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tv   Bloomberg Markets European Open  Bloomberg  July 27, 2017 2:30am-4:00am EDT

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manus: welcome to bloomberg markets, it is the european open. we bring you the first trades of the day. i am manus cranny in london area and here is what we are watching for you. it is super thursday or day from hell as companies worth more than three chilean dollars post earnings. we bring you the ceos of some of the biggest. , do not relax. the fed signals it intends to begin producing its balance sheet in september. click the dollar's descent
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shatter at key support level question mark second quarter revenues are not as strong as the ceo would have liked. matt miller will interview the man himself later this morning. what is going on at ficc? that is the rest are from the markets. 30 minutes into the trading day, this is how we are looking on the futures, little bit lower. there is a veritable feast of delivery from the corporate world. the question is how -- have we run an done on the european equities, the euro is rising. asked is erica did not the one of its big trials -- astrazeneca did not meet one of its big trials. bit -- a beat. stocks are a little bit lower. how do you look at the fed, was it bullish for exit -- for equities, was it bears for bonds?
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you have south korea higher but we want to focus in on that currency, on the currency moved -- currency moves that you see. also a little bit slower but this is where you want to focus on which is the dollar. the dollar is down by an eighth of 1%. it is the nuance in the language. the fomc says it all in terms of what janet yellen is focused on. fomc give the dollar bulls a holiday? is matt miller in the house, that is the question i ask myself every day. are we there, matt? matt: i am here. we are waiting for more earnings to come out this morning, volkswagen is expected any minute and because of the -- it is embroiled in this new scandal, the alleged collusion scandal, we will be looking extra closely at these earnings
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and because the diesel concerns were reignited as well in the u.k. yesterday. we will look and see how much of their earnings come from that portion of the markets. we are also obviously looking forward to the interview that we have later this morning. a number of questions to ask him in fixed revenue, and trading. fixed income trading not as bad equitieseers but trading revenue is far lower. it will be interesting to see cryan has to say about the turnaround plan and how it is going as how he sees -- and how he sees revenue falling this year. lowering the outlook for revenue. straightat's get across -- let's get straight across to juliette saly with the first word news. juliette: deutsche bank has reported a 10% decline to 6.6 2 billion euros meeting analyst estimates of seven what one
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billion euros. and come from fixed income trading fell. we will be bringing you our interview with deutsche bank's ceo john cryan later this morning. china's industrial firms kept up the heavy piece of profit growth, industrial profits increased nine pain -- 19.1% in june from a year earlier. accelerating from the pace earlier. it underscores the momentum and helps the nation's indebted companies grapple with their giant debt load. the u.k. prime ministers director of strategy has resigned aiming the british government without the office of her brexit fission and at a vertical time. chris wilkins will leave his post at the end of this week. the departure means that may has lost both of her top strategists in the wake of last month's general election. still in the u.k., theresa may's government has commissioner --
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commissioned a report about the economy. it comes a year after she became prime minister prompting questions as to why such a study was not conducted earlier. they have plans to develop to control migration after the brexit. the u.s. has rejected a simple repeal of obamacare. this comes in the early stages of an unpredictable onslaught on -- and the and with failed amendment was stimulus -- the informal care act passed congress in 2015. and was vetoed by president barack obama. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. manus and matt. matt: thank you. u.s. federal reserve officials say they will begin running off
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their 4.5 trillion dollar balance sheet relatively soon. at the same time the central bank is expected left its benchmark interest rate unchanged as policymakers assess moves toward their inflation goal or lack of those moves. reaction to the decision, janice billrson's bill gross told -- bloomberg that the fed favors a weaker bill. >> the have been estimations in the5% to 10% decline dollar and we have seen a 7% decline, that increases inflation by .1% or .2% for the next several years. you asked about favorable development for both sides, fit and policymakers. ofus: that is bill gross janus capital. cudmore from mark
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the mliv team. bloomms of the fed, as sat down he said the only thing that matters is balance sheet reduction. would you agree? issue,t is the key there's a couple of reasons. we are not exactly sure what the market impact will be. is one of thers lord advocates for the fact that balance sheet reduction will help yield for while markets say they will rise. they are hoping for maybe a specific date given. the phraseology of relatively soon has but the market to confirm in their minds that it will be told in september, that october will be the date to start a balance sheet reduction. this should be positive for collecting yield and risk assets. there is nothing to do real the dollar bearish trend. that is it.
