>> banks cut back. the royal bank of scotland will be stashing staff numbers and in japan. hello. welcome to countdown. we will beming up, live in paris. conferenceal tech which brings together leading companies, innovators and startups. we have exclusive interviews through the morning starting with le web's founder. markets are in focus after us a lot and equities yesterday. policymakers on short loans. of parliamentary elections and the russian central bank also meet in the next 24 hours. i will start with greece. what a day. the biggest one-day decline since 1987. that tells you something. something very interesting happened in the bond market. i will focus on this later. the yield on the three-year bond went to the yield of a 10 year bond. it is an inverting yield curve. that is a worry because that means greece will not have access to capital markets and will face difficulties raising money in the future. the asset markets in greece are flashing red right now. >> it all came on the same day as we had these tightening moves come from the chinese central bank. chinesehinese -- we saw stocks down as much as 10% yesterday. some weakness in inflation in china. by 2.7%gate prices down in november, a record 33rd straight decline. that falling oil and commodity prices are having an impact. the tightening we saw from the tighter short learn -- short-term lending loans in china we saw. we also got analysts asking what the pboc was going to do next. economists say they have exhausted their ineffective policies with this tool. what is their next move going to be? are we going to see that? --what are >> basically the measures of what the banks have been set aside. >> i touched greece, china. i think russia will still come as well. it is the highest levels you have seen since 2013. we are up a third of a percent on the ruvell this morning -- ruble this morning. the central bank has a meeting tomorrow. it is expected that could raise the rates to 10%. this is the worst performing. the bond markets are also flashing red. tenure government bonds a nearly 15%, the highest yield since 2009. you have the ruble falling and the central bank meeting tomorrow. 10% seems to be the consensus. polled sayaders a rate increase of 4% is really needed to get to grips with the currency. >> let's get the china where prices are continuing to slide. consumer prices across the country also rising at the slowest rate in five years. we are joined now from beijing by tom. what is driving this de flation? >> i think there are two factors at work. the first thing -- i think this is a positive for the chinese economy -- international energy prices are down. oil prices are down. that is having a cost to the chinese economy. in some ways that is a positive development. it could be a boost of business profit margins. the second factor -- this is the troubling one -- what these prices say to deflation in the chinese economy. the legacy of investment in the last few years has been substantial overcapacity across china's industrial sector. if you combine that with weak demand coming in from the end of 2014, the outcome seems to be the is very limited inflation in the consumer sector and deflati on in the factory sector. >> china's central bank has just cut interest rates so how does today's data play into the outlook among the policies? >> china's central bank, the people's bank of china, they presented them as a technical move. real interest rates were too high, they said and that is because inflation rates were low. well, guess what? the decline in factory prices that we have seen in november has already more than offset the impacts of the rate cuts. the businesses are now facing higher real by-line -- real borrowing costs. that underlines why the central bank felt it was important to move. if we see inflation continuing, that is going to start raising expectations of more cuts in interest rates coming in 2015. >> what does this mean for the chinese currency which at one point yesterday at its biggest interday moves since december 2008? are a variety of reasons why people are now shifting their expectations on the currency. on the past, it was about how much the yuan was going to appreciate. now we are seeing analysts shifting expectations towards the appreciation -- depre ciation. there is a huge trade surplus which is a substantial undervaluation which is not a big factor as it was. it partly reflects low growth in china's economy which argues for a week or currency to -- weaker currency for more demand. it'll add for more expectations epreciation. >> thanks a lot. >> ukraine and pro-russian separatists are close to resuming peace talks as a one-day truce is held. they hope for an end the fighting that is rocked the eastern region of the country for much of this year. ryan, good morning. how big is this seeming progress? name in a truce only in the sense that they continue to shoot at one another but on a much smaller scale than they have been for the past couple of months. last time they declared a truce in which two soldiers were killed. this is progress in the sense that both the ukrainians and russian backed rebels have been speaking positively about it. it is important because it sets it up for more peace talks in the city of minsk, belarus later in the week. this is the first step in a long process of getting back on the road to diplomacy. we cut up with the ukrainian president in cigna for -- singapore. he said this is an example of ukraine at a new crossroads. think this is decisively important to have a sustainable cease-fire. a strong guarantee from the russian general that the cease-fire will take place. unfortunately, we have several promises to keep the cease-fire. >> yesterday, i was trying to figure out where we are in this crisis. we took a piece of paper and i did the pluses and minuses of what is going on between russia, the west, and the ukraine. a plus is this truce and another plus is russia resumed gas exports the ukraine. this is a complex relationship. chasinghe armed f-16's that armed russian jets yesterday. we are seeing a lot of those top gun incidents. it smacks of cold war. we also had the german chancellor of attacking russia against adding that russia's ukraine policy should be shamed and maimed. that is really important because she has really been seen as a link between russia and the united states and the united kingdom where relations are much more acrimonious. westnk a new low in the -russia relationship is also some comments we had from the russian foreign minister will effectively made a big at the german chancellor. that is something in my 20 years i have never heard the russians do and suggest this is actually a relationship that will take a while to patch up. >> angela merkel has been the political conduit with the west, isn't it? invery pragmatic, grew up east germany, very aware of living with russia in the form of the soviet union. but, something changed. i don't know if it was in milan or australia but her rhetoric is much tougher now. you remember the last person to make an effort at diplomacy was president francois hollande when he stopped over in moscow we go. interesting because many people think if the french are the ones that are doing the negotiating, prospects for peace and not very good. >> we believe in there. we will talk about that a little later. join the conversation on twitter. ryan is -- if you have a question on russia, we are always there. on edwards -- anna edwards twitter. the one person to master twitter. what more can i say? we will go live to paris to gauge the mood of the nation's tech industry. we will go to to le web. we will bring you an interview with one of the ceos after the break. ♪ >> welcome back. we are getting some breaking news. the german travel business says their nbumbumbers are mixed. if you look at underlying every $868.5 million. the profits are coming a touch shy. $512estimates were for million. guiding thel of it merging group which includes tui. we got the numbers on december 4. the ceo will be speaking later on today on the pulse. tech leaders from around the role are in paris today for le web, the annual tech gathering. bloomberg was there to gauge france's 2 -- tech industry in a slow-growing economy. caroline brings us an extensive look. >> good morning. it has been going on for over 10 years. more than 3000 attendees here. 200 startups and some great stories, including the founder of uber who got the idea of creating the service here when he was stuck in paris and could not find a taxi. many think that france has become a pretty attractive place. france has introduced tax rates of $7 billion for rnd. these companies are also looking for the best talent. that is one of the reasons phil libin, evernote ceo, is coming to le web. camet him just after b off the plane. he told me he was setting up a new office in france. i asked him what his view was on for the france's tech scene. have a listen. >> i think the view is mixed. there is definitely a lot of sentiment that france is a difficult place to do business with. but, i think the smart companies are all contrarian. when the commission wisdom is some places difficult to be, that is probably the best time to go there. the most important thing is the talent. the most important thing to attract tech companies in to invest in the education and have the best talent. france's deftly far ahead in terms of many other places. that will keep companies like ours coming back. places talkt of about making a silicon valley summerhouse. -- somewhere else. for whatalley is great it does but there are a lot of problems as well. i don't think you need to create silicon valley in paris. i think france and europe in general is really on the verge of a notch up her nouriel -- entrepreneurial renaissance. it will be a great hub or location for technology companies. i think the next revolution that will have the highest impact on one billion people is this revolution in productivity. the idea of what it takes to make us productive is not having the separate tools that are based on physical ideas like a telephone or a slide projector or typewriter, which you can really combine these things that breaks down the barriers of individual productivity. i think people will be more productive next year than they were this year. technology, a combination of augmented intelligence, wearable computing a new workspace technologies are going to make a profound transformation. smarterng people to be in the office, to be more productive. that is the ambition of phil libin. million70% of his 100 evernote users actually use evernote in the office for work. he also said that the company will not be ready for an+++ another couple of years. of course, the next debate we will have with our guest this morning is also the tax debate. the u.k. wants to introduce a 25% tax on internationals like google and apple in their country because most of the companies actually find loopholes and do not declare all of their taxes where they make business. we will talk about this and the next tech bubble and the next tech resolution all morning from le web. >> thank you, caroline. anna will be back in 20 minutes for an exclusive conversation with the founder of le web. >> a global equity selloff yesterday with european markets feeling the effects. let's bring our conversation back to this. we are joined by peter, is shredded just at seneca investments. china, greece, russia said next week -- japan. what is number one in what you are interested mostly? choice.spoiled for things are all being driven by different things. in japan, you have the upcoming election. the economy is weaker than they were hoping it would be in china. you have inflation numbers that are coming in lower. in europe, you have greece resurfacing again. rush a ongoing. -- russia ongoing. i think iseally what the most interesting move is probably in china because it is the biggest move. you have such a strong rally in the last couple of weeks. that was bound to end as it did yesterday. how oil andhrough commodity story plays out in china because we see it having an impact on prices for many months. hina.deflation in c on the consumer side as well. i thought oil and commodities going lowers most of help these economies and yet we see this as a reason for weakness sometimes. >> yeah. it is a double-edged sword because on the one hand lower oil price should be good for economies because it is an effective tax rate. on the other hand, you do get lower oil prices feeding through into the broader economy i.e. yo u get lower consumer price inflation. if you have a highly leveraged economy with lots of debt obviously, that is not a good thing because the real value of your debt goes up. it is a double-edged sword. on balance, i think it is a good thing. not for some countries, of course. russia, nigeria, the middle east, but for a lot of countries, it is a good thing. >> mark will focus a little government bonds increase. having a risk is a greek exit. possibility or reality for 2015? >> i suppose is it a possibility? it's a very small possibility. the mechanismst are in place for support to materialize at some point. you go back to where we were three years ago. those fears about greece exiting the euro. then implementing new -- >> they can force a debt restructuring, couldn't they? >> well, i suppose anything is possible. our view right now is that we will, like we have done for the past few years, just muddle through. at the end of the day, all that matters really is what is monetary policy going to be. the fact is that will remain extremely loose. is dragi going to remain in control of things? probably yes. >> we have the results tomorrow. willere a figure that assuage the markets and maybe it will put off a chance of the ecb buying government bonds? the last figure was below 90 billion. figure,t 200 billion will that assuage investors or are we just heading towards bond buying regardless? >> i think we are going towards bond buying. it is probably the more evidence there is that bond buying is required at this point does -- because dragi feels the need to have the evidence being shoved in his face. if only two was waged the opponents of bond buying. the reality is as he said recently inflation is very low and he is legally obliged to do some thing about that which has to be bond buying. >> it is because of the oil prices. you almost have to do something. >> absolutely right. morally and legally obliged to