Transcripts For BLOOMBERG The Pulse 20141121

Good morning. You are watching the pulse. I am guy johnson. Francine lacqua not here today. She will be back on monday. Mark reckless of the u. K. Independent party has claimed a victory in the rochester parliamentary by election. Maybe a slightly bigger win was anticipated. , he madectory speech the point that ukip is gathering momentum. I wish i had the words to say how grateful i am. This is your victory. If we can win here, we can win across the country. If you vote ukip, you get you cap. Get ukip. Rec list affected to you cap from the conservative party. The chancesraises that more mps could make the same move. Speaking earlier this morning, ukip leader nigel farage praised reckless. These men have left the conservative party and had the necksge to put their on the line by forcing by elections. The kind of behavior we havent seen in british politics for half a century. Nigel farage speaking to anna edwards earlier. Rob hutton joins us on the phone from rochester. Good morning to you. We are in a situation where we are waiting to see what happens next. Rob, was this a big enough victory for nigel farage to be able to tempt a whole bunch of other on the wire conservative mps to jump ship and join him. That is a really, really good question and it is on the cusp of the answer to that being maybe. I think if it had been a doubledigit percentage lead, then the answer would have been yes, quite possibly. It is about 7 . So we are not quite there. Now, they dont have to have a by election. No member of parliament has to have a by election if he switches parties. The feeling was that douglas cos well, having announced he was doing that in august, anyone following him was obliged. Now that the general election is so close, that obligation has probably disappeared because the government controls the timetable for by election. If a tory mp were to resign and say, im quitting, im joining ukip and quitting parliament, the government could say, the general election is made. We wont bother having a by election. You would just be out of parliament. That said, the really big question that people are asking in rochester is, has reckless won by enough to hold the seat in the general election . Benefited, he clearly even ukip would agree with some kind of protest vote. The people who voted for him, how many of them plan to stay with you cap at the general election and how many plan to go home to their parties when it is time to actually pick the government . The tories will be saying to 7 . R mps, rather more than ukip saying, no, we are staying. The answer is, nobody knows. Voting is slightly habitforming. The you have voted ukip and sky hasnt fallen in, you do it again, maybe. On the other hand, maybe you dont. Yeah. [laughter] sorry, that is a very equivocal answer. Something to ponder. The big story to my mind was maybe even more significant in many ways. What happened with the labour party overnight. How onaced tweet earth did the labour Party Managed to extract defeat from the jaws of victory . That is a really, really good question. Another question that had people clutching their heads last night. Thornberry on the campaign trail here in rochester yesterday, sees a house covered in crosses of george flags and decides to tweet a picture of it with just three words attached. Picture from rochester. The question that was given and the impression largely confirmed by the fact that she resigned was that she was sneering at workingclass voters. That is a real problem for labor. , we now its message is speak for the working class. Reckless lost no opportunity last night. Problems a perception among some voters that it is perceived as being a bunch of metropolitan liberal elite londoners. A tweet like thornberrys did nothing to help that. Labor, dont forget, you to hold this seat. They say this is a seat they win under tony blair. The only thing about that kind of thinking is, it is slightly defeatist. If you keep looking at a by election and saying, that is not really the kind of place where we win, it turns out that is not the kind of place where you win. An Opposition Party with an unpopular government ought to be picking up by election seats in strange places. Doing that is is ukip, not the labour party. The blows just keep on coming for the mainstream parties. Livedems. That was very much in the price. I was looking at my spreadsheet last night. The ground up to one cent or down to zero. The good news is that you round up. The good news for them is that they werent beaten by any of the joke candidates . Is a very good a warranty miami episodes and i dont accounted for 0 . They are a party that used to pick up protest votes. It used to do very well in high elections. It is now just being wiped out. One of the Big Questions, one of the many Big Questions we will is, as going into government completely destroyed the liberal democrats had it just got back a great deal in their number of seats . They held easily. Theyve held seats where they already had it. But what they are not doing is picking up seats. They can no longer claim to be a party of protest when they are in the government. Interesting to see who the swing party is going to be. Could still be the libdems. Thank you very much indeed. To have more on this story throughout the morning. We will continue to analyze the situation for the british political process and also for what it means to British Business as well. What else is on our radar . Two of the worlds bestknown investors in business together. George soros has invested in pimco founder bill gross accounts. Lots of tweets on that story. Boris johnson could be on the in the United States according to the financial times. Johnson who holds a u. S. A british passport, is being pursued by authorities for the sale of a home in london. Ft quotes johnson as calling the demand absolutely outrageous. You can hear him saying that, cant you . Some of the most important figures in european banking are gathering in frankfurt for the european banking congress. Banking unions will be one of the main topics of discussion. Mario draghi said the Economic Situation in the eurozone area is pivotal. Inflation is the focus. We are expected to hear from the Bundesbank Bank president in the next minutes. To say draghi was dovish, something of an understatement. To get a sense of how dovish it eurodollar down below 1. 25. 1. 