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matt: what do you think about the dollar's prospects between now and when we get more on the balance sheet being trailed off for more on another rate hike, for example? shoulddollar prospects be used in the same sentence. they're going to be unwinding the balance sheets for the next hundred years whether that starts in november or december should not worry you. whether they do balance sheets in december and cut rates is -- in december is our view them at that is priced in. that is the rest of the world that is doing the fed 2014 which is we are going to normalize the ecb and we are looking for a counterfeit normalization which is the balance sheet is going to come up, they will raise rates, s have relaxed into interest rates. years in the time
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sequencing and the dollar does not deserve the 2014 premium anymore. magnus has a chart on that. manus: the dollar is in volatility in you said you are looking for a further retracement. railingou look at the and 2014. we will have 3.5% rates the next are but they do not but they start raising rates in december 2015 and that is the peak of the dollar. the trained upward stops there. the rest of the world is seeing this abnormal normalization and the dollar is giving back the market game -- gain which it was in the predictor of time three or four years ahead of the rest of the world. you have superior rates in the u.s., that is over. we are looking elsewhere and the dollar is doing back those gains. news on vw.ing take it away.
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matt: i am looking at the headlines coming across the terminal on volkswagen. they have revenue in the second quarter of almost 60 billion euros. tina .6 7 billion euros. second-quarter adjusted operating profit for .5 5 billion euros, a little more than 4.5 billion euros. the second quarter operating margin at 7.6%, a global operating margin, 7.6% not a bad margin. or relative to other large automakers. this is one of the world's biggest automakers. ofkswagen sees delivery customers moderately above the prior year so sales will increase, they say, in terms of unit sales. interesting headlines from folks wagon. i will continue to look at these results and break them down for you. >> i want to turn back to david. i get your obstruction all view and why you are various the
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dollar. on the balance sheet reduction, when we get that announcement, you believe it is going to be a slow and gradual process. what will happen to the dollar on the day they announced the reduction and when they start the balance sheet reduction? more: then markets are efficient, you cannot believe in totally otherwise we would not have jobs. they have talking about that since 2013. i am really ready for it. give me a couple of months and i am there. i do not worry about balance sheet reduction and what i would argue is your reducing the balance sheet, you're not raising rates. we know higher rates are good for the dollar and balance sheet reduction may be good for the dollar, it may not be good for the dollar -- and to reprice a prospect that is positive, a rate rise or something else that may or may not be good for the dollar. you list bullish on the dollar because they are using balance sheet reduction to tighten rather than interest rates and that is slightly dollar
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negative. manus: those financial positions are very loose. , david bloom. mark cudmore, thank you for your contribution. our mliv contributor on the show. matt, take it away. tot: we are still continuing look through the volkswagen headlines as you point out here. in a message, we are looking at a race to the forecast for sales in 2017 by more than 4%. we are looking at a profit margin target between 6% and 7%. they had a 7.5% off margin in the quarter witches strong relative to other automakers. we will talk more about that through out program. also about deutsche bank. if you are watching and you have a bloomberg, you can use the command tv to watch and follow along not only the video stream but also the charts. any of the things we talk about
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we will be running down on the right-hand side of your screen. you can click on them and click on the bottom of the screen on the blue link and write in. if you have a question for david loom, for example, put it in and we will get it to him. this is bloomberg. ♪
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matt: welcome back to bloomberg markets, the european open. i am matt miller in front for looking forward to an interview with deutsche bank ceo john cryan bearing later. here's your bloomberg business flash. juliette: cash flow from operations has risen to $11.2 billion. the consensus -- illustrates how shells takeover of bg and cost cuts are paying off. we will be speaking to the ceo at 8:00 a.m. u.k. time. will payrican says it its first dividend since 2015. the mining company will pay out 40% of its first half underlying -- underlying earnings. the policy will continue in the future. the announcement highlights the success of its turnaround strategy and checking assets -- shrinking assets. we will speak to the anglo american ceo at 8:30 a.m. u.k. time.
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airbus has reported a 27% drop in second-quarter profit as it cut production of its well selling a 33 jumbo. that was lower than analysts had predicted. at crash and whitney are undermining deliveries. facebook investors are optimistic about the revenue potential for the companies check is this is messenger and whatsapp. that is after mark zuckerberg said he would like to move a little faster to make money from them. earlier it was reported a second-quarter sales beat as -- tolyst estimates declining $9.3 billion, 43.5%. that is your bloomberg is this flash. thank you. let's talk about the pound. chatting earlier and you said where is the rate
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rise and you said it is gone. it is gone like harry potter's cloak. has it really got away? manus: where did it go? david: it just disappeared. these people tell you there will be a rate rise and they forget they said so. a lot of revisionists. there are two types of people, those with no memories and those with short memories. there is no way the u.k. will raise rates and if they do, the pound will suffer because it is a mistake. canada,ook at dollar that is a cyclical currency. it doesn't have structural or political problems, they can focus on the cycle, lower and implement rates and average earnings. we have a political and structural problem. that is the nature of the currency. the currency is not a cyclical
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currency that things about interest rates. this is a currency where we focus on the same day that retail sales are higher than expected, sterling went down. it does not respond to the data, a response to the politics and the structural nature of the current account deficit and budget deficits in the u.k. those are the issues that hand, not the phillips curve. up. up. matt: it doesn't matter if we get continued inflation, if we do not get real drops in gdp? seen --he pound is not does not seem strong to you. david: let's go through this. the pound is lower and inflation is higher. the pound is lower because of the idea of brexit and what happened there. causelitical phenomena
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the currency to fall, it is causing inflation, inflation rises, incomes get squeezed, imports go down and the current accounts shrink. that is the way it works. that is what i am saying, it is a local and structural idea. it is because of the currency inflation is high and inflation is higher to slow down imports, encourage exports, and the current account needs to shrink and we are in the rebalancing phase with sterling being incredible helpful. matt: we're covering these brexit negotiations so closely, i am off to brussels once a week these days. is there any possibility of political change -- a political change could change the situation for the pound in the bank of england? david: absolutely. no one has an advantage over there, even the politicians at hand.
