Transcripts For BLOOMBERG Countdown 20151019

Guy welcome to countdown. Anna welcome to mondays program. Guy will be spending a lot of china talking about xi jinping and his visit to london. At the moment, chinese gdp. Gdp at 6. 9 . That was enough to past on losses pass on losses in the asian equity markets, still in the negative territory. Guy it has been worse. 2009 was worse. The midst of the financial crisis. Its the shape of the curve that will unnerve people. One of the questions we are asking today, you can get in touch with us on twitter, what is the best way to measure chinese Economic Activity . Measures out there set up for a previous year. Guy things like electricity consumption and things like that, is that still the most accurate guide . How do you measure services and china . How does it work . Colleagues at Bloomberg Intelligence saying we need more data. We saw that the crash in the stock market, and some were suggesting services should have been weaker. Guy you can never have enough data. How asian markets are reacting. A very good morning to you guys from hong kong. Its just past 1 00 p. M. Here. You guys were talking about data. There is such a thing as data overload. One after the other, chinese gdp, so on and so forth. Initial reaction was pronounced. It quickly reversed. We have picked up since then. We are down about a quarter of a percent. You can compare the levels to pregdp data. A little bit better. That is down to the japanese session. Most of the weakness there, a broadbased decline in tokyo. In fact, if you strip out the japan effect, and lets have a look at the japan index. Its not as bad as the other gauge. Were looking at some of the big winners, oil and gas up 1 . , resources, so on and so forth, these are leading the declines, especially , all seeing, bhp losses. If you want to tie a narrative to this, you guys were talking about services. Biggest portion of the economic pie. We will talk more about this in a moment. Growth not the same sort of dynamic 10 years ago in the chinese economy. That is the story of cross sector groups. Individual indices, very next. Shanghai leading the gains, up 3 10 of 1 . Is up seven times in the last eight sessions. Days out ofe, last the last nine. Shares are up now 16 from lows in september, late august. Sentiment is improving a bit. ,e are seeing some bright spots with the exception of industrial production. I will leave it there. Back to you guys. Guy thank you very much. Joining us from hong kong. With the market reaction. We have the china gdp numbers. It is the slowest case since early 2009. Even if we got a bit of a boost from services. How concerned should we be about that relative weakness compared to the recent years . We put that question to guess after the data came out. Aschina is not quite important as export numbers would lead you to believe. The effect may be overstated. The point is that if the u. S. Economy continues to do well, and if europe continues to pick up, then things in the Global Economy probably arent quite as bad as some people make it out to be. Issue is they policy economic slowdown. One major concern is a lot of traditional growth measures have not been effective. Again, if you look at todays data, investments still remain weak. If you want to stabilize growth, investment is still the key. Are expecting more supporting measures coming on both the fiscal side and the policy side. 2025, china will double the level of towards 100 trillion u. S. Dollars. That will be double the level of the United States and more than the next four nations combined. When we work our way through this data, how easy is it to determine the real picture . Services are beginning to take a bigger chunk of the pie. What can we read into this . Good morning. You just summed it up there. We are getting a mixed picture on chinas economy now. On headline basis, a bit better than expected, grew faster than economists rotted wood, and the came after a 5 trillion u. S. Dollars stock market route. Its linked to the currency the valuation. When you look under the bonnet, you see weakness there, Manufacturing Sector week, industrial very weak, big Growth Drivers for chinas economy. They are the old Growth Drivers. Even though we are seeing a surprise in services and consumer low, the new model is not enough to offset the old model. That is why china is stuck in the slow lane relative to the past. Anna many economists have their own measures on how strong or weak the chinese growth story is. What does it tell you about how realistic the chinese growth number is that we get from the Chinese Government . There is almost a cottage clearing Economic Data from china these days. You mentioned earlier that xi jinping prefers to look at electricity consumption. As good as we have out of china. Even if its not on the money, and of course it is always quite close to the governments growth target no matter what, its least giving us a direction for the chinese economy is going. They are improving transparency as part of getting currency reserves out of the imf. Earlier,ou mentioning especially in the service area, a little better handle on what is happening there. There are questions around the veracity of Economic Data for sure. Anna thank you very much. One of the most uplifting things i read came from one of our theeagues who said that figures are not substantially exaggerated. Others do think it is substantially exaggerated. Guy breaking news related to what is happening with oil prices and the Saudi Arabian economy. Good morning. The worlds egg is exporter of oil actually having to delay biggest exporter of oil action having to delay payments because of oil price for this is the First Time Since 2009 that saudi arabia will not be paying some of its contractors. Renegotiateking to contracts and infrastructure contracts. Some contracts have yet to receive payments for six months. It is taking them six months to receive some of those payments. Thi this as the country is being put in a deficit for the First Time Since 2000 my. Over year to date, brent crude. 43 over thewn last 12 months. Why we are seeing saudi arabia, the worlds biggest exporter, downgrading its overall forecast in terms of payments to contractors. Back to you. Guy we will probably get this later the morning. What contractors are we talking about here . Theres a whole raft of companies in the u. K. And europe. They could all be affected by this. The could be a cash flow story here is well. Toa we will no doubt return this theme around oil and how saudi arabia is coping. Lets continue about china for the moment. Our next yes says wrote could be close to zero for a number of years. Great to see you. Official dataat is not substantially exaggerated. You think growth could be around zero. The headline gdp data for reference only, manufacturing data. Its amazing. They come out two weeks later, never revised, unlike any country anywhere else in the world. Number 6. 9 of the number they first thought of. Rail, freight, electricity production, bank lending, you wind up with chinese gdp at 3 , not 6. 