Transcripts For BLOOMBERG Countdown 20150519

Readings. Manus the worlds secondbiggest mobile carrier in an m a spree. Well tell you what to watch. Mark welcome to countdown. Manus coming up two more bloomberg exclusives with tech titans. We are told why the u. K. Needs to stay in europe but the chief of the you ks Biggest Software maker says that British Business is resilient with her without the you. Morewithout the eu. Mark lets bring you up to speed with what you have missed. David is in hong kong with a look at the asian markets, good morning. David good morning. I mentioned earlier asia woke up to a rally on wall street. Things a started quiet, but once you had the hang seng the Chinese Markets opened and that is where we got a lot of heavy lifting done. The original benchmark, more or less at a threeweek high. Third day of gains. The shanghai composite is up 3 . Another 100 point game. Gain. This market is not for the fainthearted. Hang seng up and look at the topix index. Sevenyear high for japan. Week in southeast asia. Australia one of the top stories is the rba minutes, where they cut. A few takeaways, but to summarize, they left the option open, especially given the subdued equation. They also mentioned the chinese property sector. They described that as a significant risk when it comes to demand for commodities. We are at 62 for iron and or prices. Inflation it is the same story. You have inflation and weak demand for commodities. Take a look at the chart. The reason i bring this up watch out for a possible technical shaping up if things stay the way they are over the next week or so. The Australian Dollars 50 day average is moving up. Back in september, that is a 20 drop. Last time you had these two levels cross each other, just imagine the line here. This is your hundred day moving average. More or less, when these two moving averages crossed, the Australian Dollar fell 20 , and we are approaching a threshold where they could meet. Something to watch in the currency market. Back to you. Mark good to see you. Manus hes outflanking me. Lets turn our attention to one of the stories that just keeps growing greece set to seal a deal that could save it from bankruptcy. Creditors say they are inches away from a deal, but we havent heard any confirmation from the creditors. Yanis varoufakis gave a threehour interview that ended this morning. Lets go to hans nichols in berlin. Hans, parse away. Hans we do like to parse what is happening out of varoufakis. Good morning. All the optimism we heard from mr. Varoufakis and him we dont have any confirmation from creditors at what we have out of this interview is a couple new redlines from mr. Varoufakis. He seems to be backing away from this idea of holding a referendum. He said it would be unfair to the greek people. There is referendum, it would be a referendum on the euro, and it would be unfair for greek citizens to have to face such a dilemma an answer with a yes or no. Hans manus, it is a binary question. You look at the polling that has come out over greece, support for the Government Strategy has slipped to 35 . It may not be as strong as it was heading into these to negotiations. On this crys crucial questions of the existing debt john barrow says they will not agree to anything unless they restructure the existing debt. The problem is that it means a third bailout, another trip through parliament through all 18 parliaments in the eurozone that would have to approve it. Listen to how mr. Varoufakis put it. There was no one in our government, no one, not varoufakis, no one, who will sign an agreement that will precede the restructuring of the debt. Hans he also said no one is thinking of leaving the euro however there is a meeting with an series of and they are advocating for the european union. You have this notion of what they would do if they do come short on payments. Last night, mr. Varoufakis said they would rather go with the imf rather than pensioners. Manus hans what about this reported juncker proposal . Give us the details. Hans the eu has denied that younger is working on it that juncker is working on a proposal. There were reports last night that it would focus on the primary deficits are plus around 2 . It seems like the big stumbling block is what greece is going to do on pension and labor costs and we dont know anything in terms of what would be in the juncker proposal, how it would address privatization, labor. Those are the parts that the current bailout programs that greece seems to be chasing. So yes, we have optimism from athens, but my note of caution was from berlin and madrid and brussels. Then we might be able to be optimistic, but on a technical level they are quite a bit of ways away. Athens may not be merited. Manus thank you very much for rounding of the latest. Mark lets turn from greece to russia. Just under 17 billion, the richest man in russia the chief executive of the biggest Mining Company who shares more than 58 , and despite sanctions his personal wealth increased this year by nearly 50 . Ryan chilcote sat down with him yesterday for an exclusive interview and he joins us now. Ryan his 30 stake is worth 10 billion alone, worth more than 50 what it was a year ago. Part of the reason for that is the fundamentals and the demand for nickel and the worlds secondlargest economy china. We are confident that the situation in the nickel market is improving, and the market turns into deficit, and the growth in china. People are talking about growth in china. Ryan growth in demand. In demand, not just the metrics. It is a question that the Steel Production growth nickel consumption is growing by 9 . Im not just talking about your, economical things, im am talking about consumers. Consumers of nickel are consuming more nickel, 9 a year. That is why we think it would be old news. Ryan that is not the only good news. When you talk about nickel, you were talking about stainless steel manufacturing. But increasingly, it is being used in the automotive sector particularly in batteries. The likes of tesla, hybrid electric cars are creating this outside demand for nickel. Highgrade nickel, at that with the biggest premium. Of premium of almost double the price, just because it is a highgrade stuff that you need for batteries. That could be a driver of growth. Leaving geography and china aside, globally. Manus are looking at the dollarruble chart. Almost 70 rubles to the dollar that is improved. Last year was the worst performing currency. How does that play into the numbers . Ryan here is the surprise the ruble was the worlds worst performing currency last year and it is the bestperforming currency so far this year. But it is still down year to date by 30 . What does that mean for a commodity like nickel . Well, their costs are in rubles. Their costs are 30 lower generally speaking, then they were a year ago, and yet they are selling their nickel, their palladium, their platinum in dollars. If you look at the share price over the last year, the russian listed shares they are up 58 almost exactly like the devaluation of the ruble. Manus the russian ruble is up 23. 