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tv   The Pulse  Bloomberg  September 7, 2016 4:00am-5:01am EDT

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francine: staying low. bank -- european stocks fluctuate near january hike. can carney defend the rate cuts? apple launches its newest product a week after being hit by $13 billion back taxes. could the iphone seven break the sale streak? ♪ francine: welcome to the pulse.
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i am francine lacqua. this is a picture for emerging-market stocks. currencies are rallying after week u.s. data. european stocks you can see flat. pound, we are talking about brexit. 0.83.t euro it is i want to show you south korean won because the msci -- the south korean won climbing to a level. let's get to the bloomberg first word news with nejra cehic. nejra. nejra: u.s. prosecutors are considering a criminal charge against hsbc. such a move would imperil an earlier deal. the doj has charged to people on
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-- banks foreign-exchange this year should have resulted in disciplinary action? german industrial production fell by the most in almost two years in july as a suffered from subdued global trade. production adjusted to seasonal swings. that missed analyst estimates of 0.1% rise. it is the latest data released since uk's vote to leave the eu. the u.k. chancellor philip hammond will meet senior bankers later to set up the governments plan to support the economy and sound out their views for a post-brexit written. theresa may is coming under pressure to strike an agreement with the eu for financial companies before formal exit talks start. the process will not get underway before early next year.
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mark carney will testify before u.k. -- before u.k. mps for the first time since the brexit referendum. bank of accusing the unleashing its rate cuts without sufficient evidence of a slowdown. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am nejra cehic, this is bloomberg. francine: think you so much, nejra cehic -- thank you so much, nejra cehic investors take bets on a september fed hike off the table. the move follows a disappointing august jobs numbers. the sexes go fed president is the san francisco's fed president is not drawing any conclusions. vasileios gkionakis is the head unicredit. thank you for joining us.
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give me a sense of how confusing that communication has been. --se skull -- they skull vasileios: if you look at last year, all of these concepts of forward guidance is quite confusing, largely because at the end of the day your communicative something you don't know about. if you look at the end of leicester, these guys were looking for four rate hikes, now we are hardly looking for one this year. francine: a lot of them say two interest rate hikes are still on the table. vasileios: i think it is an interesting concept. they look at their september experience last year when we had the china turmoil, and then yellen went ahead with a very dovish statement that amplified the turmoil. they don't want to sound excessively dovish. they don't want to keep shaving off further probability.
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in all likelihood we are looking at one at the maximum. a plan inis there communicating becoming a little more like the mpc? it is unclear whether that helps you because that means you understand the thinking of each voting member, or whether it is deserving of the market which is sometimes not as sophisticated as it should be. vasileios: i don't think there is an orchestra to plan in order a uniform communication. there will be some issues they will be communicating internally to each other. i don't think right now there is an orchestrated plan to make a uniform to vacation in all of the various publications. francine: are you expecting anything in september flacco -- september?
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vasileios: no. francine: the market is a discounting it, right? they would not take a chance and hiking? vasileios: it on which market you are talking about. as far as the rates market, you've got it about right. the currency market has started sniffing the beginning of this year that the dollar was overvalued and it has started correcting that. when a look at the exchange rate market i see a lot priced into the dollar. francine: what is your take on dollar? it doesn't rally from here. vasileios: i think you need to did a verysix-year tight monetary policy from here which would be quite unrealistic in order to see the dollar rallying from here.
