tv Bloomberg Best Bloomberg September 10, 2016 8:00am-9:01am EDT
>> coming up on bloomberg best, the stories that shaped the week in business around the world. apple rolls out some sleek if unsurprising new products. saudi arabia prepares to roll back some costly projects and the ecb's era of stimulus rolls on. >> we know they will have to roll out the program. they have said that. investors love stimulus. >> central banks keep taking more action that can they get a reaction from the markets. are now ready to ignore the fed. >> negative rates are returning
from being part of the solution to being part of the problem. >> there is plenty for you to react to an hour interviews from the week. >> u.s. banks are more resilient. >> i don't view china as the adversary. >> you have to talk fully and frankly about human rights. >> it is all straight 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. with positive data from great britain. in a report that challenges the expectation that brexit will be disastrous for the u.k. economy. the u.k. services pmi numbers
have just been released. a blockbuster number. the composite is 53.6. checking the manufacturing pmi with the biggest rise ever. just don't know if i have learned anything at all. immediately after the referendum -- the june, followed by effects of leaving the referendum will come through after a long time frame of uncertainty while we try to hash out a deal. we should not expect anything for the next few months. >> should we tweaked our 4 -- should we tweak our forecast. and be pretty much flat in the fourth quarter. >> it does not feel like the
economy will be heading into negative territory in the third quarter. we will have to get away from the month to month volatility. we are learning more about the pmi surveys. they tell us something about direction that the magnitude of the move does not correlate with the moves in the economy. bayer has increased its bid for monsanto. it appears to want to even more. it is about a five dollar pickup from the last bid, the original bid. the share prices dropped. it is more attractive even. what is stopping from -- what is stopping monsanto? >> they have made it clear that they will not negotiate. they want a 130 minimum to get
to the table and try to get a proper deal done. .t is interesting >> is there any discussion about a hostile takeover? >> there is a low probability of that happening. bayer does not have a history of doing this kind of aggressive deal. the other thing is that it would be a difficult one to sell. there is a lot of regulatory stuff that could come up. a mess. be i think it would be hard for them to execute on that. apple.us talk about it rolled out updated progress and features at an event in san francisco today. the iphone seven that boasts an improved camera and gets rid of the headphone jack. the apple watch also got an upgrade. it is water resistant. it has gps tracking. are these new product features
and even mario at --enough to excite investors and consumers? name of the game for this company is selling iphones. they have developed an iphone that is a pretty solid upgrade. if the processor is twice as good as two years ago. it's a power performs. -- the subtraction of the headphone jack gives more space for the battery. no one is going to lose the access to the accessories they already have. what we are really looking at with this device is a solid upgrade which apple needs to do to stay the leader in this market. to themselves as the gold standard of smartphones, that is a fair
statement from apple in terms of their technology let alone the way their balance statement looks right now. they make so much money on these phones. that is why it is important. >> expecting the rate decision any minute. the refinancing rate remains at 0%. the deposit rate remains at -40 basis points. a marginal lending facility remains unchanged at 0.25%. march 2017. or beyond if needed. .e is consistent with its goals we were wondering if we could get a firm signal from draghi. will they widen the paul of assets? -- the pull of assets. maybe he wants some breathing space. at the moment, the data has not looked pretty. at the beginning of the week, we
saw a 19 month low for eurozone growth. time, allowing himself to extend quantitative easing perhaps later into the year. many analysts inc. we will see an extension of quantitative easing this year but clearly, not this time around. the bond market. the dominant story in global financial markets. yields up higher, five basis points. us cross over to guy johnson in london and talk about the post druggie fallout. fallout.raghi he is listening to what is happening in tokyo. the boj is having a review. it is rethinking what it is doing. the curve is steepening. this is what we will focus on. we saw a wobble a few days back
but the curve started to stephen and maybe this is what mario draghi will deliver as well. you effectively deliver a rate cut. you push rates a little lower. great for the banks. let me show you what is happening on my bloomberg. this is the gr function for the stoxx 600. the banks are really trading sharply. the banks are outperforming. we have possibly a very stable indicator coming through. the moving average is at the same level as the european banks. the banks could be a big day in her. that is what europe needs because this is the transmission mechanism over here. >> we will dig deeper into some of these top headlines later in the program. whatis ahead for apple and
♪ you are watching bloomberg best. i am erik schatzker. let us continue our global tour of this week in business with the meeting in china between russia and saudi arabia. they pledged cooperation to stabilize the oil market but that is easier said than done. saudi arabia and russia have agreed to work together to ensure oil market stability. they stopped short of offering detailed proposals. this is something being watched closely in the kingdom.
