Transcripts For BLOOMBERG The Pulse 20150514

Indepth interview with intesa sanpaolos ceo, the head of italys secondlargest bank. He is on the hunt for acquisitions. Now i asked him about his potential partner. Carlo if you want to top the asian margin tap the asian market, you need a good brand. That is the reason why i am looking a possible acquisition of an International Brand. I am growing in such a way that i tonight not need to, an extra engine for my growth, but the strategic target could be to have an International Brand in order to tap International Diversification. Francine basically a brand name more than operations. How big does it have to be . Is it something everyone recognizes . Carlo there is a point on the total amount of Market Capital for the possible target, because the reality, you can have a wellrecognized brand that has a market cap that could be higher than all of my prior breaking Division Banking division. I want to have the control of this entity so the target should be in the range, my Banking Division could make the valuation between 10 billion and 50 billion. So the target, if you want to maintain control, should be in that range of valuation or lower. Well have absolute control. I have nothing on the table today, but from a Strategic Point of view this could be the second step of the road for my Banking Division. And also for Asset Management. This is another kind of discussion weekend also have with Asset Management. Francine are you concerned about valuations or volatility . Carlo no. If you look at the management activity, what is important is to have an asset you can exchange. So, valuation of the target would be the driver for your valuation. If you use your own shares because there are they are discounted. Wealth Management Companies compare only to Wealth Management. I will measure all this because my first commitment is to create value for my shareholders. Francine this is something you promised that your hitting targets above what you promised. Is there a chance the dividend goes up . Carlo the point now i am confirming the two dividends. You have to consider we are above 13 of common equity. We are in a unique position to use net income to give a dividend to our shareholders. The promise is to billion euros. We are in a good position to confirm two billion. We will see a the end of the year what will be the final results. So we decide what would be the real dividend policy. Francine you can see more of the interview later on on the pulse. Guy right, lets talk about what we just heard. Lets go to bloomberg in milan. Elisa the big question i guess is listening to Carlo Messina is yes he wants to make some acquisitions. Are there any obvious targets for him to look at . Elisa it is hard to pick out any individual name, but what is clear is that postfinancial crisis europes banks are still in flux. Many ares still figuring out what they want to be. That is creating opportunities which we saw earlier this year when rbs put itss International Unit up for sale. Its strongly capitalized. A wellrecognized bank in italy. As far as International Banks it would be in addition to their platform. Francine of course, Banco Santander is not the only one trying to grow in Wealth Management. Deutsche bank is trying to do it and we understand that Credit Suisse is also looking into it. How much can this industry grow . Elisa going back to intesa they are relatively new in the space, and they are growing internationally. You have one of the more established global players. They would have to look to ai sia. For intesa that growth could come closer to home. It would still diversify their geographic reach. There are margins and competition is finding marshes. Margins. Regulatory compliance is increasing costs. The wealth and Asset Management parts of banking are grappling with from syntec. Which is going to be playing into future earnings. Guy thank you very much indeed. Joining us from milan. Francine earlier, greeces finance ministers spoke to an economics conference in athens. What we need is investment and we need to rebuild the system of credit in this country. It is quite preposterous that we have potentially exportoriented companies that have no access to credit. That needs to be fixed. We also need to reform the states reform the Pension System reform our system of tax administration. We need reform everything. Francine we spoke to the intesa ceo about the linkage between greece and what he sees as one of the main issues in the Banking Sector. He says if there was a negative event default, then theres q. E. Guy nice for mario draghi to do whatever it takes once again. The question is how much further can make go . People talk this being a lehman moment. No one actually knows. The ripple through the Banking Sector is hard to catholic. Hard to calculate. Francine maybe the International Creditors will sit up and say it is time to write that check. Guy a budy sy day in the telecom sector. Business in spain continues to improve. Tall talk. Saw adjusted net income despite 5 revenue growth. Francine itv has been expectations with strong results. The company which airs downtown abbey saw 14 growth. Guy the ceo of an italian oil and gas company has told bloomberg that oil prices are set for a gradual rise. They reckon increased demand could see prices reach 70 before 2016. Eni our view for 2016, we are thinking about, we can stay a bout 55, 60 average. It is still our view. There is a positive trend by the end of the year. That is not the main text. 72 or 68. There is a positive trend because demand is increasing and supplies are reducing. Francine the head of Qatar Airways has struck back at criticism that Gulf Airlines has an unfair financial advantage, saying efforts to block the carrier from american airports coming from greedy u. S. Competitors. Baker says he would never forget comments made by the delta ceo that appears to associate the biggest gulf carriers and the 9 11 attacks. Baker i will never forget because we are not a nation of terrorists. As a matter of fact we are in alliance of its United States to fight against the terrorists. And what he has said will never be forgotten by me. Guy that brings us to our twitter question of the day. We want to know which region has the best airlines . The gulf, europe, or america . Tweet us. Francine up next, how will downtown abbey help itvs revenue surge . Francine welcome back to the pulse. Now telefonica has reported earnings this morning. They beat analysts on the top and bottom line. Lets go to madrid. How did telefonica perform in spain . Rodrigo ok in spain. There are two different reads. Their read and the read some people are the street are hearing here. The other read is that their financial numbers in spain do not yet reflect that growth. While thye arey are better than other quarters, they are not as good as many were expecting. Guy what about the rest of that business . How did that do . Rodrigo pretty ok, especially brazil. Germany reported last week. We saw especially in brazil, we thought increase in average revenue per user which is a measure used in the telco industry. It shows telefonicas strategy to offer higherlevel products may be working. Francine profit seem to the overestimated. What is that down to, low estimates . Rodrigo they did not do that much better than expected. There are a few things that helped, but it was not over the estimates in the sense it blew everybodys head away. Guy ig guess the big question the sector has had so much m a. What happens next . Does the repositioning of this business continue . Do they like what they have . How much more is yet to come . Rodrigo some of their latest deals have to do it two things. One is convergence that is happening with spain with the acquisition of a pay tv broadcaster which gives them a huge control over the market, 85 of the market in spain. Convergence happening in brazil. The question is what will they do in germany . They need another strategy in germany. And the big question is mexico, where they have some problems. It is the only big problem where they big market where they have these issues. Francine thanks so much. Guy lets talk another company with earnings. Uks largest commercial broadcaster itv posted strong advertising revenue for the start of the year. The stock is trading lower. Why . Caroline perhaps a little bit was too much faster in. Perhaps there are a few concerns coming out in the numbers, but lets look at the Positive Side of things. Broadcast raven eisen advertising revenue up. Coronation street has been running for decades and the runaway success of downtown abbey. In the First Quarter they had a few one offs that helped. One of them is the rugby. An early easter helped as well. Many an analyst called it. Morgan stanley saying that itv is on the track from bumper year in advertising to up 12 . We have gone to quickly there because also we have got the overall area of concern perhaps is going to be the share of viewing falling 3 . This is what itv is struggling with it less people are watching the main channel. It is going to be helped. They have exclusive rights to the rugby world cup. But audiences have been following. Been falling. The company is talking strong. Thingsey are saying rebalancing. Suddenly itv is all about content. And want to avoid from being so dependent on the advertisers. Moving into online and digital. That is reaping rewards, up 31 onlyine pay. Itv studious. Sales up 17 . They want to start making their own content. The runaway success is on it six series and none other than downtown abbey is not made by itv. It is made by carnival films. They want to start making these runaway successes themselves. They have been an acquisition spree. Buying the weinstein brothers tv unit. That means marco polo and project runway. And the maker of the voice. And the likes of real housewives. Owning content, that reaps you rewards. The benefit toare to come. We are factory and the fact that this is a company that is having falling audiences been trying to diversify itself. Content is where it is at for the chief executive. Perhaps the shares are coming down because they have been at alltime highs. If you look at the shares year to date, up 20 . In april, he hit a record high not only because of the trajectory of letter advertising but, also, maybe it is an acquisition. Maybe it is an m a target. That is what many an analyst has been saying. A little bit of profit taking as we see the numbers of the First Quarter showing growth. One area that could be concerned, but not much overlong, is the 200 workers will be striking today of all days. It is out of 3000. Not that many on strike today. Guy they very much, indeed. Itv. Thank you very much indeed. Francine why the Qatar Airways boss thinks the u. S. Competitors are being greedy. Guy welcome back. Youre watching the pulse. We are on the radio and streaming on your tablet, your phone, and bloomberg. Com europe. Now, the ceo of Qatar Airways has hit back at claims made by americas main airline that the gulf competitors have an unfair advantage. United continental claim they are being undercut. The american firms are attempted to limit the presence of the Gulf Airlines in the u. S. , but an interview with the qatars chief mr. Albaker promised a proper response. Albaker we need some time to look at and study the allegations the american carriers have made against us. We have not had insight to all the information. Once we have them, yes, we will respond to everything every single allegation which is absolutely unfounded in my opinion. Guy kari lungren. This has been going on for a while. Tim clark has been in fall. He has been outspoken about this. Qatar getting involved as well. Where is this going . Kair ri the Obama Administration is looking into it. The u. S. Airlines in the meantime have asked can there be a suspension of expansion by the gulf carriers . The gulf carriers are denying these allegations. They are saying this report that came up in january, it took two years to put together. Theyre asking for two years to put together their own report and denial of these allegations, saying that they should be allowed to expand. Francine we are seeing so much growth from gulf carriers. Is there going to be more pressure from the european once . Kairri it is interested to see the european reaction. You see the diversions of opinion. Air framcnce and lufthansa are more concerned but are asking their own governments, saying, maybe since Airport Charges in dubai are less than europe, can you look at trimming Airport Charges in europe. But there has been a diversions of opinion. Willy walsh the ceo of iag hes in favor of the expansion of the middle eastern carriers. Now qatar owns a piece of iag. Iag actually stopped being a member of the association of european airlines. And they said that is because they did not agree with some of the other members. So they are vocally saying, you know what . If you cannot beat them, join them. Guy presumably this is going to dominate. Kari it does seem likely. It is interesting to put the gulf in context. 60 of the World Population or the flying population lives within six flying hours of the gulf. This is a dilemma that is here to stay. You can see why the American Airlines are so concerned about this. The hub model the gulf has created and what they are doing is incredibly innovative. It is totally new. Who was the last group of airlines that did this . The low cost carriers. Now ryanair, easyjet, southwest are eating the legacy lunch. Francine thank you so much. That brings us to todays twitter question. We want to know which region has the best airlines. [baseball crowd noise] [x1 chime] [crowd cheers] oh i cant believe it [cheering] hi, grandma francine welcome back to the pulse. Guy these are the top headlines. Francine honda is recalling 4. 