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this is based on something that is totally unknown so i have to work within the parameters i have got. but if there is a delay was some kind of transition, that will have a massive impact. manus: this is the conversation under -- are underestimating the shift. they have talked about transition and the market is underestimating the value of that transition deal, about 40 and cable but you have -- do you agree that the political possibility that there has been a shift and where underpricing? something not for castable, i just cannot do. -- heot prepared to make has made a big speculate if did. that is fantastic and i agree. i do not know.
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i only know what i have to work with and that is a big current account deficit in the u.k. that needs financing and the way that is is sterling will fall, imports will slow down and the account will rectify itself. if you told me that something definite has happened i will reconsider but i cannot be in the place of speculating about politics because you will get absolutely crushed which i have been when brexit actually happened, when trump got elected, no one saw those events happening. when they happened, we all got a pretty big fright. manus: a pretty big fright. people are saying the market is short dollars, it is long euros. how is the market positioned in the pound, is there more fear about having a position in the pound? david: i will say something that is very strange is -- that sometimes the consensus is correct. that happens and it has been correct.
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since brexit has happened, sterling is going down. it has bounced and the dollar has been weak. people are short sterling. people are long euro sterling. one of the better ways to express the short town position is not through cable because the dollar is particularly weak area and you have a chart of euro sterling. we have the euro-dollar at 120. at -- sterling at parity. view and itry big will remain under pressure. manus: the timeline on those calls, and of the year. commentam not going to on the thieves at the airport that let me ask you who else is gaining on the pounds weakness. you mentioned euro sterling is the pounds loss. europe's gain?
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-- whatt is gaining and is gaining on the pound is people in the u.k. what had to happen for them to become competitive is human beings had to have [inaudible] seenlummeted and we have them come back to the bond market only the other day. in the u.k. we have this release valve called the currency so let's use it. that is a weaker sterling. stop saying weaker sterling is a bad thing, it is good for us in the u.k. and it is a safe haven, needs tolve, and it fall. this is saying the transmission mechanism we have in the u.k. is the weaker sterling, let's use it. we all benefit. manus: we all benefit. gettingy you and i are on planes. it will cost me more. david blue -- bloom stays with the team.
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we are counting down to the market open. for later focus, asters and a cup. you had all the rumors about the ceo and he dispensed with those that he was not off the table. the stock is called down in the market and anywhere between 10% to 15%. there blockbuster drug which was called mystic about attacking cancerous tumors and having a debtor impact than chemotherapy, they said in a statement today that their tests, their combo primaryid not meet the endpoint. you want to stay with us because we have a host of interviews to get through. shell, the ceo of anglo-american. the dividend is back. that is good news if you are a shareholder. you have not seen that for a while. is it sustainable?