9 . Its going down. Its heading south from there. Guy how do you measure services . That is a good question. That entertain the idea many of the data is manufactured and influenced by policy, they will be susceptible to that kind of influence. We have mere statistics with ,rade data, exports and so on so we try to think about the story on the server side. If it were true that the Service Sector were booming and china and consumer booming in china, i would look for imported consumer goods to be going up. Things like tourism, mercedes are going down in double digits year on year. Im not saying thats decisive about the growth of the sector, but i would think about that is one indicator at these. Anna some of our colleagues raising questions about the resilience of the Service Sector number that were getting an official data, saying we need more details, because he the selloff because of the selloff, that would be expected to have a negative impact on the value added. In terms of getting a handle on services, it seems these numbers dont help that much. No, indeed. This is the story, the official what you are missing is the growth and service side. These things take a lot longer than a month or two to achieve, to rebalance from rapidly industrializing economy to a Service Sector economy. It is not a matter of six years months, but a matter of 10 years or more. Were not seeing those measures. Anna thank you. Update out of asia, chinese story. What we watching for the rest of the week . We are not done with china get. Tomorrow, the chinese president arrives in the u. K. For his first state visit. Wednesday, corporate news, set tosuisse new ceo unveil plans for this was bank. We know hes going to make some changes. What will they look like . Thursday, what do we get . Anna ecb Interest Rates decision. Thoughtsear thir further or is it too early . Guy looking forward to see that, dw spillover effect. ,arry summers, later today around 10 00 a. M. U. K. Time joining us. P. M. , john00 williams, San Francisco fed president. Perhaps set to take the headlines. Its going to be interesting. Were going to go back to the banking sector. Deutsche bank, ceo embarking on the they guest management reorganization of the banking giant in more than a decade. What does that mean . We will find out when we come back. Anna welcome back. Youre watching countdown. Here are the stories you need to know. Gdp rose ahead of estimates, 6. 9 . The slowest quarterly expansion since 2009. Anna the u. K. Rolling out the red carpet for xi jinping as he makes his first state visit to britain. Lunch with Queen Elisabeth at Buckingham Palace before talking trade and investment with david cameron. Chinese Officials Say the value of deals that xi jinping will announce is huge. Guy good to be specific. A typhoon hit the philippines. A 14yearold boy died when his family home collapse. Thousands of Airline Passengers stranded, schools forced to close. Anna Deutsche Bank is clearing the decks under the new ceo. Seen her managers senior managers will leave or be moved to other divisions. There are plans to cut costs. Guy lets get more on that story. We have been tracking some of these big exit. Who is out . Some big heads are being rolled of the moment. People who have been at the bank for 20 years, their entire career, now moving towards the exit. Digging into what is happening in terms of breaking up the Investment Banking unit, the. Ohead of Corporate Banking he has been there since 1998, joined as a credit trader. He resigns today. Meanwhile, head of assets and Oil Management as well. He too will be moving on. The board member overseeing Transaction Banking moves to the exit. The board member for compliance. Criticized,avily the fine they face, 2. 5 billion, potentially manipulation of Interest Rates. Criticized by the regulator in germany. Big shakeup. The 19 member board Group Executive committee is going to be dismembered, and 10 committees also. Anna who is on the way out . Some new names. Trying to promote his own men, people potentially coming on, and women. Head of equities now taking on head of trading in general. His unit has been up 7 over the past year. Clearly doing a strong job. Meanwhile, jeff owen, cohead of Corporate Banking, already coheading over all with colin. He takes the helm when it comes to the Investment Banking area, the new, reformed Investment Bank trading area. He will also be looking over transaction ranking. Prince to head of Asset Management. Interestingly, two women put on the board. And chiefmpliance operating officer. She comes to coo role at the end of the year. Guy clearly all of this has. Ome Historical Context it is happening after we have record finess, from regulators, writedowns, all kinds of aspects that have caused problems for management of the banking unit. Put this in context of how all this relates to that. Road we haverocky seen, in particular this year. Just look at it. Fine,23, 2. 5 million u. K. Regulators being settled with. Ever since then, a difficult his for the man who Investment Banking unit they unveiled a new strategy, they are selling off deutsche postbank. By may, both of them struggling to gain approval at the annual general meeting. In had to stepping down back june, july is when we see john cryan take the helm. Writedowns in excess of 5 billion. The worst performance for the banking years because of this major writedown. At thison is look chart. It sums everything up. This is what is happening to profitability at Investment Banks. This is what is hurting the entire Investment Banking area. Return on equity for 45 top crashing by half. This is a new normal this is a new area. Tougher regulations, more difficult of a profits. Youve got Credit Suisse underling their new strategy on wednesday. Deutsche bank already having to change up the bank and think about how they make it profitable going for it. Guy more on that story a little bit later at a frankfurt. Anna stay with bloomberg. Banking coverage continues with jp morgan jamie dimon. Colleagues in the u. S. Put out a question on twitter asking what should be asked of jamie dimon. Get in touch with us. Guy lets get back to our big stories this morning. For anrg set down exclusive conversation with the finished economy minister. When it comes to the refugee crisis, the eu and turkey need to help more than ever. Had a. Ink we have where opportunities have been missed in the euturkey relationship. Time, we needin each other more than ever. That it is time to revitalize the euturkey relationship. To solve atrying migrant crisis together. New economic and business relations. Anna that was the finished economy minister. Lets go back to the codirector of southern consulting. We have this comment that caroline was taking from the saudis coming delaying payments to contractors on oil slumps. Lets talk about how stretch the saudi budget is by the weakness in the oil price. It is stretched in two directions. Oil prices falling about by half, the biggest change of revenue for the saudi fiscal position. On the other side, outgoings remain large, even in consideration of the large amount of oil revenues coming in. Cohort of large young people who require paying. That liability remains on the books. They are being squeezed in a number of respects. With theen reflected behavior of the sovereign wealth fund. Maybe these delayed payments are part of that. Guy we will come back to you. Thank you very much. Ountdown, then we are starting to get some breaking news coming through. Do we have the data yet . Caroline we are seeing an improved outlook. Theyre beating analyst expectations coming in with four. 6 like for like a growth for their Third Quarter. The market has been expecting 3 . Very much in line for its 2015 forecast which is growth at 4 to 5 for the year. Doingbaby food sales are particularly well. They say they see a moderate rise in main raw materials. Nearly, the cost pressure still building. Nevertheless, bringing in 5. 6 9 billionof euros. They seem to be the chinese consumers are ordering more foreignmade instant formula. A big area of growth has also been the infantry snow sales, up 11 , beating analysts estimates of a 7. 