8 million vehicles due to faulty airbags. Now it brings the total tally for recall shy of 20 million vehicles. Guy toyota plans to boost after profit surged to a record high. The carmaker will pay an average of 58,000 458,000 to its executives. Net income jumped 19 . Francine the amtrak trail that you read train inthat derailed in philadelphia was traveling double the speed limit. Seven people were killed, and 200 were injured on tuesday night. Now, this week, john kerry met with russian president Vladimir Putin for their first talks in two years. Overhanging, the meeting with ukraine and sanctions but how have so factor those factors affected russia . We are joined by the cfo of the moscow exchange. Thank you for joining us. You reported figures today. You have really taken advantage of the volatility we have seen in the markets. What is the trend . As volatility declines, how much will you be affected . Thank you for the question. We just had a report that the sixth record quarter in a row with eps going up 124 . Going forward, we will have a normalization of our income. But the key thing which will affect revenues will be the normalization of Interest Rates in russia and Capital Markets coming back to normal. What we started to see with new bonds issuance a weak year. Guy what is the longterm effects of sanctions and the overall effect on economyt on the economy . Evgeny what we see is localization of local Capital Markets. All companies coming back to russia. We see High Quality Companies raising capital locally. That is what we see in the First Quarter this year. Rosol raising capital domestically. This is the key effect on us as a company. Francine that is how you think you will make money . Evgeny i apologize. I do not hear the question. Francine as volatility since sides, how important is it that you attract new ipos . Is there anything that is in your power to deal with the falling volatility to make sure that profits do not go down . Evgeny i think it is one common misperception. We dont normally make more money with volatility. There is some affect, but if you look at the mediumterm trends we make more money in the bull markets. As for the new issuances, this is one of one the Biggest Challenges for us as a company. To get more companies to come to moscow. And actually to get more companies more local companies to lease to list. Guy how are you going to persuade local companies to list on the market given the difficulty surrounding the russian economy . Is there any reason for a company want to want to come to market in this environment . Evgency we created our infrastructure. We created a world class infrastructure. It is much more easier and more efficient to list locally. Global investors can invest anywhere. We have shown that with our own example. In 2013 when we listed are shares only in russia. We have had a successful ipo. We demonstrate that to our clients. We had several cases for that afterwards. This is not a shortterm that can be solved in one shot. But we work to convince our clients that we are the exchange of choice for them. Francine we are seeing so much consolidation within your industry. Is it something that you want to be part of . Can that only happen when we see less sanctions . Evgency y our view is that we will stay in the Regional Exchange without, we dont have an appetite for consolidation. We look at the m a opportunities across the we want to expand our capabilities and information data. But we think we will be the regional hub for russia and neighboring countries. Guy thank you very much. Great to speak with you. The cfo of the moscow exchange. Francine after the break, with mergers and the media and telecom sector, we will look at that next. Guy a snapshot of what is happening on the markets. Trading desks may be lower staffed than normal. Mario draghi speaks later. You never know. We might see something of interest. Bt is getting bigger and bigger. We will have fewer competitors and that will be bad can consumers bad for consumers. Guy dido harding talking to bloomberg about the state of the telecoms and the media industry. Francine lets get more on that. It has been a period of intense mergers. Who could be next . Well discuss that with Julian Watson an analyst at ihs. And sarah simmons. Thank you so much for joining us. In terms of first of all who, what, where, its about content. So, the consolidation will happen between the u. S. Trying to get into europe or the other way around . Julian it is not solely about content. The mobile consolidation in europe is about trying to improve profitability. We have seen in country consolidation and ireland and ongoing in the u. K. It is likely to happen in italy. It happened in norway. As mobile gets more mature there is less room for growth. Guy has anyone figured out the right answer to this . It is about content. It is about other aspects. So consolidation within the individual sectors, but we also have verizon buying Programmatic Advertising via a ol. I am looking at the different models people are trying to come up with. Im not convinced that anyone has figured out what the right formulation is. Sarah some of the deals are more about services. Aol. That is an adtech deal. It definitely is about content. They may sell the content assets. The end game is going to end up. Thats why we are seeing different strategies. I do not think they cross border im assuming more in market will be the most sensible. Francine weve heard about Liberty Global. Sarah we think the smart investment he made. He made a lot of money on the itv stakes. Itv makes content for free tv and not for pay tv. So, no. Our view is they are not going to amount a bid for itv. Guy could we have a massive or people going to specialized . Am i going to be a Telecom Company or in my going to do lots of things . Can i think about what aex ists now and assume that is going to be the future. Every time i talk to these guys, they are scratching their heads trying to figure out how content, advertising is changing their businesses. None of them seem to understand the outcome. Everybody is grappling with it. Are you safer staying in your core market . A mobile company. Or are you setting yourself up ultimately to be an acquisition target down the road . Julian most operators are diversifying. You saw Liberty Global by a mobile operator. Your also sing Liberty Global seeing Liberty Global with other services as well. All are diversifying. They you see recently telefonica moved to require capital digital in spain. Guy but that that in the t space. What about the m and the other t . Two you need to be a Technology Company . Do you need to be a Media Company as well . I whnen you look at what is happening, are bold ceos going to be rewarded . Is it bold to stay in your own area . I appreciate your saying they are stepping a little bit out, but where is the blue sky thinking happening . Is there any company that stands out . It sounds like a confusing question but the answer is because the space is so confusing. I dont understand yet who is thinking correctly about this. Julian i do not think any Single Company has moved successfully out of his core business yet. Either telecoms or tv. Beyond that we have seen some asian carriers move into the Digital Media business. But it forms a small part of their business. Today, there has not been a massive merger between a telecom. And a Technology Company. Sarah if you look at content it is difficult to create must have content the kind of content that drives cisco can services. So it is still sports rights. People still have to absolutely have to. There is a very limited supply. And there are nonpremium movies and series. That is a very consolidated market. So you know, moving and content, buying a bit of this or that does not get you that far up in stuff you really need is held by very tightly by a small number of players, which are the main sports stations and the hollywood studios. You have not seen any of the studios try to get into