tv Bloomberg Best Bloomberg July 30, 2016 8:00am-9:01am EDT
♪ "bloombergp on best," the business -- the stories that shaped business around the world. yahoo! sales go forward while european banks rivers a downward trend. >> the sentiment is really bad, valuation is really bad. >> we have been very consistent in saying we do not read -- we do not need to -- >> japan takes more steps down the stimulus path. >> they had to do something. they did the bare minimum. >> fundtech to pharma to autos to oil, earning reports come fast and. .
and. . and furious. guest help use track name news in global politics and policy. >> the democratic party is trying to reach out broadly to americans. >> we have been seeing since the beginning of the year, a significant pickup in the rate of money supply growth. >> it is ostrich ahead on "bloomberg best." ♪ erik: hello and welcome. i am erik schatzker. this is "bloomberg best." your weekly review of the most important business news, analysis, and interviews from bloomberg television around the world. let's start with a day by day look at the top headlines.
for almost two years, yahoo! has been under pressure to separate its core business from it investments in asian tech companies. on monday, the big announcement finally came. it is official. verizon is buying yahoo!'s operating business for $4.8 billion in cash. it is finally happened. >> there is a non-core a.p. component of yahoo! that will remain within the yahoo! holding company for the time being that will be sold off, but probably not for another month or so. yahoo! will remain its stake in yahoo! japan and alibaba. it will plan what if it does at a later date. the assets identify that verizon has. >> yahoo! gives a skill that
takes us out of the millions and into the billions. combining those two is the right start for us. we have been investing in content assets across verizon. so you see as going into licensing linear content and into ownership. >> what role do you envision for yourself? -- seeing thises transaction closed, but also watching the value of our asian assets and equity space we have their. moving forward, we will figure it out. but i love yahoo!. here with some of possibilities, so much help. you wanted to restore yahoo! to greatness and build out news and original content. how do you feel about this outcome? >> i feel very good about it. i think yahoo! is a company that change the world -- changed the world. >> apple shares gaining in after hours trading with a slowdown
that was not quite as bad as expected. third-quarter revenue fell 13% marking the first back-to-back quarterly sales declined since 2002. . sales beat's analyst's -- beat analysts' estimates. >> there are some highlights. they are talking about opportunities in china. that market, as a whole, is flat. they are finding that opportunities. they highlighted some initial penetration that is not been the easiest thing because of the legal issues they have had to hurdle. fors a new product line them and is cheaper and finding
new opportunities and new audiences as well. >> we are minutes away from the july decision with the federal reserve is a acted to leave interest rates --with the federal reserve is leaving .nterest rates unchanged her >> no mention of economic activity over seasonal time and for future action. if you are feeling hawkish, inserted into the second paragraph, a statement noting that near-term risk to the economic outlook have diminished. --t suggest that members may members's fear of a rate rise has grown more favorable. >> it is a pretty good america, what would be your counsel to her for september and into next year? >> janet yellen, not to be critical, but you're asking me,
so i will be --as all central bankers are focused that the lower and lower interest rates go, they hire assets go -- the higher assets go. janet, get off of this fixation of lower interest rates providing a push for economic growth. >> deutsche bank says second-quarter profit was almost white out. trading plunged in deutsche bank says i'd money to contact. the ceo has been cutting risk assets and eliminating 9000 jobs. badhe sentiment is really and the results are really bad. we were expecting some pain because of some turnaround. you see market sacrificed. these idea that 2016 will be the
peak year and everything will be fine, if not convincing right now. have touch time does he turn it around before he steps down. >> a good question. management things they can do it on their own steam. for the next two to three years, they will generate capital without emergency measures to hit its target. deutsche bank is too important to say, we will keep going and it will take two years. i think shareholders may put pressure on it. >> three big banks today out with better estimated earnings. what was the reaction? lloyds, alle, falling after announcing cost cuts and struggled to boost revenue. why did the shares decline? >> it was a tale of lowered expectations. slightly against those lowered expectations, but there are still issues of off the board -- still issues across the