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what is going on with the business with monsanto? can they do the deal question mark what is he appeared to give up to get the eu on his side? those are the debates. this is bloomberg. ♪
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manus: just under 30 seconds to go until the start of your trading day. 85 companies reporting that this beasteast of the day -- of a day for stoxx 600. astrazeneca potentially on drug trials. 10% to 15% lower. futures lower. london down by .2%. the dax up by .4%. matt, good morning. matt: deutsche bank indicated lower with revenue well short of estimates. were looking for 7.1 billion
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euros. john cryan warns revenue growth has not been strong university and this year's revenue will be lower than last year's. you can see that interview on bloomberg television or bloomberg.com. menace. manus: -- manus. manus: these are your futures. cash prices as you get set up for the trading day. you have the aex down by .1%. london is flashing in between. wait and seeto what sort of opening print we get on the astrazeneca news flow. beat, their earnings have expectations. that will be in focus for us. the aex down by .2%. the value of the euro could be a challenge for some of these equities. that relationship is key. shell earnings have come
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out and beating expectations, closing $3.6 billion in adjusted profit in the second quarter. they thought cash flow from operations rise to the highest in more than two years as asset sales and cost cuts hoped the company paydown debt-induced profit. beurden,s now, ben van the ceo of show. obsess over this bear market in oil. how is it that shell continues to do so well? ben: thank you very much for the opportunity this morning. i think the company is in the middle of a very strong and financial transformation. if you look at the last four quarters, we have been running out of 38 billion dollar operating cash flow, less than $50 oil. last time, we did $38 billion, oil was at $100. we have been working very hard
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at taking down costs and we have been working very hard on upgrading our portfolio. we are a must on with our depressed men upgrading program, and of course, we have been investing in projects with very competitive breakeven prices, so altogether, the company, after the acquisition has been digested, is sort of reinvented and reinvigorated. generated 11 point $3 billion in cash, among one of your best quarters in the past decade, which takes me to the dividend. are you at that point where you can remove the dividend? this is a pretty substantial cash generation point. on the script dividend, they said we have two priorities, two things to take care of. we need to take out the equity markets.nd the debt
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we were close to 30%. we feel we need to have line of it.t before we do gearing at the end of this quarter was just over 25%, so we are well on our way, and that is $50 oil. we will get there. if the oil price helps, we will get there faster. we can.do it as soon as believe me, at the 7% dividend yield, we are very motivated to do it as quickly as we can. manus: and you will remove that if and when you hit the debt level of 20%, just to confirm? right? ben: that is a proxy. we need to get to a set of credit metrics that is compelling and brings us into a safe area again, and then focus starting a significant buyback program. we do not really want to put some sort of mechanical trigger
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in the market. i'm sure you realize this is a matter of sort of judgment and prudence. when we have line of sight with a 20% gearing level, that is when you see it. manus: you did the blockbuster deal of course, the $50 billion one. would you ever reach out for a deal of that size and that magnitude again? say,not this year, i would but joking aside, a good deal for us to do. much of the resolve you are seeing today of course is on the back of that deal. we have been able to bring some high-quality assets with brazil, australia, and a lot of growth, and also places like all caps on and other areas -- like kazakhstan and other areas. still growing our cash
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flow on the back of that deal as well. altogether, it is a deal that has worked out very well. the synergies by the end of the year, we are done with the synergies. the $4.5 billion we promised, we will get there by the end of that year, this year, a year early. what i do something like this again? absolutely. do we have something in our target at this point in time? i don't think so. at the moment, it is about digesting, getting the company into a strong footing, but if we find ourselves an opportunity to concentrate on something transformational again, of course. we have the track record to do it. we probably have some good opportunities coming up in the years ahead of us. that most deals obviously you are going to do would be smaller than that anyway. let me ask about the strategy in the u.s., in the shale area. are you looking to still sell
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or is itage there, possible you could go the other way and pick up shale assets in the u.s.? ben: we never really comment specifically on any deals that may be contemplated or rumored about, but i was saying two things. first of all, our shale portfolio is not a bad portfolio, but it needs to be hydrated here and there, so we will be buying and selling small bits and pieces as we make it more contiguous. at the same time, also, i do believe that in the bigger scheme of things, our shale portfolio is somewhat underweight in a portfolio. i would like it to be a sort of equal rating so we can enjoy the free cash flow resilience of the water business, but also enjoy the flexibility of the shales -- the capex flexibility of the shale business.
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notill take it, but we will participate in a gold rush. matt: talk to us about how you have adjusted to $50 oil. has been asult, it positive, really positive process. to stay at this level strategically? is that the new normal for oil? ben: first of all, how have we adjusted? it, wese, on the back of have been changing the whole approach in the company, making the company completely fit for the future. as a result of it, we have been taking our $10 billion of operating costs from 5240. we are running the company at a cost level before the bg deal and if you look at where we have
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been in the last four quarters, we are running at $48 billion. there is further room. we have taken $20 billion of annual capital out of our investment program, so we are running at $25 billion to $30 billion, and on a cash basis, below $25 billion. at $25 billion, we continue to grow the company. at the same time, we are starting up some really good projects with low cash breakevens and investing in new opportunities with breakeven prices well below the $50. the low $40 most of the times, going forward. the company is it a more resilient. at $50 right now, i can cover the cash dividends, pay down the debt, grow the company. we need to tune up the script next, and the same thing again. i am confident that moment will come. matt: is $50 now the new price for oil that we should be looking at, especially if such a
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huge company as your has adjusted to it? is this what the company wants to see the norm at, $50? goodit is difficult to get predictions on the oil prices. a lot of it is sentiment, obsession with the oil price. the fundamentals still tell us that oil prices will drift up in the next few years. now of course, we do not know how and when that will happen. it may come down because of the sentiment, so we need to have a strategy that is resilient with alsorices in the $40, but in the $50 in the $60. we have a healthy focus on the oil price, but definitely not an obsession, because if you do that, you have a strategy that will only work at one oil price and you will be disappointed if it is something else. focusing on a range of outcomes is a way to do it. manus: one final thought from you.