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francine: the riksbank, they have a currency issue. vasileios: i don't think they have a currency issue. if you look at these guys forecasts, the currency has been developing much in line. if anything it has from a medium-term perspective depreciated at the base slower than they would have expected. for the riksbank, the key thing is what they are going to do with the inflation monday for the next two or three months, meaning whether they are going to introduce a ban or change inflation? think introduce a ban, i this will be positive for the exchange rate, because that will justify them not doing more. francine: was justified in doing more if it breaks away from that range? them doingjustify more if it breaks away from that range? vasileios: we're looking at a target of 2% if a band is
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introduce between 1% and 2%. withinuld be roughly very newly operated mandate francine: we have much more to talk about. vasileios gkionakis at unicredit stays with us. plenty coming up including a rare moment of calm from mario draghi. it hit the meeting, step markets -- stock markets at their most tranquil. how much will draghi deliver this time around? and new passport for britain. -- he may have to move 30% of the banks london jobs to elsewhere in the region. plus, new phone. tim cook is expected to launch the iphone seven amidst falling sales. time to panic? we talk apple. we will also hear the government of sweden's
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riksbank. that is coming up next. . ♪
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francine: this is the pulse. i am francine lacqua in london. let's get to bloomberg business flash with nejra cehic. nejra: apple will hold a keynote event tonight where they are expected to introduce a new line of products including the iphone
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seven. a modest upgrade. the latest edition of the iphone operating system. the new handset will not do enough to withstand apple's declining topline growth. the owner of water for story is -- switching strategies from chasing deals to incorporating the companies it bought. it has become assets and the -- in the u.s., and asia. according to people with knowledge, some banks have concerns about whether on buying gill provide enough -- anban will provide enough information on its structure. -- that blind-sided ceo tidjane thiam with losses this year. he was previously cohead of credit and joined the executive board.
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simple late shares rose an extended trade after -- 9.9% stake in the company. chipotle shares are undervalued and plans to discuss ways to improve the company's operations and cost structure. the fast food chain has been struggling to recover from a series of food safety scandals. shares have fallen around 14% this year. that is your bloomberg business flash. francine: tomorrow's ecb will see announcement will be met with in a currency -- an occurrence of calm. volatility has not been this low since the start of qe back in 2015. that gives some cover to the you see -- some cover to mario draghi. is phillip blond. also bg, he is -- also vasileios gkionakis.
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basileus thank you for staying on. what you're expecting and we talk more about the policies of europe. what are you expecting from the ecb tomorrow? are you looking for euro to keep that stable? vasileios: we are not looking for any action coming from tomorrow. i don't think the data would more to the ecb doing anything right now. we are convinced that draghi is going to be quite harsh in is looking atg he the data and inclined to go ahead with further monetary policy stimulus. an extension of the program. i don't think ecb is looking at the euro-dollar that much. francine: is this linked to brexit? we saw weakness and germany. production falling. it seems to be holding better
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than expected. vasileios: i fully agree. as far as surveys are concerned, they have surprised most people on the upside in the resilience that the euro area has exhibited. it has exceeded expectations. , it iss of their action going to be a mixed -- a mix of things, including brexit, the ongoing sluggishness and kickstarting lending. inflation is their mandate. francine: am a political point of view, you look at exit, how does central banks look at what is coming up in the next couple of months in europe? we don't know what the various positions are. phillip: what we are going to see is endless succession of elections don't completely change the game in europe. the italian referendum is in
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past. the crisis in italy is right back on. the trauma coming from elections is running throughout the whole year. it is a very strong likelihood of a normal result at the perspective of the ecb. the eurozone can't seem to song the problems that seem to solve the problems -- seem to solve the problems. because the popular politics are resisting rushing ahead, the euro reading is between two policy options and it is not working. we are going to see another popular revulsion against the eurozone. francine: you think so. looking at brexit, and they wouldn't -- either of the government in charge at the moment would say we don't want to go that route. you think it would get more impetus for more extreme policy.
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phil: if the government in italy loses the upcoming referendum, the five-star moment -- movement -- francine: draghi says he might not go if the referendum is get -- is against him. phillip: we had a poll out this morning that looks like the national and france will make it back -- make it to the runoff position. leaving europe is higher than brexit was. we really aren't situation now where you're no longer commands popular support -- where europe no longer commands popular support. that makes it politically very dangerous, because eurozone can't push forward on draghi's agenda to really do what is debts in order to secure and collateral, and neither can
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it retreat. the risk is brexit is just the first shock. there are more to come. francine: there are a lot of stuff that we can point to and say things are getting better. vasileios: i'm a bit more optimistic for eurozone. definitely a much better place compared to what he has that's what it was two or three years ago -- what it was two or three years ago. they are not going to disappear overnight. think as brexit, i still let's not get excited about the recent data that is surprised on the upside. i still expect a slowdown. if that happens, i think it will serve as an example to be avoided. at the margin, it will increase incentives for other members not to leave the european union. francine: a question of timeline. thank you so much.