they are trying to diversify away from oil but this is an economy that still depends on it. between the deputy crown prince and the russian president vladimir putin clearly offering some support that they will look to further cooperation. at the end of the day, what the deputy crown prince was saying was that russia and saudi mayor -- and saudi arabia are the two biggest oil producers and they need to cooperate for the stability of the market. it comes down to iran. the russian president that iran should be exempt from an agreement until it reaches the pre-sanction level of out what -- level of output. erik: it also has the largest budget deficit on the world's largest economies. it is intensifying efforts to shrink that budget deficits including canceling $20 billion in projects. put this in context.
>> the budget deficit is huge. people are talking about trying to reduce it to 10% from 50%. this is quite big. saudi arabia is a bit like a family that has been on a wild bender. they have $70 billion worth of projects and they reckon they can get rid of $20 billion. every time the government talks about waste, they are often wasting their words. the guests is in this case, that is in this guess case that they are wasting a lot. biggestn -- the container line in south korea and it has disrupted the
consumer supply chain there, all ahead of the busy christmas shopping timeframe. shipshave had a lot of being stranded at sea because the port is not allowing them to come in or some of the vessels have been stranded at the port itself because the vendors are demanding money. >> what is the government doing to help these disruptions? >> the government today and announced they are going to provide some sort of funding support to some of the vendors here in south korea and also extend some of the maturity on some of their debt to provide some sort of ease in the financial restrictions. the company itself has also started to apply for court protection on its assets. hopefully, when these come into effect, some of these vessels will be allowed into the port to unload. jumping on news of
assistance from the korean government. there are conditions attached to the help. >> we are hearing from the ruling party that the company won from 100 billion the south korean government but the parent company needs to provide collateral for that. there is an estimate that the company immediately needs 100 million won. if you add in the unpaid fuel, it needs quite a bit more. >> it is searching for a second session after it won credit protection. >> in run protection. what happens is that the company's lawyers need to find more documents ahead of the
final hearing on friday. this means that u.s. creditors cannot seize the cargo or the contents of the company's ships. they should be able to dock at u.s. docs. it is a temporary court order. vw will buy a stake in navistar. also attempting to refocus after the emissions cheating scandal. >> the truck business is changing globally dramatically. you have to be on a level to generate economic of scales and a different level of technology. this is what we are doing. >> this is a real opportunity. we have made ourselves into a better run company. what we need now is scale. >> is this a good move for
volkswagen? >> yes, they have said they want to get away from all of last year. the truck portion was not affected by the scandal. had problems with industry standards. this was the last quarter, their most profitable one. we will have to see how this plays out. for now, they are talking about 500 million in synergies for the next five years. those numbers look good. is backldly -- chipotle in the news. it wants to talk to management about ways it can improve its performance. idea that he is now taking a stake in the company, will that ease investors concerns? >> he has had a tough year.
everyone hates ackman and chipotle. there are still a lot of questions. >> a lot of criticism has been levied against the composition of its board. >> calpers and the new york city pension have already weighed in on the subject. they think investors bet on 3% should be abley to elect up to 25% of the board. lookink bill ackman could to add a few seats on the board and get some operators on there. shares of hp enterprise are not doing much after the back of the company's third-quarter earnings report. loyal to the plan, they
are looking at micro focus. tell us about what her message is this quarter and what is it after this? hpe is reallyy -- focused on infrastructure for the enterprise. if you take a look at what they have done over the last year or more, they have gotten out of businesses that were not strategic. look at the emphasis, the domestic or they did from the old eds. a lot of people, most of the off, were had laid associated with that service is this. what it will be going forward is a company that is about $28 million, focused on driving up either private cloud or serving the needs of the public cloud or serving the needs of enterprises across their campus, their
branch office, and their data center. that means that it is about one word -- scale. bank hasrld's oldest asked the ceo -- investors are seeking a change in leadership. what is exactly going on? it has been a mess since day one. >> the bank is a critical -- the bank is at a critical juncture. the issue is credibility and confidence. came from thee it investors themselves. they want someone new to carry off a risky capital increase they are trying to pull off. the risk has increased. >> what kind of person can lead this bank? >> this is a crisis issue. you need someone with good connections politically, a good investment ace.
