Transcripts For BLOOMBERG Countdown 20150120

Switzerland surprise move in severing ties with the euro after cutting Interest Rates. We will have the latest from copenhagen. Could turkey be about to lower its Interest Rate . The countrys deputy Prime Minister said a cut is on the cards as early as today. Welcome to countdown. We are waiting for a word. The company says nonoperating profit coming in for 2017, so it is giving its projections for 2017. It sees cloud and support revenue between 1. 9 5 billion and 2. 0 5 billion. A big day for s p. It is unveiling its sixyear plan. Is it sustaining its 2017 target of 35 operating margin . That was the target it announced one year ago. But as one of the key questions we will be asking the chief executive when we that is one of the key questions we will be asking the chief executive when we speak to her. More projections crossing the bloomberg terminal. Operating profit between 5. 6 and 5. 9 billion euros. That is for Constant Exchange rates as well. The big story is it has lowered its earnings target for 2017. S. A. P. Lowering its target as the biggest maker of Business Management software. The shift to Cloud Computing over the web. Operating profit for some items will be in the rate of 6. 3 billion euros to 7 billion euros in 2017 on sales of 21 billion euros to 22 billion euros. Its previous 2017 goal was sales of at least 22 billion euros and an operating margin of 35 , which implied operating profit of 7. 7 billion euros. While its Cloud Business is growing fast in a market that idc estimates will more than double to almost 83 billion dollars in 2018, revenues delayed as it proceeds over the course of subscriptions rather than upfront fees for traditional software. The ceo spent more than 20 billion on acquisitions to compete with cloud specialists as well as old rivals such as oracle, which are also expanding online services. I look forward to that interview with the sap ceo shortly after 7 00. Fourthquarter growth rose by 7. 3 . Slightly ahead of estimates. China for your growth figures were close to the governments target for the year. 2014 was the worst year of expansion since 1990. The slowing economy has been a concern for chinese leaders. The Central Bank Cut Interest Rates for november, and earlier this month the government sped up work on 300 key Infrastructure Projects to help boost growth. Lets head to christine in beijing. Talk us through those figures. Good morning, mark. As you said, those measures must have had some impact. Overall china gdp numbers for the Fourth Quarter and the fouryear came in just a little higher than economists were expecting. Fourthquarter gdp grew 7. 3 maintaining the pace we saw in the Fourth Quarter. For your gdp growth was seven. 4 . That is a little lower than the target of 7. 5 . The bureau calls this a new normal, so they must be quite satisfied with those numbers. We are continuing to see a steady increase in wages. We sell better than expected industrial output and retail sales figures. Those would have a direct impact. Consumption spending expanded for a bigger chunk of gdp than the year before. Overall and optimistic nature and optimistic picture against the background. We saw a big slump in the chinese stock market yesterday. A small rebound today. What is going on . Its the perfect example of just how volatile and sentiment driven the chinese stock market is. We saw how much it dropped on monday, and that was on news the regulator crackdown on new margin accounts. The shanghai composition closed 7. 7 lower on monday. Today potential curves are all but forgotten. Itll are starting to look ahead. Are they going to be requirement cuts. China still has problems channeling liquidity to those areas it wants to see more spending. Thanks, christine ha. Lets get a look at the global economy. The imf sees growth at three point 5 this year. Thats down from the 3. 8 projected last october. The imfs cheap executive chief economist said the World Economy is facing strong crosscurrents. He said the swiss ruling to and the cap on the end the cap on the franc was unexpected. These capital flows and the difficultly of Central Banks to actually stop the appreciation and i think what happened is the swiss bank tried to stop the appreciation for a while, and they decided it was becoming too costly. They had to do something about it. It had to be unexpected. The imf cheap chief economist speaking about the Swiss National bank. We will be regaining more on that interview later this hour. More Interest Rates in europe. Denmarks central bank has cut its rates to a record low. They cut it to. 2 . Joining me is lucy. What are the danes telling us . It was an unexpected cut. They dont have dates for their actions. They do tend to do it on thursdays. They tend to do it when the ecb has moved. That peg isnt going anywhere. You can rely on this peg. Does that mean we might see further moves on thursday, or is that it for now . We really could. Two cuts in one week is quite unusual. Everyone is rattled. Its not the most popular currency as held by reserves. Its a small currency. The big move was those held by reserves managers. What is going on since the big move to end the cap . What if everybody is picking out forecasts. Everybody is picking out forecasts. You have jpmorgan saying it could increase another 9 . Then you have switzerlands largest lender, and they are saying it is going to weaken over the course of the year because the ecb are going to be successful in the stimulus. The euro is going to do well and no one is going to need the euro as a safe haven. The Ripple Effect is felt across dealers and brokers of currency. What is the news for other brokers . He said on friday we are insolvent. On saturday they said, we are not insolvent. They have had to seek extra funds themselves. Yesterday they really declared themselves insolvent, possibly for the last time. I have 170 staff. They have probably 100 million worth of client accounts still out there. Everyone is waiting to see what happens next. Thanks, lucy. We will see you the next hour. Lets turn our attention to turkey. We might see a rate cut as early as today. The rate cuts are coming thick and fast after a cap netmeeting led by turkeys president. A Cabinet Meeting led by turkeys president. Urdu one recently called for a rate cut. Joseph stiglitz has told Bloomberg Turkey is facing a tough year. He says turkey might have benefited from lower crude prices but trading partners have suffered. Turkey is going to be facing some big challenges in 2015. Its meeting its Major Trading partners, europe, the middle east, russia are all facing severe problems. While turkey benefited from the low oil prices, two of its Major Trading partners, those in the middle east and russia had been badly hit. Europe remains mired in stagnation. The conference is ending its entering its second day. Some are offering unique advice. Turn off your phone. Is hans nichols going to listen to that advice . Is the Concern Technology is making us dumber . Its making us less wise according to Arianna Huffington. The ceo is attending the event without his mobile phone just to detox himself. What Arianna Huffington talk to me about yesterday in an interview, she said it was important to unplug. We are going to be unplugging and replugging. Its not like we are going to become luddites but we are going to recognize the importance of unplugging with