go. >> he was talking about the
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human crisis after the fact that the b seven didn't buy it. -- g7 didn't buy it. we heard leaders declare this document has strengthened their resilience of the economies to avoid falling into a crisis. we did see the g7 fix this coordination, but trying to get that recipe on boosting growth, that remains tangled over geopolitical tensions. david: in the 11th hour they added the uk's referendum about the european union -- leaving the european union. that is right, and david cameron really got that going to get that added in. brexit is a serious risk to the global economy, but they have had a good weekend for the prime minister. he was able to get support from the g7 when it came to china's
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steel overcapacity issues. they will tackle the excess, which has been fueled by government subsidies and support. not singling out china, but the rest of them seemed to point to it. as the data drops in the united states, gdp annualized quarter on quarter, the previous 0.5 rises to 0.8. this is important news which lowers the hurdle required for the next couple of quarters to hit the fed's full-year growth target of 2.2%. now we need to average 2.7% for the remaining quarters of the year. it makes it easier and help them stay on track for major activity , but i doubt at the june meeting. david: what will janet yellen and the fed be looking at in june? is it three indicators?
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jobs, and jobs. involved intors turkey, puerto rico, and saudi arabia. and then company stories about a new suitor for yahoo!. ♪
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♪ , iid: this is bloomberg best am david gura. let's continue the stories. deutsche bank is in the midst of a turnaround. that journey took an unexpected turn on tuesday. >> moody's downgraded deutsche bank, and the ceo is speaking his mind this morning. mr. cryan came out fairly emphatically. >> john cryan say he thought it
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was ridiculous to move the downgrade just two steps above words, they, in his have enough capital to pay their debt four times over. they could easily repay their debt many times over. is that a valid argument? >> the rate action was about the increased headwinds the bank is facing in terms of operating environment and its results have been in, its operating results have been in decline for the past couple of orders. -- quarters. that is what drove the rating change. what is the biggest challenge for deutsche bank in achieving this a turnaround? peter: the turnaround has many elements in it. they are trying to change the balance of the earnings mix of the bank. they are trying to strengthen
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the balance sheet. they are trying to revitalize the technology platform. they are trying to do all of these things, and all of these things achieved would be quite positive. but they are challenging [indiscernible] its award space since early january, falling 5%. is set to bet buying the internet business. why did at&t come back into the game? we had heard earlier it was dropping its bid. >> we don't know if we were fed misinformation or at&t changed its mind about yahoo!. verizon and others are at the point where they can only do so much u.s. wise from m&a standpoints. regulars will not allow them to buy a camera company -- cable company. so the digital aspects like
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yahoo!, it is probably somewhat appealing. you can make a small bat and develop something down the road that is appealing to wireless. where's go to vietnam boeing has won an order for the private airline. -- viet jet is an airbus customer. what incentives were offered? >> looking at the value of the new airplanes caused the max 200, which is through 70 max, max.t is -- 370 this was launched by ryanair, and clearly that airplane has 190 seats. they saw the economic stuff that airplanes, and this is the best economic any airplane can have in the world.
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that is the possibility. so that particular importance, they are the kind of low skill in vietnam right now, they have ambition to go into other parts of asia. they don't want to do a major order, so that is why they order 100 airplanes. er toyota is investing in ubr ridesharing partnership. they are joining together to make a specific investment in the company. it will include toyota leasing peschel fleet of vehicles to uber. -- special fleet vehicles to uber. maybe the least of those is this concept of ridesharing, but it has taken off. it has changed the way rental cars operate, it is a big part of the global fleet. it made change the weight people drive or choose when to own a car or not to.
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such we are to have, it is very toyotar them to make -- has a lot of money, it is easy for them to make an investment. agreedunicredit ceo has to step down after two years, losing the support of investors and share price capital as well. they certainly need more capital. when you are trading at four times global growth, it is diluted. there was a lot of things they can do, spin off assets, relieve the pressure. bigs the lowest capital bank across the eurozone. it has 40 billion of not informing [indiscernible] it is the biggest. arep enterprises shares surging in extended trading. this is half of the hewlett-packard still run by the ceo.