5 gain. They are also seeing a doubledigit growth in china, a bit of a surprise after nestle downgraded its forecast on friday, seeing the share fall on the back of that. The concern was merely china. Anchor metro out with numbers as well. It sees a good christmas business. The center is santa is already in gear. Anchor here are the stories you need to know this morning. Chinas Services Sector standing out. The slowest quarterly expansion. Companies working on Infrastructure Projects have been waiting six month or more payments. The government seeks reserve cash. The First Time Since 2009. Anchor tickets for the new star started to go on sale today, two months before the movie hits u. S. Theaters. The film is expected to be one of the top grossing pictures of the year. Anchor Deutsche Banks coceo heading the biggest shakeup of the year. Walk us through what we are seeing here. Read between the lines. What is happening . Seeing at there same time an overhaul of the management structure, an overhaul of the operating units. Obviously, that will be accompanied by some departures from various highranking bankers at Deutsche Bank. What does this tell us about what we could be expecting in terms of strategy . We have to wait for the details in 10 days time. Some analysts are already saying like klein is making good. They may well be trimming it back. Fan, who is one of the architects, is leaving the business. That is what people are reading out of it. Anchor tell us your interpretation as for reasons why people are leaving and others are moving up. What are they telling you . Nicholas it is a question also of the bank being taken in a different Strategic Direction than these guys would have planned. Managemente previous did suffer their reputation did suffer because there were legal problems at Deutsche Bank. What jumps out at me is the radical changes to the operating units. I think that is going to be pushing several of these guys to say, welcome a i dont agree with the direction this is taken and i want to leave. You have the Wealth Management union moved over to Wealth Management banking. The cohead of the Investment Banking is the head of the market business. Naming garth ritchie, the head that heies, is a sign wants to build on that strength. Is deutsche a by extension, what are we seeing here . Are we giving up . Are we not giving up . Are we reinforcing the road we are going on here . Nicholas that is a good question. The answer is likely yes. I think they will stick it out. A large part of their trading the question is do they really want to go to to toe t go to toe to toe . It is really a question of acknowledging that they are still committed to this business about they want to trim their focus and deal with less clients or so and make sure those clients are profitable and not get into trouble or take up too much capital on their Balance Sheet. But. S, there will be lots more in different areas. Anchor thank you very much. Put it intos context and bring in our guest for the next hour. Lets talk about these european banks. We have changes at Deutsche Bank under the new coceo team. And a lot of emphasis on whether europe on where european banks are right now compared to american banks. Moves in Deutsche Banking concepts. Guest they need to understand all the derivatives they need for banks. Most is lets make the Balance Sheet light. They are an intermediary lending money. They are an inch or medium party. They are an intermedium party. There is an opportunity for others acquiring those loans and other things involved in them. Squeeze, whodity is going to do these wonderful traits for the bond managers . This is one of the problems youve got. Anchor we hear about the u. S. Treasury market. Market makers leaving. Guest you are individually responsible for everything. It is breathtaking what is going on. If you are running a bond if you are a bond trader, your going to take that you are going to take that level of risk. Is, if they are unloading all of these things that are riskier, where does that leave them . Does that leave the more you totallylike . Does thatmore leave them more utilitylike . Everyone of them is going to chase every single rich person in the world . Good luck. It is not what to happen. It is not realistic. The entity itself changes. That is the interesting aspect of what is going on. Is interesting thing is defined by the regular. Thats regulator. By the regulator. Anchor how we hit a High Water Mark in that argument . Regulators are starting to soften the line. Is this as bad as it gets or does a get were so . Guest i think the u. K. Has begun to work out that you cant keep doing this. Between 1985 and 1995 how that felt. Theyre they are a mortgage bank. And what do they lend ultimately . Houses. It is a big a bit scary. Unloading, it is the liquidity that this is generating that is really this gary part. When people want really scary part. People choose to liquidate, where . Really the problem. Anchor looks like this could go down a brick said. We want to pick that up with some other sounds for you this morning. Francine started by asking him about the risks of a u. K. Exit from the eu. Multinational company doing business across 35 countries in europe, i would have to say that it is really important that britain stay in the eu. However, we are very committed to doing business in the u. K. This is a great market for us, one of our biggest markets. It is our biggest market in europe. Placee continues to be a that we believe is going to be a lot of where the future of coffee gets made. If you walk around london, anywhere around london, it is market inompetitive the world. The most competitive espresso market in the world. We think that is a good thing. But being the center of your competition is really important to be innovative. Francine if this country decides to leave, how do you view that . Do you start thinking about it now . Dont think it impacts us at starbucks in terms of our headquarters. Multinational company doing business across a lot of borders in europe. It is important for britain to stay part of the eu. Coming up next, as the u. K. Prepares to host chinas president for his first state visit to britain, we look at the thorny issue of sharing scientific research. Anna welcome back to countdown. Grew little economy better than expected. The slowest quarterly expansion since 2009. As plans to cut costs, will abolish its 19 member committee. Sellers take it vantage of a housing shortage. Average values increased 1. 6 in september. Properties coming to the market has fallen within 16 in the last year. Anna lets look at the top stories. Lets pick up on the property seen, but not in this city. Lets go to paris. Interesting story. And a surprising stories well in that a number of big investors are buying Apple Properties and they are fixing them up and planning to make money out of it in a low Interest Rate environment, trying to find anyway to make a yield. Guy compare and contrast. The end of the piece has a nice little line about rents. The two sides are in some way comparable outside of the city center, designed for the Financial Sector. Yet the numbers make quite interesting reading. Tim this is exactly the fact i was looking for. 8 euros per square meter the comparison is very apt. Anna Developers Think they can make up for it with the yields, i suppose come on their list. 10 yeah. Thinking itey are will improve. The French Economy is still growing, 1. 