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us. the stay with up next, philip hammond talks brexit and passporting rights. can they find a way to make quitting the eu work for the financial sector? this is bloomberg. ♪
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francine: this is the pulse. philip hammond will meet senior bankers today to set up the
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government's plan to support the economy in the wake of the brexit vote. but today -- ubs may have to move jobs out of the capital as a result of the referendum. vasileios gkionakis from unicredit. phillip blond are still with us. thank you for sticking around. is the passporting issue dead in the water? we hear from ceos that they are making possible plans. if it is, you could argue that financial services are the uk's biggest export. they lose that, what do they have left? vasileios: i don't think it is dead in the water. the problem is there is a lot of confusion of what is going on -- over what is going on. this is largely because u.k. politics have been in disarray. there is no clarity. that theclarity
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article 50 will be invoked at sometime in the future. listen, it is all about passporting. that is what this story is about. if the u.k. goes down the road of heart brexit -- hard brexit, meaning losing passporting. who knows what is going to happen 20 years from now? francine: is it better that we wait a little bit instead of invoking article 50, because there is a sense of calm which had things gone quickly without a plan, it could've unraveled. catastrophe theories about brexit -- the u.k. equity. francine: they are going up a touch. phillip: a lot of investments on
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hold. because the exchange rate depreciation, lots of people are going on buying sprees in the u.k. phonyk that we are in a for -- phony war. we have not left. we don't know the terms. there is a question on whether it will be harder soft? the government saying we are going to leave the single market given that we we want control on migration. the government clearly does not know quite what brexit means. what we are seeing is theresa may developing -- francine: what was in the referendum on? phillip: that is a good point because those that think we need a referendum on the term brexit make exactly that same point. because it is a product of negotiation, we have no idea.
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britain was always a semi-detached member of the in --an union on saying on schengen etc. the government is seeking perspective because nothing else works could what theresa may is most concerned about is migration and having control of migration. if migration -- the migration flows into the u.k. have been enormous. francine: concerned about access to signal markets or losing that passporting? phillip: it is not just passporting. the argument from the japanese government was will put. places like sunderland sitting in the northeast of the country -- all of the jobs rely on european supply chains and access to the single market. -- she will want access to signal markets.
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i don't suspect there will be free movement of people but free movement of labor, so do you will have free movement but for jobs, rather than just turning up without a job. francine: that is not free movement and i'm not a lawyer. phillip: i suspect europe will change. i think the crisis in europe are real. i think it is people being sanguine about it. i think they can change what europe means. there is a shot for britain staying in. francine: free movement. i want to talk to you about fed. vasileios: pretty much negative. the second loan lower in sterling did we have to look at the numbers. we have to look at what has been coming into the u.k. over the past years. in terms of portfolio investments, the pain of influence has been double.
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uncertainty is going to have a negative effect. francine: thank you so much for now and are getting some u.k. gdp data. manufacturing production in a few minutes. this is bloomberg. ♪
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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. francine: welcome to "the pulse" live from bloomberg's european headquarters in london. we are getting u.k. industrial production worse than expected. month on month for july, manufacturing production was down 0.9%. economists were expecting 0.3%. when you look at industrial production, it is better than expected. we were expecting industrial production to be down 0.2%. it was up 0.1%.