79 . Mark seal of approval. Ryan sometimes that is with the largest currencies they are always sort of manus exactly right. There is more to come from you later in the show. Ryan, thank you. As i said, more to come. Also over the weekend, from the ceo. Mark results from the worlds secondbiggest mobilephone here to look ahead is caroline. What can we expect to see . Caroline when it comes to Services Revenue the amount we spend we could be turning a corner. For once, we might not see negative service revenue. We are looking at an improvement in the Fourth Quarter for overall Services Revenue. We have seen 11 quarters of no growth, but for once, we are likely to see it coming in flat. We are still seeing a decline on a fullyear basis but we could see sales off by 4 . Meanwhile, earnings are likely to be down compared to last year and expected to be forecast to state flat to stay flat. Less than 20 billion pounds, so this is still a company struggling to turn itself around particularly in europe, which has been its strength. Lets have a look at what the trends are of vodafone. Where are we likely to see a turnaround . The likes of Deutsche Bank are saying that things are looking better with less pricing pressure. Economies are recovering. We are therefore expecting improvement in the market, in particular, barclays will likely say that it is stable and improvement is set to come. Keep an eye out for germany, and india in particular. This is looked to as a jewel in the future. They are spending big and india to beef up the spectrum, to be offering more coverage. This is a country they want to get into but for the time being they have had to invest more than reap reward. Mostly we are going to see a bit of a hit from the euro coming forward, a company that reports in british pounds. So when you bring your sales from germany, from france, from across europe back into the u. K. Sterling, it is not going to be quite the strong. Lets have a look at investment because this is a company that has been plowing in the cash. 90 billion euros has been the price tag and that comes to an edge next year. Interest in what some analysts have been saying that this has been more like a winter in the spring overall. They say that m a could be on the agenda. They spent big on kabul deutschland, but the big question is what about portugal . And liberty global, the ongoing speculation could they team up . Mark the top stories on bloomberg is our bloomberg spoke to the ebay Senior Executive about the upcoming referendum and whether it is good or bad for the countrys economy. I dont worry about the referendum itself. I am hopeful that the british people will decide to stay in europe. I think it has been a good thing for the u. K. Economy, i think it has given the u. K. A boost, allowing them sway. Mark Australias Central Bank indicates that it still can you see policy if needed. The rba says Slower Growth would result in higher unemployment. Carl icahn says apple shares are worth 240 to an open letter. He is also calling for a bigger buyback and believes that the tech giant will dominate in television and automotive industries. Uber is teaming up to pursue a mavs business. Maps business. The next round of bids is set to be due in two weeks. You can find more on that story at bloomberg. Com europe. Dont forget the europe. Manus jump onto twitter with both of us. Im manuscranny. This is a bloomberg. Com story which actually talks about the valuation of u. S. Equities. Q theory he he is given an instruction and goes into defiance mode. You take all the stocks in the usa and you sell them. To take the money and you go to replace all the capital and you should be left with money left over. But q theory says he would be left with money left over they say the stocks are therefore approximately 10 overvalued, one of the highest valuations that we have seen. Mark not everyone believes in the q theory, but has come back into vogue because of the s p hitting an alltime high. Coming up, we will speak to the a day after the finance minister told us it is not at risk of a downgrade. Manus then more on our interview with russias richest man and how he made billions on the rubles decline. Mark the uks Biggest Software Company Tells us the u. K. Is resilient with or without the eu. You will want to stick around. Manus but first, u. K. Inflation. We will get a preview with our next guest, coming up after the break. Mark u. K. Inflation data is due out later. Surveys are saying that Consumer Prices will probably stay unchanged. Lets bring in neil williams. Good morning. I cant wait to see the front of the papers tomorrow deflation for the First Time Since 1985. Neil the headline will be falling Consumer Prices, but lets not get carried away. If you want to go back further in history, historians would tell us that deflation used to be the norm. We had it as much as inflation up to the war years. But this is not proper, japan style deflation. This is essentially an oil inspired falling price. With a bit of food from an. I worked for a Japanese Institution that celebrated when they have pay cuts, because they were smaller than falling prices. Im not sure london and new york are ready for that just yet. Manus we look at oil, energy prices, gas prices, going up by 6 in the past month. There is downward pressure that will hes out over the next couple months that will ease out over the next couple months. How long do you think could it be a temporary phase . Neil it is temporary. The bank of england hinted that it will come over the next few months, so they have two more letters to write to the chancellor before the autumn. Because of basic facts, you get a slight, vshaped profile in the Inflation Numbers not just for the u. K. But for the u. S. , as well. That puts the banks back into their comfort zones, and they can start looking at ways to tighten the economy next year. Mark mid next year is what the markets are telling us about when the first rate hike is going to happen. Is that about right . Neil the markets are pricing out, largely our first rate hike in the u. S. And u. K. I still think the fed could slip in the first move before christmas. It is easier for the fed they dont just look at cpi, and having its employment mandates as well. The bank of england also will toward the end of the year begin to see inflation. It can sit on its hands this year and start to think about raising rates. Never mind the budget that will come to us in july. Manus if we have no inflation negative inflation no rate hike you think there will be a grab for the u. S. U. K. Yields. Colin 2 on the u. K. Im rounding up. Is that appealing . Neil of course, the great puzzle right now is why sovereign bond deals have moved up so sharply. A number of the bond bears will be saying i told you so straightaway, but it seems to me that there is a big clamp on bond deals ready to come back into motion, and that clamp the central banks. The European Central bank has set a line in the sand. It means by definition that anything yielding above. 