1 this year. So its not terrible. Anna some of them are betting on a boost from qe. Peter im thinking lots of people are having too much money and they are leveraging everything. You dont need jtwo finance you dont need two Financial Centers in europe. E funds by brexit . E do we have a peter there is a gamble. I think it is also emblematic of too much capital running around trying to find a home. Guy yields have crashed. Yields are on the floor. You wonder where they could peter you cant make money out of any of these things. And now youre getting into fantasyland again. Weve got no inflation guard. There is only asset price inflation. Guy the french are not exactly in love with the finance sector, they . Peter no. [laughter] of, whenhere a sense you look at where it is going and its future, is there ever going to be a french finance sector on the kind of scale you an see in london if you have government that isnt exactly a level of the finance sector and continues to blame the finance sector for what we are still going through in europe . Tim it is hard to imagine that. A french government is supportive a Financial Sector as the city of london. Peter it is just a pool of people. Youve got the goal in london and he got the pull of all sorts of things. But it can go a. Look at what is going elsewhere. Shipping is moving to asia. It can happen. You cant be toos too naive to think things can change. More the european economy turned to get on the service size side, the more inclined they might be into this in the market of services, which has remained elusive. Peter yes. Londons advantage will remain the geography. It just was on that basis. That is a 24hour trading route. Lucky us. Guy paris is not significantly different in terms of the time zones. Peter no. I think youve got the challenge. Paris to pieces, but i dont think it will rival london on the financial side. Anna thank you very much. Jinping arriving in london like today. His first state visit to the u. K. Bloomberg takes a look at the preparations for his visit. What the uks hoping to get out of it. Lavishr some hospitality. Chinas leader will done with the queen at Buckingham Palace, address the houses of parliament, and even take a ride in a royal carriage. The fivestar treatment is aimed at making britain chinas leading trade partner in europe. China currently invests 25 billion pounds in the u. K. Britain wants that to hit 100 billion by 2025. At the top of their list is a 2 billion pound investment in the Hinkley Point Nuclear Power plant. Britain is also offering nearly 12 million 12 billion pounds to the highest the highspeed rail scheme. Chinese also vying for their investments in coventry and london. Could be the first overseas Financial Center to open a market for chinese sovereign dent debt. Both sides are hailing this as a golden era in sino british ties. One of the visits will be to Imperial College in london. He will be there on wednesday. Are you a little nervous . Yes very heavy. This morning, when i came along to see all the flags, the chinese flags in the british legs can my think it is a great time. I am looking forward to it. Anna what are you hoping to get out of his visit . What increased ties or what new corporations are you aiming for . Is he going to interact with some of your robots . Guest the Imperial College is a Global University on working robotics, Health Care Robotics in particular. The eight great technologies eight Great Colleges on the technology. Exchange, collaboration, science, many fronts. Fear that many people have when they think about the chinese and their involvement in the u. K. Economy is security and the security of intellectual property. You deal with this on a daily basis. You work with the chinese on a daily basis. How concerned should we be . How concerned are you . Guest i dont think it is a major concern. Chinese Property Protection is getting more mature and more mainstream. I have been collaborating with many chinese and disease. Chinese entities. Guy can you understand the concern . Can see the concern. I can see the isolated incidents happening. But overall, it is moving towards a healthy situation. Us about the specifics on show. Personalized medicine, medical robots, this is an area that you work in. How significant are the things we are seeing in this field . Guess medicine is increasingly moving towards precision, Precision Medicine and precision surgeries. You cant do well with your bare hands. That. Ed a robot to do guy when you collaborate, when you work with the chinese, when you work with other universities, who brings what to the table . How does the relationship actually work . Guest u. K. , if you see what is really inspiring, it is really creativity, science innovation. D is a new concepts. New ideas, new concepts. , in robotics, you need precision and engineering and embedded electronics and other things. A lot of the Actual Development derives in making that intersystem. Guy all the stuff that gets built and that gets built in china. Anna so is it important that both parties bring ip, intellectual property to put it risk . Guest very much so. I always like to say we are living to see a very interacted interconnected world. You need synergy and unique collaboration. Guy is the halflife of technology accelerating because of this . This in isolation now what would we be if we do this in collaboration . How much more acceleration doing get out of the collaboration . Guest you bring the strengths from both parties. Just china and the u. K. , but also the u. S. And others. Each country brings their own strengths. Economicow i see collaboration and also commercialization in health care in terms of deployment. Anna thank you for joining us. Next, we are going to look at the Service Sector. A big boost in the Service Sector is helping out gdp. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. Gdp growths services grows faster than expected. Anna junk wire set down the biggest Asset Management renegotiation at the giant in more than a decade. This is a Multinational Company doing business across borders. We think it is important that britain stay in the eu. If the ceol find out when he joins us later this hour. This is the building in london. Welcome to countdown. I am guy johnson. Anna welcome to the second hour of the program. We have been obsessed by china. Some of that will continue into the second. We had that slightly stronger than expected gdp number from china. For the quarter as opposed to 6. 8 which is the estimate we have had previously and the weakest in the headline since 2009. Guy we will be spending a lot of time talking about china as xi jinping arrives in the u. K. China will play a very big role in the new cycle. Equities are going to open a little bit later on, this is the story at the moment. Theyre pointing to a negative open. It looks like we are going to open flat at this stage in europe. This is the number here that you need to be focusing on. Our bloomberg question, what is the best way to measure chinese Economic Activity . We have had a lot of conversations recently about how to realistic the gdp number is and how it reflects the new chinese economy as opposed to the old chinese economy. Europe looks like it will open flat. What has been happening out in asia . Lets find out from david ingles. Reporter it is a very interesting twitter question of the day. Im sure you will discuss this a bit more later on. Economy will naturally give you lesser output than one that is bank driven. Some of the data points that when you have services making up a bigger portion of the Overall Economic pie. We down about 0. 