technology, reconnecting with ourselves and our wisdom, and going back to the amazing ways in which technology enriches our lives. Youre going to call the to call this a digital timeout. The question is when do you take the digital timeout. You get the negative blue light from your phone. It keeps you up. I asked Arianna Huffington to give us her wind down routine. My wind down routine is putting my smartphones away before i go to sleep having a hot bath washing the day away, and then making sure when i am in my home my bedroom is a device free zone. I read books in bed and books that have nothing to do with work. This allows me to put you on the spot and ask what your wind down routine is. When you flip off your devices how many hours before you try to go to bed and does it work . It is sleep depression deprivation we are talking about. I flip off the phone about 10 minutes before i go to sleep. I need to follow that advice but i find that reading my phone before i go to sleep actually sends me to sleep. Usually i am reading your emails. Nonsense, nonsense. Unless i left it in a bar and someone has stolen it. Do join the conversation on twitter. Let me know what you think of the show. Tell me the stories we are following. It kicks off tomorrow. The big kickoff is on Bloomberg Television on thursday. Their im for there i am for the first hour. Hannah will join me on the next hour. A big week for the European Central bank. A big week for greece with the election taking place on sunday. I will be discussing the important factors. That is next. Interesting news from the south Korean Consumer Electronics company. It has basically announced it wants to develop a partnership with blackberry. This is interesting because last week there was speculation samsung would buy blackberry. Blackberry shares fell back. Samsung does want to develop a partnership with blackberry says the ceo, but he says samsung has no intention to buy blackberry. It sees patent cross license deals with key partners. It is in discussion with blackberry to expand its corporation. It already is in operation with blackberry on some matters. What is interesting is it has denied its interest in actually launching a fullscale takeover of the embattled former leader in mobile technology. Samsung is in talks to use Blackberry Technology in its devices, that there will not be a full takeover says the coceo speaking in seoul a few moments ago. Lets focus on todays company news. Fresh from picking up a golden globe award last week amazon plans to move. Amazon plans to release films in theaters and then on the amazon prime instant video Online Streaming Service four to eight weeks later. Several hundred jobs are on the line at Dreamworks Animation as the Company Seeks to rekindle it slumping operation. Over 350 jobs could be cut following a number of box office disappointments, including turbo and the lowest grossing of the madagascar are pictures. Chinas luxury watch marker maker is said to stabilize this year. The recovery follows last years decline in demand from highend customers. Exports rose 2. 4 in the first 11 months of last year it, down from growth rates that reached as much as 22 in 2010. Mario draghi is widely expected to launch qe at the upcoming ecb meeting on thursday. Will it be the answer to the eurozones problems . To discuss that we are joined by the chief economist neil williams. Hi, neal. Isnt the panacea, or not . For me it isnt. That is its a panacea, or not . For me, it isnt. It seems to me the problem is still in place. It comes down to the fact the euro is still a currency in search of a government. What we have currently is mr. Draghi. He has done a great job of attacking the symptoms. Qe is a way to get inflation back up. How could they address the problem, and the problem is the eurozone is still a Monetary Union. What would shock you on thursday . What would blow you away . I guess there would be two things. The first one would be he does nothing, which surely cannot happen. I guess the opposite extreme is we would have a bazooka with all firing. No time limit, just until we hit our inflation target. We just keep going. Would there be some sort of condition attached . I would fall off this chair or any chair if there were conditions attached. It seems to me in terms of numbers we could expect a 700 billion to 750 billion announcement encompassing all assets. Within that, lets say the 500 billion leaked some weeks ago. Perhaps her month about 28 billion, but lets face it. Per month about 28 billion but lets face it. Thats still a third of the pace the u. S. Was doing, even before tapering. It is going to spend whatever it takes to do the job. That is shock and awe. That would be shock and awe. We are considering 18 Different Countries with different fiscal positions. The problem is Monetary Union without economic union. There he to give the same position on purchases from lets say germ very to friend to give the same position on purchases from lets say germany as countries like greece. What is the risk sharing that is going to take place . National Central Banks will be in charge of buying bonds, and they will be liable as well. This is one of the details they will be looking for. We may have to wait. It seems to me the qe we are going to get is going to be restricted and gradual and in terms of restrictions, that could be done according to credit ratings, which many think rules out greece. It could be weighted according to gdp or capital contributions. It is probably going to be as clear as mud. We were talking about greece and that move. The imf cutting the Global Growth forecast. The chief economist stays with us. 6 26 in london. We are going to be chatting with the chief economist. Big news from the imf. They made the steepest cuts in Global Growth outlook in years. More than offsetting the boost to expansion by low oil prices. We will get neil assessment neils assessment of that, the upcoming greek election. Have a look at where you can follow me on twitter. See you in a second. Time for your Foreign Exchange check. This is the most interesting of currencies. It is the euro danish krone. The reason is the governors job is to target 7. 46038 kroner per euro. The Central Banks official tolerance is 2. 2 5 , but in practice it stayed within 1 of the target. That is a twoday chart. Something special happened yesterday around 3 p. M. London time. The government and central bank might follow switzerland and severing currency ties. What happened is the central bank surprised the markets by cutting its deposit rate to. 2 , matching a record low last held during the darkest hours of the euro debt crisis of 2012. The danes lowered rates after interventions in the market proved insufficient ahead of the ecb announcement on thursday. Money was plainly moving into denmark. Denmark should address that. Ahead of its traditional time to make announcements, which is usually the same time the ecb meets. It has decided to make the announcement, cut Interest Rates, take Interest Rates negative and restated will not loosen the euros paid the danish krone ares the danish paidpeg. Its not the sexiest currency. It shows we live in nerveracking times. We do. The currencies of these satellite economies, it seems this is just the start of the process. When we look at qe, it hasnt really died. It is simply resting. Japan is even accelerating. Satellite economies are now having to pull the rug from their