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tv   Bloomberg Markets  Bloomberg  August 16, 2016 10:00am-11:01am EDT

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will take you from washington and berlin and cover stories out of the u.k. and china in the next hour. praxairal gas company in the u.s. and linda will create the biggest supplier and it could be valued at more than $30 billion but it will be subject to scrutiny by antitrust regulators. u.k. inflation accelerated in july in their assigns of a weak pound will fuel further price pressures. the race to the white house, hillary clinton and donald trump agree something is to be done about it and we will hear from wilbur ross and why he is attracted to the donald trump
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platform and calls hillary clinton in a bad trade. we are about 30 minutes into the trading day in the julie: records where they were yesterday. this is a lot of more morning. we had housing starts rising 2.1%, better than estimated for the fastest pace in five months and consumer prices were not changed last month and then there was bill dudley, the president of the new york fed, saying in an interview that we are getting closer to a rate increase. he says it's a possibility it could happen in september and he says the market is becoming too complacent. futures had been down and they went another little bit lower of the samepart playbook we have seen over the past month. every time the s&p has closed at a record, it has fallen the next day.
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monthst have the past action in the s&p and in yellow are these debts that are circled after a record. if you look at mid-july and nextng the next thy -- the day. we're seeing this pattern play out once again in today's session. we're looking at the 10-year note on the back of the world dudley comments and the economic and we had been seeing the yield the back and then they shot up after that commentary. we have been watching the dollar closely because we have been seeing broad the dollar weakness this morning particularly versus the japanese yen. we saw it both 100 for the first time going back to the brexit vote in the u.k. it is hovering around their but it, too, did see a bounce up after those comments.
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hain is in the news this morning. they are a supplier to matter of expert at the company's delay financial results on concerns it is abandoning its full-year target and the shares are plunging by more than 26%. we've got a deal in the industry a $2 billion deal is on thee cintas rise. what could be the world's largest industrial gas supplier, linda confirms it is in preliminary talks with praxair about a potential merger but they caution it might not materialized for both of those stocks are on the rise this morning. the stocks are lower with the biggest decline in two weeks , the longest stretches since
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july 6. only three industry groups arising today. basic resources, chemical, and oil and gas. world'siton, the biggest mining companies, shares gaining as much as 4%. it is emerging from the worst commodities price collapse in a generation underlying profit jumped at 95%. commodity prices have rebounded from the 25 year low they reached earlier this year. the last three months the best three months since 2010. bhp billiton is rising. shares are 10% higher. it isn'tnfirmed limitary merger talks with praxair. it has not resulted in any concrete results. the talks are ongoing and earlier we brought you the story. in talks to create what
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could be the world's largest supplier of industrial gas. the deal could be valued at around $30 billion. bigger market cap, roughly $4 billion more than linda. get to the big piece of economic data. consumer prices rose more than expected, up .6% which is the .hird piece of economic data since brexit economists were expecting .5%. the piece of data that shows the follow-through from the slump in sterling we have seen since brexit is the increase in input prices, tpp input prices up-percent, ending 32 months of consecutive declines. we seeing a feedthrough on input prices. these are the prices that manufacturers are being for
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materials and energy. they signs of the impact falling pound is having post-brexit on inflation particularly on producer price inflation. let's go to first word news. : hillary. new programs clinton a lead of 52% among voters. shrinks when third-party candidates are included and the donald trump negative image is helping hillary clinton overcome her own liability. turkey is taking another step toward reconciling with israel. israel has authorized a $20 million payment to compensate the families of the 10 victims and the restoration of ties is expected to unlock energy contracts worth billions of dollars.