board. >> let's get back to credit suisse. it was an unexpected profit. on one side of the ledger, he is starting to make progress. he talked about it being a first step. on the revenue side, it is a tough picture. >> do these results mean we don't need to raise capital? can those rumors be laid to rest? >> we have been very consistent in saying we do not need to raise capital. we have been very clear. we have raised $6 billion. that we can pull many levers to drive that forward. look, you never want to --
[indiscernible] >> the bank of japan keeping key monetary talks -- >> it is going to be this review. what is your take away? >> the review makes sense. they are closing in on 40% of the bond market owned the doj and moving toward 50 and 60 on the current plans. it has not worked so far. >> when you take a look at what the boj did, this is a surprise? >> the steps they took were pretty minimal. they had to do something. they did the bare minimum. the real dark course is a comprehensive -- the dark horse --
we are really in a crossroads here. does he double down and hit the gas pedal even more? >> what do we expect to hear about potential stimulus after the boj non-move. >> the key thing to look for from the prime minister is what is it actual amount of new spending? some of the amounts that came out were massive. they included loan projections. we don't know the size of the supplementary spending for 2016, and that is the key when we talk about stimulus. erik: still ahead on "bloomberg best," even more earning analysis. we look at tech giant like facebook and what the slump in crude means for oil companies. antibusiness stories, including the change of the top of a big
♪ erik: welcome back to "bloomberg best." i'm erik schatzker. tour continue our global of top business stories with ericsson ceo. last week, he assured us that he had no lance to leave the -- he had no plans to leave the equipment company. the board had other plans. >> big changes at ericsson today. shares of the swedish telecom equipment giant -- the ceo has been ousted. he had been chief executive under years and came under scrutiny. the company's profits and
revenue have taken a hit in the face of stiff competition. how much of a shock is this? mr. best berg has been under recent pressure. >> he has. the timing might be awkward because last week, they promised to double down on cost cuts. the truth is, he has been under pressure for months, and increasingly, the company failed to deliver on profits and sales over the last four quarters. >> nintendo shares are following the most since 1990 today. hope that pokemon go would revitalize the stock are disappearing as investors realize the company has limited stake in the game. how much shock should be this -- how much shock should this be to investors? >> nintendo said it was no secret that it only had a 13% economic interest in pokemon go. and that investors should have
known this all along. whether concerned about stock had gone up. it has more than doubled since the release of the game. they wanted to deflate some of the hype, so they put out a statement reiterating the fact they only have a 30% economic interest in pokemon go through various other companies. >> what is interesting is the company will report running soon. why did they not wait until the formal earnings report to clarify anything? were very concerned about the run-up in the stock and there may have been concerns about potential action from shareholders in the u.s. maybe. abn raises -- sab miller will be entitled to receive more shares than the previous offer. the shareholders pushed bidders. it is it the last call?
>> that is what they said in a statement today. far isat we have seen so that they are not considering the offer. who knows what they will say. they propose the last opera 44 pounds -- the proposed the last offer at 44 pounds a share. has -- iller shareholders were looking for more value following the brexit plunge in the pound. they favored that they -- they said they favored anheuser-busch. >> we have to be very careful. they have not halted the merger. they want to stop integration discussion. there is good reason for that. they have a new offer. it was bumped up by one pound. they are in receipt of that offer.
until they rejected, it will be improper for them to continue the process. it is not as severe as it sounds. it is just him saying, if we continue to integrate that, we accept the offer. if we say no, people will read it -- it is a way of them thinking of putting things down as they decide. miller say ab inbev latever of $300 billion >> at go has acquired video for $2 billion furthering its expansion abroad. ambitionsr has big saying he would like to position it as a netflix of china. they also make tvs and electric cars. >> something that leeco has been
saying is that it is about having a streamlined user experience. --they hadhad been been making very good inroads. >> moving forward, we have a dual headquarter strategy and visio is our entry into the u.s. --we intendring our to over the next three to four years list our business in the u.s. market. breaking news this morning, oracle announced they will buy netsuite in a deal valued at $9.3 billion. least surprising acquisition and the history -- >> as i understand it, oracle really wanted to move into the cloud. netsuite is the original cloud company founded by lee ellison.