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it focuses on servers and stores for corporate customers. it is spinning off the corporate business and merging with computer science core. with this expected? >> it makes sense. to make focus, it is focused on hardware, predominantly networking, storage, and servers , and then finding a way to extend the services business to a company that focuses on exactly that portion of business . it is a good strategy. it refocuses the strategy for a smaller piece of the pie. the risk here is that you have pie you are small focusing on, one that is hardware, dominantly elling to tornight systems -- selling overnight systems. will that be growth? the remains to be seen. microsoft is making as many
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as 1850 job cuts while taking a $950 million impairment and restructuring charge. give us a sense of where these cuts are coming from, and what this tells us about the strategy. >> the $9.5 billion acquisition of nokia was a big deal, that was a disaster. $7 million last year, another $1 billion. it shows that decision at the time, which was controversial, was a mistake. a very expensive one. they are focusing this company on the things they do differently, and focusing very much on software on the cloud, where they have their powerful franchise, the -- on the operating side. when you think about the cloud and bringing micro users to the office 365 platform and the
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microsoft is your platform -- azure platform, they think it will be good. in newes finished lower york after the s&p looks into its accounting practices. this is from alibaba's final report. it is being investigated for what? >> it is looking into consolidation policies. the information about delivery network and also operating data for a single day. the single day is a shopping extravaganza. they brought in something like $40 billion. it is the single day issue that could be related to issues with alibaba's definition of gmd growth merchandising. there was this total transaction. it is possible government moved sometime that turned out to be
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fake. sellers, 20% or 30% of transactions could be inflated has sellers by their own products to restock their own sales ranking. issue is too much of an because alibaba is becoming to be -- trying to become more transparent. it is cooperating. because it is requested information does not mean anything is wrong. ♪
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♪ david: you are watching " i am davidbest,: gura. we begin with the bellwether for the luxury housing market. ceo doug yearly
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has been frustrated by the decline in his stock price. today they were having the best after earnings beat estimates. let's see the luxury home builders show in the numbers don't lie. first we discuss stocks. even with the best, toll brothers is down 12% in 2016. it has trolled industrials the bottom market and its peers. it lessens investor concerns that the luxury market remains a strong and construction costs are using. this had plunged to their yes -- during the u.s. housing crisis but it has come back. revenue increased 31%. toll's revenue may regain in the full year. california is key for this. it was 29% of the revenue. of several homes increased that.
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the region has seen more lap -- land opportunity and race fourth for toll -- breaks forth. closingsup all home versus 91% in the year 2000. the strategy is paying off today with stocks gaining 8%. >> tony is enjoying another positive session, the froth driving the most in a month. 8% higher. that follows an overnight jump on wall street as investors shrugged off week profit outlook profit outlook. why are investors ignoring this newly changed profit forecast? >> it seems like the impact , if you looksony at the structuring that sony has undergone with the tv and handset business, a lot of them say, hey, they are already over
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the hump. the company showing more resilience than we know. it was a pretty ugly annual forecast, it basically ruins the hope sony was going to have its most profitable year in nearly two decades. that income was expected to fall million.20 that is nearly two thirds what analysts were expecting, and operating profit was also a mess. if you do the nasa, this could cost $1 billion when it comes to -- if you do the math, this could cost $1 billion when it comes to them shutting down their facilities. growth willearnings slow this year even with a profit lasting jump. europe's largest discount airlines excited to rise 40% after a 33% surge in march. that is as they cut ticket prices and people flying off
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after recent terror attacks. is pricing going to be in 2017? >> the primary key driver will be oil. that will be $2.2 billion in profit, but we were $90 a barrel. we are already 62 barrels -- dollars a barrel, and the theme is weakening. we are seeing the first half of the year, september things will drop 7%. that is a combination of three things. ryan ayers capacity across europe, opening new bases, new markets. you have the impact of competitors responding with lower oil prices. and then the trip of terrorist activities. brussels, paris, egyptair incident this weekend. and then you have the repeated control strikes in mainly the