2 469 was where we got ourselves pushed too. Take a look at what happened in his home country of italy. Pushed down to record lows on the 10 year. Of fairly good morning to work if you are trying to continue to flatten the curve. Not a bad morning. We will hear from vitamin shortly. We will get the other side of the coin. In the meantime, we are going to take a break. When we come back, we are talking about ukip. Int does the big win rochester mean for britains future in the eu . We will discuss this with Phillip Blond coming up in just a moment. Welcome back. You are watching the pulse. We are live on bloomberg tv, on the radio, streaming on your tablet, on your phone, everywhere. We are on the political trail this morning. Ukip taking another by election, this time it was what was once red a stronghold. Mark reckless becomes the second member of the independent party with a seat in parliament. I think he is still on the train on his way to parliament to be sworn in. Joining us now to discuss the implications of the win is respublica director and founder Phillip Blond. Lets deal with the immediate and then we will have a discussion about the wider implications of this. The immediate effect is, what . Do we get a series of defections or is this a more isolated case . Will bolster this David Cameron. Even a few weeks ago, everyone won, this ukip would lead to defections. I think the results are too narrow. Will cause people to think twice before defecting. Even though it is lost, the gain is of ukips leveling off. Paradoxically, i think the real losers from this are the labour party. What ukip is doing and emily turnberrys ridiculous tweet only helped that, is repositioning. They are now targeting themselves for workingclass votes that labour traditionally got. R in the millions. Have eaten, the fmp away up to 70 of labours vote. Cameron,takeaway is, paradoxically, is more secure. The shift isnt big enough to encourage others. The person who looks really insecure is ed miliband. The labour Party Looks Like it has a tenuous hold on its own base. Ukip is doing a master strategy. It has captured the concerns of the voting base and it is now going after the labour voting base. Which kennedy road the most . Which can it erode the most . Seewe are going to start to this. Do you think they take more away then theur conservatives . No one can calculate. It takes away from the models. What ukip is going is broadening its base. Think, exactly right, this momentum against the conservatives is starting to level off. But its momentum against labour is starting to gain ground. Mightk that is why ukip really be the game changer. All the predictions even a few months ago, people were talking about 20. When you are looking at the libdems falling to 20 or 30, ukip could be an equal gain maker with the liberal democrats. Tt could be a contes between fmp and ukip. Has movede by ukip the conservative Party Leadership increasingly towards the eurosceptics. Shiftsee similar kind of within the labour party in terms of a significant policy reevaluation . Do we see them backing and in . Ut referendum where is the policy change . Europe isnt even the top factor for those who vote ukip. The top factor is their own sense of economic insecurity, which israel. Increasing numbers of middle class people are losing out from globalization. Standards, looks like decades before it catches up with what they were before the recession. For workingclass people, they have been in decline for 30 years. Europe isnt the key message. If europe becomes identified with economic decline, which it europe couldlly gradually rise up the agenda even for the labour party. Is the line between the two immigration . That increasingly appears to be the battleground. What you have got is people who have done well out of globalization. People who live in london, the metro elitists. The rest of the country where immigration is viewed as, people take our jobs, change and challenge our cultural identity. People should look very carefully at Douglas Carswells acceptance speech. The notion of taking your country back resonates with everybody, young and old. Expectfeel they could what is no longer there for them. The older generation feel they are no longer represented. Remember the ads about you cap is the people with less education none of that works in rochester. Levels ofaverage employment, average levels of education. Think, isappened, i globalization has started to undermine the middle classes. Developingbroad and and expanding constituency for ukip. If they can persuade those people that europe is identified with globalization, there is every chance people will vote against europe. If people vote against europe, what that will do is have an effect it exposes you to globalization even more. That is the point. If people vote against europe, britain will be in a worse position. Economics suggests we will suffer anything between the impact of the scale of a recession we just had to twice that level in terms of the loss of market and gdp. A lot of businessmen sit in the seat you are sitting in there is a constituency within the Business Community that talks about needing to leave the eu. But there is a big number of Large Companies that talk about the fact that britain needs to remain within the eu. Youve just encapsulated the must be got across. How does business communique that . How do the policy leaders communicate that . It is terribly difficult. What is happening is that europe is being ruined by the euro. The euro is plunging. Whole of europe is in various levels of deflation and recession. Ukip type movements are already alive across europe. I think we could be looking at the mediumterm breakup of the euro. That is probably a good thing. I think the euro as an economic model only works for germany. Even then, doesnt work for most germans. They have the highest rate of any quality between the bottom and the needy him the medium level. That may be more to do with the reforms than the euro. It is to do with the fact that they can export their labor market without relative cost across europe. Is the euroseeing as a carrier of the european project is failing. In that case, i think ukip will find common cause with many other european parties who wish to break with the eurozone. The breakup of the eurozone will make what happened to Lehman Brothers look like a cakewalk. Either way, it seems the headwinds against any sort of Economic Growth what advice would you give the Business Community that says they want to remain . Howd you get that message out . We need to create a viable europe without the euro. We need to create an exit strategy for those country suffering under the euro. Business lobby communicate to the british cost and the implications of leaving the eu and the fact that you expose yourself to even greater headwinds from globalization . I think business organizations need to realize that in the absence of strategy, they have to come up with it. What we have in england at the moment is a very poor debate. In or out. Going out would be worse. In the absence of a more sophisticated strategy, step into the vacuum and start to talk with other european businesses and parties. Create an option whereby countries can leave the euro but not lead europe. Generally, good ideas win. The ideas in control at the moment are so poor, are leading to such longterm economic depression, and causing the rise of political extremism. What business most hates is uncertainty. What generates uncertainty is political ruptures. They are so enormous, we nearly lost the union in scotland, but we are going to lose the European Union and the people coming in are very extreme left and right. Philip, great to get your analysis. Respublicas philip blond. We are back in a couple of minutes. Coming up king digitals candy crushed. Can the maker of the popular mobile game deliver a sequel . Welcome back to the pulse. We are here in