own currencies. Were seeing that in europe, and no doubt outside of europe, in Southeast Asia as they try to compete with japan. One of the issues for this year with the eurozone about to squeeze the trigger on qe and japan accelerating it is going to be i hate to use the word currency wars, but currency defenses. No country is likely to want to appreciate currencies. Someone has to appreciate it. To what extent does the u. S. When last year officials started to address the concerns to what extent does the u. S. Allow the dollar to appreciate . The u. S. Dollar is looking like the least sick currency for two main reasons. The first one is the u. S. Is ahead of the game in terms of the other g7 economies. It is leading the pack. The second thing is the fiscal position is looking pretty good. They may have to raise the debt ceiling, but what it does mean is pressure for some of the other currencies. It is interesting the imf the forecast earlier which suggests the imf cut the forecast earlier. They will probably keep a bias to avoid going up this year. You are concerned about the lack of competitiveness within the eurozone, and it was a message dated stated last night by angela merkel. You have your own competitiveness analysis. What is it telling us . If youre in a fixed Exchange Rate currency like the eurozone one cannot devalue against a country like italy because you are locked in with the euro. The only to do that is to have an internal evaluation and make sure. My indexes showing the head and shoulders my index is showing the head and shoulders winner is germany. Their costs have fallen. The obvious losers have been the countries that had financial support, but the country that worries me most currently is the country that is not attempting to improve its competitiveness right now, and that is france. I worry with and without qe we have had the first chapter of the eurozone story. Are we moving towards the second chapter, which is about the bill payers . If that is the case the whole story begins to unravel . What is your best hope scenario for countries like france who have been saying the right thing, but saying and doing are two Different Things . That is one of the disincentives for the ecb to do shock. If they do this gives the green light for countries to remove discipline on the fiscal front. There has to be caret a carrot, and the carrot is to impose restrictions on those countries on the fiscal side that are so severe right now they probably wouldnt benefit from qe, so i think draghi has a balancing act. He has to give enough monetary hope to please me and others on the one hand, but he has to make sure fiscal discipline is still important for governments this year. In the eurozone we have elections not just on sunday in greece, but local elections on france and big elections in spain and portugal to the end of the year. As a tough balancing act for the ecb. That is a tough balancing act for the ecb. It has died down in the last 10 days or so. Greece has to strike a deal with the troika come the end of february. Thats almost the top of the to do list for the new government. How do we think that will pan out . If greece thinks life is tough inside the eurozone, it will be at least as tough outside, because greece would have to prove the credit worthiness of a currency with high Interest Rates. The debt would be a de facto high currency debt because they are no longer in the euro. Life outside would no longer be a barrel of laughs. In terms of the election on sunday some of the fears are overblown. The potential new government is not talking about defaulting on its market debt. What it is talking about is renegotiating some of the official loans of the other eurozone governments and the ecb itself. The question on thursday is is the ecb willing to buy greece when the risk is greece will be paying back the ecb. Good to see you. These are the Bloomberg Top headlines today. Chinese growth figures show fourthquarter gdp rose by 7. 3 percent, slightly ahead of forecast, while chinas root figures were close to the governments target for the year. They showed last year was the countrys slowest year of expansion since 1990. Chinese stocks rose on the news rebounding from their biggest loss in six years. The former u. K. Business secretary Peter Mandelson has told bloomberg a reformed eurozone could make it attractive for britain to join the euro. We would only join a single currency if it is in our economic interest to do so. The interests have been in parallel. They may be in the future if we have eurozone part two emerging. As it completes its reforms as the architecture of the eurozone finally falls into place as it needs to do. Denmarks economy minister says his country wont follow switzerland in severing its ties with the euro. He says any comparison between the countries is impossible. His comments follow a surprise move to cut the deposit rate 15 basis points. Lets cross over to peter in copenhagen. Why did the danish Central Bank Cut the rate on monday . Good morning. The Danish Central Bank, from what we heard, there was considerable pressure on the kroner. There was influx of people betting on there was huge event for the danish krone. People expected the European Central bank to launch a Security Program later this week on thursday. Why is it you cannot compare what the danes are doing with what the swiss are doing in their pay to the euro petg to the euro . The danes are saying these are two different pegs. The danish peg to the euro has been running for more than 30 years. It was first to the Deutsche Mark back in those days. It is facilitated by the ecb, so not only will anyone speculating against the crone krone or for the Danish Central Bank to break its peg. They would have to outgun the ecb. What is next for the danes . We are waiting for what is going to happen on thursday, but before that, we are going to see what markets are waiting to see, if the appreciation of the krone continues. That forced the central bank to cut rates yesterday. Just this morning we are seeing there is more in store in terms of rate cuts later this week. If the influx into the krone continues it may be the market is very active these days. The danish krone doesnt usually see this kind of activity but its continuing, even after the rate cut yesterday. The central bank has to stay on its feet. We have a lot of tools to engage anyone speculating against the currency. Great to chat with you. Its going to be very interesting. Thanks. We will see you soon. A surprise move by the Danish Central Bank yesterday. A bleaker outlook on the World Economy from the imf. Its made its steepest cuts in production for Global Growth in three years. The imf sees growth at 3. 5 down from the 3. 8 projected last october. The imfs chief Economist Says the World Economy is facing strong and complex crosscurrents. I think the oil prices positive. I think the Exchange Rate is positive. The appreciation always slows down. The u. S. Can take it. It is going to help. Increasing risk is not good but there is going to be something, so these are negative. What about the impact of the oil price . It helps those driving a car for example. You are exactly right. The main effect of the decrease in the price of oil from countries who decreased who import oil is a decrease in the price of gas. There is more money in the pocket of consumers, and they are going to spend some of it. The numbers are very large. Many Countries Oil consumption is 3 of gdp. It is a really big fiscal expansion. That is bad news. This is definitely good news. Were seeing you downgrade your forecast. Now it is 3. 