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russia says its warplanes for the first time are using a base in iran to attack islamic state and other rebels in syria. the planes attacked targets near aleppo today russian president vladimir putin discussed the fight. of the summer olympics in rio, there was high drama on the track. miller of the bahamas dived across the finish line to win the 400 meters. she barely beat favorite allyson felix of the u.s. for the gold medal. first with 75 metals and china is second with 46 and great britain is placing third with 41 metals. global news, 24 hours a day, powered by with an 2600 journalists and analysts in more than 120 countries. vonnie: thank you. germany's linda confirmed
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preliminary talks about a potential merger with praxair in the u.s. more on the hurdles it could face. create three payments myths hammocks -- but how payments - behemoths. they could get some. cost synergies and they would have some pricing power the customers may be less satisfied with such a deal. currently four players with almost 75% of the market and if you combine linde and praxair, almost a 40% market share which gives them power and as investors are enjoying you see the stock rally for both companies so they could get savings and probably boost their prices. theie: would it pass
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antitrust regulators and are there things that either company could get rid of an order to test to do that? there, everyone agrees will be a lot of scrutiny from antitrust regulators. people familiar with the matter say they are realize that. they overlap in certain places like brazil. they realize that this deal would face some hurdles but they think they can get the deal done. they want to sell the right areas and find the right remedies. mark: what is the structure of this deal? >> they have not come out with any details publicly but some have said they would do it in all shares. it really a merger with no cash hope toust stock and i have similar stock amounts in the new company but i think they are still negotiating final details. that is the idea so far. mark: it's part of a huge
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wave of consolidation. we are talking about different types of chemicals but it highlights the fact that within the entirety of the chemical industry, it really has been alive for m&a. >> we saw the monsanto deal which is up in the air. this one in the industrial gas space is what one person called an old chestnut. as the bankers love to say that when the stars align, that's when people start talking. going ony this is been for miles but now there is a lot of momentum and they have confirmed the shocks -- the toxin that shows they have a commitment to get this done. vonnie: the chairman of linjde has taken a break from the company for a couple of years.
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is there a possibility he's doing this for short-term gain? >> there is always reasons for skepticism on his big mergers. at linde he did the boc takeover in the u k which is credited as one of the most successful takeovers. it's a very interesting coincidence that this deal comes to the frontline after he rejoined linde. much theto wonder how ceo is pushing this deal. it remains to be seen. it's early days. a lot of it will depend on integration and synergies and whether both companies fully support the deal. that all remains to be seen. how has their expansion gone into health care? has it offset the troubles within the industrial gas
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market? has been doing acquisitions in that area and i diversify away from their industrial customers because the business has been lagging. medical health care is a growing sector. there might be some overlap on the antitrust aspect that linde has some health care interest in the u.s.. they want to stay diversified but that might be an area they have to sell. more m&a activity in the global chemical industry. andhome depot profit rises americans seem to be splurging on remodeling their homes. more on the u.s. retail market next. this is bloomberg. ♪
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vonnie: you are watching bloomberg markets. amk: live from london, i mark barton and timeframe bloomberg business flash, the biggest business stories in the news. federal reserve policymakers got another reason to keep interest rates low. the u.s. cost of living was little changed in july it was the first time in five months the consumer price index did not increase. if you factor of food and energy, prices rose 1/10%. housing starts climbed to a five-month high in july. builders are responding to the strongest sales since the start of the economic recession. more homes are under construction last month and any 2008since the start of
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there is.a report that u.s. justice department has found evidence of criminal acts in its investigation of volkswagen. talks about the emissions testing scandal are expected to result in significant financial penalties for the german automaker. lawyers for both sides are trying to reach a deal by the end of the year. that is the latest bloomberg business flash. the home depot second-quarter earnings matched rosest estimates as profit more than $.90 while americans spend more money to remodel their homes in the blitz of their earnings forecast for the year by four cents. earlier today, ups retail analyst has a buy on the stock and explain what he likes what he sees. slow sequentially but that was fully expected. the first quarter benefited from some abnormally warm weather in the spring.
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this is more typical of what you will find at this stage of the cycle. we think we are still in the middle stages of the home improvement cycle and that should last. five point 4% growth in the u.s. that they saw as a good number. will they make their full-year forecast? we saw fromg 4.5y's release suggests the percent growth they imply for the back half of the year is reasonable. we think they will make it. alix: when you look at gdp, how are retailers managing inventory? inventory drawdown so much so how did home depot doing managing their inventory? >> their inventory was up about half the rate of their sales of its remarkable performance. we think that speaks to her this business is relative to others in the retail landscape.
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buy rating on this stock. home depot has been an unbelievable stock versus the dow at a normalized basis, home depot is up 661% since march of 2009. can that kind of outperformance continue? given where the hundred and cycle is, home depot can continue to generate midteens eps growth for the foreseeable future. that will be what drives the stock. we think it can continue. terms ofthat also in the housing cycle? are we midcycle? of the home improvement cycle, we think we are still in early stages. the home improvement category can grow 4% for the next several years and home depot can go better than that. alix: what does that mean for loew's whose earnings come out tomorrow?
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>> we expect lowe's and home depot grow at similar rates. we probably so that in the second quarter. lowe's have been an underperformer versus home depot for some time but it's starting to catch up. overtime, they should grow at similar rates. still ahead, etf's have taken them more money in the last six weeks than the rest of the year combined. a closer look at the investment and emerging. this is bloomberg. ♪
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mark: live from london and new york, i'm mark barton -- vonnie: i'm vonnie quinn.