02 are again going to look attractive. Im not sure weve got the end of the ball mark briefly, ahead of the referendum, whenever it takes place do you worry about the impact on the economy or not . Neil that is the big known unknown for the u. K. Economy, and logic suggests that the u. K. Probably wouldnt want to take away links with its biggest trading partner, dilute the relationship politically, or even forgo direct investments from asia. The uncertainty leading up to that, and maybe even after the referendum, could take the shine off. We know that these issues arent put to bed. Mark stay with us. Manus coming out dutmoodys rates south africa. Manus welcome back. Time to check in on the Foreign Exchange markets. The euro is in focus. Yesterday was one of the biggest drops in almost two months, down by 1. 2 . We have had news from varoufakis saying they are a week away from doing the deal. Consumer prices in the eurozone that is expected to dodge the deflation bullet, as they have done. The index is out in germany flatlining at the moment. The question is will the momentum continue to build . Will there be a relief rally in the greek Government Bonds . Which takes me very nicely to the swiss franc. That is the currency the euro swiss franc, i should say. The euro swiss franc is one of those currency players that is getting back to normal and that is what i want to bring to your attention. You are seeing the euro decline the swiss franc continue to rise almost in lockstep with the greek Government Bond and that correlation is getting back to normal, getting back to where we were in the good old days of when the swiss franc was a haven and when the euro actually began to drop as we saw with greek Government Bonds. The correlation is now a oneforone movement. The Australian Dollar is one of those currencies that is not doing what you would expect it to do on the back of the minutes from the reserve bank of australia. It is up 2 10 of 1 . The rba is saying the dollar dropped for the fourth day in a row but has managed to recover identified weaknesses in china. They are setting their Housing Market. For commodities the rba is quite dovish. Mark top stories on bloomberg this hour mongolia settling on a 5. 4 billion expansion of a copper and gold mine. That marks the end of bitter negotiations. The mongolian economy is set to get a major boost. Saddled with a total of nine affects not making the cut for the new, slimmeddown parents of the emergent company. The operation is devalued. The assets include a thermal coal mine to u. K. Oil and gas plants. Saudi arabias marshall elects a nineyear high. In iraq, the largest opec producer, they shipped 2. 9 Million Barrels, the most in at least eight years. According to the greek finance minister we are a week away. According to muscovy see, we are not there yet. I suppose we shouldnt be surprised by emerging views by diverting views. Neil bottom line and greek needs to find a. 5 billion euros by september. And i think it is a stark reminder that we are not out of this yet. It addresses the symptom but i cant address the problem, and the problem is that we have a monetary union. Countries that have different pension systems need to reform to become less disparate. This is going to take, i think years to solve. Manus do you think it is ironic that the germans hinted they wouldnt mind if there was a referendum . Very different to what they challenged the predecessors. Neil it seems to me that it is coming toward crunch point whereby greece needs to leave, which i think is unlikely or to stay in the club and Start Playing by the rules. Greece, either way,. Will default the question is will a default inside or outside and if they think outside is easier than it is probably living a lie. Better to get on with it and start trying to play by the rules. Mark on the matter of deflation, there could be no inflation. It was only a few months ago an improving trend . Is it sustainable . Is the deflation beast sla in . Neil im not so sure it is slain. Certainly in the shortterm, throwing cash into the system has helped to address the deflation. The euro coming down has helped. Im sure the ecb will continue with kiwi up to the end of next year. There could be one i wouldnt be surprised if the qb centers started to say the data is going our way, why bother to continue . But beyond that, i think that cash will continue to come in. Mark good to see you. We are not that close but you recall that what it would mean is an increase in the cost of borrowing which would put a squeeze on our expenditure. If you look at at the moment, our economic exposure to foreign debt it is kept at a reasonable rate. Mark that was the South African finance minister moodys downgraded his country. Joining us is moodys senior vice president. Good day to you, thank you for joining us. Youre very welcome. You are wrong we are two notches above investmentgrade. Mark apologies. [laughter] as you heard, the finance minister spoke to us yesterday and he said that the country isnt close to a Credit Rating downgrade. To confirm, you have south africa two levels above junk. Is that the case . Is there a risk that south africa could be thrown to junk . As far as we are concerned we have a stable outlook, and that means in our view, we dont expect to see a downgrade or an upgrade within the next 1218 months. We think the risks are pretty evenly balanced. We didnt downgrade less than a year ago november, on the basis of the economys slow growth and the consequences of that slow growth for the public finances, meaning that in spite of the fact that the government is doing a good job in restraining its expenditures and consolidating its public finances, the debt continued to grow on the basis of having a very weak to nominator. Week denominator. Mark you say the countrys Economic Performance has been dismal what are the biggest risks . How well placed to south africa to adapt to this loan growth environment . The low growth itself is the risk, because it looks to be with us for several years more. We dont expect the economy to be able to get to even 3 growth until such time as the Electricity Generation facilities are complete and that is expected to be in 2017 at the earliest. It keeps getting pushed off, as you might know. That being said even after those Electricity Generation plants come online, the country will be facing the need to rebuild other facilities that have been excessively used in this building period. The situation is going to be with south africa for some time. That means yse . Mark nene also told us that south africa is committed to selling stakes in the power utility escom. But he says south africa has time on his hands. Should the government be getting on with selling its stake in escom . Really, it is not up to us to provide advice on those things. It is not the role of a Rating Agency to do that. We simply opine on what they do as opposed to suggesting what they should do. Mark im sure that you can give a view on what is happening with the union. Unions represent a 1. 