his family owns 45% of the common stock. is that the same story? >> netsuite is a truly cloud business run by zach nelson. curious if there are other bidders. this is a healthy premium. if you look at the stock of netsuite, you can see the market has been waiting for some kind of deal to happen here. oracle was the best to acquire it lee ellison's stake in the company. ♪
hours as much as 8%. usersy and daily active --is it as good as it sounds? >> facebook has done a good job of getting the entire world on its form. it is incredible. when you look at the actual ads on facebook, what you will see are less brand advertisers and more apps install ads. in terms of trying to reach users, facebook has done an incredible job. >> the fact that there and revenue continues to grow at this time, is also significant and speaks to the investments they had made in mobile video as well as measurement. i think another interesting note is the activity that brands are creating around messenger. the fact that brands are willing to create chatline experiences speaks to the fact they see that last form as an extension of their brand. >> top of it shares gaining
after hours --alphabet shares gaining after hours. 22% to more than $17.5 billion. it is clear that google and facebook from yesterday are gobbling up most of the digital ad dollars. which one is in a better position? >> they both have made the shift as customers are beginning -- beginnings of mobile mine shipped, moving -- using their phone throughout the day. going to be stronger on the broad variety of activities. facebook is very strong and social interaction with their graph of friends. both of them are in a position to it extend from a world that -- from anng centric amortizing centric. this was a killer quarter.
the third straight quarter for amazon. can it sustain that? >> i think third quarter, you will see more of a slowdown. a year ago, fourth quarter, they did miss e-commerce gross margins due to underestimating demand. you are seeing increased investment. they also cited investment and content related to prime video. quarters inseveral a row of improving margins. >> looks like the market has become comfortable because you have amazon web service going gang buster rate making more of that operating income. >> correct. there are other competitors, but there is nobody in the market that have a product streak like amazon. it pushes more investment in the e-commerce business, which is ironic.
electronics rising fortunes of 1% out of --after it announced by backing canceling $1.6 billion worth of shares after that strong earnings report. >> we have been focusing on the smartphone business, which was big with the seven. -- when youorted for at what they reported the mobile phone business, they are pricing, it has taken up the mantle of the biggest profit driver for samsung. have a look at the breakdown here. $3.8 billion for the mobile phone, the galaxy, the hybrid, and the tablets. semiconductors, that is where the margins are. they are headed shoulders above everyone else. its half year
results. revenue jumping 14%. revenue growth accelerating. you profits going up 12%. the thing is about this company, it continues to ramp up r&d. it is so aggressive, isn't it brian? brian: these results are not surprising. these are one of the vendors we are expecting to grow from the smartphone space quite significantly this year. the question is, how much does that come at the expense -- of a spending more on r&d, marketing? expecting to be quite aggressive in this space and we do expect more of that. at what cost is the question here? >> turning to twitter, shares plunging. down as much as 12%. -- monthly active users edged up.
what that be enough to boost and revenue going forward? will the news get better? >> it is important to remember that user engagement have to leave monetization. it is important to remember that twitter -- all of their latest efforts is in the service of going. --le volume is improvement import, user engagement is more important. their latest live streaming can capture the market, the quality of those eyeballs are more important. >> in terms of monetization, cannibalization of their revenue from new products cannibalizing the legacy products. with a lack of user growth, you have to understand, are they trying to be niche or mass-market with allies? -- with the live? phillips second quarter beat estimates. they are keeping its 2016 outlook.
statement, they are concerned about higher risk due to volatility. where in particularly where he slept the moment? >> we see basically volatility all over the world. ,n the middle east, brexit elections coming up in the united states -- maybe positive is that i see china growth coming back. we had a good growth quarter in china. but overall, -- pharmaceutical giant eli lilly posted second-quarter early -- earnings as sales surged. sales went 9% for the quarter. either met or beat estimates. those of the topline numbers. take us behind those numbers and tell as what we should be looking at here. >> we grew revenue 9%. the important piece of that is a percent of that revenue growth
was volume -- 8% of that revenue was volume. six percentage points with a new product we lost since 2014. price and rate had a negligible impact on the top line. we got good growth from some of our existing products, including our -- smithkline up with earnings that beat estimates driven by new drug sales. the stock is trading higher this morning. we will begin with the brexit effect. i will put a few things together beginning with the impact of a weaker pound. around 133 at a 9% positive impact on revenue. looking at your guidance for the dividend, expected to remain. what are you going to use the extra money for? >> rate question.