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the storyboard of our news flow -- b u.k. to diesel cars. an -- u.k. to ban diesel cars. what does it mean when you see that news flow? diversify? to give me your quick take in terms of the news over the past 48 hours. buy i do, the next will be the next car, and electric vehicle. i think the whole moved to electrify the economy, it is by -- electrify mobility is a good thing. a much we need to be at higher degree of electric field called penetration, and/or hydrogen vehicles or gas have as if you want to good outcome. it will not be enough, even if you went 100% electrical, and everyone in the western world
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did. you would still see a very significant growth and liquid mobility fuels. in the end, policies really work well. if innovation works well, i could see liquids in demand in the early 30's, and oil will peak earlier if there is a lot of buyer fuels in the mix as well. we have to adjust for that. there is a huge opportunity in new mobility forms. you see a our retail footprint changing, and you see us invest more in gas, which we think is a live hydrocarbon, and you see us go into renewables, petrochemicals, and we have to in that since continue to read in -- in that sense continue to reinvent the company. manus: i am thinking of my third coming. ben van beurden, thank you for joining us.
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astrazeneca. take a look at this stock. the stock has lost 10 billion pounds in value this morning. it is worth 55 -- by 15%. a stock falling you are seeing the stock fall by 15% and they are saying their study, the tag that was given to one of their potentially super thes that would help in cancer treatment, has failed on one of the three main goals. this is a setback for astrazeneca. the study has failed in one of the three primary targets. they will continue trial testing and improving life expectancy. that is the move on astra. matt. of reinvention, i'm about to run across the street to the headquarters of deutsche bank and interview the ceo, john cryan, on his third turnaround plan for the bank in as many years. so far, it looks like they are not able to take market share
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from the u.s. peers as far as fixed income trading revenue is concerned. that is one of the of sessions right now. i will be putting some questions to him on that level. otherwise, i will leave you alone. i'm sure you will handle the rest of this show brilliantly. this is bloomberg. ♪
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manus: it is 15 minutes into the
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market trading day. you are welcome back to the european open. anglo american reported earnings. net income at $1.4 billion versus $800 million eight years ago. it will pay a dividend for the first time since 2015. good news for the shareholders. good news for the ceo of anglo american. he joins us now from the london stock exchange. always good to welcome you on bloomberg. to what extent is this a watershed moment where i would say to myself that we end the story in talking about anglo american being in survival mode, and i transfer my expression to that of a ceo who has now reset and is ready for expansion? mark: i would like to think that the foundations -- there is a recognition of the foundations we have created. i am always a bit cautious about talking on expansion.
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we have to be very conscious of making sure we deliver free cash flow. it got to be sustainable. we can grow off the base. we have got to deliver returns on capital. for me, one of the most important numbers and our results is the 18% return on capital employment. that was the milestone number, 15% number we talked about in 2013. that is critical. it is not just about cash flow. it is how you deliver those cash flows that matter. manus: let us talk a little bit more about that. obviously, you are a man on a mission to restructure anglo american. what comes next? you had this little bit of reprieve in terms of the commodity cycle. you had an uplifting iron ore. you had a couple of different things going on there. what comes next to perpetuate that story in the restructure? mark: i think the key thing we have learned in the last two or
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three years is you have got to get the engine working properly. you have the operations in proving. at anglo american, every individual in the business is now delivering 70% more product each day. and that is under -- that has underpinned the cost reduction and improvement in the performance across the business. we have still got a long way to terms of improvement. i think that it's are important. secondly, we have identified a lot of small-scale, very small-scale capital projects with very rapid return. we want to make sure we continue to enhance and improve the business. step outve some real opportunities. having a portfolio where you have got options to make the right calls is absolutely critical. manus: part of that portfolio, obviously, is not just products within the anglo, but also -- which is part of the story. the question i have for you is i think your ceo, he calls the iron ore very well.
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the market is in jekyll and hyde mode. with iron ore forecast to come down again, talk me through the sustainability for the business. mark: we changed the design, got our cost down, and we have more to do on the cost front, but he is positioning the business well. -quality producer. we will always struggle on a dollar for dollar basis given the nature of the ore body, but we can be smarter in the way we operate in terms of the cost and position, and the prices would be alive. that is how we are going to get smarter and continue the journey. we have good ideas on technology, which we think will give us another step improvement across the business. you have got to work every angle to make sure you are generating sustainable cash.