3 million state workers, and a 7 pay increase after initially demanding a 10 pay raise. Where the risks, what are the implications of this wage deal on south africas deficit and debt trajectory . Well, if the government remains committed to the spending ceiling that it put in place three years ago, then it will have to accommodate any increase in wages within that ceiling. The assumption would be that they would not change or raise that ceiling in order to accommodate it. It should not, by itself, mean that there would be different trajectory for the public finances. What it could mean is that there is less money left over for investment, because more of the budget is being consumed by the wage bill. Mark quick question on Interest Rates they have been unchanged in the South African central bank. Before last july. You say inflation is set to breach the reserve banks target by the end of the year does that mean the next Movement Rate is higher . How soon . The issue is the way inflation targeting regime work in south africa, that if the breach is temporary, and there is no need to make an adjustment in monetary policy. If the inflation would, by itself, fullback below the upper end of the target band. In this case, that is what we expect to happen. It seems to be what the reserve bank expects to happen. The reaction of Interest Rates really may be more toward the u. S. Move, the u. S. Fed, if it were to raise Interest Rates in september, which now seems to be the consensus. That will put pressure on south africa to raise rates, as well. Mark good to chat, thanks for joining us. Youre welcome. Manus join us both on twitter. We both have interesting comments this morning about the valuation on u. S. Equities. You will also be able to see ryans interview. Mark great interview. Manus a lot more to come on that. Mark was just saying that we have the exclusive interview. The impact of sanctions on the economy has that peaked . Manus these are the top stories on bloomberg at this hour. Deutsche bank has put both of its coheads in asia on leave. The decisions were unrelated. No interim heads have been were point have been appointed. Deutsche bank is facing a potential impacts from the exit of the eu. The is weighing options that may include moving activities to germany. The bank is in an early stage of scenario planning . The former thai Prime Minister has been granted bail by the countrys supreme court. Prosecutors allege that she was criminally negligent for failing to stop. She denied charges of dereliction of duties and abuse of authority. Mark with a well estimated at 17 billion, russias richest man is the chief executive of the countrys biggest Mining Company and despite sanctions and russias recession,s personal wealth increased by nearly 50 this year. Ryan chilcote sat down with him yesterday for an exclusive interview. I think that russia europe and america have a Great Potential to be very Close Friends but i think that we have a very rough legacy which refrains from going to travel and being good friends. Ryan you set the soviet union was a superpower and should be treated like a superpower. We didnt forget that 100 years ago there was a revolution in russia, which changed everything. Since that time the relations between russia and the other worlds have changed and it has been very difficult. It has given a taste. What i think we need some kind of challenge to overcome together which will help us to become closer friends. I think we all find something really important unfortunately, i think ryan you mean like afghanistan when the United States wanted to fight afghanistan through russia. For example. America and russia were best friends the next day after september 11 when putin came on air and said we are with america. That was a really friendly handshake. It has been broken since that time, but unfortunately, we need some kind of other challenge for all of us to understand that we are friends and other enemies. Manus later in the morning a word with the colombian economics professor and noble laureate. That is an interview you certainly dont want to miss. Mark bloomberg has been speaking to the uks Biggest Software maker. The company is brokering and arrangerme tnt. Caroline hyde sat down with Stephen Kelly for an interview. She joins us now. Good morning. They are trying to make Business Management easier, is that the plan . Caroline it is the sexy world of accounting. They dont want to have 4 million enterprises worrying about how to perform accounting so they are saying, it will be as easy as updating your facebook profile via mobile. They are a bit late to the party in terms of cloud computing. We were talking about microsoft with sap in the Biggest Companies trying to make that shift, so you can access your business wherever you go. Now they are tying together in leapfrogging other business by signing this deal. They are going to be having a particular agreement, which makes it that much easier. They are getting ahead in terms of tech but interestingly, i wanted to get to know about the oldschool challenges what about the new risks we face in terms of the u. K. Exiting the eu . Is that a threat to the companies it works for . An interesting response. I think it will change to radically our relationship with europe. I think the entrepreneurs in britain at the time, 60 of the imports there is a tremendous brilliance in britain. Caroline they can survive yet still. I think you strike to say that these are resilient companies, but the fact that they didnt inc. Shock and horror they didnt think shock and horror that surprised me. Manus yesterday, it was jcb saying it doesnt matter. I feel like i am living in a time warp bubble from yesteryear. You talk about business where is the business coming from . He identified some interesting regions. Caroline we think that this is a major u. K. Player, but this is a company that operates in 23 countries, 13,000 employees. I wanted to know where the interesting parts of growth from, not just in fastgrowing regions. Where we are seeing hotspots are down in africa. The economy is going well there and we highlighted someone offs with asia. Business in africa and asia is getting has a good reach. There is for strong growth in europe as well. Mark and what about m a . Caroline he is seeing growth in france, of all countries, but they were also talking about there are so much m a and speculation in that Industry Group but for him, it is more about sage group being the acquirer. Fundamentally, we always look with the bdi across the marketplace but we have to make sure there is payback, that it accelerated the strategy, and that it could be the consideration of the next couple years. Caroline there have been some reports that it might be a precursor for stronger relationships in the future perhaps they will be forced to take a stake in sage Going Forward. That hasnt happened yet. Mark countdown continues in the next hour. We get breaking numbers from vodafone. Stay tuned. We live in a pick and choose world. Choose choose choose. But at bedtime . Why settle for this . Enter sleep number. Dont miss the memorial day special Edition Mattress with sleepiq technology. Sleepiq tells you how well you slept and what adjustments you can make. You like the bed soft. Hes more hardcore. So your sleep goes from good to great to wow only at a sleep number store. Save 500 on the memorial day special Edition Mattress with sleepiq, plus 36month special financing. Ends monday know better sleep with sleep number. Emily european creditors want a deal to unlock bailout funds. Russias richest man sits down with bloomberg in an exclusive interview. We bring your our conversation with the man who got richer with the rubles decline. Could low oil prices cause a dip in deflation for the first time in 455 twreers . We look at what to expect. The worlds second biggest mobile carrier, vodafone. Well bring you the numbers as they break. Welcome to countdown. Im mark barton. Manus im manus cranny. Emily mark the manufacturers association. Fourmonth sales rose to 4. 