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taken in more money in the last few weeks than the rest of the year combined. let's go to julie hyman. julie: thank you. eric, let's dive right in -- why have we seen such a big flow pick up an etf's particularly at a time when biting overall in stocks has been dropping? at the end of july, we talked about flows. it's this goldilocks environment. you've got brexit behind you and the city economic news but not too good. fear ofreally just know the fed and nobody is thinking they will raise before the elections. i think people are feeling risk on and they are buying up etf's. be used a lot by hot money institutions and that's the kind of money we are seeing. when you see 68 billion dollars in six weeks, that's institutional money. have been the prime beneficiaries of these flows?
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out to me.ps stuck a lot of the money in july was in large caps so there was some restraint in terms of investors not going all the way. allugust, they are going the right and small-cap etf's are at $2.5 billion and a dozen julie: of them saw flow so they are all in right now. julie:it emerging markets is a thing many investors have been talking about and it looks like they have also been investing their. has had aing markets great five or six months now. i.e. credit to a train picking up passengers. if you look at the flows in august, the top 10 list, three emerging-market etf's are on their. is interesting because it tells me the advisor and retail crowd is hopping on the train. we have $20 billion in etf's this year. the big question is how much of
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that money will stick if the fed were to show hawkishness. you alluded to the presidential race. is there any kind of feet through? is difficult to figure out if the has been an effect of the campaigns on the investing world broadly. what about an etf? industrial etf's are leading all sectors which is rare. real estate has been the hot area because people want yield. xli and industrials are taking in more money and would striving it is performance and was driving performances aerospace and defense stocks. many have said that aerospace and defense is that one area that would benefit either under a donald trump work hillary clinton presidency so that's a potential driver. julie: on the flipside, we have seen the flows out. i talked about this the other day. we have singled volatility drop an open interest has dropped in gold itself and gold futures.
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it looks like that has fed through to the etf's as well? >> yes, they are still taking in money but they are dropping off the list. falling offey are the charts even amongst commodity etf's. commodities get more. 100 14 million go into the triple leverage in etf. gold miner if people put a lot of money into that, that tells you real or hot money is betting on a collapse in this huge gold miner rally. is down 96% so it could not get worse. this is a contrarian play and one we will see if it pans out. julie: finally, what are you seeing in mexico? of14 the biggest in terms single country assets but number one in flows in august. red-hot andnce is new mexico etf is up 8% this
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month in two weeks. bank raised rates and that helped the peso and commodities going back up. oil has given a boost of the markets in mexico is in the sweet spot right now. julie: surprising stuff, thank you so much. still ahead, the donald trump economic advisor wilbur ross says why the republicans have plans to renegotiate great deals and why that is the right way to go. this is bloomberg. ♪
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avtk"0 vonnie: live from new york, this
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is vonnie quinn. mark: you're watching bloomberg markets.
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alisa: china's president has been sent a letter asking to improve trade and strategical -- relations. last month, they postponed approval of a nuclear plant which donned the chinese backers. china has told the u.k. to reach a decision as soon as possible. 15 prisoners at guantanamo bay have been sent to the united arab emirates. it is the largest release of detainees since president obama took office. some had been held there for more than 14 years. a dozen of the personals are from yemen and three are from afghanistan. louisiana, 20,000 people have been forced out of their homes by record flooding. at least seven people have died. up to two feet of rain fell in some places.
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many rivers and creeks are above flood stage. global news 24 hours a day powered by more than 2600 journalists and analysts. this is bloomberg. the commodity futures trading commission has untilctions on stephen: 2018. that is just breaking. the press release says they are placing restrictions. it does not say which restrictions. it that is until 2018. the economy is taking center stage in the presidential election. there is one key issue where the candidates agree. something needs to be done about trade. both are opposing the transpacific partnership. it seems the american people have agreed.