do something. >> central banks are coping with things -- the russian central bank meets tomorrow. a lot of economists expected to see rate hikes. a strategist said the priority has to be to prevent a full-scale financial prices -- crisis. is that the extent of the worries that the central bank in russia has? >> i would've thought so, yes. >> stop capital flight? >> i don't know. so many of these emerging countries and russia is still an emerging country, they are in much better shape than they were back in the 1990's. russia is a very different country to what it was in 1998. in some ways, it is a more collocated place. broadly speaking, and it is a complicated country. >> we will have to leave it there. thank you, peter. >> coming up, we will go back to paris and gauge the mood of the nation's tech sector. web.s the web -- le ♪ let's have a look at the fort exchange market -- foreign exchange market. the yen is finally doing what it was supposed to be doing. the yen is rising in the euro is dying by 4/10 of 1%. is that your opportunity to get long dollar yen? the yen is rising against all 16 major currencies. volatility as it a 15 month high. would you want to keep an eye on election, it is an opportunity. is anps in the dollar/yen opportunity. there is a little bit of risk. sincengest losing streak 1983 has been broken. what i am hearing according to bloomberg first word is that you are singing short covering -- seeing short covering. macro funds are buying the all dollar.ar -- aussie the 30se technicians, day of the dollar has been treating below that since november 19. >> these are the bloomberg top headlines. the national monetary fund has identified a $50 billion shortfall that is bailed out the ukraine and warns the country faces financial collapse left that gap is filled, according to a report in the financial times. the imf says the additional cash will come on top of the $17 billion announced in april. people briefed about the matter say the gap is opened up because of a 7% traction in ukraine's domestic output and the collapse of exports with russia. >> president obama said the u.s. government made some terrible mistakes in authorizing torture of suspects in the aftermath of the separate -- 9/11 attacks. it includes waterboarding and sleep deprivation which is not extract better information that was gained in other ways. his remarks follows the release of the senate report on cia interrogations. >> i think that any fair-minded person looking at this would say that some terrible mistakes were made in allowing these kinds of practices to take place in part because i think study after study has shown that when people get tortured, when people are beaten, when people are put in a position of severe stress and pain, oftentimes they are willing to say anything to alleviate that stress and pain. is notormation we get necessarily better than doing things the right way. t >>he end is inside for financials emergencies for detroit. the mission in governor says emergency will conclude when the backup plan has final approval. it will be leased to a new regional authority raising $50 million a year and the city will borrow $325 million to finance its exit from bankruptcy. >> rory mcilroy has been accused of borrowing data from his mobile phone to hide information regarding his split with his former agent. suing verizon in the bid to end a contract that cost him $6.8 million in fees. lawyers for the management company made the allegations data from hisng phone as part of a request for more information from him. >> tech leaders from around the globe are gathering in paris today for the le web conference. the floor now and is bringing us in interview -- an interview. >> le web is one of the most important european events for the web industry. i'm very happy to be joined by loic le meur, the founder of le web. he was named one of the top 25 most influential people. good morning. the le web is more than 10 years old now. bring us the highlights of 2014. >> it is always about the innovation. we have more than 3000 on to doors -- entrepreneurs. uber was invented here. now. worth $40 billion we are saying no, there is no bubble. we looked at the fact that nearly 20 times revenue. to him, not a bubble. we talked about this and the shining economy which is very central. wearables. everything you can wear on your body is fascinating. they are different features which is health care. everybody believes that will be the central space of investment in years to come. >> more than big data and connected clothing? becauseis all connected connected objects like wearables, inside your body, you can swallow pills that will analyze what is inside your body. we have some products that will show what you can get from any thing coming out of your body. i will not get into details but it is like a dashboard. it will connect the doctors and the scientist which is new. the startups used to be a ceo or a tech person or a designer. now we have scientist and doctors coming. france from a u.s. point of view, there are sometimes negative views. we saw john who being blocked by the french government. how can we change the negative view? >> it is more like last year. iit is in the same space of a growing economy. france is a very positive vibe. there were 1000 engineers getting trained every year. 1000 engineers don't even have it and get an engineering dgreegree for free. that made me really proud. also a pretty popular summit. le webow web -- lo competing with the summit? >> it has been more than 3000 people for a few years. we are extremely focusing on the quality according to the stage of content. that is what people really like and the experience. 5000 orot going after 10,000 or 20,000. it is a different experience. debate. is also the tax we know that the u.k. wants to onroduce a 25% tax internationals like google and apple. we know that france is bringing the matter to the european level. is that an issue in order to bring tech companies, web companies to europe? >> this is about tech giants coming to europe and trying to avoid paying their taxes by going into some countries like ireland or others. i personally think as a french those like google and facebook and giants pay their taxes like everyone else. so why not? i think it is a good thing we try to make it a european measure. -- canrance or europe france are you upgrade a real rival to silicon valley? the road been a lot of discussions about one in london. we've been talking about a french silicon valley. is that really possible? does that exist? >> i don't think it exists yet. european investors on stage have a 95% of their transactions being raised in france or companies being acquired all happened between paulo alto -- palo alto and san francisco. we know of companies that are great but i am sad that i uber boomer was invented entirely here but now it is a u.s. giant. that is a challenge -- being able to create world leaders and i think european governments should wonder why we are unable to great a competitor to google or uber. >> that was loic le meur. thank you so much. this is happening in paris with more than 3000 tech leaders. back to you. >> thank you. she will be back in the next hour of countdown with the soft tech founder. >> banks reports this morning on jobs. rbs and deutsche bank. the cutbacks -- what it means for the financial industries. ♪ >> time for today's company news. under fire from lawmakers. standards.g ethical overcharging and manipulating data of contracts. the chair says the culture is misaligned. is recalling laptop cords in north america. this concerns it could pose a fire risk. the chinese computer maker is asking customers to stop using the power cords immediately. although no injuries have been reported. >> uber is being sued by district attorneys in los angeles and san francisco over claims it made assurances to customers about drivers background checks. this follows the banning of the service in spain. >> repercussions of the global financial crisis continues to be felt by the world's biggest banks. new regulation is being unveiled by the federal reserve. lenders are retrenching for more costly as this is across europe and asia. here with more is caroline hyde. like theyng, it looks are continuing the tragic -- strategy. >> they are downsizing internationally. japan is where it is being felt. some 200 staff have been cut. they will have bare bones when it comes the fixed income trading. they are no longer going to be a dealer. they will be dealing in japanese government bonds in terms of a primary dealership. there has been underperformance because they were attempting to manipulate the benchmark rates. pry took a hit in terms of and lost their main executive. we found out they will meet with the financial services agency's to disclose their plans and they will be inferring -- informing clients next week. >> it is not the only bank, is it? >> it is not. deutsche bank as well is also scaling back. recent talk about this all the time. government bonds -- >> the right page on bloomberg. >> this is a derivative that you can use to protect yourself. keep with the program. 10 traders in london are losing their jobs. they are being moved on. it was announced last week that deutsche bank will be ending trading in individual names. you can then trade the credit of bp as an individual name or trade it if you want to bet bpther the cost of insuring will rise or fall. agencies.nly do it on it is because it is becoming more costly. this is one of the fastest-growing businesses for banks but now we are seeing deutsche bank scale back. the focus is shifting to just corporate bonds and more active derivative indexes. they say they'll remain committed to the cds indexes but they are clearly moving back. >> the fed is being tough on globally significant banks. >> we know the united states is trying to clamp down much more. boggle is a supervisory board to the world when it comes the banks. the international climate is the globally important banks have a ratio of 7%. you have a lot of capital -- >> for the whole world? >> if you are globally significant bank at 2.5%, according to these particulars. so 9.5%. the u.s. is gone even further -- 11.5%. if you are going to be even this important, jpmorgan and the likes, you have to potentially hold 11.5% capital to make sure you are never at risk. your asset will be that enormous, you will have to protect ourselves. they'll want you funding yourselves in the short-term markets. >> that is where the credit crunch is born. >> suddenly in england they had a liquidity problem. jpmorgan is the one under it. other banks seem to have enough capital to meet these requirements and they will put in place in 2016. they couldjpmorgan, need $20 billion more if they will have 11.5% capital ratio. so, pretty significant stuff. keep your eye on it. >> thank you. france's ailing economy could soon get a boost as the economy minister is set to present a reform bill to the cabinet. he will offer a number of proposals, including speeding up labor dispute settlements. joining us now from paris with more is mark. good to see you. how important are these new reforms that the french government is presenting today? >> i think -- we are talking about not a revolution but a significant step in the right direction. shopping whichy the elements of this law will not change the face of the french economy overnight. things andeing up of it will create momentum. more important are the measures such as -- they are going to expedite the settlement of disputes between employers and employees. this is actually quite significant. it will remove liabilities from companies and other changes to labor law which will essentially free up and make it easier for businesses to hire and fire. it is quite important for the economy in the medium-term. that theave said minister is searching for a tony blair moment. does that mean he is likely to encounter resistance in what he is doing? invoked the idea that this is a big moment comparable to what tony blair did. i think that is maybe a slight exaggeration because unlike blair, he is not taking on the great sacred cow such as france's 35 hour workweek or the minimum wage. things that will be dramatic changes. are -- we are talking about over 100 elements of this reform bill. 100 things that will free up a little bit of growth here and there to essentially reform the french economy. i think it does matter. i think it is a bit of an exaggeration but it is a step in the right direction. >> thank you very much for joining us from paris. >> coming up, what do you buy a nobel prize winner? today's look at the papers. ♪ in hour away from today's european equities starts. it is newspaper time. of armoris a picture to troops going to heathrow back in 2003. these troops were sent by tony blair to protect the country. this goes back that the cia actually lied over the threat to britain to justify torture. the white house and braden and try to cover up the scale of its global torture program basically saying all of this information will help protect britain. the cia's claims of torture help protect britain repeatedly in the plots because were foiled long before these troops were ever sent to heathrow airport. it is not good news for mr. blair and not good news obviously for the cia. pretty damning. >> han, what do you half or us today? - -have for us? >> i will talk about the new auto stars on the front page. we have the new ceo to be for bmw, the ceo to be for volkswagen. harold kruger for bmw. two young guys. here in germany, the auto industry plays such a big role. we can expect to have more electric cars and only wish wa anna was here to tease her about her parking. guys? >> he speaks in a position of absolutely not knowing. i can drive. billionaire buys back noble medal for a pioneer. he was so horrified of that james watson, one of the dna, waserers of prize to put up his nobel medal for money. he bought it for him. >> liverpool in the champions league. it is futbol related. win to go to thee knockout round. a draw means liverpool will not. not a great night. >> we will have more from le web tech conference taking place in paris. caroline ins there. ♪ >> the global equities selloff continues. asian markets fall as low oil prices weigh on investors minds. >> everybody is tired of the war, says the ukrainian president. he says that will not be a military solution to the conflict with russia. >> everybody is tired of the war. it is not