85 million cars. The gains extend the automarkets longest growth streak. And man taken a recovery reached in 2013. All five of europes biggest car makers expanded last month with italys gain the largest at 25 . Growth in the u. K. Was strong for an april in a decade. Fiat chrysler sales up 30 . B. M. W. Up by 12 and daimlers european sales up by 7. 8 . Manus lets get to caroline with the vodafone numbers. It is a beat. Cory yeah. Caroline we have declines. Finally a turnaround. They are looking optimistic when it comes to next year. Full year earnings. This year coming in at 1130eu7b9 billion perhaps were starting to see an investment of 19 billion euros invested in Fiber Network boosting the overall the provision they give us as a customer base, starting to reap rewards. Starting to see exposure to germany and spain. We dont just want our mobile phones from one company. We want our tv and internet and homeland lines as well. It looks as though the company is turning the corner. They have the intention to grow their Dividend Per Share and that is going to be music to investors ears. The revenue creeping up 10 . It is a return to growth. Lets get our attention now back on to greece. Is it about to seal a deal . Could it be safe from bankruptcy their leaders say they are inches away from an agreement to unlock bailout funds. Varoufakis spoke a lot today. We have heard a lot of this before from varoufakis. Hans it was a remarkable interview. He talked about a referendum. He backed away from this idea of a referendum. He said it would be unfair to greek people and said it is a binary choice. If there is referendumming it would be on the euro. I think it would be unfair for greek citizens to have to face such a dilemma and have to answer with a yes or no. Hans there had been a bit of talk about using the referendum. Lost a little bit in this interview was a new poll from sky tv that showed support for varoufakis has fallen to 35 . Manus, 50e. 5 of those polled said they were 50. 5 said they were concerned about a greek exit. Varoufakis clearly said the greeks would not sign any deal that didnt include some broader debt restructuring. The problem with that, we have heard clearly from berlin brussels and madrid you have to go back to the parliament and complete the second bailout, the second program. Here is what varoufakis had to say. There is no one in our government. No one, not varoufakis, but no one. Our government who will sign an agreement that wont proceed the restructuring of the debt. Hans that seemed like a clear line. They will be holding a meeting in athens and they are talking about a clean break, a rupture with the euro. One important thing to watch today, what are the splits and how far are they splitting apart . Manus . Manus talk to me about junckers proposme. What is it . Hans juncker is involving himself in negotiations and he wants to unlock part of that 7. 2 billion in economic aid that is lefto. At least e. U. s portion by changing deficit targets just a little bit. Nothing on pension reform or labor reform. It has been very clear from the euro grew that they want to use labor reform and pension research. Those are very crucial points for them. I would caution about any optimism about the jounger proposal. Juncker proposal. Manus . Manus thank you for running all of that up. Emily vladimir is russ cras richest man. Shares advance to 58 . His personal wealth increased by nearly 15 this year. Ryan chilcote sat down with him yesterday for an exclusive interview. What does he have to say about sanctions against russia . Ryan it is interesting. Somebody had to call it. He called it yesterday. He said it is time to get back into russia. You saw his wealth rise. Up 58 over the last year. Up 26 this year. He said in part that is because the threat of sanctions is waning. The threat of sanctions has really peaked. Were entering into predictability. The uncertainties that they created. Have a listen. Some people are making a huge mistake trying to push russia and it is a big mistake. We want to be part of the euro and part of the civilized world. We have our own mentality and interests, etc. It is a big mistake. We are friends. Not pupils in the class. Ryan one of the things they point out is is that there is still a russia discount, if you will. The price is still discounted. The company is still discounted precisely because it is in russia because of the uncertainty there. They think that is unreasonable. As we go fwurte the this period of political instability. They said when you look at the multiples, we should the company should be valued at a much higher share price than it is now. Manus a lot of the miners and oil companies, what is he doing in terms of making norisk more efficient . Ryan one is fundamentals. The big issue is china. They have been competeing with nickel protection. On the low end of the scale. He thinks the chinese wont be able to produce as much of that Going Forward but better for them where the bigger margin is on the higher end of the market. They think there will be more demand from china. They only have a couple of months of reserves to produce pig or as it is called lower grade nickel. Better still there is other things happening in the industry as well. For example, you have the introduction of electric cars. Hybrid cars. They all require batteries which require a higher grade of nickel where you get a much fatter profit margin. They are moving into this space where they deal with industrial commerce. They think they are in a good space because the dynamics of the nickel market are changing. Emily thank you. We have more of that interview. Be sure to catch our halfhour special of that chat with mr. Potanin this weekend. A dip into inflation. Noflation. Wothesbides. We will find out Consumer Price index numbers. The last time the u. K. Experienced deflation was 55 years ago. Last week, the bank of englands governor mark carney warned you could see it again. Jamie murray joins us now. I read your preview piece. You are more on the side that will flat line rather than go into the grave. I think that is the feeling among