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french, which is causing a lot of cancellation. plunging of best buy after a week forecast. -- weak forecast. , why do markets care so much? >> she came in after the current joins in 2012 and give the turnaround a lot of credibility. they jacked it up and they did that. that has been the best part of this turnaround. they cut costs, sold off the for a division. now it is a matter of, can we make sales again? alix: in terms of growth, it was a store within a store concept that was going to be one of their growth drivers going forward. where are they in the actual growth turnaround plans? matt: it has been tough because
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they have done a lot of stuff to make the store better. samsung door, apple store within the stores, but the product cycle has gone against them. full-year results, the u.k. ceo also unveiled a new plan to boost closing and home -- clothing and home business and refreshing styles were often. headlines released talking about the need to focus on hold returns. what does that mean for shareholders in the context of what you have done previously, buybacks and stuff? >> we are continuing the shareholder returns. we announced last year the ongoing customer return, and that is continuing with special dividends at 75 million pounds for the first half of the year. we are a strong cast business. we invested growth, as we said, but politics is about to be 40 million pounds next year, which
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will generate capital, and we can share that with shareholders. at hp are climbing this morning after reporting 11% decline in second-quarter revenue. the focus on consumer market spun up from hewlett-packard enterprises in november. they did beat estimates, which is why the stock may be up. matt: there was a hint in the restructuring going on since 2001, but we are reaching an end. they started the company with restructuring programs. it is crazy restructuring, so they have non-gap numbers, they beat that gap number with a non-gap number. are 11% year-over-year. they have always been tied to printing and pcs. pcs are a disaster right now, the printing is unfolding right now. this is a bad sign, because that has been the bread and butter
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for hewlett-packard for over a decade. the week'sng up, most interesting interviews on bloomberg television. china's policy, brexit, and more. ♪
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♪ david: this is "bloomberg best," i am david gura. time to replace the interviews. we start with eric shafter's sitting down with janet gross. in june.k the move i think that because of the second quarter is looking decent, it is a 2% to 3% type of quarter, it will come back from the first quarter and jobs will probably be good in terms of
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growth, and the dollar has gone down instead of up. for all of those reasons, financial conditions and really economic statistics, this is their time if ever to move. i think janet yellen is more dovish than governors and presidents, but there are presidents and governors, edwin, williams, who are beginning to understand but we just talked about in terms of effective low interest rates on this thing. erik: and kaplan as well from the dallas fed, arguing on the same thing. sooner than later. bill: right. erik: has to make a move. those of the arguments in favor of a hike in june. what, if any arguments, do you find persuasive against a hike in june?
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bill: it is the question of trying to answer what the appropriate neutral interest rate is. some would argue that where we are now, close to zero and where central banks are in many cases negative, the appropriate rate. in a situation where aggregate demand and global demand is insufficient, which has been a condition for 15, 20 years. erik: and that holds some water with you? bill: oh, it does. >> where do you think rates should be at this juncture? >> if we lived in it environment where we did not have to worry about the past, i would like to see interest rates 2.5%, 3% in the abstract. but there is a past history. we are sending this tightening cycle, if you want to do it, by the fed from 15 basis points, or
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something like that. and the last thing we americans would want our central-bank to do, and unfortunately the last ,hink the central bank is to do is being the economy over the head with a huge amount of monetary tightening. it is not going to do that. it will go really slowly. >> what will it take for investors to rewrite european banking stocks? [laughter] we -- ank of you that view that we now have predictability, that is the most important thing. we need to believe we are at least at the beginning of the end of the regulatory environment for european banks going forward. we need you think we are at the beginning of the end of the conduct issues, whether it is rmbs in the united states, ppi in the u.k., there needs to be a
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vision of predictability. francine: do you think it is a level playing field between u.s. banks? s: i think the regulators have an enormously complex task of regulating this banking industry . i know they have a goal, try to make it a level playing field between home countries and post countries and u.s. banks and banks.n banks and asian it will not be perfect, it is not perfect today. i have confidence the regulars want this to be a level playing field, and they will make the course corrections as we go to allow that to happen. ,rancine: so about the brexit do you feel the discounts on barclays because you are in the world when the possible brexit concerns? jes: i think for sure, the markets are being impacted by the uncertainty of this vote.