distribution in terms of telecoms. But what they are doing is realizing they can start to go direct to consumers. They are becoming a bit more of a competitor to the traditional media because you cannot get espn online without having to sign up to a cable operator. Guy it is over the top products that its making. I am seeing Telecom Companies looking to do some of those things you get 4g and a fiber link and 5g. There is a possibility to create the opportunity to get direct to a consumer with your own content. Sarah it is not that easy to make content that is good enough. You have to have a massive scale. Netflix has tried to do this globally. That netflix once wants access to consumers. And might be easier to do distribution deals. Youve seen this already where you get free netflix with years of scotian to talk your subscription to talk talk. It is a very different business. Guy the silos remain. Sarah your getting more alliances, as content guys get close to the consumer. And the operators want to have content. But most of those alliances are not exclusive. Francine julinaan, going back to the players that are doing it right, are we going to see consolidation . Julian we will see some consolidation in the next 12 months in europe. It looks likely that wind in italy will tie up with three. The big question will be what are the conditions that the regulators will impose on these consolidated mobile operators . In the next for years we will see a flourishing in that sector as consumers tryt to save costs. Sarah id agree. I think youre going to continue to see more content space and more of what itv is doing. Weinstein is next on their list. They are trying to create a scale player and content. I do not think you will see telcos or Cable Operators buying content businesses. Guy nobody buys itv. Because that is what was talked about a year ago. That you think is not going to happen . Sarah we do not think either of those deals are very likely. Vodafone is interested in owning network assets. Sky does not have a large network. It create some content of its own, but it is mainly licenses. It owns the premier league writes, yes right, yes, but only for three years. An itv has to say that we do not think that make sense. Francine thank you for joining us today. Guy top stores. Senate leaders have agreed on a deal to move forward with present Barack Obamas legislation to speed the approval of trade agreements after a oneday rebellions by democrats. The senate will hold a hearing on to related bills. Two related bills. Francine londons Housing Market rebounded in april. The guage for u. K. Capital increased from minus six in march. Guy the ralph lauren is scheduled to increase and expand in sudops in europe. Francine up next we meet the english aristocrat charged with running francine welcome back to the pulse. Guy now, lets go to my neck of the woods. Not being an english aristocrat. Being an aristocrat in charge of resources and race horses and racing cars can be difficult. We meet the lord of speed. I would not introduce myself as the earl of march. The address it be, you put dear lord march. My name is not lord march. Im Charles Henry gordon lennox. I live here at goodwood. Where my family has been for 300 years. I live in the house with my five children. It is sometimes challenging. There are a lot of people around, lots of things going on. 75,000,000 people a year come through the state. One of the challenges is to fix costs. We, like most other states, have got four street, farming, and property. So, ive tried other businesses and focused on sports. Here we are at the racetrack. Probably the only country racetrack in the world. So, we created a special track in 1993. It took place in front of the house. That has grown and grown. Over 200,000 people attending. It was the only major sporting event to take place with a period theme. It is an amazing experience. To see 100,000 people all dressed in the right theme. It is magical to go back in time. I guess the unusual thing about goodwood is its a mini conglomerate. We have all these businesses active in this one place. The estate is 12,000 acres. We have horse racing, motor racing two golf courses and shooting and cricket all here. I am not sure whether aristocracy has much meaning as a kind of group as a word to describe a group of people. But, of course, these great houses these estates that are attached to them are meaningful. The outside world, the public, really understands that much better now. A lot of you think, i would not want that responsibility. I would not want to look after all that. It is a big responsibility. But mostly, it is in their blood and its something they want to do. Most people do it very well. Francine the lord of speed, that is quite a good nickname. Guy the set up is fantastic. They do a thing called free friday night switches is racing dj, massive party. Francine parties like only the english aristocrat can throw. A little bit like downtown abbey. Guy with a big ligh show l ight show. Uk Prime Minister David Cameron has called the lack of Affordable Homes in britain a national emergency. A new survey showing a jump in demand for homes will examine that issue. Francine as u. S. Refiners reduce their crude years, we will look at where the price of oil might go. Guy kim kardashian, the interview at 4 30. That is what is coming up. Guy Francine Francine a reminder of her twitter question. We want to know what region has the best airlines. ay. Guy telefonica reports a Strong Quarter as it sees the benefits of consolidation. Francine the war of words between gulf carriers and their american rivals continues. Guy so, good morning to our viewers in europe, good evening those in asia, and a very warm welcome to those just waking up in the u. S. I am guy johnson. Francine i am francine lacqua. This is the pulse, live from london. Lets start with our interview with intesas ceo, the head of italys secondlargest bank is on the hunt. I asked about his targets. If you want to attack the asian market i looking for a possible acquisition. I am growing and such a way that i need an extra engine for growth. The strategic target could be to have an International Brand to tap International Diversification through Wealth Management activities. Francine this would be your brand name rather than operations. Is it something that recognizes or something that you can grow . It is the total amount of market cap of the possible target. In reality you can have a wellrecognized brand that has a market cap that could be higher than my prior Banking Division. In that case with the merger i would not have control. I want control of the entities so the target could be in the range of a valuation between 10 billion euros and 50 billion euros. So the target, if you want to maintain control, should be in that range of evaluation or lower so you have control. I have nothing on the table today that from a Strategic Point of view this could be the second step for my Banking Division. This is another kind of discussion that we can have an Asset Management. Francine this is something you have promised. You are hitting targets above what you have promised. Is there a chance it goes up . I am confirming the 2 billion dividends because it is an eye level dividend compared with european