london. Im guy johnson and these are the Bloomberg Top headlines. The u. K. Independence party has won it second seat in parliament. Mark reckless claimed victory in the by election gaining 42 of the vote. The ukip victory has been widely anticipated. Some would say it is a rebuke for the government over its policy on europe. Laidnight, president obama out plans to allow around 5 million Illegal Immigrants in the United States to avoid legal jobn and obtain status. The measures include the streamlining of the visa process for Foreign Workers and employers, and expanding the options for farinacci burners. Obama defended his actions against claims that he is exceeding his authority. The actions im taking are not only lawful, they are the kinds of actions taken by everything a president for the past half century. Members of congress who question my authority to make our immigration system work better, or question the wisdom of me acting where congress has failed, i have one answer pass a bill. Now, the british chancellor George Osborne is abandoning his bid to overturn the European Union ban on bankers bonuses that exceed twice annual salary. Osborne said he wouldnt spend taxpayers money. The arguments were rejected by a senior official at the eu court of justice. King digitals games are played by hundreds of millions of people. Now, the maker of candy crushed has released a followup to the hugely successful franchise. Help prove this company is more than a one trick pony . Caroline hyde. First of all, tell us about the new game and how it is using the power of the candy crushed brand. It is using that same pony. It is dining out on the success of candy crush saga to develop a sister game. Slam a bit of soda, turn gravity around, and make it more exciting. Of course they are going to dine out on the candy crush brand. It has been so successful. It is one of the Top Grossing Games ever, since it was released two years ago. It has been played billions of times. They are marketing hard. Last night, tower of london, we saw giant illuminated replica candies floating down the river. You had nicole shares in her of purpleunch a sea soda as a special fountain display. Get this, a sevenmeter high candy there as well. So far, this is a company that has not managed to recreate the winning formula even though it has released of her games. Other games. What is it that is in here that is going to deliver . I think the fact that they have decided to throw away the old tactic of promoting new sagas. They have launched relatively successful games. Farm hero, pet rescue, all of them basically in the Top Performing apps. Games in the top 50 at the moment. Isll, candy crushed saga basically their big winner. It is where the big cash is. 50 of their money comes from candy crush saga. But we are starting to see sales ease off. We saw profitability down by 38 . Candy crush saga is starting to slow. They are bringing in this new game, promising a wider pipeline of games. We have a lot of new games yet to be launched. It is about the network of games rather than a single game. We have a lot of games coming to the market next year where we will look at other types of games. They are trying to alleviate investor worries by dining out on candy crush this time around but they promise a whole pipeline of new games. Perhaps not just casual games anymore. I asked about virtual reality. They said they would be very keen to get on the back of that. What is happening worldwide . Geographically, there are differences. You look at the way the Japanese Play games, the europeans, there are subtle differences. What is the big story here . Ask you are right. Sagady, candy crush soda is number one on the apps list already. But what about Global Expansion . They have caps on repeating to me that it seems eight and other emerging markets are crucial to them at the moment. India wheres like there are massmarket of smartphones. All those territories are interesting for us. I think currently renovating roy hibbert is is in south korea currently where the Market Growth is, is in south korea and china. They want each and every game to be global, to be used, the same in japan as in the u. S. And u. K. They say they have to be very sensitive to the ways in which they tick all the boxes around the world. They just made a purchase back in august of a company in singapore. This mobile developer, nonstop games, 6 million, might end up paying 84 million. That just shows how important asia is. It also shows this company will bring other types of games as well. Look out for that pipeline from king digital. Caroline, thank you very much indeed. Staying on gaming, what are the trends . The research looks promising for mobile games, at least with their revenue set to overtake that of consoles. To be honest, the whole space is expanding massively. The question is, who is going to capture that and make the biggest advantage from that . Lets bring in the creative director of microsofts gaming studios. Good morning to you. You would have thought a big company like king should be able andeverage its advantage continue to deliver sequel after sequel. That is what you get from the movie industry, from other creative sectors. Is the gaming industry different . What is the story here . I think it is interesting when you look at king. They have actually been successful with other titles, just not as successful as candy crush. It is one of those outliers that may be difficult to replicate. Players a relatively big now. They are a huge player now. They have data on why their games are successful. I would expect candy crush soda saga to be successful, potentially more successful than any previous attempts. Are we going to expect a series of franchises to really dominate . Or do you think you get you are going to get both. The mobile games market is very interesting. It has expanded enormously. The nice thing is this huge diversity of games. You have opportunities for really large players like king or super cell to make a lot of revenue and keep pushing franchises and keep making lots of money for long periods of time. You also have opportunities for more creatively niched games to make less money than that but still make a tidy profit and be a sustainable business. Is it becoming easier for saw companies to get the tools they need to develop the games . Absolutely. Tools like unity or game maker allow almost anybody to make a game these days. That kind of democratization has generally lead to a more creative output from the Games Industry as a whole. Monetization model so far has been straightforward. You get the game free or you charge them to download it. Game, youithin the find ways of charging people. Is that the model that is going to carry on . I think that will be the model you see making the most money. Both models will continue to exist. I think the model that is going to make the most money is the free to play model. The companies are going to be successful when they understand that your game is a business at that point. You can run it as a business and your studio needs to reflect that. You have to have people who understand marketing and acquisition. Within