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it is a historic vote, for sure. as our chairman, john mcfarlane's, has said, the best thing for customers and clients in the u.k., if they vote to stay, part of the european union , as we get to that date, the uncertainty will impact financial markets. >> the chinese economy is a $10 trillion economy. it is the second-largest economy in the world. it is growing apparently larger at 6.9%, whether that is right or not. it is growing demonstrably faster than the rest of the world. japan has negative growth. ,he first largest is germany and that the u.s. percentagewise, yes it is slowing. china accounts for 35% of global growth. >> how about the unvarnished view of china growth? are citing the
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debt problem at the banks is far worse than anyone is reporting, upwards of 22% of outstanding credit in the chinese banking system will go npl, nonperforming, by the end of the year. james: they are big numbers they are throwing around. npl's are going to rise. but china's economy is a complex , enormously complicated set of things going on, moving from an expert loop economy to a domestic demand economy, moving from a savings economy, consumer savings, to consumption. all of these changes will not happen without some bumps. are going up in the bank, no question about that. but they are tremendous at the same time. >> as a regulator, other european banks prepared -- or the european banks prepared in
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case of the vote? >> the banks are aware of the risks that exist. as much as they can against those risks. and judging by the mounds of therere we identified out , the banks will be resilient for such -- if it happens, of course. we will have for a while negative impact. >> have negative do you expect that to be? -- how negative do you expect that to be? >> very negative, many economic reactions in markets. one can expect turbulence in financial markets during a period of time. >> even more than the last six months? >> yeah, of course.
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at the beginning of the year, they are debating it right now. we will see. very difficult to really predict the degree of the effect that it will produce by such an event. certainly [indiscernible] month that sees the june 23 referendum in britain on whether to stay in the european union. which way would you like that to go, and why? >> we have tens of thousands of employees in britain. if we weredevastated to pull out, pull out of europe. europebeen wonderful for . it would be wonderful for britain to be a part of europe.
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i remember remember the days before we were a part of europe. myi wanted to export products to europe, i had to pay 35% tax. if i wanted to import products from europe, i had to pay 35% tax. and the bureaucracy of all these things going on, we could not pay employees from europe. we could not go work in europe, we could not live in europe. all of these barriers have been taken away. let us hope that sense prevails when push comes to shove. people will realize it will be enormously damaging both for europe and great britain if britain was to walk away. ♪
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♪ david: you are watching
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""bloomberg best," i am david gura. , ando rico's debt, turkey the megadeal in saudi arabia all had implications for investors. let's look back at the top stories with politics. turkey,ing news out of should check has retained his -- shimsek has retained his prime minister post. give us the details, why is this so important? >> he has just announced his new cabinet. as he said, investors were waiting to see if the deputy prime minister of economy was in or out? he has been named the deputy prime minister. extremely light investors just like my investors. -- liked by investors.