5 . What gives it a more positive twist as we forecast this year to be higher than last year. Our forecast has been revised. We think next Time Next Year the World Economy will be better. Why did we revised down . There is a weakness about prospects. Many economies are revising their forecast down. That is decreasing growth. We think the effect is stronger than the price of oil. The chief economist of the imf commenting on crude oil prices. You can join the conversation on twitter. Let us know what you think of the show. Among the trending subjects, state of the union in three words. And you achieve that . Its taking can you achieve that . Its taking place today. We are going live to paris next, talking about chinas gdp figures. Its a truly global countdown this morning. China has posted gdp numbers for the Fourth Quarter. Growth beating estimates, helping the spansion remain in line with government targets but last year was the countrys worth year for growth helping the expansion remained in line with government targets, but last year was the countrys worst year for growth. Good morning to you. Does todays data suggested millis efforts that stimulus efforts that started last year have started to boost demand . I would say it was the consumption and exports that helped the last quarter. If you look at investment, it dropped to 11. Even infrastructure, it didnt really improve that much. I would think it is a pattern we would continue to see in coming years that investment growth would continue to correct, which is a structural change china would need to go through. Post the data does the data lower the need for further stimulus or increase the need . I think in terms of the government policy, policy easing will also be a new normal meaning you will continue to see strong downward pressure on the growth. The government will have to try to offer some policy easing but they are not willing to try to do too much, so it is basically continued control growth deceleration. With the help of some selected easing. Does that mean we are talking about required reserve ratios . What about Interest Rate cuts . Could we see further rate cuts in 2015 . We think the government will cut Interest Rates one more time in 2015 and cutting the ratio is inevitable. The central bank has stayed away from the current intervention, currency intervention, so if you dont have currency intervention, you dont have to stabilize the money. Its not just about easing. Its actually to adapt to the structural change in terms of the exchange policy. You see these pictures putting together, it is an economy increasingly looking like other economies, meaning the government policy would not be that effective in terms of keeping growth from falling. To what extent might the surging stock market ensure we dont get a cut . Liquidity seems to be springing up in all sorts of places. At some stage it boosts property. At the next stage it boosts stock rises. Is it correct in saying funds continued to flow through Economic Activities on the ground. Instead people are adding leverage to speculate. I think for the government, you have to look at the real economic situation. I think its quite clear to us the stock market rally or the kind of rally we havent seen isnt supported from the economic fundamental so at some point is policy makers have to do what it needs to do, which is to provide some support through growth. I think the stock market there is quite a lot of leveraging, which is not sustainable. At the same time its not quite unreasonable there is positive things emerging in china. The consumption story is a real one. That means rebalancing is happening. The government is pushing through reforms. The longterm perspective of the chinese economy we think is getting better. What you think about external demand, because the imf what do you think about external demand . What is the external demand picture from a chinese perspective of 2015 . One thing that came across as somewhat surprising for 2014 is the external demand held very well. We could see demand is doing ok. It can do better given the overall economy is not recovering that well. I think the continued recovery in the u. S. Will provide some cushion to the chinese economy through exports in the manufacturing sector. One thing china does seem to be doing is exporting deflation. We know Producer Prices have declined for numerous months. I think it is over 30 months. How concerned should we see . Low inflation or deflation is clearly a worry for the economy now. Chinas debt problem is comparable. If you have a price deflation that makes it quite difficult and 2014 didnt give us much comfort in terms of the flirtation story. Deflation story. Chinas own demand was very weak. It seems to me the government needs to make more effort in terms of stable enterprises. This will hopefully happen in 2015 as the government promised so i think the solution to all the problems in china is reform. Thanks for joining us today. We are just over one hour from the start of the equity session. I am joined by an old friend of the show, ryan chilcote. Roger federer has spoken about the swiss franc. Im sure he has to exchange into swiss francs. He is playing tennis in melbourne. He joked, doesnt mean i have to win does it mean i have to win . Even roger didnt see the s p coming snb coming. Christ we are at the digital life design conference. What is amazing is to hear these executives talk about how it it is time to take digital timeouts. The Deutsche Telekom ceos said he didnt bother to bring mays to the tech conference because to bring this to the tech conference. He sometimes goes weeks without his phone. Mix we are going to be speaking to the chief executive office next we are going to be speaking to the chief executive officer Bill Mcdermott. Stay with us. Expansion since 1990. We will be live in beijing with analysis of the latest figures. It is a lackluster growth picture for the World Economy. The i. M. F. Cuts its projections for global expansions for the most. Denmarks central bank insists it wont follow stwits lands surprise move in receivering its currency ties with the euro after cutting Interest Rates. We will have the latest from copenhagen. And could turkey be about to lower its benchmark rates . The deputy Prime Minister says a cut is in the cards as early as today. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org welcome to countdown. I am mark barton president. And i am anna edwards. It has just got 7 00 here in london. Lets get straight to breaking news from the giant that is unilever. Fourth Quarter Sales coming in at 2. 1 , below analysts estimates. They were looking for 2. 7 . Looking at some of the underlying movements, the underlying volumes were down by 0. 4 and thest made was for an increase of 0. 8 . It seems on the volume side things are weaker. They see no improvement in the market for 2015, one of the highlight comments through in the release. And q 4 underline pricing growth was 2. 5 , against an estimate of 1. 4 . They actually have more Pricing Power than analystsest mating but on the volume side they paid the price. 