only just the efforts of the ukraine, or peaceful efforts of ukrainian people, this is also the position which from their site also -- side aloso, people are tired from the war. i think we can deftly bring a resolution. >> banks cut back. the world bank of scotland is said to be slashing staff numbers at its japan. >> welcome to countdown. bealso coming up, we will b, the annual tech conference that brings together leading companies, innovators and startups. we will have exclusive interviews through the morning. founder it is softtech jeff clavier. a selloff of equities yesterday and policymakers in china and collateral rules on short-term loans. the russian central bank also meets today. what a day in greece yesterday. taking a massive gamble on its future. bring forth its vote on the next president will take place on december 17. many say he does not have the votes necessary which means he will have to hold an election which many say means the anti-austerity party could get the power. that was the reason behind yesterday's move. what moves they were in the stock and bond markets. the benchmark in greece fell back 30% -- 13% which was the biggest daily move since years ago. they are outstripping all. in the bond market, an inverted yield curve happened. that is very significant. that means the yield on the three-year actually went above the yield on the 10 year. the shorter-term yield was higher than the longer-term yield. many say this highlights that greece is going to have difficulty accessing the capital market. it started selling three-year and five-year bonds this year. are the red lights flashing about greece? >> at the time they are trying to investigate other funding options. we have that in the market yesterday. we also have the conversation about china. that continues to be felt in asia markets today. china faced somewhat of a turnaround in today's session. yesterday, we saw stocks down by 4%. there was this concern about tightening up short-term lending rules in china. it seemed to spook global investors in equities. just this morning in china, we had these cpi numbers on inflation. and tpi that showed factory gate prices, deflation deepening. a record 33rd straight month of decline which is fascinating. clearly reflecting what is happening with oil prices and commodity prices of late. that is what people are asking. what will they have to take in terms of actions? what they call recently invented and ineffective policies. what is the next move going to be? is it going to be cut the rate that banks need to hold - -the level of capital they need to set aside? when we see that -- all of this fv.s back to lg local government financing vehicles. there is a lot of changes going on in the way regions raise money in china. the government saw all those changes happening which will reduce the levels of debt. >> i think that was my plaster board moment. >> i found it unhinged at times. >> it is very knowledgeable. >> it always comes from nowhere. >> it doesn't take very long. i am seeing some news here that the bank of russia intervened in the markets to the tune of just over 21 billion rubles on december 9. again, what you are seeing is ruble back in play. watching russia was going to default. this was nowhere like the last for russia. the central bank will meet. will they raise rates for the fifth time in a row? people are saying if you go to 10%. it will be the fifth hike in 2014. it is back at levels that we have not seen since the middle part of 2013. the whole argument around russia -- i know we talked to ryan heout this a little later -- t argument about intervention and defaults. those are the words that will be top of the list in 2015 people talk about this currency. >> let's go back to china because the prices are continuing to slide. consumer prices also rising in the slowest rate at five years. we're joined from beijing. tom, what is driving this delfation? >> i think there are two factors at work. the first one is actually good news for china. international energy prices are down. that is passing through to lower-cost across the chinese economy. there is a boost for chinese businesses. the second factor is the more troubling one which is concerned that years of very rapid credit hasth, rapid investment left a legacy of overcapacity in china's industrial sector. as growth slows, the consequence of that now is falling prices in the producer sector and very low inflation in the consumer sector raising concerns that china might be facing some deflationary risks. cutting interest rates recently. how does today's data play into the outlook for monetary policy? can we expect further measures? inflation weak certainly opens up more room for easing by china's central bank. speculation in the market today that the central bank has made an injection of funds into the money market by providing funds to one of the state-owned banks. that is the reason we are seeing this turnaround in the equity markets this afternoon. looking a bit further forward, the central bank presented its rate cut, it's november rate cut, as a technical response to high real interest rates. the fall in producer prices we have seen in november means that real rates, real borrowing costs for chinese businesses are now higher than they were before the people's bank of china cut interest rates. megan only add to expectations of further rate cuts heading into 2015. >> what does this mean for the yuan which yesterday had its biggest interday fall against the dollar in years? what next for the chinese currency? a i think we have really seen paradigm shift in how the markets are thinking about china's currency. coming into 2014, the question was always how much is the yuan going to appreciate? the question now in many people's minds is sustained depreciation a genuine possibility? it will betion is easing as the federal reserve raises interest rates which will lower the interest rate differential between china and the united states. china's exporters face competitive pressure as the yen and yuan depreciative. we have the signs of pressure, deflation in the factory sector. this will add expectations that the yuan could be entering a period of high into volatility and potentially also did depreciation against the dollar. >> thank you very much. we have some breaking news. >> bg confirming they are agreeing to sell the australian pipeline for $5 billion. a great quote from the management of apa which says it is a great business -- pipelines are assets. you will find apa is interested. we can see other acquisitions from the company and from analysts. apa agreeing to buy a pipeline australian forg about $5 billion. mt is adding to the apa syste that already carries half of the nation's gas. the company received at least three bits of the pipeline, according to people familiar with the matter that we have been speaking to. the transaction is effected the yield about $2.7 billion in profit for bg but that will be partially offset i a $2 billion impairment by their remaining assets. ukraine and pro-russian separatists are closer to resuming peace talks as a one-day truce is fueling hopes for an end to fighting that is rocked the eastern region for much of this year. let's bring ryan into the conversation. how big of a deal is this -- one date cease-fire? >> while there was fighting, according to the federal government of ukraine, there were 17 times they were fired upon by the rebels. effectively, the russians and the russian backed rebels are all saying that this was a good day. this was a trial balloon. now it looks to be having peace talks on thursday or friday of this week in minsk. we caught up with the ukrainian president. he is actually in singapore heading to watch really a. austin -- to australia. it is home of many of the victims that died in the malaysia airlines crash. he says that ukraine is at a crossroads right now. >> i think it is decisively important to maintain the cease-fire. we have a strong guarantee from the russian general that the cease-fire will take place and they will be. unfortunately, we have several russiansful times from promising to keep the cease-fire. >> the fact we saw lower levels of violence yesterday in ukraine and the eastern country that we have seen the last couple of months is a plus. another plus is that russia has resumed gas supplies to ukraine. we had another one of these top gun incidents were a couple of f-16's chased down russian jet . s. we also had the german chancellor really attacking president putin's policy in ukraine and the russian foreign minister kind of attacking angela merkel as being unconstructive. it is very worrisome because asela merkel is seen by many the one person in western europe and perhaps the west that can broker some kind of deal to end the impasse between russia and the west. clearly, that is not the situation we have now. >> india. it is all about the directional change in terms of where to look for relationships. >> this is the so-called vivid. he went to china, turkey and now he went to india. as was the case in the previous trips, energy is at the top of the agenda. the indians are very interested in investing in russian oil fields. they have got rising oil demands. and, the russians look like they will offer stakes in a couple of those oil fields, maybe even in is a part ofich this geopolitical thing because exxon just drilled an export-oriented -- exploratory well. they found some oil there. the russians may just offer the indians to have a crack at that. that would be a little bit of a geopolitical play. there was some talk about building a pipeline. the russian president did not use these words saying it whewo uld not be commercially viable. the problem is lng is much more flexible. it is harder to lock people with the crotch track from they can get their fuel the a ship - -via - via ship. thebig and always centerpiece between the relationship between russia and the soviet union and india is weapons. they will be talking about weapons as well. alongside the united states. >> thank you. >> join us on twitter. the three of us are there as always. trading made money. i am about the press the button. there we go. i tweeted. >> i was tweeting out caroline's interview. giants should pay their taxes, one of the messages he had. >> 2014 will be about -- 2015 will be about divergence. the u.s. will continue to grow while the eurozone will muddle through debt. more outlooks on the new year. ♪ >> let's go back to one of our top stories -- concerns over china and greece. will european market still feel the effects? they are indicated to rise at the open. to put this all in context, we have brought in the big guns. j.p. morgan asset management global market analyst, david. greece walks -- drops the most in 27 years. china has been in that market. what you make of these moves? >> i think if you look at china right now, the inflation number was low. i think everybody is concerned about not just what they can do but what they will do to arrest the slowdown in the air economy -- the economy. they can cut reserve requirements but that gets them back to a world of kind of debt growth. they can drive the currency down if they choose. they are playing with fire if they do that. it is a question of what they can do. i think the best way is to manage the decline. it is fiscal policy. we will see a little more stimulus. we are seeing the patchwork stuff. is that what you would pencil in next year? and that is ok? >> i think that is fine for the global economy. but not forget how big china is. 7% growth is a huge addition of raw outputs of the global economy. >> let's talk about greece. i think i am right in saying i'm right in recent years. -- looking atd greece and what can happen in the vote for the next president which could entail an election which could entail the rise of the anti-a stare party winning -- anti-austerity party winning. >> i think it was very illustrative to hear talk ye sterday and say the debt is completely unsustainable. we need another round of consolidation or cuts. i think that kind of talk in the world market and we have seen it fobefore. absolutely, if they get into power, we would discuss this again. it leads to a very uncertain future for europe next year. there are so many upside capitalists in the market from the falling euro coming into the play, valuation looking good, etc. you can all be -- we can be sitting here with the european stock market lower and even cheaper in all the capitalist are in place. wouldld those politics -- jpmorgan say the ruins of european politics is enough to hold the fed and bank of england back from the brink of raising rates? >> it is not enough to hold them back, no. it is enough to delay the bank of england. from the united states on one hand. absolutely with a very robust and deepening expansion out there. the fed moves in the middle of next year and continues to move in the next couple of years. ecbalso have japan and the and what they are doing. the u.k. is a wildcard. is our extension strong enough to see rates rise for that to be required or are we going to drag down if it does not perform? in which cap is the u.sk.? >> we will take a short break. when we come back we will see a little more in terms of what happened. david is staying with us for more. ♪ >> welcome back. stubbs.oined by david australia's more sever than canada. the netherlands became too dependent on natural gas you to discovery in 1959. the view is maybe canada can weather eight decline in -- a decline in comedies -- commodities better than australia. >> it pushes the currency up and pushes of the domestic price based. that is what happened in australia and canada over the last decade or so. it leaves the non-mining sector unprotect -- uncompetitive. we are seeing in australia they have been hoping for a couple of years that the sector will step up to the plate as mining investment falls back and it is not happening. it leaves them with the they don't of -- seem to get. now with the realization this is really in play in trying to slow idea what you have is the of returning to rate cuts next year. >> there could be more divergence with one central bank cutting rates next year. >> absolutely. new zealand actually hiked it this year. i believe a meeting is later today. again,e seeing, potentially not as strong as they thought it would be. >> thank you for joining us. >> a brave man. we will live in paris at le web. we will bring together the companies, the