♪ this is bloomberg best. i am erik schatzker. our financial markets growing resistant to central banks stimulus? if so, where do we go from here? economic anchors discuss the credibility and effectiveness of central bank right here on bloomberg television this week. >> in the words of european think hank, when markets trust in central banks, the central bank needs to do less to the literate. that quote has captured the
debate perfectly. markets do not buy it anymore. >> i wish i had thought of it. it gets to the ends -- to the essence of the key driver. if people believe central banks create inflation, they need to do less. they are fighting against the public's lack of faith in central banking right now. the central bank change the market expectations for inflation? >> we had a couple of things in the last few years including the decline in oil prices, the surge in the dollar -- that lowered inflation in the u.s. now that oil prices have bottomed out, then headline inflation will start to pick up. are hopingks inflation expectations will rebound on that as well. >> our markets as sensitive to central-bank statements as they were a year ago? >> i think they are less sensitive, especially to the fed
because it has been all over the map. markets are in the mode to ignore the fed, largely, completely, but now you are looking at low rates, support of monetary policies and markets spend less time trying to reverse engineer fed statements. >> reaction functions in their models. passive.s been if you lose the market and you are the federal reserve and you desperately want to do something, how dangerous is that? >> i think it is dangerous. markets are doing well by ignoring the fed may feel good in the short run. ultimately, there is a price to pay if the fed continues to wallow in uncertainty. >> is the fed losing some of its clout in terms of influence? and not just the fed, but also the boj, the ecb, the bank of
england. central bank, the community is becoming less effective but within that, there is a huge variation. on one end is the bank of japan which in my view is not only ineffective but also counterproductive. and on the other end, the fed which is still effective but not as effective as before. >> let us talk about the boj. ratestakes interest negative and it sees the currency appreciate. why? it is starting to trigger the counterintuitive reactions of individuals and companies. and that tends to happen at extremes. negative interest rate at some point, that encourages savings. >> how do you get that counterintuitive reaction without going too far? >> this does not just have to apply to the bank of japan.
low interest rates, is that the problem and not the solution? rethinkre need to be a on the effectiveness of low rates in this environment? >> yes. ultra low rates are now part of the problem. coming up on bloomberg best, more of the weeks interesting interviews including a conversation with canadian prime minister justin trudeau. this is bloomberg. ♪
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fiscal policies. assessing the level of panic at u.s. bank. let's begin with strong words from the canadian prime minister. just intrude out wants to -- just intrude out -- justin tru i the popular buck backlash. >> i think canada needs to draw in foreign investment. we need to draw in global investment as a way to be able developrly -- properly our resources in a way that will create resources in canada. we need to think about the benefits, the labor standards, the environmental impact. we need to analyze every deal and have a high degree of confidence that it will be usually beneficial. anyone canink imagine that we would do better
by closing ourselves off from the world. >> how do you engage that balance? human rights is near and dear to the hearts of canadians and the global community to many of us, and that it is part of our social heritage and our social roots. withre trying to engage china more in economic interests. how do you balance that? is there a trade-off? >> i don't know if i like the word balance. it makes it sound like you are making a trade-off. i will pull back on human rights to be able to do this -- i think you have to talk fully and frankly about human rights and engage and talk about the challenges. >> do you do that in beijing? >> certainly. i do that in private and public. as part of canada's identity and as part of our appeal to a certain sense, we are very frank
about our positioning and our strength on the values that make us successful. values of openness, inclusion, creativity, different perspectives. all of those things are a strength. we are looking for to engaging in ways that are mutually beneficial. i do not think you have to choose. , what is notrking working that you would try to change as president? >> i think we need to join arms with china to deal with north korea. diplomatically, that is something we have to push for. free trade. i absolutely believe in free trade. not includep does china, but i do not view china as the adversary. i do not view them as an adversary. >> please you see them as a military threat? thatwould not see them in
respect. it is an interesting time. i was thrilled that he is not a cult of is now a guy, coming from the reformist government, coming from a more maoist guy. i thought that he would want to steer the country in a more western orientation for economic purposes. i still think that. along the way, he has decided the communist party is number one and have to be contacted at all costs. we have the huge anticorruption probe and being responsive to what the people want in respect to smog in beijing. those things are very high. i think we can engage productively on that basis. >> i think we are seeing the tip of the iceberg in government controlled economy, and it will
get worse and not better. today, a much greater awareness of the fact that one way to get out of this very mediocre and undesirable outlook for economic growth is to use what we call the fiscal and spend more as long as that expenditure is done on investments, which are carefully chosen, which will have a big multiplier effect, which will productivity, and which eventually, after going through a time of war public expense, will generate a lower debt to gdp ratio. >> are we doing the debt side right? >> today, you have the china and