the game studio. Sitting alongside the people who code, do the art, do the game design. You need to have marketers, Customer Service specialists. A little economy within. If you dont think of it like that, you cant be successful. How does this fit along the console story . You would have thought as we look at the latest ipads, the chips in those are pretty punchy. You can develop some quite nice products as a result of that. Are we just looking at a point where the lines cross and you are almost getting as good an experience out of your tablet as your console, or are they two markets that can coexist . Maybe mobile takes more revenue but it is not a zerosum game. It is not a zerosum game. It is difficult not to get too nerdy but the difference in the game you play on a controller and you play on a tablet in terms of how long you play, the richness of the experience, those two things will kind of remain separate as long as the controller and the touchscreen are separate things. The controller affords you the opportunity to do different, more deep experiences on the console then you can do on a tablet. The graphics are going to continue to become on par with one another. The interface is the differentiator. And you find that people who self identify as gamers will tend to still sabr consoles and pcs as their gaming platforms. You are in the gaming business. Where do you see the point of maximum value . Where do you want to be positioning yourself . The niche that i find most interesting personally is the mobile space. I think the massive expansion of the last few years has generated so many opportunities. That is what Microsoft London has been set up to do. I think there is going to be a lot of opportunities. So this is going to be a massive market. The perimeter is expanding. Bywe are talking 42 billion 2017. It is enormous. It is growing still in the markets. ,he u. S. And western europe people say it is saturated but it still continues to grow. Japan still continues to grow. When you look at the bric countries, the share of mobile usage there is going to make that market explode. Creative director of microsoft lift studios in london. From games to spying, Cyber Security in the u. K. A russian website contains thousands of live webcam feeds. We spoke to a security expert at the most recent spying scare. Security Global Research and Analysis Team at kaspersky lab. Russian hackers have created a website that contains footage of thousands of devices out there on the internet including tv cameras, webcams and baby monitors. Use Software Vulnerabilities to hack in if it has an internet connection. On the other hand, it is also true that many devices like this come with a default password which the manufacturer has set. Heres what you can do to protect webcams, tv cameras and other internet connected devices. Change the default username and password on webcams, baby monitors, and any other device connected to the internet. Check if there are security updates for your router. The router is the front door to your house. Date, software is out of hackers are able to find loopholes in the software. They can use that to force their way in. Many laptops, tablets and smartphones also come with web cameras built in. It is important that you install Internet Security software on those. Why you cantason take over the webcam or put the device in the drawer. Put it in a drawer if you are doing something sensitive. Hm. Coming up, how to win the tour de france. We are going to get some tips from alberto conta door. He is going to give us the heads up on how you win in big events. Welcome back. You are watching the pulse. The spanish cyclist Alberto Contador has won every major european race there is. On two wheels that is. On his bike. Bloombergs Ryan Chilcote went to meet the man and talk what it takes to win. You have won the tour de france. You have won a lot of really big races. What is the secret to success . Dont tell me it is exercise. I think maybe the most part is to win the tour de france. Win again and win again and win again. Enjoyk the secret is to the training and the work. Enjoy the training and work . Thats the secret . You enjoy it . Of course. How many miles did you ride last year . 10,000 . Kilometers . Maybe 35. And you enjoyed every mile . No, but for example i go to Training Camp for 20 days to concentrate. For me, it is hard. I need to concentrate 100 on the bicycle. Opposite, the day i dont enjoy my work are you going to win the tour this year . I will try. The first of the year will be the giro ditalia. It is ato the giro, risk. You dont know if you will be 100 for the tour. It is difficult to recover. You prepare for one tour, then prepare for another tour . Yes, maybe you are arguably the best cyclist in the world. If you were in a different sport , you might make much more money. Decided to wish you go into football and not cycling . Course, the cycling. I believe one thing, it takes a lot of time. A lot of people try it. Other part of it, i think you need to believe in you and your work. Cyclist. N, im a for me, im very happy with my situation. A lot of guys in lycra. What is really disappointing is that Ryan Chilcote walked around the office quite a lot in lycra. He is a big cycling fan as well. Disappointed to see him not dressing up for that package. Lets get some company news now. Ridgemont is considering an ipo as soon as next year. That is according to people familiar with the situation. Richemont has discussed options for the company. Sales are estimated to be around 660 Million Euros for the fiscal year of 2015. Profitability of big question. Stmicro may take longer to reach a key profit target. The chief executive says the company will reach its goal of a 10 operating margin but the timeframe may change. The chipmaker previously set a deadline of the middle of 2015. Uber is considering cutting the number of vehicles it operates in berlin during nonpeak hours as they struggle with legal challenges. The recent changes eliminated. Rofits for ubers top drivers coming up, global spending on manila fall as temperatures rise. We will look at what actions are needed to meet future climate goals. That is coming up after the break. Good morning, everybody. Welcome back. We are live on bloomberg tv, on the radio, streaming on your tablet, on the phone, on bloomberg. Com. It is that time of day. The new energy top headlines. China has dropped its target for coulter gas output. Output. To gas the projects also need large amounts of water, which is a challenge as most proposed sites are in chinas water stressed areas. By governmentsng and companies fell for the second year in a row. That has threatened the yuan goal to cap Global Warming at safe levels. Spending on renewables needs to double by 2020 according to the International Energy agency. Panasonic has denied a local media report that it may be making batteries for electric cars earlier than planned. The company says the timing is now up in the air. Now, for those listening on bloomberg radio, the first word is up next. For our viewers, it is a second hour of the pulse. We are going to talk about reckless win in rochester. Back tooing to