innovators and the startups. softtech founder jeff clavier. ♪ >> welcome back to "countdown." let's check on the foreign exchange markets now. yen is strengthening. it is the biggest three-day rally in yen since august 2013. the euro is climbing by 0.4%. the yen is rising. dollar-yen down. the question is whether this is a short-term retracement on dollar-yen, an opportunity to to yourosition and add dollar having an position. at the moment, you are seeing a little bit of a jolt in greece and china. the deflation story still very much a core thing. the yen is on the rise at the moment. aussie-dollar, have a look at that. what you've got with aussie is short covering going through. we had the longest losing streak -- j.p.83, so we are morgan asset management would say that this is something which , the change in the economy, from a commodity-based economy, rebalancing is more difficult to achieve. risestimate is for jobs to by 15,000. that is the estimate, but the view from the market is there are more rate cuts to come. >> i mark barton and these are the bloomberg top headlines. the imf has identified a $15 billion shortfall in its bailout and warns the country faces financial collapse. that is according to a report in the financial times. says the additional cash would come on top of the $17 billion announced in april. people briefed about the warning say the gap has opened up because of a contraction in ukraine's domestic output and the collapse of exports to russia. >> president obama said the u.s. government made some "terrible mistakes" in authorizing torture of suspects in the aftermath of the september 11 attacks. he said the techniques used including waterboarding and sleep deprivation did not extract better information than that gained in other ways. the releasefollowed of a senate report on cia interrogation. that any fair-minded person looking at this would say that some terrible mistakes were made in allowing these kinds of practices to take place, and part -- in part because study after study has shown that when people are tortured, beaten, put in a position of severe stress and pain, oftentimes they are willing to say anything to alleviate that stress. the information we get isn't necessarily better than doing things the right way. >> the end is in sight for detroit's financial emergency. governor rick schneider says the emergency will conclude when a bankruptcy plan receives final approval. detroit's water and sewer system will have new regional authority. the city will borrow $325 million to finance its exit from bankruptcy. >> rory mcilroy has been accused wiping data from his mobile phone to hide information related to the split with his former agent. mcilroy is suing verizon sports management in a bid to end a contract. it is a hearing in dublin. lawyers made the allegation against mcilroy as part of a request for more information from him. techt's return to the theme. tech leaders from around the globe are gathered in paris. caroline connan is on the ground and is joined by another big name in the tech sector. caroline. >> my next guest is jeff clavier, the founder and managing partner of softtech, one of the leading vc firms in silicon valley. how are you, jeff? >> i'm great. >> you've invested in many startups. 156 startups that have been bought by the likes of facebook, twitter, what are your next targets? >> we have a pretty broad strategy. service,as a marketplaces, connective devices, will be the core of what we invest. in terms of new areas, we will ,e looking at commercial drones the infrastructure of the bitcoin, and we might actually do a robots deal. >> how much venture capital do you have available? >> we have a new fund that we chose last june, which is $85 million. we will get about 45 investments out of that fund over three years. 400 to 750here from companies a quarter and we invest in four or five. >> where do you think the next tech revolution is going to come from? is it going to come from health care, from connected objects, from big data? what is your idea on the next tech revolution. >> revolution for us, the it evolution,is revolution, or disruption? platforms,number of mobile, social, cloud, big data. they can be made available to a number of different variables. i will be looking at the web today-- talking at le web about health care. you deliver services to both consumers and doctors/hospitals. so we have a very keen interest in health care. i'll curate the session on that today. otherwise, we think that we will see connected objects really grow pretty much everywhere, for the consumer, or businesses as well. onersonally have an interest the evolution of drones. unfortunately, we have some regulation issues in the u.s., where europe is actually taking a much more positive stance on drones. >> what are the big startups that you've invested in that you've been a seed investor in -- fitbit. it is to track your health, your fitness. do you think it is going to suffer now that apple is launching its iwatch? >> the iwatch is a very different product both in terms of target, price point, and functionality. we think that there is two different markets here, one which is focused on having the iwatch as an alternative of the iphones, and then there is the , which you don't need to recharge every day. that is why we think that with this new version of fitbit, which has been extremely successful in its first few weeks of sales, won't be effective. tell us about this. august is basically a lock that you connect to with your smart phone which is going to sense your presence and unlock itself as you get closer to the door. i can invite you to come to my place and give you access to the lock so that you can get in the house without having the keys. we will deal with those issues by offering a digital solution. it is selling at the apple store very well. coin is another sort of product. it is basically a digital smartcard which allows you to program all your credit cards into one and no longer have to have a wallet full of credit cards. au just switch and choose credit card that you want to use with a click of a button. coin is still in beta because it is a challenging technology to put together. i used one for a few months and it is working really well. >> finally, we have seen that it has been a rough year for stocks like twitter. are we going to see more high profile ipo's in 2015 and are you concerned about the next tech bubble? >> i'll answer the tech bubble question first. there are lofty valuations right now in the valley and there is a , when you pays to a few billion dollars for a company, how you can actually make money. certainly, we have seen extraordinary innovation, but we don't call that a bubble. we will see how long that lasts. contraction in the number of jobs being made, but fundamentally there is extreme interesting innovation happening. we feel this is companies being funded just because you can. as twitter is concerned, it has been a rocky road for the stock. i think there has been an issue in terms of the message for the market, in terms of how they scale monetization. facebook is killing it and twitter isn't. that doesn't mean that twitter isn't a very valuable property. definitely, our understanding is that 2015 will field an interesting year for ipo's. we hope to have a couple of them of our own. fors that the big problem coming forward, the monetization of all these new innovations? >> i think it is, how can those companies which are getting a lot of traction from the consumer -- you have something snapchat,, which will have a $5 billion to $10 billion sticker price. some point, it can deliver $700 million in renovations -- in revenues. of the companies will grow into their valuations. thatan i justify the fact i was priced at such a high price and have zero revenues? er, thank you so much. vc, oneder of softtech of the leading venture capital firms in silicon valley. back to you. >> caroline, thank you so much. caroline connan joined by jeff clavier. >> coming up, today's berks chart -- bart chart. how anxious should investors be about greece? ♪ bartme for today's chart. how anxious should investors be about greece? on tuesday, they had significant moves in the greek bond and the greek stock markets. the reason why is the prime minister has pretty much gathered -- gambled his political future on this parliamentary vote on the new head of state. unless he can persuade 25 opposition lawmakers to support his choice, samara will be forced to call a parliamentary election and the anti-austerity party is favorite to win that election if it takes place. take a look at the top chart. it is the stock exchange in .thens, the benchmark on tuesday, it fell by 13%. that is the biggest decline since 1987, even outdoing declines during the sovereign debt crisis. since reaching its high for the year in march, the ase has sunk. this chart goes back to june. your today, it is down by 22%. the middle chart is the greek three year yield. the yield on the greek three-year bond on tuesday reached a record high of 8.3%. greece onlytes that started selling in july as part of its reintegration in the bond markets. justare notes that it started selling and they have reached an all-time high. bonds falling, yields rising. , theield on the three-year middle chart, is now above the yield on the 10 year bond, the lower chart. that is very, very significant. yesterdayr yield finishing just above 8%. the differential is now 40 basis points between the three-year and the 10 year. this is called the curve inversion and it is a sign that access to capital markets is starting to unrivaled. as sunrise brokers says, curb inversion in greece isn't a good sign. it usually signifies heightened perception of default risk. voting kicks off on december 17 with two further rounds possible. vale your to install a candidate after three attempts would force samaras to dissolve parliament. syriza takes over, it will not be a smooth ride. keep an eye on those three market,the athens stock the greek three-year, and the greek 10 year, as we approach the vote on the new president next week. a massive week for greek assets. >> 87:40 eight in london. let's talk about the oil prices. drilling is an expensive process. with prices of crude near five-year lows, projects across the world may be making less sense. >> hard-to-find and hard to extract, deep-sea oil is one of the most expensive sources. one of the costliest projects is brazil's ultradeep water libre oilfield. arelopment costs for total estimated to be $80 billion. hostile weather conditions make drilling in the arctic a huge technical challenge, and very costly. ft and exxon spend millions drilling in the sea. exxon has pulled out because of sanctions. ft is hampered by rising debts. while shale has helped flood the market and lower crude prices, some operations could still become unviable. regions of some texas, oklahoma, and north dakota, is already proving unprofitable. across the sector, exploration spending could tumble 50% if oil prices stay low, according to bernstein research. the ramifications of that could be felt for years to come. >> oil producers are not the only ones being attacked -- affected by oversupply from the u.s. consumers are profiting from oil's pretty prices. we will be speaking to the chief iata later in the morning. tony tyler joins bloomberg later on. >> some commodity traders might disagree with that. in the meantime, we are going to give you a little bit of a live shot. equity markets open higher. these our beautiful starts to the trading day. we are looking for a bounce and european stocks after a slide. let's keep an eye on greece when it opens. stay tuned. we are back in two. ♪ repercussions of the financial crisis continue to be felt across the world by the biggest banks. more from the federal reserve in terms of lenders, retrenching from costly businesses, europe and asia, caroline is here. we have news from rbs. >> this is the top line in terms of banking news when it comes to asia. retrenching, but this time it is happening in japan. they are cutting 200 staff at the top line. are no longer going to be a primary dealer of japanese government bonds. they are going to be talking to the financial services agency, informing them of this decision. next week, they will be informing their clients. interesting. ubs losing money in japan. it looks like rbs is taking that step from retrenching when it comes to fixed income. and it is not the only bank cutting jobs in credit. deutsche bank, interesting story. not an enormous amount of people, but an interesting trend. touch a bank is starting to exit credit default swap trading. insurance.hat bond it went mad in the greek debt crisis. also, indexes with the sort of derivatives in them. weeks announced also last that deutsche bank is no longer providing trading in individual credit default swap names. anyhey wanted to trade bp, debt derivatives linked to these companies, you couldn't do it on an individual name basis. you can do an index of these derivatives, not an individual name. this is an area that is shrinking 22%. still $17.6 trillion. still more than the entire u.s. economy. >> caroline, thank you very much. caroline hyde with the latest on the banking sector. >> join the conversation on twitter. >> very good. >> it is a mark barton day. >> "on the move" is up next. the european markets look set for a higher open with a rebound on the way. what is in the cards for 2015? they will be discussing that on "on the move." stay with us here on bloomberg. ♪ >> welcome to on the move. i'm jonathan ferro. moments away from the start of european trading. let's get to the morning brief. chinese low-inflation. factory prices drop for a 33rd month in consumer prices rise at the slowest pay since 2009, triggering plenty of talk whether there is cause for another rate cut. japanese stocks plunge. the nikkei drops 2.5%. europe asading day in greece steps back into crisis mode, driving the equity market to its a guest one-day drop since 1987. a new french revolution? the nation's minister of economy introduces a new bill to jumpstart the economy after slowing to a virtual halt. futures looking for a little bit of a rebound. euro stoxx 50 futures up 40 points. we could get a little bit of a rebound. manus cranny. yen --y going into the it is performing and delivering, as it does. in moments of reflection, this is the euro down, the yen rising. we have a little bit of a move in dollar-yen. you are seeing probably one of the strongest three-day since we have seen since the middle of august 2013. the reason i'm starting with foreign exchanges because volatility is back in the markets and back in the foreign exchange markets most evidently. it is the most volatile