peers. We are above 13 of common equity so we are in a unique position to give dividend to shareholders. The promise is 2 billion euros. One billion euros in a quarter. We are in a good position to confirm 2 billion and we will see at the end of the year what will be the final result and we will see what we dividend policy will be. I can confirm the 2 billion euro commitment. Francine what is happening on the bond market . It is related to qualitative easing. The action of quantitative easing was probably over expecting the real results. So the reduction in yield and spread was too high. Now i think they are considered the market is considering the right level of medium term and Short Term Impact deriving from quantitative easing. So i consider this more correlated with the fundamentals of Different Countries so i am not worried at all. In this phase of the market, you have correction relates to the fundamental and not shortterm infrastructure. Francine this is what janet yellen was saying, stabilize and find a correction to a level more sustainable. We talked about migration, russia and what is the one thing we have not talked about that you do not really know how to deal with . Is inflation something i think, i dont know if you will talk later but it was the first time of italian positive growth in gdp. I can tell you that italy is back. It is very important. Italy is back for the first time in the last five years 10 . Now there is a positive sign. It is the clear evidence that there is a complete turnaround within our country. Guy Carlo Messina describes it as a mismanaged crisis. Intesa see youre talking about greece intesa ceo talking about greece. Lets get the view of our next guest, ubss chief european economist. Hard to argue against that. The year crisis has been a huge president. We all went into this with limited experience. Mistakes have been made. Francine if we move on, the other thing he says is we dont need a plan b because there is qe. That was put there to reincent other countries. With regard to greece and a potential grexit we need a plan b and im sure the authorities are working on this. This is part of sensible risk management. And then we would hope our best Case Scenario remains that grexit will be avoided. In any case, we hope the eurozone will come out of this and a stronger fashion. Guy italy is back. Is italy back . For the first time we have seen positive growth over 3 quarter on quarter. In your and your terms, were still at zero. Over the next couple of quarters i think we will see italy return more convincingly to positive growth because we had the ecbs qe, we see very low inflation which is helping the consumer. We have moderation and fiscal austerity and something very important in italy, an improvement in bank lending conditions. Francine the problem is that you could have a recovery without employment going down, unemployment going down. This is a huge danger. The block of structural unemployment in the eurozone is very high. It is also an italian problem. I think the Unemployment Rate will probably go down by the block of structural unemployment is so high that the scope for a reduction in unemployment not just an italian problem but a european problem is pretty limited. Guy once we get back to low growth do you think politicians are going to get the job done we can move on and we can relax . The danger is, if we do that this is the time when we need to build on a recovery. With loose monetary conditions and qe with a little bit of growth it is like taking antibiotics for three days. They actually deliver the disease back to you in a weeks time. That is a relevant risk. You indicated we have unprecedented stimulus, certainly from the Monetary Policy side week euro, low oil prices and the moderation of fiscal austerity. This generates a cyclical upswing in the euro. The risk is there is a sense of complacency on the side of european policy makers. The message has to be that growth enhancing Structural Reforms need to continue. That refers to the labor market above all. It also refers to the Pension System, the Public Sector guy how do you get that to happen . We just had one of the worlds most thinkable financial crises. They have been dragged kicking and screaming into making Structural Reforms. Once the pressure is off it is going to be difficult. I also think that pressure from the market, prince or from the crisis helps to kickstart reforms. Pressure from the crisis helps to kickstart reforms. In the countries where we have had troika programs, Structural Reforms have moved forward. In the countries that were not logged down bogged down, less has happened. Pressure helps. It is difficult to engineer because the public remains skeptical. Francine if you look at what the story on europe will be, are you more worried about a greek exit or a u. K. Referendum that says lets move away from the eu . It goes back to the perception you are talking about, what people are getting in terms of benefits from the eu. This year, greece will be the dominant theme. On the u. K. Referendum, whether it takes place in 2017 or earlier, that is more a story for the future. It is relevant but the real pressure is going to come in the future. The greek issue has to be sorted over the next couple weeks. The debt redemption payments over the next couple weeks particularly on the 20 of july and august, more than 3 billion each will have to be paid back on those days. This will require a resolution. Not just with regard to the current troika but also to a third bailout a followon program that will put public finances and external funding in greece into more solid conditions. Guy nice to see you. Thank you for your time. Ubss chief european economist. Francine heres a look at what else is on our radar. Guy a busy day in telecoms. Telefonica has reported firstquarter revenue, a beat. Business in spain continues to improve. Francine britains itv has been expectations. The company which airs Downton Abbey saw a growth to 65 Million Pounds and external revenue. Guy the ceo of italian oil and Energy Company has told bloomberg that oil prices are set for a gradual rise. Descalzi reckons increased demand could see prices reach 70 for 2016. We think we can stay about 55 to 60 average. We think we can see this trend theres a positive trend. By the end of 2016 we can reach about 70. That is not the main fact. There is a positive trend. The demand is increasing. The supply is reducing. Francine the head of Qatar Airways struck back at criticism that state owned Golf Airlines have an unfair financial advantage, saying efforts to block the carriers from u. S. Airports come from greed. He said he will never forget comments made by delta ceo that associate the carriers with the 9 11 attacks. Where nomination of terrorists. Where an alliance with the u. S. To fight the terrorists. When he has said will never be forgotten by me. Guy that brings us to todays twitter question which region has the best airlines . Gulf europe, america, or asian . America is not coming out on top or particularly well. Francine for the moment. But please keep tweeting us. guyjohnsontv flacqua. Most of you think it is the gulf carriers. Back in two francine welcome back to the pulse. Live from london. Guy pc year of Qatar Airways has hit