go germany. We have a whole bunch of guests coming up in the second half of the next hour. What is happening in the first or second 15 minutes is that the boss of the bundesbank is going to be talking. Jens weidmann will be addressing the conference in frankfurt that mario draghi addressed earlier. Draghi, lets call him dovish. Certainly a big reaction in the market. We saw yields falling pretty sharply. Talking,re going to be or listening, to mr. Weidmann. We will show you the pictures. We will figure out whether this is going to mess up the end of the week. We will bring you those headlines a little bit later. That is what is coming up in the next hour. Follow me on twitter. See you in a moment. Reckless in rochester. Ukip takes the second seat. The antieu party delivers a blow of political mainstream. The bundesbanks Jens Weidmann speaks shortly. Crowning the king. Can the maker of candy crush extend its reign . The future of mobile gaming. Good morning to our viewers in europe, good evening those in asia, and a very warm welcome to those ust waking up in the u. S. I am guy johnson. This is the pulse. Francine lacqua will be back on. Onday the ukip has claimed victory. Voters had anticipated a you cant win. U. K. Win. A ukipess pointed to momentum. This is your victory. Most winnable seat. Ukip. Vote ukip. You get the electiongered when he defected to ukip. More tory mps could make the same move. Reckless. Rs praised they have the guts to put line bycks on the forcing elections. It is an honor we have not seen in british politics for half a century. Government in our reporter. On the phone from rochester. Seven minutes ago, David Cameron tweeted out that he is determined to win back rochester in the upcoming general election. They think they can do that. Proportionn is what of the 42 of the electorate last nightfor ukip are doing so as a protest to the government and what proportion are doing it because they want what ukip are offering. Protesteffective as a party. The most brilliant way of terrifying everyone, from labour to liberal democrats to conservatives. They have a protest vote. Is that going to fade away when we come to a general election and people have to choose the government. The conservatives hope so. People will stay with them. Nobody knows. The thing about voting and changing era voting pattern is that it can be habit forming. You switch to another party and decide this is not so bad, i might do it again. We will have to wait and see. Everybody is going to be tracking the polls carefully. It is going to come down to a tight margin. The real story and many peoples minds is not the fact that the conservatives lost in rochester. Rt is the fact that the labou party reinforced how much disarray it is in with the resignation of a fairly Senior Member of the shadow party. Party, note labour of this worse than the conservatives . That is the great mystery. Much to hide doing that this was their thought. The those who do not know, Emily Thornberry was in rochester and tweeted a picture. It was perceived that this was a sneer at workingclass voters. She resigned. How has labour managed to not be the party of the working class anymore . That is the question and they seem not to know the answer. This is the seed they used to hold until 2010. They did not even come close to winning it back last night. A mess is the electoral math ahead of the general election next year . How much does the overnight story change that or does it confirm the mess we knew we were in . I think it has confirmed rather than changed it. One of the debates we were having was this is the most british politics has been since chaoticit is the most it has ever been. We have four or five parties going on. Ukip do not have to win 271 reckless was talking about. It is a hand grenade rolled into politics. It goes off and you do not know who it is going to injure. They pick up 5 or 10 , seats that labour dont win, the tories dont win. Knew things we thought we about british politics no longer apply. Last night is the confirmation of that. If you were sitting in berlin, paris, or brussels, could you drop any solace from this . Anything you can take away that is positive . Aw do you interact with political system that is more chaotic than it has ever been . On the parties are trying to find solace. The tories are saying the margin of victory for ukip could have been bigger but a win is a win. What effect does this have . Changed british politics. Pushede of ukip has outd cameron to push an in referendum on the eu. It has pushed him to hit that he is going to go for an end to Free Movement within the eu. Mps, wasore it had any changing the future of britain in europe. It has 2 mps, it is hard to imagine this will not increase the pressure on cameron and his members of parliament want to increase the pressure to be even more euroskeptic. That shifts the balance of politics. If you are in paris or berlin and you wish things to go on even keel in britain, i do not have solace to offer you. N, joining us from rochester. What else is on our radar . Mario draghi says the Central Bank Must drive Inflation Higher as fast as possible. The ecb it will broaden its Asset Purchase Program if needed. The inflation situation in the euro area has become increasingly challenging. Headline inflation has fallen significantly over the last year. Last november, is still stood at 0. 9 percent of this was low but it was generally expected to rise safely above 1 by now. Mario draghi speaking at frankfurt. Minutes time, the bundesbank president jens there. N will be we will bring you the headlines as soon as we get them. The worlds bestknown investors are doing business together. George soros invested 500 billion dollars in bill gross Janus Capital group. Janus attracted 1 billion since luring gross from pimco. The london mayor Boris Johnson could be on the hook for unpaid taxes in the u. S. He was born in new york and holds a u. S. Passport. He is being pursued for Capital Gains tax. American citizens are required to file a tax return even on income earned abroad. Johnson called the demand absolutely outrageous. Ismagine and private he saying other things. Next, we get back to our big focus. We will speak to a guest who thinks ukips victory in trigger more defections from the conservatives. We will speak to Philippe Legrain in a few minutes time. Welcome back. You are watching the pulse. Live from bloombergs European Headquarters in london. , thatdraghi has a spoken is the damage he did to eurodollar. 1. 