2014 core e. P. S. Coming in at one euro and 61 euro cents. They see fullyear performance to be similar to 2014. Going into the numbers, there has been a lot of focus on emerging markets. Is the growth still slowing in the emerging markets . Back in the Third Quarter we saw chinese sales down 20 . We will look for any details about the Chinese Market in particular. Also what is happening in the European Food business. If that is still slow, are there anymore plans to divest other parts of the company . We have lower Commodity Prices as we have talked about, and we have some insight here from unilever on pricing. They said they are cutting prices after crude prices have fallen. Interesting to see how the Fast Moving Consumer Goods Companies are coping with the Lower Oil Prices and how they are passing that on to consumers. More on that as we go through the reporting season. Unilever said they see growth softer. The most rerecent information, 2. 4 in growth, lower than the estimate of 2. 7 . Paul will be sitting down with our European Business correspondent, Caroline Hyde. We will bring you that interview as soon as we have. The big news from the corporate from came from s. A. P. We have Bill Mcdermott the executive office of s. A. P. Joining us now. Thank you for having me. The big news may well be that you have lowered your profit target for 2015, just a year after putting it in place. We are totally in control of our destiny. Bottom line, mark, our Cloud Business is growing, and we Just Announced our full year results at 72 in the Fourth Quarter, which means as the cloud grows faster and faster, in the shortterm, it puts pressure on the margin rates because you recognize that revenue. So we still have a very fastgrowing core business but the cloud is growing even faster. Therefore we guide on absolute operating income which is still improving this year, and it is going to improve next year and the year after that. But what they are referring to is the margin rate itself. I believe this is a time to lead, to take market share in the cloud. We already have more users in the cloud than any other company. As you have absolute reach in a global economy, the more users you have, the more scale you have and ultimately the more providence it you had. Which the more profit you have. Which is why i showed them by 2020 we could have upwards of 9 billion in income. That is a very nice trajectory of growth. We are pleading, not reacting. Do you think investors react too merchandise . How long will margins be under pressure as you make this push into the cloud . Well, first of all, i couldnt agree with you more, that no one should be obsessed with a margin rate. People should be obsessed with the fact that you have a core business that is growing in high Single Digits which is very good for a company our size and scale. You have a Cloud Business that is growing faster than any other Cloud Company in the world. And at the same time we are managing this transition we are improving absolute operating income. It is very important, and i know you know this mark, we could easily hit a margin rate. Just slow down your growth and you will hit a margin rate. You will have less operating income and less growth, but you could hit a margin rate. I think it is time to be bold, to have a Growth Company and to adjust to the market dynamics. Cloud computing will be the consumption model that is pervasive in the world. We should be the leader. We should keep an ever strong core. We just anouned s 4 hana which is our business suite, which will revolutionize the way people manage their business in the cloud. We have 700 billion u. S. Dollars running through our network for labor, travel and expense. That grows to 2 trillion by 20 to. We are building a Growth Company. We are setting the tempo, and we are letting people know in a highly transparent way. Here is what we did this year here is what well do in 20127 and 2020. I agree with you. I dont think anybody wants to harvest a margin rate and have a company that two years from now is an alsoran. We want to be a leader and winner in this market. Can you give us an idea of what customers are doing when you look at their lance sales, they are deadlining. Does it tell you that does it tell you that customers are not adding new things . Tell us about customer habits right now . A couple of things. Number one the business suite has now been rewritten for the cloud. We are announcing s4 hana in a big launch on february 3 in new york. So that is happening. Our business is growing in the core. It is just that it is growing in the core in the cloud. That software gets rented as opposed to bought up front. But our core business of software and related services net guidance is growing at 7 . The cloud is growing faster. The customer wants to choose the consumption model. Some will want it on premises and some will consume it out of the cloud. Market leaders have to give the customer what they want. If they want to represent the software and in the shortterm that puts preb on the up puts pressure on the upfront recognition of the revenue, so be it. In the long run you will make more money anyway. It is in everybodys interests to give the customer what the customer wants. That is what we are doing. You are highly inquisitive you bought a company for 7 billion in september. That was your biggest ever acquisition to expand in Cloud Computing. The size of your acquisitions are roughly between 4 billion and 5 billion. Could you take out some of your nimbler competitors . Is that a potential strategy for you, take them out, or do you not worry too much about that . We intend to beat them in the marketplace. For example, in salesforce. Com in the old days you got sales hygiene from a cloudbased application. You manage the sales pipeline. The sales force did that well. But the new era is all about omni channel ecommerce, how a c. E. O. Can speak to their customer on any channel, whether a wholesaler or a retailer. You have to know the consumer and make a real time offer on a confuse. Sales force cant do that. We will beat them. And work day they have an h. R. Application. The problem is they have payroll basically in the United States and canada. We have it all over the world. And one of the things we did is not only want to give a beautiful Human Capital Management Experience to the h. R. Leader all mobile easy to use and very pleasant for everybody. But also how do you manage contingent labor . The contemporary labor force in europe and the United States has grown by 40 . That is why we have field glass, and only s. A. P. Halings the combination to satisfy that Human Capital management need. So we will beat them. So i dont look at competitors like them as interesting to buy. I look at them as interesting to beat. In terms of the guidance that we gave, we gave a very or beganic Growth Guidance for the midterm and the longterm. I think most of the big m a is behind us. That is the way we are looking. We have the assets we needed in the cloud, in the network and the core to satisfy the customer in every industry all over the world and that how we intend to win the game. Now we execute. It has been great talking to you. Bill mcdermott, the chief executive of s. A. P. Joining us today after his company, the worlds biggest maker of Business Management software announced reports. Interesting on the competition. Lets move on. Lets go to china, where g. D. P. Figures out show that Fourth Quarter g. D. P. Rows by 7. 