4 . It is not exactly a rush to the exits the real a lot of what youre seeing is down to the losses we are seeing over in japan. If you take japan out of the , the japan index, you can see the weakness across the Consumer Services company. I want to get into the details. Asia is looking like this. We are looking a little bit mixed right now. Slightly more red compared to about an hour or so back. You have japan, south korea and australia closing up the monday session. About an hour left on the shanghai composite which has turned red. We have seen a mini rally for the shanghai composite. Go, let mey before i show you what is happening. Were mostly flat across the asian effects. Look at the aussie dollar and the kiwi dollar, the south korean won and so forth. We are basically trading sideways against the u. S. Dollar. Anna thank you. Guy caroline has some details coming out of japan. We have some breaking news out of corporate japan, to bring companies becoming private two companies becoming private. They are both coming at the top end of the range. Is setting thek ipo price at ¥1450. And they are also seeing the Insurance Unit being sold offer ¥2200 per share. These are both coming at the higher end of the range and these units are being sold off by japans post holdings, banking and Insurance Units. The will racemic hundred ¥43 raise ¥443they will billion. They are selling off their banking and Insurance Units for about 6. 25 billion dollars. Anna lets get more reaction to chinas gdp, the slowest pace since 2009 even if it was ahead of estimates. How concerned about that should we be . Fact, lets go straight over to asia. What is your take on the number . The Services Sector proving to be quite resilient in the face of the selloff in the stock market. We need more details to work out how that adds up. That was the big surprise today that it held up the way that it did even after the fight trillions stock market route 5 trillion stock market route. As well holding up not too badly which is part of chinas growth transformational plan to shift the economy away from the old and heavy industries. Even with the new Growth Drivers performing relatively ok china has a long way to go to fill the gap inc. The old economy. Left by thehe gap old economy. When you look at this and try to understand this and think about what is happening in china, how useful is this number . What does it tell us about what is happening here . It is a fair question. Skepticism a run gdp and the government sets a growth target and typically no matter what is happening to the underlying economy, the growth figure comes in where politicians want it to be. Those questions will again be asked after this number and we have seen the services do very well despite the fact that it had such a huge tumble. Going forward, what china does need and what economists say that it needs is more highfrequency numbers on consumption to give people a better handle on what is going on. I think the view is that china is not perfect but improving all the time. They are taking steps to make it as part of aent reserve currency by the imf. In the near term, 20 of questions will linger. There are some signals that the data will improve. Anna thank you. Guy we have changes at Deutsche Bank. The coceo is undertaking a Major Management shakeup as he scales back the trading empire established under his processor. Caroline hyde has more. Some big names walking out the door. Caroline i want to focus on four of them. Who arethese people walking toward the exit as soon as today have been at the bank for 20 years. Lets focus on how the company is reorient taking reorient tating itself. How do you make it more profitable . You split it in two and say goodbye to the cohead. Colin fan will be leaving. Michele fasiola will also be leaving. Management will be focused on by a new person. Stefan krause, a board member, a man who was once upon a time the cfo, is also to leave. A man and charge of compliance on the board. In terms very abused of the german regulators saying they did not do enough to crack in on the manipulation that was alleged to have occurred. For key members are leaving as the Investment Banking unit is split in two. Anna who is on the way up . Who is filling their shoes . Caroline some new people are taking the helm and it is interesting that we are going to see four new units to focus on four key clients. He is trying to go big corporate. Urwin coming to cohead the corporate financing unit. Ritchie was head of equities, and will now become head of trading in general. This is to satisfy the other key client. Trading of equities and bonds. This is the man who has done well with trading of equities. Meanwhile, asset managers. Another key client. The head of Asset Management becomes quintin prince. We have a World Management unit being set up, and you have a nude digital new digital bank. There are other key players. Two women entering. Kim hammonds, who will be the chief operating officer. I want to focus on why this is happening. Why the focus on four key clients . Profitability has been eroded. Across the board you see the ies, now downit by 6 in general. We see how much it has fallen since the financial crisis. This is my Deutsche Bank has to reorient itself. Guy lets get more on that, go to frankfurt with nicholas standing by. Walk us through what you can tell us about this. How can we extrapolate into the strand strategy announcement we will get in a few days time. The key is the midlevel guys, colin fan and michele, tells us how cryan wants to put his stamp on the company. Fan is more of a debt trading guy. That is Deutsche Banks largest source of revenue but has been difficult over the last couple years. The signal he is given to some analysts is that, this looks like debt trading will play less of an Important Role than it has in the past. That equities and the other part of the bank will be pushed to the fore a bit more. And the longtime confidant of he isthe former coceo, leaving. Theyre moving half of his empire, the Wealth Management business, to the consumer bank. That is a model which is more similar of ubs. If you are the boss of a combined unit, you dont want to lose half of your business. That,ld give us a sign how cryan wants to reshape the business and how he is targeting them. Anna bloombergs nicholas comfort joining us there. Guy we have talked about the banks a little bit and the property sector. We havent talked about what we should be doing with our money. We have come through a reasonably volatile. Volatile. Er e period into the summer. Go the shakeup happened yet happened . It hasnt. Most of the quality held up. It was fed by the same things that have been weakening anyway. Touched. Idnt get all those good things that we have been focusing on. So it was an absolutely amazing event that what drove the ftse from seven to six was entirely what caused it to be not so strong in the previous two bang years so they carried on just plummeting and the rest of the market held up quite well. A little witness toward the end of that selloff but that was really it. You have seen corrected behavior but underneath it not everything got any cheaper and that is the problem that some managers face now. Conundrum, ite looks optically cheaper with things like the ftse and the dax. It didnt really feel that way and there is the anomaly. You continuously have this growth versus value thing. That means generally some kind of compounding element and they keep getting more expensive. So the dividend payers in the dividend growers keep moving up and on and the others are being left behind. If there about stimulant Economic Growth how does that work . How far do you want to stretch the elastic band . The anomaly is energy versus health care. Anything other than the fact the market has been made cheaper. Anna are you looking for dividends . Youre not. We were talking about how we had seen the biggest expense and u. S. Stock dividends but now that is coming down and they are growing in just 5 . And the Share Buyback is fading away because margins are under pressure. Youve only had the six times in 30 years. Each time the margins peak, recession follows and so do stock prices