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pound, 1.3409. let's stay with the u.k.. mark carney is back in the spotlight today when he testifies in front of lawmakers. they are expected to quiz him over the rate cut in the wake of the brexit vote. bloomberg u.k.y political correspondent svenja o'donnell. also with us in studio, vasileios gkionakis, head of global asset strategy at unicredit, and phillip blond. svenja, these figures today, manufacturing worse than expected, industrial production a little better than expected, where does it leave the bank of england? svenja: carney is in a difficult position. he's going to be facing lawmakers, some of whom are brexit years, saying where is this disaster the treasury and the bank of england was predicting? they also want to have to tell
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that he as to whether a second rate cut can be projected. the economy hasn't quite crashed. francine: there is basically one tory lawmaker that has gone after mark carney every single time. will mark carney defend himself? a lot of economists saying these numbers are stable because the pound dropped so much, but also because there was stability thanks to mark carney. svenja: it is early days. we are in a state of limbo at the moment because article 50 hasn't been triggered. we don't know what brexit is going to look like yet. francine: are you looking forward to the exchange? it is quite entertaining, very british. vasileios: you said it. it is definitely early days. let's not get our hopes high. we have to bear in mind what the
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surveys measure and how they measure it. they measure month on month changes. they say nothing about the increase or the decrease. equally say that just because communication by the bank of england has been so ,trong ahead of the referendum post-referendum, there was a building anticipation, expectation that the bank of england is going to respond big-time. to that effect, carney can basically fall back to that and say it is the expectation that is cushioning the economy in addition to the big fall in sterling. philip, are you expecting from the economy? you were putting up ideas which we should think about. maybe we need to rethink globalization as a whole. until that happens, the u.k. feels like a lonely place. phillip: the u.k. is often the first adopter of trends that start elsewhere in europe.
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what we're looking at across the west is that globalization is increasingly failing to deliver for larger numbers of people. it hasn't delivered for the working class in the developed world. it is beginning not to deliver for the middle class. what that creates is a whole series of political popular upsurge is, scapegoating of migrants, etc. francine: a la donald trump. phillip: and it creates popular support for protectionism. what we urgently need is a new form of globalization. we need some mechanism of modern capitalism that distributes assets and equity. we are in an age where equities -- wages no longer deliver for a lot of the population. francine: it is unclear whether the u.k. will start thinking about this unless there's some
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kind of international conscious that this needs to be done. phillip: i think there's international wrecking russian. -- international recognition of the problem. i think the u.k. isn't alone. as i argued earlier, i think we've been too sanguine about the stability of europe and i suspect europe will become unstable even more so. i think britain will likely be joined by others over time. i think what europe will likely do is create concentrated euro type countries with increasing opt outs. that is the future for european stability. if britain sees that and forges that path, and i think that is what theresa may should do rather than just the extreme arguing witho are each other and not developing strategy, we could stabilize europe. francine: let's see if you are lessons. away from all this
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globalization, there's a more immediate concern that philip hammond, the chancellor, and prime minister need to safeguard the bank. the chancellor is meeting with bankers today. svenja: i think at stake here is the fact that we've had all these new ministerial departments, ministry for brexit, international trade ministry, and banks are wondering where the treasury sits in all this. i think hammond is going to be very keen to say, we are still in charge. we are still here to protect your interest. we are still here to listen to you. francine: do they have an official position on how they want to keep the banks from leaving london or the u.k.? been quitemond has clear in his support for the city and for the single market. we heard from david davis that he doesn't believe in staying a member of the single market. that is not to say he doesn't want access to it.