3 . That is slightly ahead of the forecast. While chinas full years growth figures were close to the target for the year they show that 2014 was the countrys worst year of expansion since 1990. The slowing economy has been a concern for leaders. The Central Bank Cut Interest Rates in november, and in september the government sped up work on key Infrastructure Projects to help boost growth. For more, lets head over to christine ha, who is in beijing for us. Hello, anna. As you mentioned, the fullyear forecast came in a little lower than the government target at 7. 5 . But if you look at the National Bureau of statistics report, they are calling this a new normal. Overall the tone is confuse positive. Here is why. We are continuing to see a steady increase in wages, a narrowing ofrural income gap. Consumer prices went up 2 . We saw sales better in december, giving reassurance that the slowdown is a controlled one. They expanded to account for a bigger chung of g. D. P. Than the year before. There are still risks in investment growth. Still some concern about the manufacturing sector. But overall it is an optimistic picture against a background of a manninged slowdown and of a managed slowdown and a shift in the growth model they want to see. We see further liberalization in many markets in china. Do we read into any moves in the stock market any interpretation as to whether there will be more stimulus coming from the Chinese Government . The only thing you can read from the stock markets today is how volatile and sentiment driven it is. The come posit closed monday 7. 7 later on the regulator crackdown on new market accounts. Today the stock market expecting some kind of easing coming up. It is up on the back of the g. D. P. Numbers. The potential trading curves have been thrown to the curb. Will they cut rates or requirements . At the moment china has problems channeling attention to the area they want more things. Thank you very much. Join the conversation on twitter. Let us know what you are following today. Anna has been tweeting on my having. Following that interview with Bill Mcdermott saying the big m a deals are behind them. He doesnt want to buy you, so he tells us. Coming up, we are going to be speaking to the chief equity strategy in wells fargo asset management. Bonds are out performing equities in 2015. Welcome back to countdown. We are back with the conversation on equities. With a look at where the markets are head negligence 2015. Lets welcome john manly. Welcome to the program. Thanks for joining us. Thank you. One of the things you are suggesting is that people should follow the growth from the u. S. To the rest of the world. Is that one of your strategies at the moment . That seems to stand in contrast to what the i. M. F. Is telling us in their latest forecast, where they are more positive. It is a good thing to be positive. There is nothing wrong with the u. S. The u. S. Is still a very trackedive place to invest. I think what happened in the u. S. Several years ago can happen here. One of the things i find interesting is people refuse to do something because it hasnt happened yet. If it hasnt gone up yet, it cant go up. That is the wrong way to think. The same sort of brothers followed in the us are here as well. How excited are you for the potential of kiwi on thursday . Is it going to be enough . They say it will be about half a trillion, but they say you need a lot more. What do you think . Yes. I dont think it is going to be enough. I think there may be a bit of a disappointment. I have given up trying to call 3 to 4 moves. You want to get the big one. You will get enough when you need it. They will keep on going until disdone. They dont run out of money, and they are pretty sure of how to do it. Do they get it right the first time . If you dont succeed, try, try get. Once it starts, it is hard to go back. You are going to have disappointments, but they are rather efemoral. So all is not lost . You still think you would see the euro weakening into the futures . European equities would be a buy because of a general move towards quantitative easing . I think they are a by now. I cant think of anything that moves around more. It is almost improbable to predict. The strong dollar and weak euro has been a bit of a transition. I think things are behaving as they should, if they are, why shouldnt i be a buyer of that kind of market . As i said i dont dislike the United States. I just see a lot more potential here in europe. I was told to buy value, find out why stocks are cheap, dont move until cheap starts to go away. The reasons are starting to go away. Equities globally as measured by the all country world index down by 1. 5 . Bonds are outperforming as well. Give me the case for buying equities over bonds this year if there is is one . It is still early days. My experience over 35 years has been stocks do well while bonds do well, and then stocks do well for a bit longer. Bonds are doing well because the worlds economies havent really ignited. I have to believe there is pentup demand, that people want more things than they have and they will go to work to earn them. It happens in the you could, the u. S. And you were. The surprise in the margin is what moves the markets. There is also going to be a bit of a transition. I think what has happened in the u. S. Market in the last three or four years has been a push market. Money has been pushed in. It has been hard for managers to outperform. Something we get towards the end of all ball markets, which is a pull bull market. I think that is going to be a very Good Environment to invest in. He is the chief equity strategyist at wilson fargo. We are taking a short break. Welcome back. We are joined by john manley, chief strategist at wells fargo equity management. How do you look back on what we heard from the f. N. B. Last week . How do you look ahead to what seems to be a story with gathering momentum with denmark and their currency peg. The pegs do they always burst when tested by the markets . When the hedge funds get them in their sites . Hedge funds have a certain coyote aspects to them and they like to go after them. Pegs shouldnting be there. If they werent needed, they wouldnt happen. Currency should fluctuate and all you do is delay the inevitable. You can slow things down, but i think standing in the way of what a currency wants to do is like trying to stop water. It goes where it wants to go eventually. Now there is a warning. I dont think Central Banks and governments like the idea of hedge funds making money at their experience. Many times i have seen it in the states where the hedge fund will try to do something, and the government isnt happy, and they get slapped. They do it at their own risk and peril, but i think they will test it i dont think it breaks unless the government wants it to break. Can the markets withstand a hike in u. S. Interest rates this year . Absolutely. You cant confuse higher rates with tightening. As the economy gets stronger it can stand higher rates. Think of it as a rising level of neutral rate. They are trying to keep the same degree of stimulus. Thank you. John joins us from wells fargo. After the break we are going to continue a series of conversations we are having with executives this morning. Lots to come. This is countdown. You are watching your Foreign Exchange check. The euro danish kroner a fascinating cross. It is the news behind it. Yesterday something quite special happened within denmark. We had the Central Bank Cutting Interest Rates. The Danish Central Bank lowering the got rate by 15 basis points to minus. 