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markets in turkey have paid .aving over the past months the lira has strengthened and the stock market is up. mark: i have been looking at turkish lira and the vault, and is ticking higher. and the uncertainty, the source is politics. where do we go from here? do they continue to's consolidate power away from the prime minister's power to the president? 100%. that is the prime minister's mission, and he has been saying this. he will take the constitution to a presidential system. this is exactly what resident -- president as long wants. they are saying this is his number one mission. they will be following this through 100% and trying to change the composition so axla''
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s grip on power becomes tighter. >> congress took a big step, striking a deal with puerto rico to rescue it from its and $70 billion debt crisis. this is a major hurdle as congressional leaders work out the details and the disagreements. onjuly 1, the big deadline the horizon. what is the likelihood this would get to the president's desk before then? >> it will be tight, but we can have this bill passed her the house maybe through the senate or close to being passed the senate, it would give the market and understanding of what will happen. we can take some of that accordingly. david: how does this bill respect the priority of the claims of the bond market? rob: the goal of having this oversight board is bringing rain into order to the island to
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everyone gets paid back, whether they are on obligation bonds or tax bonds or the pension. we are not picking winners and losers. everyone needs to be made whole. there has to be an orderly process, and this creates federally processed a compliment. -- accomplishment. it will work, but we have to do it as quickly as possible. >> general electric will take part in a $3 billion investment in saudi arabia that has nothing to do with oil. it is all about of the saudi plan to diversify the economy. they will invest in water, digital, and other projects. this is for 4000 people. >> let me say how important it is for that governments like saudi arabia to be clear with their vision for 2030. like in china, you have a series of iv your plans. .e are now in the 14 one
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they have an agenda they can focus on. the saudi's have done the same thing. it is fit for purpose. they are talking about by diversifying the economy. extendingalking about their health check capabilities. we can help there, and human capital development. creator -- creating a higher skilled labor force to do different things. these are all in our sweet spot. david: let's stop in with disney folks, which may be the happiest place in mainland china. the disneyland theme park opens its gates on june 16, and right now they are trading to people that will translate the magic to customers. tom mackenzie gives us the inside look. tom: he is one of 1000 performers being trained before disney throws open the doors on
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thing toventure some date. the action sequences come naturally. he trained in martial arts. it is the crowd that. sam. -- it is the crowd that daunts him. how to make people happy, that is the most difficult thing. shanghaire a theme in disney, and that swashbuckling can be difficult. >> we have a lot of performances, so we need 30 minutes of training to keep up with physical fitness. tom: she plays a hapless love interest in a pirates of the caribbean spin off, and she has note plans to leave. >> i have been very ambitious. i want to work at least 10 years or maybe 20 years or even longer. tom: they are getting ready for
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another curtain raiser. >> ♪ tom: on stage at the game -- -- lion in shanghai, king in shanghai. they have audiences of 1200 people. lee wei ling is already a celebrity in china. she plays nala, simba's long time friend and wife to be. how do you feel about this? >> this is my first time taking part in a big production and to be a lead actress in a really important role, so i feel really proud but at the same time, it is a big challenge. i never thought i would be able to be a part of disney and perform as nala in the lion king, and i get to perform it in chinese.
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tom: some have doubts if disney can get these performers up to guys haveut if these anything to go by, it can be a good stab at getting it right. ♪
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♪ what sort of tools you are using to assess the situation and brazil. >> we will dive into the crp function. this function is calculating a country risk premium on the countries you see listed. it is comparing the perspective term on the equity market and then comparing that with 10 year yield on government bonds. >> there have been 30,000 functions on the bloomberg, and
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we enjoy showing you our a bridge. that has become your favorites too. go, when you get fast intakes on timely topics. here is a quick one from this week. 2000, andhe year vladimir putin has become the president of russia. after a decade of post soviet intimidation, he starts reasserting his country on the world stage. the timing is convenient. while prices are still -- oil prices are surging. years later, he has the presidency and doesn't interim stint as prime minister. by 2012, he is president again. now, following international russia's provoked by intervention in ukraine and the livinge of oil, standards are falling, and that
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is putting his appeal to the test. this is the situation. , and is all about strength is this strongman image that maintained his leadership. you can get in his vast publicity stunts, whether it is competing in martial arts, writing horseback, or having his petnt labradors sniff -- ,abrador sniff angela merkel who is not one of the biggest fans of dogs. really time he showed softness was at his victory rally in 2012. here comes the argument. he is being tested by an economy that is tightening. russia is facing the lines recession in two decades with real gdp allington 3.7% -- falling by 3.7%. while, he is holding onto the image.kgb tough man he has tried playing the role of a diplomat. after starting a bombing campaign in. to support his outlines president -- his
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ally's president bush are all assad, he is now pushing back. ? w would he be remembered for his diplomatic flexibility or the unyielding ruler whose military adventurism hurt russia when its economy could not afford it? david: that was one of the many quick takes you can find on the bloomberg. you can find it at along with the latest business news and analysis 24 hours a day. that is all for "bloomberg best" this week. thank you for watching. ♪
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