>> great question. we have seen a strong tailwind effect from currency in all of our business. 97% of our sales are outside of britain. about one third of our cost base is inside britain. we see the benefit at the top and we get benefit through the structure of the p&l as well. from thatry good news point of view. it is driving sales. it is driving margin and driving the company in terms of dividend cover. >> volkswagen recorded -- reported a profit drop of 36% for its biggest unit. >> we are seeing the audi and porsche brands are the biggest contributors. volkswagen has seen profit declines a 36% in the second quarter. that seems like a big drop. when you consider the extra charges and costs triggered by the diesel scandal, that is still a pretty robust result
considering the difficult situation the brand is in a moment. >> at the moment. >> earnings came up short in the second quarter. the automaker is warning profit targets are at risk given that sales of pickups and s.u.v.'s are surging. ford european sales posted the biggest gains in four years for the brexit could lead to a slump. >> there are a couple of different risks. we are seeing lower pricing and higher incentives in the u.s. and china. we are seeing softening in the u.s. of the retail industry. still at a healthy level but it is down overall as an industry in the second quarter. at the same time, we are also seeing the effects of brexit, particularly of exchange and volume in the u.k., our biggest market in europe. that ishinese r&b,
important given the profile of vehicles we import into the country. we are seeing lower auction values for small vehicles leased in the u.s. later, we will drill into oil earnings and what they mean for an industry struggling to find its balance. in straight ahead, some of the week's most provocative conversations with leaders in business and politics. tom on the race for the white house. alan greenspan on the fed and more. this is bloomberg. ♪
hillary clinton: when there are new ceilings, the sky is the limit. week, hillary clinton received the democratic party nomination for the u.s. presidency. billionaire investor and climate change activist tom steyer has been a longtime clinton supporter and a major donor. spoke with bloomberg about the u.s. economy and the democrats' platform. >> i think the democratic party in 2016 has done a very good job of trying to get to the actual concerns of broad-based american people. a big part of that, and i give
senator sanders a lot of credit for this, is raising the issue about inequality. about the fact that even though the country as a whole has gone forward, the gains from that, the benefits from that have not been distributed fairly or equitably. i think that is something where we are looking at 25 years where working people in america have not had an increase in their wages. i think the democratic party is trying to reach out broadly to americans and listen to them, understand their concerns, and address those concerns. >> you have put a great deal of capital behind the environmental movement and support for hillary clinton as an environment of candidate. how do you hope to see that play out? what do you hope to have a clinton presidency do? >> if you look at 2016 and a platform we have agreed on, it is a quantum leap forward from four years ago. i think we have the most
progressive environmental platform in the history of the democratic party or american politics. erik: monetary policy was again in spotlight this week with both the federal reserve and bank of japan making rate announcements. on thursday, the former fed chairman alan greenspan joined bloomberg to offer his perspective on the challenges facing the central bank. >> you said you are starting to see some indicators. what are you looking at that would indicate inflation may be coming back? >> we are beginning to get a pickup in wages beyond the rate of growth. that is usually the best indicator. just as importantly now, is that since money at the end of the day is what causes inflation, we have been seeing since the
beginning of the year a significant hiccup in the rate of money supply growth. run, it isry long the money supply divided by the real gdp capacity to produce which ultimately determines the price float. it is a very rough indicator. it does not work for two or three years and then pops up. but over the long run, it has never failed. where in a situation now with the inflation rates, it is clear we are going to be moving reasonably shortly into a different phase. meantime, economic stability in europe remains a major concern. britain's brexit vote has added to insurgency -- uncertainty and turkey's leadership is trying to restore investor confidence.