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manus: is part of -- could part of it be that you would sell the company if the price was right in the next couple of years? could that be part of the strategy? mark: today, we are really pleased with where we have come kumba.th we have established competitive positions. we would be happy to keep ku mba in a portfolio for the long-term. we have to keep an eye on the policy frameworks that south africans present to the market. happy to stay where we are and continue to improve. if things are more difficult or we have to consider other options, we will do that, but not get ahead of ourselves. manus: let us talk about the new mining chart. the minister deciding to freeze mining. you,s that going to affect
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and how will it shift your thinking? mark: the first thing we have to say about the mining charter is that it is a document that does not work on any level. we have made that clear as an industry. it is being challenged. as far as we are concerned, our existing operations are pretty well protected by the constitution, legal frameworks, and bilateral treaties. we think we are in a good position. what we have to do is come inether and start again terms of the mining charter framework going forward. the most important thing is to encourage dialogue and work with the government to make sure we have an industry that is sustainable for the future. this is bad news for all south africans. what we have to do is be part of the solution. manus: listen, just one last question. i finished off with ben van beurden and we jumped onto cars and the diesel story and being here in the u k, the
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transformation to electric, which is very pricey and -- prescient. analysts have been revising their forecasts for the growth of electric vehicles. what do you make of this? what do you predict? what is your take on where we are going? mark: look, i think the move to electric cars is a good thing. i think it is going to speed up. we use platinum in diesel cars, but we also use them in hybrids, hydrogen vehicles, fuel cells, so we think there is a great opportunity. the only uncertainty we have is how quickly this which occurs, and how that impacts platinum. in the next five years, we think, the platinum industry will be flat with maybe some positive demand because the number of vehicles around the world will increase. beyond that, the speed in terms of transferring will be important. and what technologies come to the fore left us with a bit of a
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question mark. julianne industrial demand growing. the prognosis long-term is good. we have the best assets in the business. we have to make sure we deliver a 15% return on currency prices and we will be left standing no matter what happens. manus: the last man standing. it is like friday in a bar with mark cutifani. thank you for joining us. the stock trade up 3.35%. that is adding .5 billion pounds to the value of that stock. the dividend is back. up next, we will get the market movers and the stories that are driving this equity trading day. stoxx 600 up .8%. ♪
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manus: welcome back to the market open. 26 minutes into the trade day. let us get across to nejra cehic. au are kicking off with company, different from astra. nejra: after stock being punished. in give you are rising. .ontclair rising the market taking those and rising the most in four months. that is a closing company. r down.
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the ceo stepping down as well. much. thank you very more results, more conversations, and there is only one destination. we speak to the ceo. ♪
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manus: bust. astrazeneca suffers a setback in its long cancer drug trial. do not relax. the fed signals it intends to begin reducing its balance sheet in september. .he dollar's dissent about to shatter a key support level. deutsche's disappoints. john cryan says the second quarter revenues are not as strong as he would have liked. matt miller interviewed the man himself -- interviews the man himself later this morning. good morning. it is bloomberg markets -- "bloomberg markets: european open." from our european
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headquarters in the city of london. another stock, another conversation. buyer has trimmed its earnings er has trimmed- by its earnings for the year. we have the ceo of bayer, and he joins us now. many will say, look, you warned earlier in the year and cut your forecast on the crop unit. here we are again this morning. you are tallying the market you to thehieve and rise upper one digit percentage. if i am looking at this story, is isw asking myself -- becoming a pattern. is this as bad as it is going to get? werner: first of all, good morning. i think what is important to
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note is that we had adjustment based on high market inventories in brazil in our crop business. you have probably seen some of our competitors report. they do have similar issues, but not to the extent we have them because of our product portfolio, and after the adjustment, we are very confident we will reach the adjusted guidelines we are given, and that means, based on a very strong pharma business, that continues to do very well and in the second quarter, based on a relatively small, but will performing business, and they will consolidate. we will have a good, though not as good as we thought, year, 2017. last but not least, currency ways honest. we have seen a significant erosion of currencies against the euro in the second quarter that has been included in our updated guidance.