back at claims by an American Airlines that gulf competitors have an unfair advantage. Delta, united and continental said they are being undercut by golfbased counterparts. Francine Akbar Al Baker rejected the allegations. Akbar al baker we need some time to look at and study the allegations the american carriers have made. We have not had insight to all the information. Once we have that, we will robustly respond to every allegation, which is unfounded in my opinion. Francine joining us to discuss this is kari lundgren. When you look at this back and forth between the gulf carriers and the u. S. Accusations, what is the next step. Kari the Public Consultation goes through may. In the meantime, u. S. Airlines are asking the gulf carriers not be allowed to expand further. The gulf carriers deny the accusations and they said they want a couple years themselves the report took two here so they say they need two years to refute it. They are plowing ahead, adding routes. The reason salton clark at emirates talking about potentially adding routes out of europe you even saw tim clark at emirates talking about potentially adding routes out of europe. There is one route from milan that u. S. Carriers have been vocal about because it is not originating out of the middle east. Guy i remember air france getting aggravated about this. European carriers have been thinking the same drum for a while with a different beat. Kari maybe because it is a lost battle at this point. The gulf carriers have a big position in europe and they are coming into the main hubs. The european carriers have looked at it from a different way. Looking to their own government and saying the Airport Charges in the by are less, can you think about giving us some support here . There has been a divergence of opinion. One thing that makes the u. S. Report so strong is that all the big legacy carriers in the u. S. Are backing it. In europe there has been divergence of opinion. The ceo of iag, the Parent Companies of British Airway and iberia, he is in favor of the gulf carriers. Qatar now owns a stake in iag. He has been saying they have a business model, the best option is to work with them. Francine where does this leave european carriers . Kari it is going to be interesting. The International Air transport association and that is in three weeks time. It is going to be at the forefront of what everyone is discussing there. It will be interesting to see how everyone, where everyone comes out on the issue. Open skies, it is something that has benefited u. S. Airlines and european airlines. It is something that you do not necessarily want to throw the baby out with the bathwater. You want to get this right and we will have to see what happens. Francine thank you so much, kari lundgren. Guy we will take a break into you in a couple minutes. Two francine welcome back to the pulse. Live on bloomberg tv and streaming on bloomberg. Com. Guy u. S. Oil benchmark features closed lower for the second time this week after red finerys after refineries decreased the ceo of italys oil giant says he thinks we think we can stay about 65 average. That was our view and is still our view. The price of about 67, 68. It indicates there is a positive trend. By the end of the year 2016 and maybe before i think we can reach about 70. That is not the main factor. There is a positive trend because demand is increasing and supply is reducing. Francine for more on oil, lets bring in julian. We were just hearing from the eni ceo, he was saying oil may reach 70 a barrel by 2016. Is that your prediction . Julian there are a range of factors that are uncertain. I think there is more pressure on the downside than the upside. This is a view that Rex Tillerson of exxon mobil has expressed. He has been talking about a w shaped price dip rather than a v shaped or any sort of recovery. If you look at the forecasts at the moment, the International Energy agency is forecasting demand to grow 1. 2 this year. People are jumping on that as being close to twice the demand growth of last year. It is being seen as very supportive. This is 1. 2 in a year where prices are expected to average 60 a barrel. It is exactly the same demand growth as we saw two years ago in 2013 when prices averaged over 100 a barrel. We are not seeing a huge demandside response to lower prices. There are suggestions that we are seeing a slowdown in output. Well we may be seeing a slowdown in output growth but we are not seeing output itself shrinking. Guy the big battle has been between the saudis and the u. S. Show producers. I take your point that it is one of the stories out there. Have a saudis been successful in curbing u. S. Production . . What i hear is the u. S. Guys. Have been successful in dragging costs down the marginal rate is going down. Julian theres a lot of talk of prizes in the u. S. Shale patch coming down money percent. What i think that this period has done is it has slowed the growth in u. S. Output. Whether it has put the output into decline is still debatable. We have some weekly figures coming out of the u. S. Department of energy. Theyre a very broad estimate and there has been a lot of questioning how accurate those figures are. The monthly figures, which are based on reporting by individual companies they run about two months behind. We are getting figures now for february. We are not yet seeing absolute decline in the u. S. We are seeing a slowdown in growth. I think the real battle, the real slowdown in investment is coming in the investment in future production from expensive deepwater offshore oil. That is going to take time. Francine up next, we will be looking at how hit shows like Downton Abbey have helped itvs advertising revenue. Guy we will see you in a couple minutes. lacqua. Guy im guy johnson. Francine honda is recalling further 4. 8 million vehicles due to faulty airbags which has also been found in 20 oh to and nissan cars. It brings the total tally to shy of 20 million vehicles. Guy toyota will boost its directors pay. The carmaker will pay an average of 458000 to 14 directors. Toyota is awarding executives after net income jumped 19 . Francine the new york bound amtrak train that derailed was traveling at 106 miles per hour, more than double the speed limit. 7 people were killed and more than 200 or were injured tuesday night. Guy its a holiday in a lot of europe. Markets are open. Volumes are light. Lets go to Jonathan Ferro. Jonathan stocks are pretty much flat. The ibex know doing nothing. The ftse in london is flat. Let me show you the shape of the session two hours in. This is the dax. There was a drop off, we have a raised those losses, flat on the day. I will show you the reason we had the initial drop off from the fx market on the euro. About an hour before the opening, zero pushing higher against the dollar 1. 1421, up. 6 . Not so much a euros story but a Dollar Strength story reflected in the fx markets. The pound climbing against the dollar for a 5th day. Through 1. 58 for the first time in 2015. U. S. Retail sales yesterday lighting a fuse under dollar and table. And cable. A stronger euro makes you think twice about the equity story in europe, particularly in germany. Yesterday, bund yields higher. This morning up about one basis point to 0. 