analysts. They are split evenly among those. They think it will be slightly lower and slightly higher. The guess is the price lbs no prices will be no higher this time than they were this time last year. If you look at services the rate is 1 . We think you should see inflation rising rather quickly. Emily do you think it will reach the 2 target over its twoyear horizon . It depends how much slack there is in the economy and we are within spitting distance of the long run employment rate that the bank of england judges to be consistent with inflation. Were starting to see some very very tentative signs that wage growth is starting to pick up a little bit. It is moving at about 3 a year. Manus the bank of england, the last time we read their minutes, they were finally balanced. There is the argument now that cameron is on austerity mode. He handed mark carney a bit of a poison chalice. Slack is hard to measure. Youre an economist. Help me help mark. Is that what they are going to be focused on . Yeah, they will be focused on slack. They already know there is going to be a drain on demand this year and in subsequent years of austerity. They are forecasting ahead what they need to do to keep to allow that fact to be taken up slowly. They will be looking at wage growth. That is what they are looking at as that final indicator that will tell them that slack is used up. Emily wages are showing some signs of picking up. The real risk is if wage growth starts to pick up faster than productivity growth. If you see wage growth bid up higher than that, thats when you start to see inflationary pressure. Emily good to see you. Jamie murray bloomberg industries. The top stories at this hour, mongolia and rio tint settling a dispute of a copper and gold mine. Mongolias economy is set to get a major boost on that settlement. B. H. P. Billiton not making the cut for the new slimmed down parent or the emerger company. The operations are valued at more than 2. 8 billion. According to r. B. C. Capital markets. Saudi arabias march oil exports hit a nineyear high. The country exported 7. 9 Million Barrels of crude a day. The largest opec producer. The most in at least eight years. You can find more on that story at bloomberg europe. Manus join us both on twitter. Im at manus cranny. Mark is at bloomberg tv. Youll want to know what to watch for your business day ahead. What you need to know. Nobody thought i could do it mark you did. Were going to take a look at traditional with publishing. Manus then something you tune in for every day. It is the bart chart. What greek assets are telling us. Mark well take a look at the marks and why q. E. Is not all good. Manus coming up after the break, european stocks harboring near record highs. Well get an investors take on where next for the equity markets . Stay with countdown. Manus welcome back. European stocks are harboring near record highs. Rory, great to have you with us this morning. Loverly hot headline on bloomberg this morning. Ah auto sales are the best on record. They rise nearly 7 . Italy is charging ahead. So is the u. K. They had a great run last year, the autos and have had a good pace this year as well. Yeah, the numbers have come through this morning and the continuation of a trend we saw where volume is up. It has been good in germany, u. K. France and spain particularly where volumes are up over 30 . The real consumer almost is kicking in. Mark what is the effect for people who have financed to buy their car . That is the unknown quantity, i guess. Particularly in the u. K. There will be an impact. It is still very low and still very cheap to borrow. I would guess were in for a continued rise in auto sales in europe. Manus where do you stand . We have a big article on bloomberg. Com this morning. Talking about the value of u. S. Equities. He would maintain that according to the tobin theory, the q theory 10 voverjalled. Overvalued. You take all the investments and factories and by that theory, the markets are the most overvalued since the bubble. The u. S. Is tradeing with pig margins. In europe we are still substantially below 2007 levels. If you were to bring profitability up to 2007 levels in europe, you would see a 30 to 40 increase in profitability whereas in the u. S. Were at peak levels. It is improving as we speak. The recovery is coming through. Stimulated by q. E. We feel it is pretty much a broad base recovery. This is the beginning of a prolonged recovery for europe. There is no reason this monetary easing less fiscal hend wind that we shouldnt see that continue. Manus last week, there was an article that said u. S. Consumers didnt really spend the money in their pocket from the decline in oil prices. Do we have a bigger propensity in europe to spend the money . It is effectively a tax cut. Because europe is a far greater importer of oil than the u. S. , the impac passed ball is probably double. Mark the effect on the equity market, has that dissipated now . Do you think the two are can be linked or not . I think there has been a temporary shift in bond yields. I dont expect any dramatic move from here. Manus one of the headlines we got is will the u. K. Go into deflation mode . For the first time in 55 years. Im not too stressed about pinning you down for a guess on that. You can answer that if you want. Talk to me about how i look at the u. K. Typically it outperforms in an Election Year, post Election Year for the past 30 or 40 years. Is that where i want to be . Even with brecks it potentially in play brexit potentially in play . I think it is a very temporary phenomenal. That will normalize towards the ebbed end of the year, i would imagine. With regards to the possibly of a brexit. Deutsche bank said they are restrugesprose of the possibility of the u. K. Coming out of the e. U. That is good. We need to have more debate about the Economic Impact of what is going on with potentially the u. K. Leaving the e. U. That is a very good indicator of what is going to happen. Much more debate and we can concentrate on the economics of the impact. There is not much contagion risk. Particularly with quantitative easing. Thats been nipped in the bud. The markets given that increase in the markets we have seen, there is a little bit of complacency we have seen. Manus where do you stand on u. K. Banks . I think the whole argument about city of london as a in the brexit argument. U. K. Banks. How do you look at those . You are r. B. S. Lloyds, santander. How do you look at that at the moment . Im more concerned about the continental european banks. There is a possibility for them to redomicile. I think what the debate will enable us to understand is the importance of you know, a very, very we have quite a significant current account deficit overall. The importance of the city and the Financial Services industry is very important. That will hopefully come to the forewith that debates. What is your on german stocks rory . Great piece on bloomberg yesterday showing the cost to hedge against declines in the dax is the highest since twixrellive to the s p 500. The First