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the number of americans who are supporting free trade has declined over the lax -- last two years. thanks for joining us. we see more opposition to this new generation of trade deals. we just had the brexit vote. you are advising mr. trump. in what way would you have the u.s. trade with the world? >> there are quite a few simple things that can be done and should have been done. it's not the next trade agreement we have to worry about. we have some very bad existing ones. both sides to a trade agreement announce what the expectations are for their respective economies. there should be an automatic look back meccas of some after
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five years. if something has turned out to be very lopsided, there should be an automatic readjustment process. make shouldthat we be made simultaneously to concessions made to the other parties. made ourlly we have concessions first and the other parties later if at all. people i think many agree a trade deal should be beneficial to both parties. forn't the wto allow dispute mechanisms? >> they don't work very well. they are very lengthy procedures. there is no automaticity to them. theing deals with constructs. happen with now
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the, we said we would get 200,000 jobs in the first two years. we have actually lost 800,000 jobs. tradee a $60 billion deficit with mexico. it's the same thing with south korea. vonnie: some of that is beneficial. 15% of our exports go to mexico. some of our car parts. net between what you export and what you import. a lot of the parts we export to mexico get assembled into cars and then shipped back here. trade deficit means when you have more going out then coming in. to tom yesterday. he is one of donald trump's economic advisers. one of the questions that erik
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schatzker to him was about giving away money and generating revenue. it seems on the empathy -- economic plan that there were a lot of giveaways, but not out -- announcements on generating income. what will we hear to balance the books? >> the way the plan will balance the books, i'm not sure they will ever be exactly balanced. it's been a long time since they were. the plan calls for stimulating the economy and generating more revenue for government. by relieving the private sector burden. tax ratethe corporate from 35% to 15% will have a huge effect on our ability to export. now a company could reduce its profit margin by 20% and still
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make the same post tax profit. most don't pay that 35% rate. >> on an incremental basis they all do. some of them have deductions. boeing is probably our most successful exporter. the second thing is freeing up bondage that we are in from the dad trade agreements. our deficit in trade is over half $1 trillion a year. if we could cut that in half, that's $250 billion in year more for the economy and more productive -- tax protective revenue. -- : i just want to get
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ouraking advantage of natural energy sources and not imposing all of these tax burdens and other regulatory drains of the economy. as is overregulation in general. mark: i want to get a question in. i know it's what our viewers will want to hear your view on it. marry the fact that you are a donor to donald trump and an advisor, how'd you marry that with some of his more outlandish views, whether it's on the second amendment or do you or mexicans, how marry your economic interest with some of the more contentious statements that are coming from the candidate? >> his rhetoric is more exotic
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than my own. you know that. i also think that a lot of what he says is taking out of context and out of proportion. the media have been saying he is going to start a trade war by imposing tariffs on china. what he actually said in his trade speech was if it turns out that china is distorting its 45%, we by as much as might have to threaten something like a 45% tariff. that's a far cry from saying he is going to slap a terrible on. i think a lot of the feeling about his rhetoric is generated by the media as opposed to by the man himself. vonnie: i do have to ask you. could you have done your job and
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had 20,000 employees if it wasn't for things like the wto? >> the wto is its own peculiar problem. all the countries in the wto have the same vote. so the smallest one has equal power to us. as a practical matter, that means we are outvoted by the exporting nations. is most glaring example every big competitor we haven't trade has a value added tax which is refunded on exports. we don't have evaluated tax. the wto will not allow us to do that. begin yourant to investments. talk to us about europe at the moment. have you exited a lot of your investments in the u.k.?
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largestld one of our ones. it's a very good company and doing fine, but we think the eu in britain will be hurt i the brags it. -- brexit. i don't think there will be any winners. 10% drop ins a sterling. does that offer some opportunity for you? >> on a personal basis i bought some sterling. we don't speculate in currency for the fund. the fund is hedged back to dollars. our investors gave us dollars and we want to give them dollars back. be gettingrling may a little overdone. i don't quite agree with george soros. mark: it's the industry that is
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under the stoxx 600. it's the worst performing industry. we are aware of the problems faced by the italian banking sector. you have held various banks. buyingthe time to start european banks? do they have further to fall. acis the selective european banks are very inexpensive. they are trading at huge discounts from value. justified by the problem loans. the problem nowadays for the banks is overregulation and the very low interest rates. it's hard to make a high rate of return on bank equity with a 0% interest rate environment. vonnie: is there any place in the world you are looking at distressed debt?
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been buying the distressed debt of u.s. shale producers. vonnie: you are continuing that. >> it's getting harder now because some of them have started to go up here in a -- up. vonnie: for that paper? the chairman of wl ross and company. interview withur carl icahn this afternoon. ♪ this is bloomberg. ♪
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vonnie: you're watching bloomberg. mark: this is your global business report. we are getting data on the state of the u.k. economy after the exit vote. it's not looking good. vonnie: google is getting into the video chat business. can't they compete with facetime and skype? mark: sub prime loans are making a comeback. could auto loans be the next bubble to burst? vonnie: inflation picked up in the u k the weak pound lead to the biggest jump in import costs since 2011. it's the first hard economic data since the vote to leave the european union. it's the next step toward opening china's equity market to international investors. chinese regulators have approved
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the long-awaited stock trading link thing hong kong and shenzhen on the mainland. that gives an option to buy equities. they will start in about four months. the collapse in raw materials has set profits plummeting in the world's largest mining company. earnings fell 81%. it was the worst result since 2001. iron ore and other commodities fell to half their peaks from five years ago. long-terme a brighter outlook for copper and oil. >> prices are going to trade in the recent ranges. i don't think they are going to get higher anytime soon. mark: google has introduced a new chat application designed to compete against skype and facetime. it works with mobile devices running through the android
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system. it also uses phone numbers rather than a google account or a gmail address. that would make it easy to call people already stored on a smart phone. time for our quick take it -- take. subprime loans almost broke down the global economy. said toncial world never go overboard. some forms of some private are on the rise. the rebound has been fastest and auto loans. in addition to handing out loans to more borrowers, lenders have eased terms. says the auto loan market is overheating. the number of late payments has risen. it is different than home loans.