73 . In greece greek yields up three basis points on the 10 year. Yanis varoufakis speaking in athens talking about debt being redesigned and indicated singling out the 7 billion worth of ecb bond redemptions coming up in the summer. A suggestion he might like them to be pushed out. Whether he gets that wish remains to be seen. Francine Jonathan Ferro with your asset check. Telefonica has reported earnings to the Spanish Company Beat Estimates on the top and bottom lines. Lets get straight to rhetoric up to trodrigo in madrid. How did telefonica perform in spain . Rodrigo on one hand, they were happy to celebrate for the First Time Since 2011 the number of which is used to measure performance. There is still a decline. The good aspect is that those declines are slower than they used to be. It is not as bad but it is still bad. That is a bit of contradiction the markets are showing the results are good but the market is a bit down. Guy what about the rest of the business . Walk me through that. Jonathan the rest of the business seems to be solid. They had some weaknesses in brazil but the revenues were pretty good. They came out yesterday from their unit there. Germany last week parted and in general it was good. Access was up. In spain it was up 1 , 10 for the company. Francine rodrigo in madrid. Guy and other company with earnings out, itv posted strong advertising revenue p at the stock is down, why . Caroline Second Quarter was a little bit more muted. Perhaps that is taking the wind out of the share price sales. If you look at the numbers, up 12 . Ahead of most consensus when it comes to money from companies advertising with itv. It looks like the full year they are going to get a few upticks. Theyve got the world cup for rugby and champions league. For the full year we are going to see is slowing in the pace of advertising revenue growth. That is what is sending the share price lower. Also an area of concern, the share of viewing eyeballs people watching itv. It seems to be slowing if you look at the itv family, down 3 . This is why the company is saying they want to rebalance. They are saying we have got strong growth but we want to rebalance. They do not want to be dependent on the highs and lows of advertising spending from companies dictated by the Macro Economy and oneoff events. This is why the focus is content and online. This is one of the chief executive is focusing on and it is working. Plowing money into online. Online pay an interactive up 31 at the firstquarter numbers. This is the interesting one, itv studios. The key hit, what everyone knows has been Downton Abbey. In its sixth series, the last one. Itv does not make Downton Abbey. It is made by carnival film. They want to start having blockbuster hits of their own and they are on the acquisition trail. They already make programs, but they have been getting the weinstein brothers tv unit, that brings project runway and marco polo. The owner of the voice. That will start to reap rewards. They say the benefits of the acquisitions are still to come. Adam crozier is trying to drive itv studios so it can offset peaks and troughs of advertising revenue going forward. If you look at the share price, we are seeing a little bit of downward trend in the itv shares. Look at that. They hit a record high in april. Yes, because we were seeing full year at a revenue was going to be looking pretty good. Notably, it is the m a potentially of itv. You know the speculation. Their they are one of the number one picks for 2015 p could we see Liberty Global buying them . The cfl recently said we are not interested in buying itv but we might be interested in buying content. Back to you. Francine thank you, Caroline Hyde with the latest on the media and Telecom Company. Guy David Cameron has called the lack of Affordable Homes in britain a national emergency. What can be done to address it . We will discuss the subject when we come back. Francine welcome back to the pulse. Live from london. Guy lets look at pro perty. A jump in demand for u. K. Housing as well as a decline in the number of homes listed for sale. David cameron has called the lack of Affordable Homes a national emergency. Lets take a look at the we are joined by Jefferies International director. The languages getting pushed up a notch. It is now a national emergency. Does that signal we are going to see a change in housing policy in the next parliament . I think all of the main parties are prohousebuilding at the moment. We have had a structural undersupply for many years and it is difficult to think that can be solved overnight. The Planning System is being worked on and we know that the demand side, levers are being pulled. This is really a supplyside issue. Francine how long does it take . Five years or 10 years . The latest planning regime came in in 2012. Three and a bit years of that. Of the 384 local authorities across england and wales, only about 25 actually have sound plans in place. They are the ones that have identified warehouses are going to be built for the next 510 years. We cannot really blame House Builders for not building houses if the authorities have not said this is where you can build them. Guy yesterday talking about releasing publicsector land. Is that a solution . It is part of the solution. The Public Sector more land suitable for Residential Development than anybody else. If there is one way to pull a supply lever, the biggest way is by a publicsector release. That would benefit the likes of barrett that also smaller House Builders. That is where we need to supply response, small guys. Francine planning is getting easier. It is getting more straightforward. Guy never that straightforward. Reserve matters so they are dotting the is and crossing the ts. Yeah, i think it will always be the case. Guy there are not enough plumbers and sparkies that is the problem. The issue is Production Capacity per bricklayers carpenters plumbers. This is not an issue that is going to go it quickly. Francine if you look at big Real Estate Companies or the builders is anyone going to benefit more if we actually do get a push in housing . Well, while supply is constrained now benefit. Ait helps prices go up in it will have to look at the next tear down, tier down. Larger builders reliant on debt finance, the loan to value and loan to income ratios are not attractive for them to enter the market. The guys with access to equity finance are in a real sweet spot of the market. Guy what can be done to deal with that . Is there anything that can be done in terms of help to buy . Is there a way of financing those guys more effectively . We can look at this game that Taylor Wimpey is working on at the Olympic Village in stratford, london. The agreement is you only pay for the land once you have actually sold the house. Given cash flow is the issue for smaller private builder and even the larger it is publicsector land if it was given and released to tier 2 and 3 players as well as Taylor Wimpey, we could see a supply response. If the current government is saying we need 200,000 homes a year and last year we built about 140,000. The listed guys built about 66,000. It is unrealistic to think theyre going to double production overnight or even over five years. The smaller guys are crying out for finance, they want to build more