2432. A dovish speech. Yields at record lows. Draghie seen mario delivering a little bit of good news for those who hoped to export the way out of the eurozone crisis. We have got Jens Weidmann coming up in a few minutes time. If we are getting bird driven, draghi is a dove, jens is a hawk. How much is he going to upset the apple cart . Equities has benefited. The u. K. Party ukip has dealt another blow to David Cameron, it won a second seat in parliament in less than six weeks. Philippe legrain is the author of the european spring. Good morning. Do you think that is the case, the victory was enough that if you were a conservative mp deciding whether to defect you will go . There are lots of conservative mps panicking at ukips rout. They are also sympathetic in many ways to ukips argument. Inp has won two byelections a row. A generalo very near election. That might stay the hand. Theres a bandwagon gathering force. Both the tories and labour are panicking. Which should panic the most . So far, the conservatives have suffered most. In terms of defections. If you look at where ukip voters come from. More recently, ukip voters are coming from the labour party. You have the resignation of Emily Thornberry over the unfortunate tweet, placing labour in the spotlight when it ought to be the tories. It ought to be the tories . Strengthays, the ukip lies in its ability to act as a those who are suffering at the hands of globalization. The ones that are seeing immigration as people taking away their jobs. The exposure to the Global Economy has more affected the the income scale than the top. You wouldve thought it would resonate more with labour voters than conservative voters. It has worked on the tories but carswell and you they are reckless and both making the same point. That point is about those who have been disenfranchised. That i would have thought would hurt labour more than conservatives. Theres a majority of people who are not reactionary. Therefore there are more votes for the Labour Party Rather than trying to chase ukip. The fact is that in the labour the north of england, the majorities are very big. You can lose support for ukip without losing the seat. It would have to be a massive swing. Chasing the ukip vote will alienate labour voters. For example, in london, who might attempted to defect to the greens. Labour depends a lot on young london. On you have a series of very strong labour beats in scotland that look like the snp will tak e. It is pretty clear that theres a lot to play for at the moment and parties are coming in. This is becoming a multiparty taken and nothing can be for granted. The northern cities are at the moment looking safe but some cities north of the border looked safe and that has changed quickly. U. K. Politics has been up in not since it has been 1982. It is hard to predict what is going happen. It is hard to see whether people will vote the same way in the general election. Given that we have a winner , you all kind of system can get a share of the votes and not get lots of votes. It is hard to predict what will happen. Lets talk about the backdrop to this. Howlvote for ukip a against globalization . Is this a protest vote . Not the right way of phrasing it, but is this about outsiders coming in and changing our lifestyle, taking our jobs . What is the vote for ukip about . Why are people going from where they traditionally voted to voting for ukip. People who are unhappy about their personal circumstances and the way the country has changed. They harken back to in idealized past where things were better. One of the reasons why ukip voters are older. Is due toses it economic worries. In other cases, worries about immigration. In other cases, a loss of faith, much broader, and establishment politicians. There is a host of factors. Ukip is very clever in saying that whatever problem you perceive, it is all due to immigration. The solution is to leave the eu. The only solution is to vote ukip. Hat is a simplistic analysis it does not mean that the way to counter it is necessarily to echo ukips lines. Conservatives can be talking about the economic recovery. Itour has many arguments could be talking about, starting with the nhs. Of this isy of all that leaving the eu would expose the u. K. To globalization on a greater level. That is an argument we do not hear anywhere. Alone. D go it going it alone in the global system is probably harder to do. Than going harder to there are some protections that come with membership of the eu. Why is british politics getting so obsessed with immigration . Is it because nobody can figure out a way of countering the ukip threat. Why is the political narrative so narrowly defined . Political parties are panicking. The reality is that most people in britain do not support ukip. Hade are votes to be elsewhere. We have had the european withions and by elections low turnout, which magnifies the threat from ukip. It is a big mistake for both labour and the tories to only be talking about the issues ukip once the talk about. Farage and echond things they cannot deliver. Has no prospect of being Prime Minister so he can promise whatever he wants. Ed miliband and David Cameron will be Prime Minister, so they cannot make reckless promises. Or they will be found out if and when they get elected. It is a bidding war that you cannot win. It has not been working to stay on the ukip line. Thank you very much, Philippe Legrain. King digital tries to prove it is not a onehit wonder. Will its candy crush sequel convince investors . We will talk about that. Welcome back. You are watching the pulse. We are talking about mobile games. Lets talk about king. Its games are laid by millions of people. The maker of candy crush has released a followup. Help prove itme is more than a one trick pony . Caroline is here. When this company went public, the worry was can you deliver a longtime Business Model . So far they had not, that is why shares are a third below where they initially sold in march. They are trying to dine out on deck cash cow comic in the crash. They are making a sister game, candy crash soda saga. It turns gravity upside down and it is a new way to get sucked into this market. Marketing spend is huge. In an enormous seven meter high candy bear is being lifted up by tower bridge. They are going all out to try to excitement. I spoke to the cofounder, he said we cannot ever aim to reinvent the wheel and reinvent candy crush. It is hard for any game to crash and the success it has had. For us it is about creating a great game that the players love. Thatat is interesting is previously they have unveiled other games. They have always been in the top 10. But they have been a different aga pet rescue, bubble witch. This is the first time they are going candy crush is what everybody wants, lets keep going. Lets add on to it. Reinvent a little bit some of the excitement around candy crush. They are promising a new portfolio of genre games, they are yet to come out. We will watch. Jens weidmann on his feet in germany. He is at a conference mario draghi was talking earlier. There he is. I cannot see any earth shattering headlines. We will take a break. Welcome back. You are watching the pulse. We are live from bloombergs European Headquarters in london. Im guy johnson. In germany, bundesbank president Jens Weidmann at the european banking conference in frankfurt. All the more so is the path that risk weights vary across banks using an internal risk ratings approach. The risk based approach must remain a key element. Creates rule often problematic incentives to take risk. I agree with my colleague mark carney from the bank of england. A is sometimes good to wear belt and suspenders to prevent your trousers from falling down. The flaws of the riskbased approach need to be addressed to methods. He it is