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what we need is a coherent government position. francine: we haven't had that yet. what do you need to understand the next step in the economy? there's one thing everybody agrees on negotiations haven't started. it makes your life very difficult to try to forecast trends in the economy. phillip: it definitely compounds -- vasileios: it definitely compounds to the conclusion. i have very little doubt that it is going to be a rough ride for the u.k. economy. i go back to the issue, we have a massive current account deficit. this has been financed by foreign direct investment and portfolio flows. portfolio flows have been doubled. why would foreign investors keep financing? why not take their money out of the u.k. when there is so much uncertainty about what is going to imply for domestic
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developments, the housing market, the financial sector? francine: and we couldn't become a switzerland, we couldn't be treated like a haven? vasileios: right now, for markets, it is not the destination that matters, but the journey. i think that in the end, we're going to end up with some sort of a soft brexit. that isw we get there going to be really important for markets. francine: and there's no model at the moment, unclear whether we want to be like greenland or norway? phillip: the clear direction from the government is they are seeking a bespoke model. every other model, north korea has access to the single market but it pays him through tariffs. britain wants tariff-free access but it also needs migration control. i think that is a narrow enough zone for people who want to do a
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deal to do a deal. i think we will have a soft brexit and i expect that is what theresa may wants. think he is completely correct about the current account deficit. britain remains a good place to invest. it is quite likely to out-compete eurozone growth this year. the idea that britain isn't resilient, it has one of the best levels of innovation, one of the best universities in europe, it is the center of an enormous amount of human capital and investment capital, so i think if we have soft brexit, the indications are really quite benign. but if it is hard, then i think it is going to be very difficult. the english language is important to a lot of people. phillip: it will redeem the language as the official language of the european union even after brexit. francine: thank you so much.
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svenja o'donnell, phillip blond, and vasileios gkionakis, head of global fx strategy at unicredit. let's get to the bloomberg first word news with nejra cehic. nejra: u.s. prosecutors are considering a criminal charge against a unit of hsbc related to contact on its foreign exchange desk. such a move would imperil an earlier deal that let the bank avoid prosecution. the doj has already charged two people who were on the fx desk with improper trading and is asking when the internal review of that trading should have resulted in disciplinary action. hsbc the kind to comment. german industrial production fell by the most in two years in july as manufacturing suffered. production adjusted for seasonal swings cropped 1.5% -- dropped 1.5% from previous months. it is the latest data released since the u.k.'s vote to leave
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the eu that suggests the outlook for the german economy has weakened. the bank of japan will leave its stimulus program unchanged this month, given little deterioration in fundamentals and growing caution about the risk of expansion. that is according to the former executive director. we get a decision from the central bank on september 21. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. francine: stay with bloomberg. plenty coming up, including apple's big day. the company unveils its new product range. then, draghi's moment of peace. equity markets are calm. we break down the moves to watch and bring you a great show lineup for surveillance. 10:00 a.m. u.k. time.
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this is bloomberg. ♪
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francine: this is "the pulse." apple holds a keynote event in san francisco today, expected to present its updated line of products including the iphone 7 and updated iwatch. let's get more from neil campling. great to have you on the program. that means we will all be
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updating our systems very soon. the annoying, update while i'm sleeping as long as it is plugged in thing. is it exciting or is it boring? neil: to be honest i think it is going to be quite boring. expectations are quite low. there is such a massive supply chain now with the way apple use the semiconductors. we get good indications of what to expect. most people think the hardware will be a very marginal improvement. that is a big issue, we think. francine: why? it is good enough, isn't it? i have a phone, i'm happy with wow every twoan't years. neil: they need to. technology moves at a breakneck pace. the iphone hasn't even been around for a decade yet and people are already expecting the iphone 8. i think they need to be proper
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shatterproof, fully water resistant, better technology, better battery life, a whole range of things. i don't think there's enough in this release. francine: i guess it depends on who you compare it to. if you think they are not going fast enough, but there's no other rival, they can survive fine. neil: i think we have a big problem for apple in china. three reasons, one of which they have very high growth that has now become negative growth for revenues in china. you have a second issue which is huawei, the local competitor that has ambitions to be the number one global smartphone maker within five years. they've been very disruptive. that could be a big issue for them. francine: for the moment, it is very skewed to the emerging markets. it depends on whether you would i a huawei phone in london.