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they are not near the $168 billion in some prime mortgages handed out in 2005. here is the background. enterrd subprime did not the lexicon until the 1990's. the term return to credit scores couldas below those that qualify for prime loans. more loans were secured. brokers and banks made egg fees for making loans and investors collected higher than prime interest rates. moreled lenders to make loans to more stressed borrowers. worst recession since the great depression with 7 million foreclosures since 2007. the financial crisis is tarnishing the idea of homeownership. the debate is whether lower income households are better off with less access to credit and
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more lending would give the economy against the risk of another meltdown. autoncrease in subprime loans contributed to the rebound in car sales. rising to legacy rates of made people wonder if this is making an appearance once again. you can read more about subprime mortgage loans on the bloomberg. that is your global business report. more fallouthead, from the brags it meant area -- brexit vote. gain fromn tack london's economic uncertainty? this is bloomberg. ♪
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mark: i am live from london. let's focus on the european to economic scene. can germany benefit from the
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exit uncertainty. announced a $22 million funding round led by octopus ventures. caroline hyde is joined by the founding managing direct there. i am joined. the first question we have to ask his congratulations. what you doing with the money? >> we are investing that into our business. we are growing further in europe. caroline: you are already present in germany but you are not in the united kingdom. >> we are in eight european countries now. we are serving at hundred thousand men and making them look great and there is more expansion to come up in the existing markets. caroline: would you look at the u.k.? has brags it changed your
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opinion? it, we willbrags have to see. end, men love to be dressed well. they don't want to spend the time to go shopping. that's probably going to stay the same as the u.k.. . caroline: it might become -- >> there is still a lot of potential. the start up. us it is the funding easy to come by at the moment? >> it is a difficult funding environment. i think for our model we saw a lot of interest. in terms of e-commerce or online retail is the first line has been all about huge assortments and making everything shop will.
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from a consumer perspective, that became overwhelming. shirt, looking for a new i don't want to see thousands of options. i want to know what is relevant for me. we provide this relevance to customers through the personal service. oft's why we see a lot growth and a lot of customers coming to us. caroline: a lot of people are looking for investors. are they looking to german startups because of brexit do you think? know octopus longer than the brexit exist. i don't think that is the strategy behind the investment. european investors are looking at europe as a continent and not a single country. i think that will stay the same. caroline: is there more talent coming to be based in berlin? it's a big potential and
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opportunity for berlin. i think there is a fight going on between what is the big startups in europe, is it london or is it berlin? it helps berlin to attract even more talent and more capital from investors. caroline: anyone building up their own startup right now, can they survive? >> i think it's a same advice i would have given before all of those developments. you have to start. you can't sit around in room thinking and discussing. you have to go out there and test your right here with customers. i think that's the way to go in that's how we started the beginning was my cofounder and myself were on the floor of my apartment starting to address our friends. that's just how you evolve and learn what the project works with the company -- customer.
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caroline: might you be looking to have a box sent to you, mark? they are looking to get into new countries and regions. we are handing it back to you from berlin. mark: i always need a style improvements. coming up, the first look at the u.k. economy. we are going to look at the inflation data points and why the bank of england sees die version in the forecast. we are 30 minutes away from the tuesday session. it's london. that is the european stock market. this is bloomberg. ♪
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♪ vonnie: it is 11:00 a.m. here in new york. i am vonnie quinn. mark: live from london i am mark barton. you are watching the european close on bloomberg markets.
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♪ mark: we will take you from washington to london and cover stories out of china and australia. here is what we are watching today. in the first in clues on the u.k. economy in the wake of the brexit vote we see inflation accelerated july. we will ask an economist whether he sees it bursting through the 2% gold by the second quarter of next year. vonnie: more of brexit vote fallout. investment banks will start the process of moving jobs from the u.k. within weeks of the u.k. government triggering article 50. our exclusive reporting on the largest four of the firms.

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