exchange market we have seen according to some of the agencies we have watched since august 2013. your tian -- european equity markets are tanking. we lost 2% of their value yesterday. we should keep an eye on the banks. european equity fund's have got a small bounce for them. that will give you a little bit of a flavor. the minor response quite nicely in australia. i think this is a story of do what you do best and if you on a pipeline, sell it. that is what bg are doing. they are selling their apa pipeline in australia. they provide a natural gas project there. they're going to sell it for $5 billion post tax. they're looking at a profit just under $3 billion. when on to read bank of america's recent note on liquefied national gas. multi-year markets may have an uptick. multiyear bear markets on something they bet significantly on. that is bg. global equity actually making a one-month low. that asian news was very much a theh-up session, mirroring 2.2% drop in europe. that is the bg start. back of the japan story, not necessarily tied together. it is structural change over at rbs. credit fixed income positions to go. 30 representatives will be left. caroline hyde will take you through the story. standard chartered down this morning. they will remain under investigation from the u.s. regulators on site for another three years. there is more new information that they may have been unlawfully processing dollar transactions. this is a risk. this is a risk for them that falls more issues. i can only talk for so long. you can come back to this. these are the two greek strauch's -- stocks, biggest drops in greek stocks since 1987. the point is whether you believe there is a momentum behind a seeding to power and what that might have an impact to the debt, or something that they will talk about, but nothing once to say it, but what is the statistical possibility of greece leaving europe? back to you, john. >> we are waiting for greek stocks to open, but let's get erday,o that move yest the greek equity market down 12%. we did not see that even when it was on the brink. biggest drop since 1987. our next guest has not just downgrade his look of growth in europe, he is downgraded political leadership at all. he is wayne barrel. the issue of leadership is in focus this morning. not just in greece, but also in france. asre joined live from paris the nation's economy minister is proposing a bill that will jumpstart an economy that has slowed to a virtual halt. what is in this bill and could it signal any meaningful change at all in france? >> i think it is meaningful change, just not a revolution. that is the way to look at it. you have over 100 items in this bill. tweaks,lot of small things like sunday shopping. changes to labor laws, it's speeding settlements between the disputes between employees and employers. removing the threat of jail to executives and employers who break labor law. it is a lot of little things. it is a step in the right direction. it is something the french economy knees. economists say will help, but it is not a revolution. >> when you talk about change in europe, we also in -- we often talk about resistance. is there likely to be any resistance today? >> i think you will hear a lot talk.itical the mayor of paris said she is not in favor of sunday shopping and the mayors have some sway in this matters. i think the overall bill is likely to go through more or less intact. measures, less talked about on the labor law-front, for instance, getting through, and that is important. been very much designed to avoid a big confrontation over something symbolic, like the 35 hour work week or the minimum wage, which would have risked bringing people into the streets. a lot of the stuff in this bill is too technical to really get the population excited and protesting. >> joining us live from paris. thank you up very much. bowers, thein wayne ceo at northern trust asset management. he helps manage $900 million in assets. political risk in europe. downgraded your view of political leadership. you guys can talk up change. any confidence they can deliver? >> the french release is a prime example. a lot of things in there are technical, but they are positive and common sense. one would have expected that to be drawn out and presented 10 years ago, 20 years ago, not now when we have just gone through a significant financial crisis and pretty significant austerity. for leadership perspective, we expect the leaders to step up and push forward and perhaps not talk down the economic view from a european perspective. >> the clock is ticking for france. ek e is a presidential lection in 2017. how do they turn it around in two years? >> is not just restricted to france, the window of opportunity governments in europe have to implement structural reform. draghi has been clear on this, that the ecb can only do so much, and creating the conditions for asset purchases is one thing, but he wants the economy to move into growth mode. i think the politicians need to step up and take more leadership for and to grow the european a economy. >> it is fueling radical illegal -- political movements. we have not seen a collapse like that since 1987. that can't be right. surely in 2011 we have a debt that was that bad. we did not. what is going on in greece right now the concerns you? >> from an overall greek perspective, we have always been very clear that greece is not the same as peripheral europe. it is in isolation for lots of different reasons. it was a move of greek risk backing to be for referral -- peripheral. toating greek as similar ireland, italy. what happened yesterday was a disconnect from people saying greece is different. it should not be treated like the rest of the peripheral. it has a significant risk attached. point around far left or far right political votes is correct as well. we see a shift away from center-left, center-right. political opinion and populace folds into the far-left and four-right. it can create issues in implementation. we saw that in sweden a few weeks ago where we had this great coalition that is only lasted a couple of months because they can't get the budget through. they get the vote, but the implication of policy can be difficult. >> let's talk about money and where to push it. you manage a decent chunk of change. where you putting it to work in europe? >> from an overall allocation perspective, we are heavy in u.s. equities. for photo, we have measured risk as well. from a european perspective, we are looking at core having a prime home. also looking at the transparency of political stability and government policy. some of the fiscal and changes we have seen are careful. some peripherals have done very well simply because they have taken a lot of pain in the early days. we would note with interest from a positioning perspective is that you could have a barbell approach around germany and some of the peripherals to average out the risk while maintaining core liquidity and safe haven. >> i want to go back to u.s. equities. when i look at the treasury market, the treasury market next year is almost a mirror image of the course of the treasury course this year. it turned out to be very, very wrong. nexthe call to be underway year the right one? >> we are over high yield. there is risk with the income allocation. the other aspect about what happened this year and what we expect next year is the investor around theetting nominal value of fed hikes. the bonsai was pricing in -- another collapse in bond price and an increase in yield, but it did not happen. investors have to take note about the smooth exit of tapering, but the introduction of more qe from the bank of japan. that has to affect risk assets. you could argue that you would not necessarily expect to see a significant drop in price and increasing yield because you will have higher behavior looking for yield to you have a support function there. >> we are going to talk about not the ecb, the people's bank of china after the break. we will talk about chinese investments. chinese data disappoints. almost 3%ai closes up this morning. we look at the reason behind the rally as "on the move" returns. as we head to the break, here is the picture for you. losses around 2%-3% on the periphery. a rebound today. the dax in frankfurt is up. ♪ >> welcome back to "on the move ." i jonathan ferro. ing live on your phone, apple tv, amazon fire tv, and on the television. a little bit of a loss yesterday. you see it on your screen. it was pretty sizable. everyone talking about the economic fundamentals support this rally. this morning, we got a little bit of data. second-largest economy drop for the 33rd month. consumer prices rose at the slowest pay since 2009. tom or lick joins me now. we can talk about whether this will scope a move from the people's bank of china. let's talk about the date of first. what is driving the deflationary pressure? >> there are two factors at work. the first one is good news for china. china is a big importer of energy. international i will -- international oil prices are down. that is going to give a boost to profit margins. the second factor is more troubling. china is paying the price for its years of excess loan growth and excess investment. the legacy is showing up in overcapacity across the industrial sector. combine that with weak demand in this is why we are seeing the deflation pressure in the banking sector. >> if i was looking at the ,hanghai, if it had ears it is listening to the prospect of another rate cut from the central bank. how does this play into the outlook for monetary policy? >> china's central-bank cut interest rates in november and they described this as a tactical move. what they said was low-inflation had push the real cost of our wing for businesses up and that is why they had to cut rates. the fall of producer prices in november already more than offsets the impact of that november rate cut. the real cost of borrowing for china's businesses is now higher than was before the cut rates. this focuses attention on what is coming next and raises expectations into 2015. we are going to see more interest rate cuts from the people's bank of china. i think that might be one of the factors underpinning some of the resurgent buying that we saw on the shanghai in composite index today. the other factor is that there are rooms in the market that we have a more direct intervention from the people's bank of china, an injection of liquidity. i think it is that which is driving the turnaround ensures we are seeing today. joining us from bashan -- tom orlik. now, -- you have been to china recently. you can look of the data and continue one story. you went there. what did you see? >> for a more sanguine understanding of the growth picture. central policy from the government is on a mission to drive out corruption. a cleaner and greener growth story and government policy is having a negative effect on growth. you would expect that. psychologically, the chinese government have an issue around the seven numbers. it wants to produce a 7% growth number. if you go under the covers and scratch at the surface, investors tend to be more sanguine about the growth number at 6.25% or 6.5%. the employment picture seems to be better than we would expect or anticipate. it tends to be a better and more fuller employment picture. if you think one of the risk of outese government coming with less than 7% growth number, the argument being social unrest, you need the sustainable of a of growth to ensure you have employment. if employment is looking better in terms of rural and urban employment opportunity, perhaps it takes some of the risk off. >> let's talk about the markets. we can talk about old china versus new china. old china is the rate cuts and stimulus. new china is the restructuring. , is thathai comp trading on the belief that old china is the running the economy? we can talk about a stunning decline in greek equity. the move over the chinese stocks in the last month as an something else. >> it has. we have seen significant volatility. one of the aspects we see from china's point of view is that as they have developed economically, the capital markets have not caught up with that. in terms of the underlying liquidity to the market, the ability to buy and sell stock. those who have opened have gained access to the chinese market and are restricted from selling. that is not good news from a price perspective. we would expect to see more development of the capital market system from chinese authorities to try to match the economic development. all you see when you look at the isolated stock indices is a level of immaturity and under development in terms of price volatility and liquidity. >> very quickly, that is not going to end well. what is your view? >> is not, i don't think. the picture is you tread with caution in markets like that. there will be an increase in volatility. liquidity is in both ways, investing in and investing out as well. >> when bowers of northern trust asset management. thank you for joining this morning. thanks cutback. reports of jobs at rbs and deutsche bank. ♪ >> welcome back to "on the move ." more job cuts at rbs. here with more on the story is caroline hyde. not a u.k. story this time. a japanese story. they're retrenching in terms of their international presence. they have got to cut one million pounds. this is one way of doing it. it is about japan. they are no longer going to be a prime-rate dealer when it comes to japanese government on -- government bonds. they are cutting 200 jobs. it will be bare-bones left in japan, just 30 people trading fixed income to service their clients. the dealership will no longer be a primary dealer and they will inform the financial services agency as soon as today. next week, the clients will be let known. clearly this is just a global to entrench in global areas. they are not the only bank not taking money. we have ubs that has been losing money for two years now. it is a tough market. >> not everyone is pulling back from japan. 