and your there now. Costs andising headline level growth is not that stunning and more importantly, what you find interesting is the whole come petition between the sectors is relatively cheap and the growth sectors are very expensive so that is why i say that everything seems pretty well priced. Into your point guy, why is there lots of noise . Emerging markets are down in most cases and develop markets are negative just, positive just, and that is because of this noise. Into qe, what have we succeeded in doing . Keeping it afloat. Anna great to have your thoughts. The investment director at citifinancial. Guy it is 7 16 in london and 817 in frankfurt. If youre just ticking up let us tell you about the stories that you need to know about. Anna the chinese economy expanding quicker than expected. Gdp rose slightly ahead of estimates. It is the slowest expansion since the three months of 2009. Nikkei is rolling out the red carpet. Xi jinping will lunch with Queen Elizabeth before talking investments with david cameron. Some say that the value of the deals she will announce huge is a number we should be thinking about. A finish minister spoke to bloomberg in an exclusive interview. Believe in the coming days and weeks we should work hard to to mediate thent also to in turkey and seriously work on rebuilding the eu, turkey relationship. Guy i cannot believe i will read the next bit. For the first time in history, the Rugby World Cup finalists are all from the southern hemisphere. Anna deep breath. Guy this was a great game. Sensational. They were all sensational areas france suffering a crushing feet and they now go on to play south africa. It will face either australia or argentina. On friday, before this game i blackto the former all head coach about the strengths and weaknesses of the team. He also talked about who he expects he would like to see in the final. I think australia in the final. If i had to pick right now. It will be huge. The australians have improved a lot. They have played each other twice this year. Won one. S have one each. What are the key points . The scrim will be key. They dominate in the scrum. They dominated everybody else and england. There build up games, they have not dominated the scrum. That could be a factor. The scrum is very psychological. If you get dominance there, you grow as a team. The defense has been excellent. Theyve defended the game well. They tried to play a pair game and it was numerical. They attack well against england. So, they will get better. They have gone through a poror round where they need a win. You know that when you need a win, you are not playing right mentally. Now they are in the finals and they will play well. Who knows in the final . By three. Guy it will be a good game. It will be an excellent game if that is the game. Someone who is not taking part in this years cup is recovering from an acl injury. All blacks flyer. He spoke to me that coming into this he had a different list for who he would like to see and the finals but i think he ultimately agrees with graham. I am a bit biased but i would love to see a new Zealand Australia final, that would be pretty cool. Blacksaying that and all english final would be pretty cool especially with the host nation being here in england but that hasnt panned out i think. Rugby, this is some great to be played over the coming weeks. Guy that hasnt panned out. No kidding. Companies working on Infrastructure Projects have been waiting six months or more for payment as the government seeks to preserve cash. Lets bring in Matthew Martin who is in dubai. The saudires is government taking in response to the oil slump. Is this a material departure from tactics previously employed . What we are seeing is that the government is coming in from a position of strength. Highhave low debt and savings levels with a realization that the oil price hang around this level for a long time and they are starting to recognize that now is the time to start moderating spending. Now we will see payments to government detractors being delayed. We starting to see have already reported on measures being taken around not rewarding new contracts. We have seen measures around limiting spending on Government Services as well. Were starting to see some very significant measures being taken to limit spending as we run up the end of this year and the interesting thing to watch will be 2016, and does the government carry on with the same attitude toward spending in 2016 or does it start trying to spend again to stimulate the economy more. It seems like we are now into a period of spending being moderated quite severely. Guy if i am a company owed money by the saudi government, how long previously did i have to wait and how long now do i have to be waiting . What is the metric in terms of what that number is . Is a great question and there is no hard and fast rule. Typically Payment Terms can be one to two months, but the middle east has never had a particularly great reputation. Now we are hearing people wait about complaining complaining about waiting six months. Some are waiting even longer. We have heard people saying they have been waiting sometimes up to 12 months. When you have to wait that long it starts to cause cash flow issues with the companies as they start to wait for this money to come in for work that has a ready been completed. We are also seeing the government trying to renegotiate prices that had previously been agreed. This will start to put up strain to the private sector economy. That will be interesting to watch as time goes on. Anna thank you for joining us. Guy lets go from oil to yogurt. The worlds biggest yogurt maker has reported sales. They Beat Estimates thanks to china where the has been a high demand for a foreignmade formula. John talks, the head john cox joins us now from zurich. How does this compare to what we heard from nestle . Guest after nestles disappointing figures on friday, this is actually a very positive news. Consensus was expecting somewhere close to 4 organic sales growth and they came in at 4. 6 so a decent result in that comes on the background as you mentioned against poor figures from nestle on friday. Anythings this tell us about the story on the ground or is this way too specific around dano to give us a Bigger Picture . Guest it is a very complex environment in china for most of the Companies Operating there. What youre seeing specifically is a whole boom in foreign infant formula with the chinese coming to europe and buying cans of infant formula taking it back to china and selling it on various internet platforms there locally because of the concerns that the local chinese have with locally made products after a few contamination scares. This is something very specific because it has all the premium european brands and benefits more than some of the other players such as johnson or nestle. We saw 11 growth in their infant formula business during the Third Quarter driven by buyers in europe. Guy i have 20 seconds left. That is something that could be turned up almost almost overnight. How worried should i be if i am a danon investor . Guest theyre working with authorities right now. It is hedging bets. Guy got to wrap it up. Nice to see you. I just had a horrible nightmare. My companys entire network went down, and i was home in bed, unaware. But that would never happen. Comcast business monitors my Companys Network 24 hours a day and calls and emails me if something, like this scary storm, takes it offline. So i can rest easy. What. You dont have a desk bed . Dont be left in the dark. Get proactive alerts 24 7. Comcast business. Built for business. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Here are the stories that you need to know. Anna the chinese economy expanded quicker than expected with the Service Sector standing out. Ahead ofslightly estimates but that is the slowest quarterly expansion since the first three months of 2009. Guy Deutsche Bank with the new coceo who helped build the Securities Unit and reorganize the Money Management division will leave or be moved to other divisions. Anna tickets for the new Star Wars Film go on sale today, two months before they hit u. S. Theaters. The force awakens is the first in the series since disney acquired lucasfilm for 4 billion. It is expected to be the top grossing film of the year. Guy will not be buying all of the tickets. Guy some breaking news in fifa, be,secutors manning a pro there has been concerns of inappropriate payments. The regulators are beginning to get more information on what is happening here with measures related to possible corruption. Lets get some details on how the market is performing right now. Slightly better than estimated chinese growth data and that took the edge off of some of the declines. David inglis with the latest. It is 2 30 in the afternoon here in hong kong. We have about one hour and a half left in hong kong. Map, iting at this would be hard to make out one consistent direction. The overall benchmark is lower by about 0. 4 and that is down to what happened on the nikkei 225. 1 . Re down about 0. 9 of 0. 9 . Are down about we did close toward session lows. This is roughly 160 point decline right now. Consideringry bad that thursday and friday last week, the index gained 1 so we are seeing a little bit of a pullback from some of those highs we had last week. It is not exactly a rush to the exit with no reason to panic. Let me break this apart as far as the sector groups are concerned. You take japan out of the equation and things are looking ok. Flat but not down 0. 4 . The miners are reacting quite negatively. This investment into mining stocks. Consumer services with the drop we are seeing right now. You have the goods makers and of the auto stocks are in this group as well. We are flat across that. ,ust to add to the conversation the chinese economic pie. You release and data on which parts of the economy grew the fastest. 4 8. 4 . A 50 of the pie. Then you add that piece up i and it will just get bigger which is where they want the economy. Elsewhere, there is nothing much else to mention. Currencies are mostly flat. Trading sideways. I will leave it there. Anna david ingles in hong kong. Guy a quick look at where we think european equities are going to open. A look at the bloomberg terminal fair value calculation. A slightly negative open here in europe is what we are predicting. Down by 0. 2 . Lets see as the week progresses how things develop. Anna london gets its newest skyscraper today. The leaden Hall Building opens for business. The 46story tower which is 225 meters high is expected to house thousand workers. Of oneed now by the ceo of the Developers Behind the iconic structure. Even beforey iconic anyone has taken their seats behind the desk. What is it like working on a Land Mark Project guest it is been a lot of fun. If i look back that is the main thing. When we first started in 2010, but the market were not in our thection and as you say, buildings gradually became more and more popular both with the general public. How did you feel when that did you close your eyes and hope . Guest it felt a boulder decision then then maybe it does now. We started to feel that there was stability and we remain a longterm believer in london. Felt there were not many other people who had the Balance Sheet strengths at that time. It should work out well. Anna it comes with a great architectural pedigree. And the early days when people were looking at the drawings what the walkietalkie would do to the london skyline, those are not names perhaps filled with a great deal of love at the time. Do you think people are like this now . Guest our sense is that they do. We have had a huge amount of social media comment. Anna you have fallen in life line. Officially it is the lead in Hall Building. Did you ever think about just calling it the cheese grater building . Guest i think that would have been a bit radical. Guy you talked about the decision to build it. Where are we with the supply demand story . You are a long way through filling this. Guest this is a great position to be. Way better than where we expected. If you look at the numbers, it is still true that supply in london and the city has remained very low. That will pick up and it is expected to pick up and 2016 and 2018. There is a. Eight period when we expect rents to pick up. There was suppressed demand. A lot of people took the decision not to move in their naughties. We have a lot of people wanting to move and not that much space. Anna lets talk about something that perhaps you have been focused on. There is a lot of political noise about brexit. How do you think this will pan out . It does feel that there will be a period of uncertainty around this. If i take a step or two steps back, the feeling among businesses that would there would potentially be a big period up uncertainty, whether that was prescotland, uncertainty of what the outcome if you put that in perspective it feels like a. Of relative stability. It from our own. If you put it feels like the u. K. Is in a better position. There will be some uncertainty about brexit. Guy which side of the fence you sit on . Guest my own preference would be for a good negotiation. Guy what is that mean . Guest getting some proper concessions and being articulate about what they are. Be i do think that we would better off overall in the eu. Anna what difference is it make to a business such as yours . You and the European Headquarters to have various businesses to the site to locate themselves within the u. K. . Is that the business driver . Guest i would say that we have two bank two big businesses. If i talked to the retailers, there is a degree of ambivalence because there is a more up domestic orientation. London, there is a strong sense among some of our occupiers that the u. K. Is better off because as you say that european connectivity, but a lot of these businesses are global businesses. Toa you must talk a lot insurers. Guest we do. We are going to see a Business Community that doesnt have one single voice or one degree of you name it of a unanimity. Have an ecb meeting on thursday and expectations we will hear more about qe coming be, how meaningful will that in terms of the cost of capital and what yields are likely to do . Give us your sense. Guest i have been a believer of the lower for longer school for some time and it worked out. Look at theif you likely path of u. K. Interest rates, by historic standards they will be low. Carney and his friends have to think carefully that if they soon,ates too sewn inflation kicks in. So even if you see some interest e rises next year anna some are pointing to wages and saying wages are picking up and that could drive inflation. Constructionr the sector picked up on that for many others. Periodthat was after a of extraordinary or falling prices. It is not as though we suffered. We have just seen a degree of normalization. Rates are rising, but another way to think of it is we have only ever seen real wages rise over the course of the last year. It is not like we are seven or eight years into a recovery for the man on the street. Parcel re part and nevertheless associated with it. When you think of the chinese development, what do you think of their opportunities . And the u. K. Infrastructure story, how do you think your way around that . Guest the u. K. And london in particular has been a beneficiary of huge, internationally inflated capital. China and our sector has been a part. That has been overall very good for cost for capital and the rate in which investment around the u. K. Has started to get going. It would be part of that process. In property, they are here to stay and that is a good thing when they are larger or smaller. Good luck with the cheese grater. The emea president has been telling bloomberg that nobody wants to pay taxes more than us. Anna welcome back. Here are the stories you need to know. Guy chinese economy expending quicker than expected for the Third Quarter with gdp rising slightly ahead of estimates. Lowest quarterly expansion since the first three months of 2009. Anna saudi arabia is delaying payments to government contractors. Companies working on and for structure projects have been waiting six months or more for payments as the government seeks to present cash as the slump in oil prices has pushed the company into a deficit. Guy homes in london of surged by 10,000 pounds this month to take advantage of a shortage. Average values increased 1. 