bloomberg spoke exclusively with the turkish prime minister about the measures his government is taking. attempt had an economic impact on the turkish economy. s&p immediately cut our rating. i think that was not an ethical stand. it was taking advantage of the situation. we have overcome a coup attempt. you struggled to keep democracy agencies should not be rushing their decision. .his was saddening for us the turkish economy does not deserve this if you look at the indicators. it is an ideological and political decision. we have no doubt about that. what we are saying to global investors is this has come and gone, and the national will and will of the citizens has destroyed it. life is back to normal in turkey and you can continue long-term investments. we will eliminate obstacles before you.
we are laying out the turquoise carpet in front of investors. we have all kinds of tax incentives, investment incentives, and we are giving priority to value-added investments. >> you mentioned the government would increase investment in the productive sectors rather than investment in social spending, but more on the investment side. are you planning any measures to encourage private investment and foreign investment rather than just foreign investment in foreign stocks? but also maybe direct for investment into the turkish economy? >> we are establishing a wealth management fund. it is a structure that will finance long-term -- large-scale projects. the general budget will be cleared of problems. e.u., doal with the you see a model realistically where the u.k. can get access to the single market? >> i think people at the moment
are jumping to it must be norway or that. i think the u.k. is a unique case. we are the fifth-largest economy in the world. we have a trade deficit with europe a 52 billion pounds. it is not in the interest of the germans for us to impose taxes on cars coming over or on french wines. there is only one country in europe we run a trade surplus with, so the u.k. is a powerful engine. we are number one in europe for foreign direct investment. for all of those reasons, it would be very difficult not to do a deal in the best interest of everybody. i will give you one example weekly. inbus bodies are made france. avionics in germany. you have to have a free-trade agreement for aerospace. you have to do the same for defense products and automotive's.
when you break it down category by category, but i think will come is something that is common sense in the best interest of all the people of europe. right now, a lot has been said. i think it is time for everyone to go on holiday and come back and think in a logical way about what is best for everybody. ♪
erik: you are watching "bloomberg best." i am erik schatzker. oil began the week trading at a three-month low. as energy companies around the world rolled out quarterly earnings, the travails were a steady discussion on bloomberg television. bp, thengs plunged for first major company to report results. bp is being hurt by lower oil prices.
brent crude's 25% increase provided prospect of relief. >> there is concern about refining. what does it mean for the sector as a whole? >> what is happening is during the last year providing sector was -- the refining sector was providing too low prices. the refining engine is sputtering. for bp, it was the weakest second quarter since 2010 in terms of refining margins. >> how tricky is the chief executive's road ahead? that rising, the oil price rally is seemingly fading. >> there were some positives. the company is bring up cash -- freeing up cash. it is hard to see what the catalyst for change is here. oil prices seen in a rut at $50 or below. they have added $6 billion of debt in a year.
they will seem to have to keep adding to the debt to keep paying i investors. absent a big rally in oil, it does seem like a bit of a slump. >> what caused the decline in prices? because theue fundamentals are not distinct now, the market is trading off the dollar. if you make a picture of the dollar and oil prices going back to june 1, it has been trading in lockstep. what do we focus on? the bearish news and we don't focus on the bullish news. when the dollar pushes oil prices higher, we focus on the bullish news. i could make a bullish case as well as a bearish case. the passionate bowls in the market have backed away. the passionate bears have backed away which tells you the market and the fundamentals are not going in any -- pointing in any significant direction.