hard to assess the probability of default for low default portfolios, which includes exposures to sovereigns. As the name suggests, their respective credit events are rare. To some extent, the calculation of regulatory thermometers for such low default portfolios falls under what is known as the turkey illusion. Imagine you are a turkey. Every day you are approached by eats you. What kind of mental model do you think you will build up . Things giving is coming. Thanksgiving is coming. [laughter] measures to reduce the leeway for banks using a rose thanks approach a rulesbased include parameters for risk calculation and the exclusion of certain types from the modelbased approach. Efforts are underway to make the standardized approach more risk sensitive. Thatould be noted weighted assets is not a problem per se. Deviations are reasonable. Otherwise we would be calling into question other approaches. Iii is implemented, regulatory Capital Requirements will be higher and tougher than under basel ii. A typical Credit Institution will have to achieve a capital ratio of 8 plus various buffers. Give aat be enough to profound answer, we need to have an idea of what would be an optimal or adequate capital ratio. Academic research on this topic is not broad. Several study by central Bank Economists found that a capital ratio of around 11 would be a reasonable figure. Minimumber exceeds the requirement that falls well short of more radical proposals. There is a tradeoff between the benefits and costs of higher Capital Requirements which lies at the heart of this optimization problem in the study i just mentioned. And also in practice. Capitalne hand, higher requirements reduce bank leveraging. Interestingmann is to listen to. We have more breaking news. This is just flashing across the screen, has cut Interest Rates. It cut its money deposit rate by. 25 . It will expand floating range. Aussie rallying on the back of this, hitting a session high. The oneyear lending rate has been cut by 0. 4 . Weve seen a fairly big move as a result of what mario draghi had to say this morning. A reaction to what is happening globally maybe end to what is happening internally within the market ind property china. We are seeing the chinese coming through and cutting a number of key lending rates. Pboc doing that ever the last couple minutes. Market reaction, we are a little caught by surprise. Lets talk to Jonathan Ferro and see what he can see while i check what the fx rates are doing. Europe didarkets in not need much more encouragement. Session highs. Gains on the periphery around 2 . In frankfurt on the dax, up by 1. 7 . Cometse in london up. 6 heading for a fifth week of gains. Outside of that rate cut from the peoples bank of china, weve got a little bit of magic last from mario draghi. In that speech, one line standing out. The ecb must raise inflation and Inflation Expectations as fast as possible. We see china acting. Hes trying to push for the idea that the ecb will act, too. A chart that brings 1000 words, eurodollar drops to 1. 2724, down by. 75 . You talked about the aussiedollar. Theres the move. Up. 7 china is their biggest trading partner. More demand for australian exports, aussie dollar higher. Reacted to mario draghi. Money going in to everywhere. Basis in italy lower by 3 points. Yields in spain down by 4 basis points. The yields on the 10 year in spain heading towards 2 . Record lows. A dovish mario draghi. A big move from the peoples bank of china. Lets get a reaction to what has been a busy morning for macro news. Lets go to the conference Jens Weidmann is talking at. The chief officer of beh renberg. The last hour has delivered a large amount of macro news. Cutting Interest Rates. What is going on . Was not a surprise with regard to the speech of mario draghi. He confirmed and prepared the markets over the last days and weeks. Today, he confirmed this is the way. Hes ready to take action. I think we get more confirmation that will be needed. He said he wants to lift up inflation as fast as possible. This is nothing new. The euroh rates in zone low. Hes ready to take action, he with a it in december probability of more than 50 . With regard to china, also here it is nothing new that a bank of china is pretty focused on the growth rates. It is nothing new that growth 7 to 7. 5 . Roughly they have to balance it out. They take measures to go for a reacceleration. Nothing too spectacular. Put this together and you still have a very dovish centralbank story. We are still seeing easy money, cheap money being driven into the Financial System globally. When we talk about the fed and the bank of england and the possibility of rate hikes coming through as a reality, how do you compare and contrast what is happening in the euro and china with what is happening in the United States . Is two different stories. When it comes to a comparison andeen the u. S. Region europe, and particularly the eurozone, we are talking about the transatlantic gap. Growth rates are solid in the u. S. Corporate earnings are solid. A different story in europe, particularly the eurozone. Not a surprise that centralbank policy is very much a different in the near future. The fed is getting a bit more back to the path to normality. The ecb will stay extremely ill do moreand w and december. Growth differentials are there, Interest Rate differentials are there. The eurold weigh on and support the dollar on the other hand. When you look into the capital flows you have another confirmation that many Market Participants will buy that story, too. Lets talk about a Market Reaction and how you should be positioned. Youre not surprised mario draghi is dovish. It will be interesting to see what he delivers. Whether or not we get more moves coming from the central bank. You said you are not surprised by what weve seen in china. How much of this easy money story from the two Central Banks is priced into the market . How much will the extra easy money compensate for the fed tightening . Where does it leave the Equity Investor . That is a very interesting point. We think the majority of all the liquidity pumping, all of that support story and the same with regards to Economic Growth in the u. S. Is priced into the market. A big surprise that markets today, when the speech came out, were quite positive. We have a clear confirmation that the aggressiveness will stay. Upside potential based on centralbank aggressiveness in particular in the eurozone, upside potential with regards to the corporate earnings side and the current stage we are in, we think it is pretty subdued for the moment. With regards to the current equitywe achieved, the markets upside potential is limited. The liquidity story is already to a majority priced in. Will stay. Tential we are pretty much convinced that over the next weeks there will be some ongoing negative news out of the Macro Economic cant in the eurozone. There will be nothing completely new out of the centralbank when it comes to the ecb positioning. We also have in mind that there trende a kind of weaker in corporate earnings in europe based on the Macro Economic problems we currently have. Very much based on ukraine and russia and also a kind of standstill in reforms in france and italy. With regard to investor positioning, we see the potential for further upside limited here to keep a long story short, we think all these factors, for the time being, should be priced in. I would not expect markets training to much higher of the next one month for three months. A correction is possible. This could open the door for a renewed buying opportunity for the strategic oriented investor. Great to get you on air so quickly after the pboc cut rates. Stefan keitel, chief Investment Officer at berenberg. We will get more reaction to chinas Interest Rate cut. Stay with us. Good morning. You are watching the pulse. It has been a bit of a bang. China cutting Interest Rates in the last 10 minutes. Dollar,tion in aussie spiking higher. It looking like we are going to be coming off the end of that uplift. The rally beginning to fade. We have had a very big move in eurodollar. Dovishson for that, a speech by mario draghi, the president of the ecb. Sending euro dollar down to 1. 