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you are one of the first cfo's to join me quite early in the season to talk to me about of the euroe currency. are you taking any hedging positions at the moment? try to protect yourself at this juncture? do you have a message for the european central bank in terms of the strength of the euro? werner: we do hedge. it depends on the positions we are taking. first of all, all the sales books in firm currencies -- foreign currencies are hedged. payables are hedged. we know to this. secondly, the anticipated projectionsour projecte on sales going forward, typically hedged at a level of 50%. including the hedging effect, just to give you a sensitivity, by onecurrency moves
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percentage point on an annualized basis, that has an effect of 300 million euros topline and 80 million euros bottom line, either way. fromlide of the dollar there is114 shows you a not insignificant effect we are seeing from currencies. that the european central bank has not changed that much. i think the currency fluctuations are very much a apresentation of -- politically stronger europe wasr the french election won by president macron and a relatively getting -- relative weakening. thes: you are sticking to $66 billion deal for monsanto and telling the market it will
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get done by the end of the year. what gives you that sense of confidence that you will get it closed by the end of the year with that? strategic do not make positions or change strategic positions on a quarterly basis. we have seen a week second quarter. no doubt about it, of our crop , itness, but one more time was an adjustment that was a one-time adjustment based on inventory levels. with thenothing wrong underlying performance of our crop business. if you look at brazil and correct for the brazil effect, we have seen growth in the second quarter of 2017. moving forward, we continue to be as confident as we were before and the long-term outlook in thatg industry, and context, we stick to our , the monsanto
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transaction to a successful closing by the end of the year. we are making good progress. we continue to work very, very well with about 30 regulatory agencies around the world. manus: the question then comes to mind -- that you can be quite an all-encompassing beast when it comes to extracting concessions from ceo's such as yourself who want to do big deal. what will you be prepared to give up? are you prepared to consider selling the rapeseed business? would that be something you would countenance giving up to get the bigger trophy home? are willing toe with ourcollaborate regulatory industries. not only the european commission -- i mentioned we are good in constructive discussions
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with the european commission. it is inappropriate to speculate on what it is going to be that the commission and other regulators will ask us to divest of. there are some areas where there is obvious overlap. you mentioned one of them. again, please understand that we do not want, nor can we, preempt any position the regulatory agencies will make. manus: um, just one final question on the health care business. obviously, a little bit worse than the market had anticipated. are there difficulty coming through in the united states of america? how is the u.s. performing for you? well, first of all, our pharma business continues to do very well. we have seen a 4.4% growth order over quarter. a little bit slower than quarter one, but there were some effects such as our japanese partner.
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similarly, a small provision adjustment in germany that rate.r did hit the growth we continue to be very confident with our pharma business. also expressed in an unchanged guidance despite the fact that currency also weigh s on our pharma business. the underlying is a little bit better than we thought it was going to go at the beginning of the year. manus: thank you very much for the conversation this morning. referred to you as the cfo. you are very firmly the ceo. -- wernerlden baumann. first-quarter operating profit, ¥153.3 billion. so that is a myth in term --
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miss in terms of the quarterly numbers. they reaffirm their full-year forecast. they say net income will be ¥535 billion, so that is breaking nissan.ming from th was ¥17.4 billion. up your engines. we will talk about vw. they released their earnings. this is bloomberg. ♪
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welcome back. it is just gone 8:42 a.m. in london. this is the european market open. first word news with juliette saly. juliette. deutsche bank has reported a 10 percent decline in second-quarter revenue to 6.6 2 billion euros. that missed analyst estimates at 7.1 billion euros. it comes from fixed income trading. 28%.ue declined we will bring you our interview with deutsche bank's ceo john cryan later this morning. china's industrial firms kept their heavy pace. industrial profits increased 19.1% from a year earlier, accelerating from the 16.7% pace
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one month earlier. it underscores the chinese economies momentum and helps embedded companies grapple with their giant debt load. theresa may's government has commissioned a report on the impact of e.u. workers on the economy. it comes one year after she became prime minister, prompted questions as to why such a study was not done earlier. amber rudd will ask the advisory committee to assess the role of the european union nationals in the u.k. economy as plans to to control migration after brexit. russia has threatened to retaliate against new sanctions passed by the u.s. house of representatives. the country's deputy foreign minister said the measures may get all but impossible to achieve the trump administration's goal of improved relations. it comes less than three weeks after donald trump and vladimir putin held their first official meeting at the g20 summit. the u.s. senate has rejected a simple repeal of obamacare.
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the defeat of the republicans comes after a floor debate on health care after significant doubts the gop could muster the votes to pass any bill. the failed amendment was similar to the affordable care act repeal that passed congress in 2015 and was vetoed by then-president barack obama. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you very much. salesagen has raised its forecast a little after reporting a 3.7% increase in second-quarter profit. even as allegations of collusion with other automakers threatens to renew the disarray, operating profit for special items rose to four point five 5 billion euros. that is on cost cuts and new models at the german carmaker continues its recovery from nearly two years of revelations
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of these omissions -- emissions cheating. we have ferdinand dudenhoeffer. is it a phoenix moment for volkswagen as they raise -- ferdinand: yes. what we see today is that , porsche, they improved the general brand. the review was not so strong at the moment. what we realize at the moment, is that germany has the cartel problem with the total car industry, the german carmakers, and german media is stuck to strongly in this, so therefore we see problems with the oil industry in germany if we do not change the strategy, if we do
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realize to say we want to plan for this. likent to go into the -- the u.k. yesterday announced. manus: you are right. this is about getting ready for the future. i just had a conversation with the shell ceo. he said "my next car is going to be an electric car." when you look at bmw, when you look at daimler, when you look at volkswagen, how behind the curve of going electric are they? ferdinand: depends on what will be the benchmark. take tesla and elon musk as the benchmark, and we just started producing a modest -- five years. tesla has a big chance to become the big brand in the car in the premium sector.