the united states and japan, you have canada, just to name a few, the you caps off, which have itself,-- the u.k. which have decided that using the physical space they have, they can move ahead. >> how does this complicate the environment? >> it's complicated. record saying that this will have severe costs and consequences, mostly for the british. it is turning out to be like that. it is also having impact on uncertainty in general because, you know, the u.k. is a large economy. it is also because it have to do with the broader systems of europe, what kinds of deals are being struck going forward, including negotiations with the u.s., which become more
complicated one the u.k. is no longer going to be a member of the eu after 2019. >> what is the level of panic, michael? we are back on the labor day, we need to figure out next year's budget. they are sweating bullets at the too big to fail banks. don't tell me they are not. >> on the one hand, the banking industry is healthier than it has been in decades based on the strength of their analogies. no one is sweating about anything failure of u.s. bank. tom: agreed. >> on the other hand, you have the worst revenue growth in decades. if you are not making it on the top line, the only way to make it on the bottom line is reduction in headcount, reduction in compensation.
tom: you have done the math. you have jpmorgan and wells fargo. wells fargo in yellow. down at the bottom are the laggards. will that ever narrow, or will this go on and on, this massive difference in performance? >> we are much more positive on the large banks. the banking industry, the u.s. banks are more resilient than they have been in decades. they have more utility like outcomes. >> the revenues are not there. they have to cut costs. >> they are making headway piece by piece. anything with outcomes like consumer staples or treasury bonds, those valuations have gone up. the banks are starting to get credit for the reduced risk profile. there two sides, there is less revenue and the other side is less -- dramatic risk reduction
>> welcome back to "bloomberg best." i am erik schatzker. let's return to one of the weeks top story. apple's introduction of the iphone seven and series two of the apple watch. are they worth the update? you decide. we focused on the bigger picture at the world's largest company. >> where are we in the cycle? you have talked about a gloom and doom cycle, increased seasonality around the iphone. --re does apple cs situated see us situated? >> there will be a nice upgrade
cycle here. it will not be the size we saw with the iphone 6 in terms of the growth. we are looking for growth in the second quarter of fiscal 2017. we are looking for growth in total. >> do people buy this time and the next time? oneare going to want to buy next year, most likely, too. >> with technology, this is the issue we always have. we could always wait and get the better product next year. it is the 10th anniversary, so i found a will probably be -- iphone 8 will probably be a big deal. in iphonea 7% growth units in 2015. i think there is an upgrade cycle. i think we are looking for 5% 37% like we saw in fiscal 2015.
>> will this be enough to reverse two consecutive quarters of decline? -- holdey pull through true, they are in line for the next two months to seven months. it is a big upgrade. the installment plans are a big deal to bring to china and the u.k. for as a significant move lot of customers in these markets who have seen year-over-year increases and think it might be time to join these programs. >> is it going to be a not to play out favorably when it comes to the chinese? how will this play out there? >> the chinese consumer likes whizz bang. it is not just a communications tool, it is accessory and the statement of sorts of your
wealth. premium for athe phone that looks the same but is a little better on the inside? probably not. there are more phones that have basically the same features but sell for much less. i think within the overall issue with the new iphone, the bigger challenge is going to be in china. >> super mario was also featured at the event, and that was almost a bigger deal than the iphone itself. >> it is a huge deal. nintendo, not a lot of people realize this, but they don't have any mobile phones. they like to keep control of its software and hardware. that is why you have not seen super mario games for smartphones. that has changed overnight. super mario is coming to iphone. that is definitely something to watch. >> apple is making moves into
india. the uc india picking up the see indiao you picking up the slack? >> i think it is a competitive market. it will be difficult for apple to make a wide push into india and get major attraction. i think it is a lower-priced products that we have seen up until now that will really be the lead product for apple in india. that is a price-sensitive ace with a lot of competition. >> -- >> for now, they deliver on the expectations. what they have done successfully with this launch is clear some -- between the plus release and the other release. >> if you take everything apart from the jack, which is
controversial, aren't they just catching up with the marketplace? >> absolutely. we have got to a point in this industry where the technology, all of these players are moving three to six months behind each other. it is not at a point where we have seen any evolution of features. at some point, apple needs to deliver around a big step up in functionality. at this point, this is not a growth market. it is more of a placement market. >> monetary policy was once again front and center this week with a thursday meeting of the european central bank. it left its three main interest rates unchanged. there was plenty to discuss about the economic outlook and the debate over more stimulus.