but cannot get it. If they could get deals from publicsector land i think that would be a good way. Francine this is not across the u. K. . It should be in places where people want to live. To put it very basically. Guy where the demand is ultimately going to be. Francine which is where . I think there is a danger we get too focused on london. We are only seven and a bit million people. The hotspots are london southeast, southwest and may be the m six corridor as well. If we look at employment growth and wage growth, we are starting to see that across the country. As we all know, if you want to live in Central London it is ridiculously expensive so you tend to move out and commute in. We have talked about the nhs. If we can reduce commute times, that opens a wave of new areas for houses. Guy is there a glut of houses anywhere . Are there areas in which actually we need to make better use . You are talking about transport links. Should we be linking areas of surplus to areas of deficit . Is it a simpler way of thinking of it from that point of view . One of the interesting initiatives is what they call brownfield site regeneration. That is rundown housing estates. If you put some investment in not just gentrified but improve the quality and make it attractive to businesses and restaurants, you can improve an area. Companies like morgan syntelindall are doing regeneration that increases the attractiveness of areas. Francine thank you so much for everything. Managing director for Equity Research at Jefferies International. Guy here are the top headlines. The u. S. Senate leaders have agreed on a deal to move forward with president Barack Obamas legislation to approve a trade agreement after a oneday rebellion by democrats. The senate will hold a vote later on two related bills here the chamber will decide on whether to advance obamas measures. Francine honda is recalling further 4. 8 million vehicles due to faulty air bags which have also been found in toyota and nissan cars. It brings the total tally for recalls to just shy of 20 million. Guy ralph lauren is set to increase prices in japan canada, australia and europe. This is according to the wall street journal. The company aims to mitigate losses on a stronger u. S. Dollar. Francine we will be looking at what to watch, including president obamas middle east summit. We will be discussing that after the break. Guy nine minutes to the top of the hour. You are watching the pulse. Live on Bloomberg Television and we are on bloomberg. Com. Being an english aristocrat in charge of an estate full of fast cars and golf courses does not sound like a tough gig. Lord march would beg to defend. Running a proper english estate can be a punishing as it is a privilege. I would introduce myself as lord march. You would not say oh earl of march. If you ask what my name was, my name is not actually lord march. Ok . Im Charles Henry gordon lennox, the earl of march and kinrara. I live at goodwood. I live in the house with my five children. It is sometimes challenging. There are a lot of people around and a lot of things going on. 750,000 people a year come through the estate. One of the challenges with the big estates is fixed costs. The overhead is about 30 million. We like most other states, have forestry, farming and property. I try to have other businesses alongside focused on sports at goodwood. Here we are at the racetrack. We are the only racetrack in the world in its original form. We created the festival of speed in 1993. A celebration of motorsports that took place on the private road running up to the racecourse. It has become the biggest car culture event in the world with over 200,000 people attending. It is the only exporting event in the world to take place completely to a period theme. People dressed appropriately and driving the right cars. It is a magical step back in time. The really unusual thing about goodwood is it is like a mini conglomerate. We have all these businesses here in one place. The estate is about 12,000 acres. We have horse racing, motor racing, two golf courses, flying, shooting and cricket all here. Im not sure whether aristocracy really has much meaning as a kind of group as a word to describe a group of people. Im not sure it had a lot of meaning to it at all. These greenhouses that these great houses and the communities that come with them are meaningful. The public really understands that much better now. A lot of people look at it and think i would not want to have to be linking after all that. It is a big responsibility. It is something people do very well. Francine the lord of speed. You have been to the festival of speed. Guy i live about 20 minutes away from goodwood. Great things. Francine for a look at what we are watching, we are joined by Elliott Gotkine in tel aviv. Probably it president obama is hosting the summit. How important is it . Elliott i suppose it is a summit, president obama hosting leaders from the Gulf Cooperation Council it is more notable for those who will not be there. It is meant to be a president a meeting between president obama and six heads of state. King salmon of saudi arabia dropped out recently, followed by the king of bahrain. The only heads of state that are attending are the heads of state from qatar and kuwait. The absence of the saudis in particular is seen as a snub to barack obama. The saudis are not happy with the deal being negotiated with iran. They are concerned if a deal is done and sanctions are lifted iran will become emboldened economically and start meddling in the affairs of saudi arabias neighbors such as yemen and syria. They are worried that in 10 years time after the deal expires with iran, iran will be able to produce nuclear weapons. Something it fears could spark an arm race. Saudi arabia not happy the u. S. Went back on its threat to carry out airstrikes on syria after it discovered chemical weapons were being used. Those are a number of issues, as well as the fight against islamic state. Do not expect any treaties but we could get some soothing words from president obama regarding sales of arms and security guarantees for gulf nations. Guy great stuff. Thank you very much indeed. Lots of responses to our twitter question about who has the best airlines. North america is not exactly coming out well. One viewer tweeting, which carrier is the least wretched. Francine another, dont bother trying to optimize your flights. A little bit harsh. That is it for the pulse. Stay tuned for surveillance. That is coming up next. Kim kardashian that interview is at 9 30 p. M. London time. Sident greets arab leaders admit sunnishared turmoil. The nations retail sales are tepid. Does the new mediocre extend to the u. S. . Mcdonalds is ms, shake shack is the burger of choice. This is bloomberg surveillance, live from new york. I am tom keene. With me, brendan greeley. Brendan there was a summit this morning. They had a lot of things to do. I think one arab leader is at a horse show. Tom have you been to camp david . Brendan i have never been invited to negotiate. Tom the president leaves the white house at 10 00 a. M. That is there a and that is their definition of allday. Brendan if you bring someone to camp david, you expect to get something done. Tom in our next hour, stanley mcchrystal. An