200 jobs within japan. the market can be quite brutal. that is a dip in the ocean. another small amount of jobs, but interesting. deutsche bank are losing 10 job when it comes to credit default swap trading in london. the area of supreme growth before 2008, before the lehman collapse. trade, assuming what the riskiness is of a certain corporate. deutsche bank had been exiting trading of individual credit swaps for individual names. if you wanted to trade rbs, you can't do it on an individual basis. you can trade indexes. 10 traders are going to be moved or lose their jobs overall. they are shifting the focus. they are looking at the corporate bond market. there is more activity. they are to derivative indexes as well. they say they are very much focused on credit indexes. that is what the spokesperson said on december 5. clearly there is a trend. regulation has come in. it is more costly to trade credit default swaps because you need more capital to protect yourself, to be able to make the market that much more liquid and safer for those who want to trade. the size of the global derivative market shot 22%. an interesting fact, it is still over $17 trillion, this market. that is bigger than the u.s. economy. >> is still a monster. that is it for the banks. we will talk about the big oil majors. bp is going to be hit where it hurts. the oileen where with price. how does the oil giant do with crumbling crude prices? ♪ >> welcome back to "on the move ." i am jonathan ferro in london. 30 minutes into trading day and this is how things are shaping up. ftse 100 up .5%. the stoxx 600 in europe, also a nice little game. a selloff yesterday, down across the board. a rebound today. you could call it a little bit of the bounce. we are up 100 points on the dax. >> let's look at one of the u.k.'s top winners. they are trading up more than 6% at the moment. they rent out equipment to homebuilders and alike who don't perhaps have the cash to be able to buy their own. rental equipment is doing pretty well. full year results will be ahead of their previous forecast. they are increasing how much they are going to be spending in order to keep growing the business. jeffrey's group saying confidence of the company in the first year of a multi-your supernormal. also saying the company continues to show a significant market share gain. tops the list. co up 4.2%. australia extends a contract worth about one billion pounds. five-year contract with the dip -- the us try in department of immigration and border protection. they will continue to provide onshore immigration detention services. one of the top performers this morning. on the downside, the worst performer was down sika, down a was 2%. this with a stock is in the throes of a management overhaul of potential chaos. -- $1.8a company billion is what a french company wants to pay for them. what is the stock continue to fall? the main people who want to back the sale is those that are related to the founders' family. it is the family that wants to see the sale go through. the management does not like it at all. the management are challenging it and threatening to quit if the sale does go ahead. inbulent times for sika switzerland, a company off by what more than 1%. >> they are the stocks to watch this morning. chinese factory gates deflation deepens. consumer rises slow at the since 2009. the shanghai comp dropped on the heels of the data but has made up the losses, closing up nearly 3% on the day. yen gains again against the dollar as stocks fell in japan. 2.25%.kei fell brent resumed losses this morning and deb upi erased gains from the -- wpi erased gains from yesterday. crude could fall to $40 a barrel if solidarity among opec members falters. aspects, theenergy 12-member group may have to call an extraordinary meeting in the first quarter if oil continues to fall. bp is amid historic lows and oil prices. the company has announced a restructuring program. what can we expect from their meeting? anding us is the single oil gas analyst here at bloomberg. we will get to oil in a minute. let's talk about the day today. bp are going to talk to investors. what can we expect? >> the first thing is how do they see russia? how do they feel about the russian engagement? the south korean pipeline has been counseled, more or less. -- canceled, more or less. 20% for rosner. how will the russian sanctions -- rosner f -- rosneft. the mexican oil spill, what competitions -- consequences will have? the third point, the last thing they said was they intend to $10 billion worth of assets next year. how will this turnout for buybacks? >> bp, the last six months look like this. put oil in their as well. it would look like this. here is a question. how does this move lower -- has this move lower in the bp stock price make them a takeover target? >> they refuse to cut targets. the oil companies will have to look at how they cope with this new situation. it might be as it sells. there might be more m&a going on. violations are lower. >> -- valuations are lower. >> i look at the brent rice right now, just below $66 for barrel. it has been a stunning move. how long does it have to stay at these levels to transform the environment? >> it is an interesting point. it depends on how long the oil prices going to stay at this level. twotays at $66 or $70 for or three months, this is not going to change ongoing big projects, especially what bp is doing and other big oil majors. if this level stays like this for another year, where year-and-a-half, we might see some delays and cancellations of big projects. >> when we talk about job cuts at a company like bp, the job cuts of the weekend we are being spoken of lot are likely office jobs. at what point do we start talking about cutting jobs upstream? >> we must not forget the company is a much smaller company than it used to. it does not show in the market cap because the oil price was so i. , bp sold $3000 for 38 of assets in the last -- thousand dollars worth of assets in the last year. the job cuts make a difference in bp's space? they can make a significant difference in cost it does it make a difference to the oil majors? >> they have huge costs just for getting the oil out of the ground. the personnel costs are a rather small share of their cost race. it is -- cost base. it is not the most important area. >> get out a crystal ball. the oil price. everyone explains the movie have seen an oil so well right now. nobody was shouting about it back in june. when you think about it in the last six months, what is change fundamentally with the supply story? not much. everyone is expecting a rebound next year. could they turn out to be just as wrong as the people were in june? >> the market is divided right now. some people think there will be a rebound. others think oil prices will stay for a long time. i think the risk is on the supply side instead of the demand side. chinese demand, which is the main demand globally, it is still very strong. the risk of libya falling out again, the risk of the kurds not coming to an agreement about oil exports, this is the higher risk than the demand. >> we have to leave it there. senior oil and gas analyst. still to come, we're going to talk russia. theyentral bank, could raise foreign costs as the collapse of the ruble and western sanctions threaten the economy? let's get a quick check in on the markets for you. make rebound this morning. points,up a sizable 100 almost completely erasing the losses from yesterday. up 1% this morning. ♪ >> welcome back to "on the move ." i'm jonathan ferro. let's talk about ukraine. kiev and russian separatists are closer to resuming peace talks. there are hopes to an end of the fighting that has rocked the eastern region for most of the year. president poroshenko spoke out about the need for a lasting cease-fire. is decisivelyt important to have a sustainable cease-fire. we have a strong guarantee from the russian general that the .ease-fire will take place unfortunately, we have several theccessful attempts when russian and pro-russian rebels have promised to keep the cease-fire. >> joining us is ryan chilcote. i've kind of been desensitized to the word cease-fire over the last year or so, with good reason. >> you heard the ukrainian president being tentative. it is significant in the sense that this could be a positive. you think about this coupled with the fact that russians resume gas supplies to ukraine yesterday, that is good news. it is not a simple relationship. we have another one of these cold war style incidents where you had a couple of f-16s rounding up russian fighter jets in international airspace. that is not good. that is that between the german west wasr who said the contingent name in shame russia, and you had the russian foreign minister effectively directly criticizing the german chancellor, saying germany should not dictate european policy. that is important because she is seen as a link between people like president obama, david cameron, and putin. if the relationship between her and putin is in at ramones one, that does not vote well. an ace well -- putin is rimonious one, that does not bode well. year, the ruble has been driven lower, and lower. the chart, the ruble is higher, higher. the central bank, it has not change with the ruble did. >> on the other hand, they have raised rates. we don't know what would have happened had they not done that. the ruvell might be in much worse shape. it is the toolkit left over. they spent a billion dollars on trying to prop up he ruble. they can't control the oil price. they have done other things. we had the finance minister tell russian state companies that they should turn their foreign currency into rubles. t, which bank of america says is tantamount to capital controls. what they can do is raise the rate by 50 basis point and if directly thet at ruble, they can at least try to temper inflation. the big concern for the russian government isn't so much the ruble itself as it is the prospect of rising inflation. you look particularly in the food category of inflation, about 10% a year. that is not good. you think about president putin and his power base. it is elderly pensioners. they need to be able to feed themselves every month or they will get upset. they are able to do that easily now, but if it continues they will get upset. >> capital controls. >> the russian government continues to say, no. there will be no capital controls. you can measure it. if you look at ruble bonds inside and outside of russia, what you will see is the very same bonds -- the yield moves and lock sink. investors are demanding a premium, about .67% to hold those bonds. why? they are concerned that money make it stuck in russia. their concern about capital controls. i would not say it is a prevailing concern. we see a lot of people moving money out of russia. the central bank keeps changing forecast. people are factoring it in. >> thank you very much. we want to check in on the open markets this one. one stock on the move this morning's stagecoach. a set bowl -- they set lower fuel prices. whether to take it to public and private transportation. by 4.74%. down a nice rebound. points. 100 is up 25 strong gains seen in the eurozone after the broad equity selloff yesterday. a little bit of a rebound. .9% higher on the dax, 88 points higher as well. i want to take it to the commodity markets. you have seen brent and wpi get crushed over the last few months. it is down 40% down from the highs in june. crude touched a $65 a barrel, down 1%. the vti also down 1%. under $63 a barrel. in terms of currency, the story has been dollar-week over the last 24 hours. the move has been in dollar-yen. money climbing back into the yen. it is down under .33% right now. the nikkei traded lower. the dollar-yen, nikkei story still going on. we are back in two cooper we'll talk -- we are back in two coo. ♪ >> welcome back to "on the move ." let's bring you up to speed with companies on the move. than $20may need more billion in at your capital by 2019 to meet federal reserve requirements. the central bank laid out boosting surcharges for a big u.s. firms. stanley fischer named jpmorgan in particular, saying the bank will have to come up with more capital. is said to scotland be planning an exit from fixed income trading in japan. the bank may cut more than 200 jobs in the region. is the latest effort to cut assets. standard chartered will be under u.s. watch for three more years because of new potential violations of iran trade sanctions. the extension means that standard chartered still faces possible prosecution. we want to get back to that oil story. drilling fort is a very -- drilling for it is a very expensive ross is. with the price of crude at its most in five years, some projects may make less sense. hard to find in hard to extract, deep-sea oil is one of the most expensive sources. one of the most expensive is the brazil ultra-deep field. costs of the project are estimated to be $80 billion. hostile weather conditions make drilling in the arctic a huge technical challenge and very costly. rosneft and exxon spent $700 million drilling a well in the sea. exxon has pulled out because of sanctions. rosneft is hampered by rising debt. helped flood the market and lower crude prices, some operations could still become unviable. drilling in some regions of texas and north dakota is proving on profitable. -- unprofitable. sector, exploration spending could tumble 50% if oil prices stay low according to bernstein research. the ramifications of that could be felt for years to come. let's continue this story. "the pulse" is coming up the top of the hour. guy johnson joins us. bp will present their strategy to investors. they had told investors back in october that the cap could fall one billion dollars-$2 billion. that meeting >> formally kicked off at 9:00. that meeting kicks off at 9:00. hopefully we will have more details, more flesh on the bone about what exactly they are doing, which projects are viable and not viable. we will get some analysis. oil is one of the key things that will be running to the program. we will deal with bp and figure that one out. we will also be talking to tony tyler a file or to -- of fire to . we will talk to the ceo travel. that theme running pretty clearly through the pulse over two hours. the other theme running through his tech. details from google tech in the u.k. today. we have the web taking place in france. we have a bunch of guests on the taxes story and tech story. wearable clothing will be one of the skin-type themes we will be discussing. oil and tech. >> i'm not sure that is suitable for your