2 matching a low during the darkest hours of the euro debt crisis in 2012. Just like the swiss four or five days earlier, they lowered rates after interventions in the market proved insufficient. We have had money flooding into denmark, making a move ahead of the e. C. B. s announcement on thursday, which is likely to weaken the euro and push up the danish krone. It is pegged to the euro and after the swiss franc euro tap was obliterated last thursday, many hedge funds have been asking them around the world will your peg be the next to go . They say our peg is different, it is backed by the e. C. B. It is different. Our peg will remain in place. The job of the Central Bank Governor is to target 7. 4608 krone per euro. The official practice is 1 with the target. The dane us krone plays a fairly minor role in world markets, accounting for just. 8 of global currency training in 2014. It is not the exactly cross that is interesting. It is the news behind the cross that matters today. These are the Bloomberg Top headlines this morning. Chinese growth figures out today show that Fourth Quarter g. D. P. Rows by 7. 3 . That is slightly ahead of forecast. The fullyear growth figures are close to the target. They show that 2014 was the slowest year of expanse since 1990. Markets rose. Denmarks economy minister says his country will not follow switzerland in severing ties with the euro. He says any comparison between the two countries is quite impossible. His comments follow yesterdays surprise move to cut the countrys got rate by 15 basis points to 0. 2 . All eyes are on the World Economic forum starts that starts tomorrow. They say that deflation is going to be big on the agenda. I am thinking about the european zone deflation. Look at japan. The question is how do you define global . The big risk actually now is that the whole world moves into a cycle of deflation. And a reminder that we have some great coverage lined up from the World Economic forum this week. Among the highlights francine lac la guard will be hosting a summit. We have talked to one and he says the Falling Crude prices have been felt. The main affect in the decrease in the price of oil is a decrease in the price of gas, which means there is more money left in the pockets of consumers, and they are going to spend some of it. The numbers are very large. In many country position, Oil Consumption of g. D. P. 1. 5 can go into the pockets of condition tsunamiers. It is like a really big fiscal expansion without an increase in detriment oil has been trading below 48 a barrel. The u. S. Is the Worlds Largest consumer of oil. It has signaled it will let the market decide the price. We are joined by Neil Atkinson and ryan is here as well. Thank you for joining us. It is a boring question but it is one i love to ask. How low could oil go . I am going to help you a bit because 28 is a figure that you have cited is possible . Well, it is an educated guess. Anybody that tells you it will go to 20 or whatever is frankly guessing. The reason i cited that figure is to give an illustration based on what happened back in 2008 when oil price went from 146 to 36 at a time when the underlying fundamentals were actually not as bad as they are today. All i was pointing out was is a similar fall would take us from 115 down to 28. It is just a mathematical illustration. So you are no the saying oil will go to 28. Certainly not. We just did a poll and deadlining oil prices are boosting Global Growth according to three out of the four investors we talked to. The reason they think that, and you can see from their answer to another question, which is why is oil falling. Nearly three out of four thinks it is an oimp sly new and not a demand problem. Is that what you are seeing . It is a bit of both. During 2014 wurp successively slicing back our expectations for the increasing global oil demand. China is a gooze example. We are hearing about the chinese Economic Growth numbers a second ago. At the beginning of the 2014 we thought the world would use about a Million Barrels more of ail a day in 2014 than 2013. Now it looks as if we are only used about 700,000 barrels a day more than in the previous year. So demand expectations were sliced back, on the supply side, the increase in supply growth from particularly the United States, but not only there, canada as well, was higher than scombeck the. So we got lower demand, higher supply and we are suddenly in a situation where the market is glutted. That is going to stay the case for about the next six months based on the numbers that were put out last week. We are not out of this yet. Do you think the prices go up towards the ends of twoist . That was a very nice piece of spin on their part. If you look at their numbers, yes, during the second half of 2015 is looks as if the market starts to balance, and if you get optimistic and global or growth starts to take off again, as the i. M. F. Said a second ago, people have more confidence they spend more money and more Economic Growth, and oil spry growth from the United States in particular is curtailed because of lack of investments and lower prices, then yes, the i. E. A. Could be right and we could see prices creeping up again. But there is a long way to go before we reach that point. Why are Oil Companies cutting costs already if they believe prices will be rising towards the ends of twoist . Isnt that a message in itself . I dont think anybody thinks that when it starts to rice in 2015 that it is going to go nuts. People are making a fuss about the fact that Oil Companies and traders are buying oil and storing it on tankers or land because it is cheap. All that means is that is deferred supply and that will come back into the mark at some point when the time chances or the contract the expire. So it is not as if the surplus is going to go away very quickly. Unless there is a dramatic fall in production from the u. S. And other nonopec countries, coupled with a dramatic rise in demand it is difficult to see there can be a major recovery in 2015, as opposed to finding a floor and balance from which we can get gradual growth in price. If we go to opec again half of the people in our poll thought that opec would be forced to cut production half way through 2015. But interestingly most of those people thought it would happen in the second half of the year. Opec meets again in vienna june a. So that suggests that people dont see a cut coming from opec any time in the next six months, and if there was going to be a cut it would be at the end of the year. I conte see there is going to be a cut. I think they have taken a very, very clear change of policy here, that they are not going to sit idly by as they have done in previous periods of history when the north sea went from zero to 6. 