they reported a 72% drop in profit. ryan chilcote is here to break it down for us. >> we already knew oil profits follow oil prices. oil price fell year on year so it was no surprise there would be a decline. the problem at shell was the production fell as well. they produced on hundred 20,000 barrels less than the market was anticipated. that does not sound like a lot when you are producing a few million barrels. at $50 a barrel, that adds up to $6 million a day. over 90 days, that is $540 million. that explain half of the loss. another big business at show is the gas business. that underperformed. really bad news at all three of show's businesses. >> they beat estimates. what is behind that? >> production is up. just 5%, but that helps on the
margins. in addition, they are cutting costs. that is something investors love. target of $2.4 billion of cost cuts this year and say they will beat that target. >> all of a sudden, people question oil demand. do they have reason to do that? >> they have an underlying reason. if the world economy is sputtering, oil demand should be sputtering. actually, will demand has been robust given the global economy. is rising at one more than -- more than one million barrels a day annualized. making 2.6rrently million cars a month. that means gasoline demand has got to go up a good 8% of matter what. >> wrapping up a big week for , chevron and at sun both missing estimates -- x on
both missing estimates. chevron a loss of $1 billion. exxon's call is currently underway. what has been the big takeaway so far? >> a big concern about increasing debt. they are concerned about what is going to happen with refining margins in the third quarter. rosol is still positive with $1.7 billion. it is the weakest for exxon mobil since 1999. that is the big takeaway. i think the analysts will be asking questions in exxon mobil but also for chevron about what is going to be the outlook in the second half of the year. both companies at the moment are failing to make enough money from their operations to pay for and investment in new production facilities and also paying shareholders.
i will give you a couple of numbers from the presentation for chevron. year, first half of the chevron spent $14 billion in investment in projects and also paying shareholders. over that same time, they only made $1.5 billion. we see a huge drop in what chevron is able to make and what it is spending. >> as you look at the majors, talk about the reserve replacement ratio. >> absolutely none. we are beginning to see these companies struggling, production coming down, and not one company inpresenting in outlook -- outlook that is convincing for the second half of the year or the next few years i have. -- ahead. ♪
>> this is the market implied policy curve. this is what it was the day after brexit. we did not see 50 basis points for a fed fun hike until 1.5 years out. >> one of the charts you looked at in your work is the relative rotation a different sectors. health care is in the leading sector, the upper right-hand quadrant. tech is not doing as well. that is the blue line right here. erik: there are about 30,000 functions on the bloomberg. we always enjoy showing you our favorites on bloomberg television. maybe they will become your favorites. here is an action -- another function you will find useful. it will take you to our quick takes where you can get important context and fast insight on timely topics.
there is a quick take from this week. there are five major energy sources in the world right now. petroleum, natural gas, coal, renewable energy, and nuclear power. thanks to the u.s. shale and movement and the fact it is cheap, plentiful, and clean, it is natural gas that may be the future. become pennies are using technology that turns it into a liquefied natural gas -- big companies are using technology that turns it into a liquefied natural gas so it can be shipped all over the world. here is the situation. the trickiest problem with natural gas right now is in the name. it is a gas. most gas travels through pipelines. that makes it fairly difficult if the u.s. wants to sell gas to korea. but a few things make shipping natural gas possible. first is the possible -- process of cooling it two -250 degrees fahrenheit, converting it to a
liquid and reducing its volume by about 600 times. it is like going from a beach ball to a ping-pong ball. this makes it possible to transport gas on really big ships which leads us to a fleet of $250 million tankers, some the size of almost four american football fields that can carry it all over the world. the only problem is these ships are too big to fit through the panama canal -- until now. projectillion expansion was finally finished in june of 2016, allowing for faster shipping to key markets like asia. what does this mean for global energy? a growing number of countries are trading it with 34 nations importing it by the end of 2014 compared to just 15 in 2005. here is the argument. on how, demand depends fast countries will turn away from coal, the largest source of power generation in the world. one selling point is it is
cleaner, producing about half as much carbon dioxide as coal. intoompanies are pushing it for a greener future. bg groupcquisition of made the dutch giant the world's largest lng trader. but not everybody is aboard the lng train. countries like japan, the largest importer in the world, is focused on nuclear power after starting to get reactors back up and running after shutdowns prompted by the 2011 tsunami. plus, some u.s. gas utilities say longer-term it could raise gas prices for american consumers. you can find a wide selection of quick takes on the bloomberg. you can also find them at bloomberg.com along with all the latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week.
prime minister, thank you very much for making the time to talk to bloomberg after what has been a very difficult week for turkey. you especially about the future, the next steps for turkey after successfully stopping the coup. had, wetion we have have heard a lot from investors and markets in the past week, is how far will