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neil: i don't know. the main thing for huawei is where the incremental growth comes from in the market. markets, huawei now are putting in iphone equivalent technology in a device half the price of an iphone. there's a third issue as well. if you think of it, they are trying to diversify, trying to get more traction with other isducts, the watch which pretty dead on arrival in many ways -- francine: a lot of people have it. is it just sold the journalists? neil: data just last week showed that the watch volumes had fallen 50% year on year. part of it is because it is not a seamless device. it needs paring all the time with the iphone. francine: what i'm trying to get
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at is there's a lot of people saying apple is not doing this well enough. are we expecting too much of apple? i wonder whether it is because analyst one it to always deliver every quarter something new and that is just not sustainable, or whether there's a real problem at the company. neil: if you look at tech investing over the last 20, 30 years, it comes back to the big incumbents dilemma. in technology, it is always and thee disruptor incumbent that isn't aware of the disruptor coming up. apple was a disruptor and is now the incumbent. francine: it is still the biggest company in the world. neil: it is for now. francine: samsung could take its place? neil: i think it is more likely, the candidates to become the
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biggest company are probably ten cent in asia. that comes back to the growth in the smart phone market. it is actually growth in services. everyone in asia, they are using phones as a primary form of connection to the internet. tencent has the biggest platform of all. if apple try to move to a service-based operation to become less reliant on the iphones, they need to sell more services. if you are a consumer, and you want to watch or listen to riha nna music -- francine: or "the pulse." neil: or a ryan gosling movie. how do you penetrate that market? consumers now -- francine: can apple catch up? neil: apple playing catch-up is
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not really what it is about. the smarter way of looking at it if there's an extension of an upgrade cycle, it takes longer for people to upgrade, then what apple do now is put pressure on the suppliers to protect their own margins. you have an issue potentially of not only volume cuts, but margin cuts as well at apple. francine: samsung had a massive recall earlier in the week. is that a big setback? neil: it is a setback to a degree. galaxy as a more important product for them than the note itself. i think it will put some pressure. i've seen some messages of about due to the cost of the total recall. if we take a step back and think
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logically, the recovery in samsung and the strength they about where the leading technology is now. they are still very much the leader in memory. we have a big upgrade in memory. oled displays is a hyper growth market, partly because apple want to get there. because the technology is now good enough, better than lcd, that will be ending driver. francine: thank you so much for all the updates. neil campling. up next, draghi faces the calmest european equity markets instead beginning of qe. this is bloomberg. ♪
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francine: i'm francine lacqua in london. let's get straight to nejra cehic. nejra: apple will hold a keynote even tonight where the world's most valuable company is expected to present a new line of fronts including the iphone 7. all evidence points to a modest hardware upgrade and with meaningful advancements to ios10 . this has sparked concern that the new handset won't do enough to suspend declining growth. volkswagen is assessing the feasibility of an electric car joint venture with china that could be formalized by early
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next year. they are evaluating a potential venture in which each owns 50%. the german carmaker has said it will invest more than 4 billion euros in china this year and introduce 15 new energy vehicles to the market within five years. credit suisse has promoted brian chin to chief executive officer of its global markets unit. it puts him in charge of the securities business that blind-sided the ceo with losses this year. chin was previously cohead of credit. he replaces timothy o'hara. that is the bloomberg business flash. francine: thank you so much. markets fluctuating a little bit. let's head to the bloomberg with mark barton. mark: stoxx 600 up for a fourth day in five. volatility 23% below average before the ecb's last 10 rate decisions. volatility hasn't been this low in the days preceding a decision
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since the start of qe. ahead of carney's testimony later to the treasury select committee, u.k. assets since the referendum in local currency, the pound, u.k. goats up by 10%, ftse 100 up by 7%. the bloomberg pound index is 10% lower. the economic surprise index data continuing to beat today's manufacturing survey. the trend is very much a positive one. economic data is on balance, beating estimates. as you can see from this, the most since 2013. a building equipment rental company, shares today at a record. adjusted operating profit rising by 4%. francine: thank you so much. stay with bloomberg. "surveillance" is next. tom keene will be joining me.
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we have a great show lined up with you. we have the pearson ceo. we will be talking about negative rates and the swedish riksbank. that is all coming up. this is bloomberg. ♪ dd
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francine: staling low. september fed, and keeping rates on hold at 07.95%. we will speak to riksbank governor stefan ingves. and we will talk with brexit bankers and pearson, the largest education company with text books and dwindling college enrollments, what can you learn from the industry. i'm francine lacqua in london with

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