eye, guy. guy.r you or i, let's take you back to the oil story. what is interesting here is that it is not obvious what it means from company to company. stagecoach talking about this public versus private transport having a negative impact. >> more people can drive their cars because it is efficient to do saw. you had a merrill lynch report saying that knocked a bunch of airline stocks that local carriers that seem to be doing well could be the big losers from this because what is going to happen is that the lower price of oil will keep you less efficient operators in business and the higher efficiency operators will not be reaping the benefits of these guys going to the water. neo.e a320 what was that about? >> it still makes sense. is 70%-20%.g bump it does still make sense. if you can operate efficiently out there, you have that competitive advantage. they can be transferred into prices. you become more competitive. the aircraft's story make sense, but it will delay the whole story. maybe the 2016 guidance from some of the local carriers, it was roaring. they are, but it might not be as easy to achieve. it is a double-edged sword. you thought it would be great for the airline sector, but it is not uniform. >> quick on what it means for the ecb. chief economists talking about oil and what it means for them. oil at 65 is better the for europe and oil at 120. oil prices may push below -- >> short-term, long-term. short-term expectation start to fall. if those expectations of lower inflation get embedded into your mind, that starts to be a problem for the ecb. further down the road, it will provide an economic kicker but it takes a while for that to be felt while the more immediate pump price story and face affect is much more immediate. it forces inflation below zero. the ecb has got to go big. it is a word situation. in 2015, you could end up with an economic bomb from oil but a bump driven by the fact the ecb has to be more aggressive. next year, you can see some upside may be on some of the expectations for the euro zone economy. >> so many different angles from this week. look at this chart over the next six months. wrench down, bp down, investor day today for bp. look out for the headlines from that. historic stuff yesterday. the biggest selloff since 1987. that is it for "on the move ." ♪ >> bp under cost pressure. the oil giant just started laying out its plans to analysts. gunning for google. the u.k. lays out its plans to tax multinationals later on today. and, try before you buy. how virtual reality will change the way you plan your holidays. good morning. welcome. you are watching "the pulse." i'm guy johnson.
assignment this week. who is taking her place today? contestant is bill cohen. theing me out at all hours, bloomberg contributing editor, welcome. >> great to have you here. >> i am no replacement for stephanie, but i will try. >> i know you will. the top stories out of business and finance, let us begin with oil prices. the lowest level in 12 years, brent crude is at its lowest level. also -- already facing the highest capital surcharge under international rules and the bank may have to than 20 billion in additional capital because of new regulations proposed by the federal reserve. the capital boost would not be due until 2019. wellgan says they are capitalized and intends to meet the requirements, whatever they are. shares of yum are trading lower. forecastp their profit for the year. yum was hurt via food scare in china, a huge source of its profits. kfc is very popular there. in july they were investigated for altering expiration dates on their meet, not what you want. beat posted earnings that estimates, plus sales growth that beat rivals from walmart. 7%, walmart is of less than 1%. greece is back on the front burner, in case you missed it. dropeting in the biggest since 1987, the snap election and ofthe greek default course, bill: this year. i was delighted not to have to any longer,regxit will i have to use it again? so. don't think what you are seeing is the combination of the political and the surge of populism in europe and a backdrop to the markets. you get these incredible price moves. >> does that make any sense? that they should drop 12% in the space of a day? is continuing. and it is interesting. >> here we are, this is what is happening today. they areertain extent trying to benefit from the volatility and spook the voters into supporting his candidate. so, the more turmoil, the more likely you will get those marginal candidates in the parliament to back the vote. this is the best play that he has got. is this a buying opportunity? overblown, this fear? or something that we should stay away from? >> on the debt side there is no question that we will pay. in terms of the percentage of interest costs, that is incidental. when people talk about the scare of restructuring it applies to the official factor of the debt. what greece is looking to do, they are looking to do a considerable haircut on the bilateral debt within europe. ironically, if you get this dialog advanced, it is probably better for the private sector, but you still might have tremendous turmoil on the ground in the equity markets. the underlying economy? we read stories over the summer and into the early fall the ends were picking up, that the economy was doing better. absent this political turmoil, how is the actual economy doing? >> is picking up but it will have a setback. ironically if you look at the euro area rates in general, a lot of the companies and countries caught up in the enthusiasm, looking at the baseline numbers and greece, greece looks very attractive, but technically the greek bondholders tend to be risk on risk off traders, where countries like italy and spain in some ways look worse than greece and are trading very well . so, this is a good buying opportunity on the debt, but political turmoil is going to continue for a little while. >> can we go back to appoint a point that you made at the outset? that they are hoping for a 12% plunge in the stock market to wake people up to the risks of electing or putting too much power in parliament? are greek voters to what goes on in financial markets? we have spoken before about argentina and how unusual it is that the people there have been forced to become kind of closet experts on the economy. this seems like a very difficult to manage business. it is even difficult to manage one's personal affairs when you have no idea the value of the currency tomorrow. >> this presidential election goes to parliament, not the voter on the street. do is swingrying to the additional fringe party voters. >> the parliamentarians. >> i think they are. you have seen two rounds of elections where people were faced with a real abrupt change and they backed off. if you look at the general sense of it, look at the scottish wrote. when people are faced with what might be a scott -- catastrophic vote, they back off. in some ways it is helping him and what he is trying to do in these elections. you could make a much broader argument that he has mismanaged the dialogue, but i think that what he is doing now is probably the best that he can. >> do you think that there might be a knocking affect on the rest of europe? we all got nervous, even over here about it. this is juste political turmoil and economics might not be as bad as they apply. >> agree. i think there is a risk of this percolating into the peripheral countries. objective analysts is going to look at those instabilities in europe. >> fueling the populist outrage against renzi? >> i think that what will have to happen is at some point they may have to blink a little bit in the discussions. >> helping out again? will the german government have to help out with financing some of these? >> they gave the two-month review extension, so there will have to be some progress. some of the rhetoric that came out of the dutch and the germans over the last few weeks, they will have to back off if they don't want to strain your to mark -- too much. >> what does this say about europe right now? >> they get volatile sometimes. [laughter] is going on inat greece is a good example of how these markets trade and it is interesting. in this situation they are trading much more like venezuela than spain. markets, you have a group of people driven a little bit more by headlines. the money can come off the table a bit more quickly. he continues to be a tricky asset class. >> based on yesterday it feels like a shoot first ask questions type of situation. is that the case? >> possibly on both sides. to the market in general is not to overthink it. if you spend too much time looking at every angle of a you are going to -- >> but the reason that i ask is -- what is the likelihood that current levels for the market has stabilized will be the lows? or will we see the market test on the debt side or the equity side with greek markets testing new lows as we move towards the early election? >> i think that we may, given where we are in the year, see some further selling pressure with people unloading risk. i might be wrong. this could be the capitulation trade. >> because we are getting towards the end of the year cleanup for investors. nevertheless, investors are desperate for higher yields, i call it the yield hunger games. is this an opportunity or more of an illusion? could this be worse than it looks? side, i really think you are not going to go wrong. there is some mark to market, but there is no way that if you buy a greek bond you have to go through restructuring. every headline that you see about debt restructuring talks about the efficiency structure. they are not going to have to restructure the private sector debt. stomachou have a strong as an investor and you have excess cash into play the credit markets, this is a good buying opportunity. we are not too far off the lows. >> very good. nice seeing you, my friend. of greylock capital. when we come back we will be talking about jpmorgan getting hit by yet another requirement from the federal reserve that may force jamie dimon to find another $20 billion of capital. plus cashing in on the housing recovery, the ceo of wall would make her. ♪ >> jamie dimon likes to boast that the fortress balance sheet is not fortified enough for the federal reserve. jpmorgan, which already fell into the riskiest category may raise -- may now need to $20 billion in additional capital by 2019. at the same time they are bringing unprecedented scrutiny to the bank. asked richard farley to join us. a partner in the leverage finance group. richard, we have lots to talk about, so let's be in with the new capital surcharge. but really, as you have probably gathered by now, it is all about jpmorgan. unequivocally singled out jpmorgan is the bank that needs to raise capital. >> i think that the policy is completely backward on this point. i think that it is just the latest iteration of uniquely american insanity in terms of the prejudice against large banks. because back of the founding fathers, where we fought against the central bank and were the last nation in the industrialized world to have a central bank. this is the latest way of saying the large banks are where the risk is. it is incorrect now and has been incorrect historically. the idea that we would require large banks, the best run, historically, which present the least risk, requiring them to have more capital than smaller banks is a misguided policy. save,reat is too small to not too big to fail. >> did i miss something? i'm getting older, i know, but in 2008 was there not a financial crisis that originated in many of the large banks in the city? >> that is one. two in history. about 1931. >> the savings and loan crisis. >> 8093, as far back as you want to go. but historically it is too small to fail that is the problem. >> his point is that there is basically one point that has not enough capital. by the way, jpmorgan could raise that capital by retaining their earnings. >> may i at one point? from what i gather it is not the size of their balance sheet, it is how it is financed. more so than the other banks they rely on wholesale funding. think that that is what they argue with respect to smaller institutions when they want to spend more capital. essentially this is peer discrimination against large, which is misguided. >> well, there are other large banks. bank of america. citigroup. i don't think the fed is going to penalize me in particular. my balance sheet is entirely deposit funded. >> as i understand that this particular issue is related to the size and not necessarily the mix. if i am wrong on that, i would be happy to stand corrected. >> look, it's 2008 there has been a lot of talk about having more capital at banks. >> correct, a separate issue. a separate issue. argueable people can about what the right level of capital is and how the risk inting ought to take place other matters, but i am talking about the discrimination of large versus small. >> i don't know that there is discrimination. >> that's what this is. >> not really. >> yes, really. >> it is one bank that the fed thinks needs more capital. >> it is applied -- implied discrimination. i'm sorry. >> richard is unquestionably right in the sense that large attracts more scrutiny. look at what is happening with leveraged loans, for example. loans tot make large finance buyouts are getting a lot of scrutiny because the fed apparently has some issues on the terms in which the loans were being made and the sheer amount of money being committed. >> they do. right. it has been characterized the sierraot as leone erroneously, as the fed using its power to regulate the prudential aspects of banking to enact monetary policy. and went through the rules regulations i was attracted to what they were after and i came upon something that said that these rules, the more leverage loans that we want to limit, we want to look at them closely and squeeze them down. it applies to whether or not they have balance sheet risk at all. deal,f the best efforts these rules apply, so how can it possibly be designed to protect the banks? it's not. policyly is monetary using regulatory authority to essentially treat the banks differently from other institutions that will fill the gap created by the regulatory arbitrage, which is completely unfair. >> even if they syndicate these loans, the fed does not want them to do them? >> even if there is no obligation at all. >> here is a question for you, bill. >> takes agents. >> to