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sometimes, we can be compared a little bit with apple, which is comparing apple with samsung or others. apple is the real -- it seems tesla can make that approach. if you compare the volvo and others, you see they are still strongly taking the right they invest too much money into all strategies and diesel engines. they want to do everything. that is a big problem. you are not focused clearly on a clear-cut strategy. you want to do everything. that is a big problem because you are going to burn money, and the other thing -- you have too many different things to do in the marketplace. just to convince consumers from diesel engines. nobody wants to have those
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engines at the moment because there are problems with those engines. if you compare it to volvo, i would say we are two years behind the volvo. we are still going into the future. they have to improve their speed. manus: they do indeed. it could be that has left field everybody. ferdinand dudenhoeffer, joining us from the center of automotive research. blockbuster bust. astrazeneca suffers a setback on its crucial lung cancer drug trial. we did the analysis, next. this is bloomberg. ♪
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manus: you're welcome back. the market open. let us get to nejra cehic with your stock movers. picking up. nejra: we are starting with the worlds biggest distiller. profitability target came in also slightly above estimates. we are seeing the stock hit a record high in the session, rising the most since june, 2015. the most in more than two years, in other words. inbev, theseab are some of the biggest performers on the stoxx 600. they have almost 5%.
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they are widening cost savings. are widening the cost savings at a faster pace than expected. helping the company post second-quarter profit growth that absolutely trounced analyst estimates. on the downside, looking at us is in a cap, i know you will talk to bloomberg intelligence about this, however, i know you will be able to travel, so i will not hold back. after zedekiah hitting a -- astrazeneca hitting a low. this is a combination of two drugs. study weren that poised to hit sales by 2022, so the failure, starting to call into question the ceo's ability to deliver on his growth strategy. place to keep the company independent when he rebuffed pfizer. a lot are seeing it as key to goal to boost revenue.
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he says we must be patient with the mystic trial. they are selling off the stock quite aggressively. manus. manus: thank you very much. down 16% is aggressive. director --g in the let us bring in the director of research a bloomberg intelligence. the name of this trial was mystic. the prospect for this drug was a long cancer treatment. tell me what kind of numbers. nero mentioned a few. how terminal is the current warning from astra on the mystic trial? guest: the trial failed, at least on this first reading. there are other readings coming longform analysis within one year's time. estimates are around 3.5 to $4 billion for the drug. it was tested in this trial. manus: that was 3.5 billion on the mystic trial? sam: no.
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there have been other successes. the drug is already approved. it is likely to get approved for a different type of lung cancer. this is not a lung cancer treatment. it is a cancer therapy that can work in many different settings because it targets the immune system to attack the cancer, which can work anywhere. manus: manus gets it enough and bolts. 14 pounds and tumbling. the pound is down. it had a bump in the road. begins. to me that this what is it and why? so, weree years ago or sat at this table and talked about pfizer, the bid for -- manus: 50 quit. -- 50 quid. sam: the share price basically has not gone anywhere with their fall today, and the pound is a lot weaker. i'm not suggesting pfizer is going to come back to this. it is muddying the water a
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little bit, this failure. i would not be surprised if people start talking about that. addsially if the ceo reality, truth to the possibility that he might be looking at another job. pretty soreuld be a thing if the ceo up and voluntarily left on the back of this kind of news. sam: i agree. files fail. it was the right thing to do to try it. manus: we put on 15 billion pounds. the market reevaluated astra on this. they hung there had on this. sam: absolutely. we should not forget that astra is not dependent on this one clinical outcome. reported one they today that no one is talking about although we need to see the details is another lung cancer drug that works in a very important trial, but we need to see the details about that. manus: tell me about what this might mean for merck anderson
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meyer -- and bristol meyer? sam: they could have been coming to market with a combination for lung cancer. this leaves merck being the only company in the drug market with two drugs for lung cancer. it is a positive for merck for basic competitive analysis because they do not have a competitor, likely. maybe negative for bristol meyer because they have other details in their. -- in there. manus: thank you very much. could be that the pound is down and astra is back into play for something lighthizer. stay with programming because surveillance is up next and there is a banking interview that we had. we have the deutsche bank ceo, john cryan. that is a man on a mission of reformation of the bank. he says basically that it is not just going according to his plan
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in terms of revenue. the stock is down this morning. let us see what is next in the strategy for john cryan. we are down 3% at 16.1. this is bloomberg. ♪
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>> ceo john cryan says revenue is not as high as he would have liked. astrazeneca as luz billion after suffering a huge blow. and dovish on rates. the dollar plunges to a two year low. officials say unwinding will begin soon. good morning, everyone. this is "bloomberg surveillance" and i'm francine lacqua in london. we are getting breaking

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