Quarter it stormed ahead, didnt it . Yes. Mark are german stocks overvalued . I think you have to be selective again. Because what we have seen is consumers are beginning to spend. It is a turnaround for german consumers to actually spend. They are notorious for saving. We are seeing a much more broad based recovery. That has to be beneficial for the german market. I would say if there is volatility in the shortterm particularly given greek exiths these are opportunities. Manus rory, thank you very much for coming in. Mark coming up, the harry potter publishers chief executive joins us for his first interview of the day. Dont go away. [beeping] ooo come on everybody, i think this is my grandson. [lip syncing] little girl you look so lonesome oh my goodness. I see you are feeling blue come on over to my place hey girl were having a party happy birthday, grandma well be swinging dancing and singing baby come on over tonight manus welcome back. The relationship between this currency and the swiss franc and the euro is beginning to get back to normal. What do we mean by that . Euro down, swiss franc up. The relationship, the correlation is getting back to lockstep move where the bond market in greece drops and the euro continues to decline and the swiss franc rises. That correlation is now. 7. Before they dropped their protection. Were almost back to normal. You can see that kind of relationship developing. Lets have a little bit of a look. We were virtually unchanged. That was when they ran the math. Everybody went into shock that the greek banks might rouvent collateral to keep their lifelines open. Varoufakis does nothing to help the euro. He does say they are a week away from getting their money. Consumer price index expected to be 0. Of 0 . Were looking at a slightly lower reading. It is about avoiding the deflation bullet. That is the question. Can europe continue that . The aussie dollar actually goes in reverse. You have got to love the aussies. They just kick it. They just kicked the aussie in other direction whenever they feel like its. Some value in it if you look at the past 30 days. Are we beginning to change direction . That is what you want to. Slower growth will result in elevated unemployment. They identified weaknesses in one of their biggest trading partners, china. The weakness in their Housing Market and that has an impact on their commodity market. What you want to ask yourself is really whether this is just a temporary pause in the aussie dollar. Whether the bigger trend is something which reasserts itself on the downside with an easing bias intact by the r b. R. B. A. Mark . Mark bloomberg spoke about the u. K. s upcoming referendum on the e. U. I dont worry about the referendum itself. Im hopeful that the british kind of people will decide to stay in europe. I think it has been a good thing for the u. K. Economy. I think it has given the u. K. A voice in world matters that allows them to and that is a great thing for the united kingdom. Mark apple shares are undervalued. In an open letter to tim akhan is calling for a big icahn is calling for a bigger buy back. Uber is teaming up with baidu technologies. According to people with knowledge of the matter. You can find more on that story at bloomberg. Com europe. Manus a harry potter publisher. That is what they are best known for. Bloomsbury. Joining us to talk about the numbers and covers of books, his first interview of the day, the companys first c. E. O. And founder. Nigel. Good morning. Before we get off in harry porter land and wizards and talk me through the business. There is children and education. There is harry potter. I think in our 29year history, we built a unique Publishing House because were half academic now and half consumer books. If investors want exposure to those they have to go to two separate silo companies. We bring them together. The synergies are tremendous. Yes, we have used some of that windfall money that we made from harry potter to buy about 25 Different Companies building up our presence in academic publishing to complem the highly volatile world of trade publishing which brought us harry potter in the first place. Manus how long can you milk the harry potter cow . There is more films. More rich content that j. K. Rowling is producing on her popular website. Is the harry potter phenomenon something that just cons to give and give for bloomsbury . I hope youll forgive me if i your word milk. However we are very fortunate about the biggest events in the history of publishing harry potter since the last book in 2007. Which is on october 6, were releasing the illustrated edition of harry potter. This is a labor of love by a very talented artist. There will be one book a year for the next seven years. October 6 sees the launch of harry potter and the philosophers stone. I think that people all over the world will going to be clamoring to own this book. Manus well get to some of the selections you in a moment. You have an academic in front of you. Forbes said that the harvord Business Review is creating a special relationship with readers in the academic world. It is about being digitally engaged with your readers. How are you digitly engaging . How much money are you spending on digital . The number one priority at bloomsbury. I nearly said bloomberg. Is Online Knowledge hubs. So we are taking great bodies of information that we have thousands of books on your back list and philosophy theology and son and creating digital subcrippings hubs for academic institutions that they can subscribe to on an annual basis creating the holy grail in the march in income. Let me give you an example of one you dont have to pay for because it is tree. Free. This thin book is just the outward invisible sign of a huge website that is has been created by the German Institute for the study of labor. And we are trying to find 191,000 individuals all around the world who are policy makers and influencers in the world of labor and economics. This is a key area. If you think about what is in your daily mail every day, immigration. Unemployment gender balance in the workplace. We have so far in this 150 articles of thought leadership best practiced by leading academics who are members of this institute from universities worldwide showing an incredibly cogent way forgive me if i open it up. You have to read one page online or in this new book format. On a lighter note due to nature of my life with young children, i dobets get to read much. Mine is the original jacket with the reign. It has just come out on the bbc as a series. Does it lift sales . Are you accusing us of milking it . Manus im not going to use my milk analogy again. We published this in 2005. It was a worldwide best seller for bloomsbury in the u. S. As well as in the u. K. As many of your viewers will be fortunate to know, it is on bbc, 9 00 p. M. On that coveted sunday night. Mark can you give us an example of what happens . How many manus the main actor was on the andrew marshall. I think he did an amazing job. Not a movie yet. Thats right. 4. 