for market participants, is a place to discuss expectation disappointments. read between the lines. come on. what is the bottom line? >> it sounds to me more like a situation where they have come to the conclusion that more qe would not help. he kept referring to the g-20 communicate and fiscal policy. this will policy needs to step up to the floor at this point. you have austerity measures in europe dampening fiscal stimulus. i don't think i know where he thinks this growth is going to come from. as we have done as much as we can. it is someone else's turn. that is the domestic governments. >> druggie made it clear in an indirect way that the council is
not satisfied with the underlying trend, and they will keep purchasing assets until they see the path of an asian in a sustainable -- inflation in a sustainable direction. 1.6% inflation in 2018. that is not in line with the target. that points to an extension at the december meeting. jonathan: we look at where expectations are. we look at the statement that you have to be down. is that another round where they can get over the hurdle? >> it looks like expectations of actions they where there was a small selloff in the market. those expectations will be carried forward into september. the ecb cannot control the market expectations. mario draghi is doing a good job
at not sending any singles that signals. he is playing close to this just. -- his chest. they are still pricing in an extension and a cut. no reason to be concerned about what is happening in september. toit set up committees address the scarcity of bonds that the ecb can buy. does this tell us that investors are addicted to central-bank stimulus? >> we know that investors love stimulus. it is the candy they cannot get enough of. they like certainty. i think mario draghi's term that they will study options is incredibly wavering.
mark is around the corner when the bond buying program stops, and they are saying no way, he will have to do something else. words matter. notought his wavering was the right across. it is clear they will do some sort of unstated easing. anytime you say gdp growth is 1.6%, you cannot say wow. based on inflation, you cannot say wow. based on volatility, you cannot say wow. >> were they right? ofsix months to september 2017, basically change the modality of the bond buying program. we know that the central banks have a shortage of paper to buy in the secondary market. that is an issue. we have been here before where the ecb has failed to deliver. in thee a keynote speech
next few days followed by an interview by the chief economist of the ecb where they will lay out a grand plan. >> the fact that they are setting up these committees to study the bond buying program, does that preempt measures in the next few months? >> it is a subtle one. the pattern has been here before. the ecb is often a long way behind. we know that they will have to extend the program. he has basically said that. it is subtle changes around the edges. they can delay any major decisions. slight appointment -- disappointed. there will be other things as well. ♪
>> we have a function on the bloomberg, it includes 61 container ships. it shows where a lot of these are located. the clusters, when you zoom in on them, they separate out so you can get more detail. erik: there are about 30,000 functions on the bloomberg. we enjoyed showing you are favorite on bloomberg television. here is one function you will find useful. it takes you to prefix where you can get important context in timely topics. >> immigration in the u.s. is broken. democrats and republicans agree on little, but they do agree on this issue.
the question is what to be done about it. already million people living illegally in the united states after crossing the border or remaining in the country after their present has expired. -- visa has expired. in june, the u.s. supreme court was divided over obama's executive order that would have shielded as many as 4 million unauthorized immigrants from deportation. obama overstepped his authority. in the presidential race, hillary clinton says she would enforce existing immigration laws provide a pathway to citizenship. donald trump has proposed real immigration reform, including building a wall between mexico and the united states. ronald reagan was the last president to win passage of major immigration reform.
in 2012, republicans focused on andrting the undocumented opposed a path to citizenship. of undocumented immigrants cast their ballots for president obama. photo security is the only issue that needs to be addressed, yet there are conservatives who approved of offering have to legal status but not citizenship said paul ryan. thegration will complete alienation of the growing number of hispanics. >> that was just one of the many quick takes you can take on the bloomberg. you can find them on bloomberg.com, along with the latest business news and analysis 24 hours a day. that is it for "bloomberg best." thank you for watching. i am erik schatzker.
>> since the start of the century, the fortunes of russia have ebbed and flowed. there has been one constant, vladimir putin. taking power at the end of 1999, first as president, then as prime minister, and then as president again. he has made russia in his own image. risingc rebound and living standards. he