24 43. He has said, i am putting words in his mouth a little bit, whatever it takes to get inflation up to target. In december we get staff projections from the ecb. That is usually a point when the governing council feels freer to act. Are we going to get that kind of action in december . Initial reactions seem to suggest that is looking increasingly likely post the mario draghi speech. Two pieces of macro news, draghi is pushing hard. We will see what he does in december. Pboc has cut Interest Rates. Back with more analysis. We will talk to the ceo of dz bank and a couple minutes time. Welcome back you are watching the pulse. Out to frankfurt. A busy morning. A dovish speech from mario draghi. In the last few minutes, china has cut Interest Rates. Wolfgang kirsch of germanys dz bank joins us. A very generic question. Thesee your reaction to fairly big announcements. The ecb is going to be dovish. Has cut Interest Rates. How do you read these stories . First of all, mario draghi gave a speech this morning where thatnfirmed the measures the ecb has taken and presumably will take in the future. In the Interest Rates are incredibly low these days. Still, the economy is not read. 0 is not reigniting he announce that they want to b and theyured credits would like to seek more securitization from the banks. A little hint that it could be buysible that the ecb will government bonds at the beginning of next year. The question in germany and europe is whether this will change the game. What we all need our Structural Reforms in the periphery and European Countries. That cannot reach just by Monetary Policy. You think Monetary Policy Monetary Policy is not enough. It has to be accomplished by Structural Reforms. Perhaps some elements of fiscal policy. The other thing, you mentioned the interest step of the bank of china. Isean, we find that this reasonable. It is certainly good for germany and good for europe. Economyd a lot on the of this part of the world. If the conditions for the economy in these countries improve, that is a good signal for us. Let me ask you a question about regulation. The transition mechanism in europe is not functioning. To what extent is regulation the reason for that . Do you feel other regulator right now and is that impeding your ability to lend money . It is a little bit contradictory. On the one hand, the regulators want to tame the banks. They would like to see more capital brought to the balance sheets. On the other hand, they should lend more to the real economy. Some banks are not able to get equity from the market. The only way they can reach a solid equity ratio is to deleverage. That is contradictory to the needs and wishes of the european Central Banks. How do we solve that . How do we make credit cheaper and more available . At the demandk story. On the supply side, what needs to be done . Money is cheap. That is certainly not a question of liquidity. Liquidity is there. Everybody can go to the European Central bank, regardless of the rating of the bank, and get money for funding. It is not so much liquidity in terms of the bank. It might be solvency issues. And the most important thing is in thee companies periphery and southern European Countries are not so confident about their future. Been Structural Reforms, labor market reforms theso on to bring down numbers of civil servants. And the going public of companies that so far belong to the state. All the things we done in germany a few years ago could be a model for the other countries around us. And interesting point. Thank you very much indeed, Wolfgang Kirsch of dz bank. Coming to the end of the program. Lets wrap it up. A busy three hours. Jonathan ferro is back with us. We had mario draghi in the 8 00 to 9 00 hour. He crashed the eurodollar and btps. An interestboc with rate cut. The Chinese Central Bank cutting rates for the First Time Since 2012. The lending rate for the oneyear benchmark dropping by 0. 4 percentage points. Heres the story for me. You have the peoples bank of china resisting rate cuts for the last couple years, preferring instead selective liquidity injections. A concern about debt levels. That now trumped by concern about growth. That is not a very pretty story. But it fits into a global narrative that we need to use to draw the lines. A narrative of concern among policy makers. A sound of urgency from mario draghi this morning. You have inflation levels incredibly low, debt metrics are very alarming in europe. We could get a rejection of the french budget on tuesday. We will wait and see. We will figure that one out. You can see the big announcement billiong to channel 300 into the euro zone economy. To change thed numerator and the denominator. If we have high debt levels you need to get growth going. Figuring out that is challenging. The global story, the deflation story. There is that domestic china story. Before we run away with the global story, the domestic china story is a bigger driver of what is happening here. Jonathan ferro, thank you very much indeed. That is it for the pulse. Tearing up theis script as well. Tom keene trying to figure out what the implications of the chinese rate cut our. They will have a lot of analysis of it next hour. See you monday. It is an unconstitutional power grab. Resistance regroup in response to the president s executive order on immigration. The political battle is engaged. Can battleground state democrats support their president . And in the past hour, china blinks. Beijing cuts Interest Rates to support a mediocre economy. Good morning, everyone, this is bloomberg surveillance. Were live from our headquarters in new york. Im tommy tom. Joining me, scarlet fu and brendan greeley. Lets get to our top headlines. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] china making a surprise move to boost its economy for the First Time Since 2012. The oneyear lending rate was reduced by. 4 , a 5. 6 . China headed for its fullest growth in more than two decades and yesterday, factory output fell to a sixmonth low. President obama has thrown down a gauntlet to a republicancontrolled congress. He is taking an exeti