5 Million People tuned in to the First Episode with six to go. Mark i didnt i was in bed having gone to bed very early. Manus fantastic to have you with us this morning. The c. E. O. And founder of bloomsbury. Mark tell us what you think of and if you read it. Whats coming up next . The bart chart. What are the greek assets telling us . You cannot switch over now. Mark time for todays bart chart. The greek bond yield jumped to 11. 32 now. It is 11. 319. The market hasnt opened as of yet. The nations Financial System may be just weeks away from run out of cash. Investor consist take some encouragement from the fact that the yield is below what was reached in april. With yields of twoyear notes jumping 308 basis points on monday to almost 24 the inverted yield curve, the twoyear yield, tells us investors are concerned about shortterm crisis rather than the longterm outlook. Essentially they fear that greece wont repay its obligations in full. Still, look at the middle term chart here. By the way, this is a yeartodate graph. Global fixed income markets unless you have been asleep have experienced a bit of a route in the past month. Greek debt has been a harbor of safety. It is the only sovereign bond market which has posted positive returns in the the middle chart the blook greek sovereign bond index. Since touching a 19month low, it has rin risen by 18 . That is the best return in the fixed income space according to a bloomberg world wond indices. Take a look at the a. S. E. Index. The benchmark in greece. Stock investors were on a different wavelength. The index rose by 1. 6 following a report that the European Commission is trying to broker a compromised deal. Now an example of the jumpy nature of the bond market is the bond market, the stock market hits a 21month low on april 21. Look at the rebound since that level. April 21. Rebounded by 17 . That is almost a bull market. A bull market of course is a 20 jump in equities. That is best performance in the world out of 93 primary equity indices. Since april 21, best performing stock market and best performing bond market as well. What are greek assets telling us right now . Manus time for the top stories on bloomberg at this hour. The decision to ask two men to take leave were unrelated and no interim has been appointed in their place. Deutsche bank is studying the potential of britains exit from the european union. The company is weighing options that may include moving activities to germany. The bank is in an early stage scenario planning. No decisions have been made yet. The former thai Prime Minister has been granted bail. Prosecutors allege she was penalty in. She is denying charges of dereliction of duty. Mark equities are set to open in roughly 13 minutes time. Futures indicating that stocks will open higher today. Stay with us. Manus welcome back. Lets get to one of those exclusive interviews we do on bloomberg. First quarter earnings missed analyst estimates. According to our numbers. You are spending more on research. You said you see a slight rise in sales for this year but that is below the estimates. Should we be concerned that all is not what one would have hoped over at merck . First of all, i think that we have overdelivered against the estimates in terms of top line. We are growing sales by 15 . All of our business sectors are growing organically. Of course we also have some tail wind from positive developments as well as from acquisitions. Electronic materials is included for another full quarter as inquisitive growth. We slightly missed the the reasons here indeed somewhat higher are which we have announced as we are ramping up our strategic collaboration with pfizer. We have some Competitive Pressure on our biggest franchise and facing some less royalty pames, income. We have our quantitative guiding for 2015. We have a quite challenging year in 2015 and delivered a solid guidance. Manus are we going to see more deals with pfizer . Excuse me . Manus should we expect to see more deals similarly to the one you did with pfizer . Youre number four. Youre up 30 this year. Of course, the deal with pfizer is somewhat special because it is pretty farreaching. Our First Priority at the moment is actually to get traction on the deal and to ramp up our scope of activities. That means we have announced to entering into 2015 and into out of to programs there are five to six studies. This is our First Priority to get this going. We have already announced that we have recently together with pfizer entered into a phase 3 study for lung cancer. We have some work to do to realize this Ambitious Program for 2015. Of course we would be open to screen further opportunities for partnerships, but the First Priority clearly is now on the collaboration with pfizer and to make this work and to ramp this up as fast as possible. Manus marcus, lets see what the rest of the year brings in terms of these numbers. Thank you for your time this morning. Mark after last weeks bond rack up bloomberg we have gone from 65 basis points. Hovering around 65 or 75 basis point markets. A seismic move from where we were. The market has taken some comfort from that. Risk is still there. Manus the view from a number of different people at these levels in italy and spain, there is appetite at these levels. 2. 25 in the u. S. You begin to see the buyers. Is that what youre hearing . If yield start to go higher. Yes. If yields are going higher youll start seeing investors step back a little bit. That incremental yield story is still there. It is just a question of how fast it gow goes. For the time being, it is a question of positioning itself on high data, high yield. Perhaps some nonperipheral yields. Being driven by inflation and stimulus. If you look at the q ratio for equity markets today they are at their widest since the dot. Com bubble in 2009 and the peak of 1929. The underlying assets of each individual company. It makes you feel that it is possibly not sustainable over the longterm, but for the time being, yeah, carry on. Mark 7 55 in london. What is next . Manus we get through everything very quickly. Futures indicated higher. On the move is next. Mark have a look at our twitter handles. They are cool handles. What is your account . Well see you nice and early tomorrow. Jonathan good morning, and welcome. Moments away from the start of european trading. The nick a heading for a sevenyear high nick a heading for a sevenyear high. For a ficus varoufakis think they can get a deal. U. K. Consumer prices are expected for a Third Straight month. The data is due in 30 minutes. Vodafone reports revenue gain. There are a few of the things we will be watching. Futures markets really punching higher. That is futures up by 93 points. It is the dax euros story manus cranny knows so well. Here he is with your market open. Manus equity markets are taking their cue from the record breaking trend. We have japanese markets. Topics at a sevenyear high. The momentum might change. We have a little bit of data. We have Consumer Prices, but its down to the autos. 20 straight months of rising auto registrations