5 Million Barrels a day. They are not going to make the same mistake of cutting their own production only to allowed head room for a growth in production from the high cost producers, particularly the United States and other countries. How much of the highcost producers are feeling the pain now . Are they hedged so they dont feel the pain in the short term . That is a good point. Hedging is an extremely mysterious concept. What we are trying to figure out is how much is hedged and for how long . As 2015 moves along, we will presumably see the unraveling of some of those contract and insurance policies as they come to an end. There is an element of hedging, which means the producers can carry on for the timebeing irrespective of the current price because they have a guaranteed price. Hedging is playing a role, but i dont think it is playing a major role. We are seeing signses, schlumberger one of the huge Equipment Companies in the oil and gas industry making major cutbacks in employees. We are seeing cutbacks in projects cutbacks in announced expenditure budgets, and that is going to continue. You could argue that maybe they are acting too fast and maybe a little more time should go by. But having said that, they have their shareholders to please. They will have taken the view there is going to be no four seeable return to the ghorey days of 100 a barrel oil. We approaching an eri in the back end of the 1990s where we saw megamergers . Could we see the exxon and b. P. s walking down the aisle . They were heady downs with b. P. , arco and so on. That is a good question. There are companies out there, the second Tier Companies as opposed to the majors. It is difficult to name names. Premier oil, tele oil, companies of that size and stature. They dont have the same heft as the majors, but they have some interesting prospects. It may be that companies of that size and stature may well find it makes sense for them to merge or be acquired by one of the majors. The weakest of the megamajors for all sorts of reasons is b. P. There are a lot of unknowns in the case of b. P. But for a company like that which is suffering from the low crude price like all of its peers has these additional problems and i would have thought that b. P. There has been some speculation about exxonmobil talking to them. That is something we should be watching closely in the next few months. Thanks a lot. Neil atkinson, head of analysis at lloyds list intelligence. Let us know what you are following today. Ryan is on twitter. Weave tweeting out a lot today, especially on the s. A. P. Interview. We will be tweeting on what neil has been saying. He didnt give a price. No. But he did talk about what it is not going to do and he did mention it will. Coming up after the break, it is at time. Time for the shot. Guilt gets a drogbay boost. Government bonds are getting a boost from an unexpected source in 2015. It is the president of the European Central bank. This is the spread or the yield prem yum premium between german and 10year u. K. Bonds this. Is a oneyear chart. The yield differential has narrowed to the least in almost a year. Investors are betting that large scale purchases from the u. E. B. On thursday will boost the rate. The yield difference between the german and u. K. 10year Government Bonds was 121 basis points. Now it is down to just 109 basis points. The german 10year yield is almost at a record low. The u. K. 10year yield is lowest in two and a half years. There is speculation that the bank of england will keep Interest Rates at alltime lows in 2015. Interesting stats, something i didnt know. U. K. Government bonds, talking about the entire bond market, are enjoying the best returns of sovereign debt markets in 2015. That is barring greece. U. K. Government securities have returned almost 3 , the greek Government Bond market has returned 4. 9 . One final question before i go. How much could this yield premium between the u. K. And germany shrink in 2015 well, smith and williamsons director Robin Marshall says it could half to levels last season in 2013. Getting very much a drogbay boost in twoist. 10 48 here in london. Lets talk about some of the corporate earnings. Unilever reported earnings. The company sees no improvement in 2015 as its sales missed estimates in the Fourth Quarter. Our European Business correspondent, Caroline Hyde has been speaking with paul. She started by asking howie merging markets were impact the the business. We have about 60 in the emerging markets. That for us is still a very good position. Despite what you read in the papers. The emerging markets are still growing. It is difficult to come by in europe and the u. S. We think growth is 2. 5 . About 60 of our business is building share. With low growth in this environment, you need costs to be better. You have seen the results of 40 basis points core operating margin on 11 share Earnings Growth is a Good Environment. You saw the i. M. F. Lowering the growth forecast. Europe is difficult to get growing. Risks of deflation quantitative easing coming. We will have to see what that does. Limited effects in the u. S. U. S. Growth started to pick up a little last quarter disappointing in overall markets. Then we have the geo political challenges, the middle east, and that obviously affects the markets. Let me pick up on where you say quantitative easing is coming. They are braced in the e. C. B. What do you think is coming . You did see a sales deadline in europe . We need to all Work Together on this. The example that the u. S. Has shown and the risk in europe that just pumping money in might not be enough if we dont address the underline fundamental reasons. How do we make the european mark bark, investing in education and r and d. If we dont make fundamental reforms, we risk still being unexcept itf. Talk about china. We have seen 20 deadline in terms decline in terms of growth there in the last quarter. Is that starting to turn around in china . Yes, we see positive signs there, but the economy is slow. We were sitting on major trade stocks and we thought it would be better instead of keeping the volumes up especially in the big cities we thought it would be better to manage our own destiny. That is what we are doing. Wore going through a sixmonth adjustment but it is time well spent. Then we will also be again able to make our innovations work for us. That was unilevers chief exec executive. Trading is scheduled to start in roughly seven minutes and 45 seconds. Crack futures, dax futures all pointing higher. We are going to look at denmark futures. Welcome back. We just have time to mention what is going on in denmark. Of course the Danish Central Bank consulting their rates to minus 0. 2 . The minister saying any comparison to switzerland is impossible. Our man in copenhagen backed this up. You have the danish bank defending it and the e. C. B. It is not as sexy as the franc last hour. It accounts for. 8 of global currency trading. That will do it for countdown. On the move is up next. We will be speaking to the Digital Light commence in europe. We will be talking to the commissioner. That is coming up next, so stay tuned. Welcome back to on the move. I am anna edwards, we are moments away from the start of european trading areas trading. China delivers. This growth is in line with the nations targets but it is the slowest pace in almost 25 years or it 25 years. Europe is expected to grow just 1. 2 this year. Central banks spar. After the Swiss Central Bank said shockwaves Group Markets denmark says it will not abandon its cap on the euro. And the anticipation of draghis longawaited quantitative easing. Manus cranny is at the touchscreen. It is very much a case of yang and yang. Yet the china data which beats one of the slowest years. We should take a little bit of heart from the retail cells numbers. Is the imf cutting growth at the fastest rate in three years, really that much of a shot shock . We suck equity markets and