6 . According to the house and the number coming into the market have fallen more than 16 in the past year. Anna lets bring you an exclusive interview now. Starbucks european president. About thed by asking risk of an exit from the european union. Guest a Multinational Company doing business in europe it is important to say that britain stay in the eu. , we are very committed to doing business in the u. K. This is a great market for us and is our biggest market in europe. To be a placees that we believe will be again a lot of for the future of coffee gets made. I said earlier that if you walk around london, it the most competitive Coffee Market anywhere in the world. We think thats a good thing. At the center of your competition is important to being innovative. Do you need to change headquarters . Do you start thinking about it now . Guest i dont think it impacts us at starbucks in terms of our headquarters. As a Multinational Company doing business across lots of borders in europe, we think it is important that britain stay in the eu. Friend also fran also asked him about the tax issue. Guest you remember that the root cause of that was profitability in the market. I find it hard easy to understand why customers with think we were not making money when they walk by and there are cues out the door. But that was the root cause. We came to britain about 15 years ago and it is hard for me to admit, but we made some mistakes early on in that we took on expensive real estate. By member a store very vividly on Oxford Street that was remarkably expensive. 850,000 pounds just to get the keys to open the door. In the Coffee Business when you sell a couple of coffee for 2. 5 pounds, you have to sell a lot of coffee to pay the rent. And there are people who work in the store and a few other costs. We quickly realized that we needed to make a change in the operating model, to get back to profitability, because we had just never been profitable and that was the cause. In the last three years we have changed that dramatically. Francine you pay more taxes now than three years ago . Guest there is nobody who wants to pay taxes more than me. That is about measuring the success of the business. If you look at it from last year, you will see that this is this is profitable. When we file our statutory counts youll will see that we are maintaining that momentum. To me that feels good. And is what we needed to do we needed to get the business of sustainable profitability. Francine on the tax issue there has been an investigation. Has that force you to change the way you pay taxes . Guest i would not comment or speculate on the eu investigation because that is ongoing. But what i would say is that we are and have been supportive of all the reforms that are being suggested. It is critical to bringing consistency and confidence in the International Tax system. Is,other thing i would say our global effective tax rate is 33 . We are paying taxes all across the world. We comply with all the laws and the rules. All the guidelines. Were supportive of what the oecd is trying to do. Anna more from that exclusive interview throughout the morning. Guy the news on vw. Rand deliveries in china are slowing down. Probably more related to the economic slowdown in china then the scandal. Spoke to the head of multiassets at royal london. We were talking about the car sector and the pressure they have been under as a result of the china story before the vw scandal. Did you take that as a time to load up on Car Companies or stay clear . We like European Equity still and if you look at the macro data that will be gdp growth by a couple quarters. It is all cut up in this industrial sector problem. I think that europe still looks attractive. Guy what do you need to hear from mario draghi . Guest we would like more easing. The things that we have heard that suggest a fourthquarter rally is some stocks doing better, sentiment seven weeks in a row of panic stations. If you go back to the lehman crisis or the euro crisis to get that near panic and then the stimulus. We have the fed backing off a little bit. It might take another month or two before get that, but we think that we will get there because this is a deep inflation shop. Anna mario draghi was one of the central anchors who did not shy away from mentioning china as a driver. Is the situation in china we can off to justify more from the ecb . Guest i think it is about inflation and commodity prices. Commodity prices are very volatile at the moment but oil prices have dropped. G7 average inflation is currently about zero. Anna we even had someone on last week saying core inflation is well below target. Guy but it will drop out . The excuse for not raising rates will feel a little low. Guest it cannot just be about inflation but if you look at the industrial cycles, you dont tend to get interestrate rises at that time. We have had an industrial slowdown for a year. And ad stronger activity pickup in inflation but the good news is that the stock market in the summer was already panicking about two things. And theysion in china were panicking about a fed rate hike. I think that things are more constructive. Anna are you banking on it being off the agenda way past the start of 2016 . Guest we think it will be pushed right out to Second Quarter next year. If there is any sign that the fed is about the hike Interest Rates, market instability will come back in the shortterm just because the Macro Economy isnt Strong Enough to cope with rate hikes. It is a catch22. Not saying he further downside and stocks. Guy nice to see you. Sorry it has been so short. Trevor ran around the block. He looks cool, calm and collected as a result of that. Jonathan good morning and welcome to on the move. I am Jonathan Ferro and bloombergs at bloombergs European Headquarters. Bynas gdp grows betterthanexpected 6. 9 . That is the slowest expansion since 2009. Crude reality. Saudi arabia is saying is said to be delaying payment to government contracts. Deutsche bank shakeup. Sends out the biggest management reorganization at the bank and more than a decade. 20 seconds away. The other three stories we will because of trading on. Ftse 100 futures down around 10 points. Dax futures up by 21 points. Caroline hyde kicks off the weeks trading. Caroline we are set for a red day. Happeningofit taking across europe. Concerned about quantitative easing boost. Down any immediate gains. Anymore bond buying. An effect on euros and stocks as well. 600 and the s p 500 are in mud pies at the moment. Here is the effect we see in the euro. The euro rallying up. 2 . Meanwhile, we