judge whether the borrower will repay a loan? jamie lee or dan tarullo? no question, jimmy lee. >> no question. [laughter] is's face it, jimmy lee smart enough not to hold onto these loans anymore. vice chairmanhe of j.p. morgan. >> vice president of jpmorgan, in it for the fees that a leveraged loan generates. no mistake about that. someone is going to wind up holding this loan and is going to have a principal risk related to it. my concern is that we are once again in the part of the market where these loans don't have covenants. where basically people are mispricing of risk. i'm not sure the jpmorgan necessarily cares so much about that. what they wanted for their clients take the fee and syndicate it out. wife you don't want to be in the position to blow up your client a keyhen you touched on point, where do the loans and that? hedge funds. cbo. they don't wind up in the banking system where you put your deposits. >> which is essentially what happened with mortgage backed securities. >> there was an interest rate arbitrage where the banks kept it on the balance sheet as aaa. did not haved they to add regulatory capital against it and they could borrow from the fed cheaper than the return they thought they would get on those securities. that was the disconnect. again we have real investors with real principal risk at stake who are probably mispricing risk because of the frothy nisan the market. >> some of the most sophisticated investors in the world. >> like we did in 2007 and 2008? sometimes investors do miss priced things. >> of course they do. >> if they mispriced risk, who is responsible? underwrote the loan? >> that is an ongoing debate. >> here is what we know for sure. buyers --icated >> eager lenders want to loan the money. eager borrowers say that i can get a return on my investment using these proceeds. those between shall meet, even if the regulators -- >> the banking -- >> the fees will go to others, unregulated entities, increasing the risk when all of these loans move off of the regulated grid and into the unregulated grid. i think it will stop because it is wrongheaded. >> i am not so sure that it will increase risk when you move it off into the unregulated sector. >> we will have to continue this debate another day. >> rich, thank you. >> richard burley, bill cohen, my guest host for the hour, author and bloomberg contributor. and all sorts of other great things, wouldn't you say? >> whatever you say. >> all right. what is it like having warren buffett is your biggest shareholder? we will ask someone who knows. ♪ >> time for bloomberg's "on the markets." market, in the oil brent crude is down another 2% in trading with a 65 handle. brent has not been this low since 2009. opec cut its forecast for the amount of crude oil it would have to supply to meet world demand after the lowest in 12 years. opec figures now it will have to supply $28.9 billion -- barrels per day, below the target that they affirm that their last meeting in vienna. this is a serious existential problem for many of their members. 10 out of the 12 need oil prices higher to meet their budgetary forecasts. and qatar can survive long term with the oil price is $65. we will be back in a moment talking about home construction. ♪ let's live, from bloomberg headquarters in new york, this is -- >> live, from bloomberg headquarters in new york, this is "market makers." >> stephanie is on assignment this week, bill: has ably taken her place thus far. helping me out, bill, he is a contributing editor and also the author of "the price of silence," but you have also written books about their sterns and goldman sachs. >> good to be here. >> great to have you here. talk about- time to the housing recovery. they took a huge hit when the housing bubble burst, they were among the nations largest manufacturers of drywall and other building products. companies making a comeback, here with an outlook for his business in 2015 is jim metcalf. jim, let's begin by having you explain how closely correlated your company's sales are to housing prices and gdp growth. >> i like this -- i would like to say it is a pleasure to be here once again. we are very excited about the future. housing is very important to us, but i think that where some people make a mistake is that it is only 25% of our business. the biggest part of our business is the repair and remodeling side of the business. think about people in their homes now, home prices are going up, which is very positive. we have seen the employment figures that came out last month . employment is getting more favorable. people just feel better about remodeling their homes. with half of the portfolio the united states tied to repair and remodel, we are really excited about that segment of the business. housing is important, as well as our new commercial business, the third part of our segment. we are very optimistic about the future. housing, obviously, is an important part of that. >> obviously, you have a very famous large shareholder. do you think that warren buffett is just playing the recovery in the housing market? he does it with the stock market and other sectors. after the 2008 financial crisis he just asked -- what is down so low and will rebound some nicely ? or is there more to it? >> well, we really enjoy the investment from mr. buffett. like we do all of our shareholders. we feel the best opportunity for our shareholders is to continue to feel the growth in the company on the bottom line. if you look at the aging stock houses in the united states, they are about 40 years old. looking at repair and remodel, a lot of homes need repair. wahlberg is one component of that. you have paint, carpet, a lot of components that buy into the model. our philosophy is to treat all shareholders equally and provide them appropriate returns on their investment and hopefully they are pleased at this point. >> jim, do you have a dialogue with warren buffett? >> we do. he is very open the phone calls. we have meetings with him but by the same token we do that with all shareholders, firmly believing that to have an open dialogue with shareholder small and large, to talk about the future we are optimistic about the future. we have been through a very tough time with the recession. it really helped us to create a recovery. we were not sure what housing would come back. there was a lot of uncertainty, going back a few years ago. so, we focus on strengthening the core of the business, helping us to whether any type of storm. one thing that we did in the recession that i think was unique to a lot of companies was we doubled down on innovation. we provided products to the customers that are lighter. i don't know if either one of you gentlemen have put up products. have you installed sheetrock before? what's i have not. on my specialty. eric, probably. >> have you? >> i have not installed sheetrock. i have not tried to put up aboard, let alone ceilings. >> you know what, i think that that is the best thing to watch, to leave to the pros. it is a heavy product. >> bill, my view, is an expert mutter. [laughter] >> of what is important is we doubled down on innovation during the recession. the customer said that we had a heavy product, so we took to wait out and focused on using less water, which means you use less natural gas, which is really very good for the environment. we invested not only on innovation, but we also have a lighter and sustainable product. the other thing that we did in this recession but i think is really important is we diversify our earnings and made an investment in asia and australasia, where the growth rate is higher than it is here in the united states. we did some things to create our own recovery. >> given those two things, the technological advances and the fact that you have a market to tap in asia, how much pricing power do you have in 2015? >> if you look at the overall pricing for our products, it is really providing value to the customers, which is why innovation is important. when you use the term wallboard, our product is branded sheetrock wallboard. it is lighter and more environmentally friendly and we feel customers will pay us for the value. >> that is precisely my point. if they know that it is sheetrock and they wanted more than the nationals product, how much more can you charge for it next year? your competitors are raising prices. i would have to imagine that usg has at least as much of not more pricing power given the strength of your brand. >> we sit down with customers every day to discuss the regional demand. a regional business. when you look at nationwide pricing, it really is a market by market asis. some parts of the country may be busier than others, where you can get price improvement. other parts of the country not. we look at where we have individual conversations with customers, we look at raw material costs and regional demand. for example, if you look at the united states the demand is true -- the demand is strong in what we call the gold horseshoe. san francisco through texas and in the east coast. in the middle part of the country here the demand is not a strong. those are individual conversations that we have with our customers and the customers that pay us for our value, we feel it is good for them to be able to sell more products. >> jim, thank you for joining us. we would love to have you back. jim, the chairman of sheet rock maker usg. virginia, many are asking questions about sexual violence and fraternity culture, as well as big questions of -- the questions about publishing and reputational management. ♪ >> this is "market makers." i would like to turn to the controversy of the story published last month in rolling stone magazine. as you may know, there are some serious problems with the story and rolling stone as ibaka what -- backed away from its own story. it is not a business story, clearly, but it does underscore the challenge of reputational of ubiquitousera media. no one is better suited to this discussion than my guest host, bill, and. his latest book, "the price of silence," chronicling the ordeal in thesued for everybody rape accusations against three duke lacrosse players. i have asked my cohost to step into the breach a few minutes early, sheila, welcome. no, you have seen this unfold since last month. least,at the very fascinating, still potentially tragic. we don't know enough to know what we know. what are your thoughts? >> i'm having flashbacks, as i am sure anyone who followed the duke case when it first happened in 2006. basically it's déjà vu all over again. extraordinary inflammatory charges and acquisition -- accusations. in this case the media broke the story and sent it worldwide before anybody really knew what happened. that is the danger. these things get reported very quickly. they are salacious. they are exciting. they bring out all sorts of concerns about young people's behavior, alcohol induced wrong behavior. >> it touches a raw nerve for american society. whether what has been reported in rolling stone is accurate or happens allike that the time. >> all the time. >> there has been a lot of talk about how suddenly do fraternities are looking really bad and that maybe people have been too hard on the fraternities on this, that there was such a rush to believe every detail of that piece. do you think that the fraternities have been unfairly painted in this malicious fashion? i would never want to send my daughter to a school with a fraternity like that. is it fair? a raw nerve,touch it is representative of what we sort of know is happening and is in fact happening. that is why it is so important to get the facts right, otherwise people rush into discredit the basic outline of the story. the same thing happened on the duke case, the same thing is happening at uva. the basic idea that fraternities are more than a little bit out of control, that underage drinking is more than a little bit out of control, and that people -- with that volatile combination of things it leads to bad behavior all around. >> if you were running a fraternity company, hypothetically, what would you advise the company to do? what should fraternities be doing to try to fix this serious damage? even if this piece winds up falling apart -- >> i hate to be simplistic about it, but to me it is all about too much drinking, frankly. we know, once you drink too much and too quickly, all hell kind of breaks loose. the drinking age is 21. you know, you have to adhere to that law and prevent anyone who is not 21 from drinking, or you have to change the drinking laws, or which i think we should, lower the drinking age to 19 and make any kind of yourng with i'll call in blood zero tolerance, like brazil, immediate loss of life. i think we have to trick -- change the drinking laws and recognize that it does not make sense, because that becomes a forbidden fruit. >> where do the similarities start with the duke case and where do the similarities end? >> the duke case similarities are the rush to judgment. absolutely, the media pouncing. , ofnd a similar response sorts, a similar response from the university. >> a similar response? sort of a condemnation. >> there is a big difference. the duke case got into the legal system nearly immediately. within hours of happening it hit the justice system. this matter is only just now being brought to the attention of the justice system. we would not know about this except for the rolling stone incredible story, true or not. case, the victim herself brought this into the justice system and then the media found out about it one week later and then pounced on it eats later. >> what about the role of the prosecutor in this case? >> one of the questions that everyone is asking right now is organization -- look, rolling stone has done some tremendous journalism over the years, how could an organization like rolling stone not check its facts? >> that is an upsetting question . i have been a huge admirer of their journalism for my entire career and this is sad to see them happening to them. i don't know if they will ever recover the reputation. by their own admission they obviously made some serious mistakes. even if the broad outlines wind up being true, the fact that they left it so open to attack by cutting corners is very upsetting. i agree. >> anybody involved in publishing and journalism, as both of you are -- bill, you publish books, right here, for vanity fair. sheila, you work for business we. >> the damage goes farther. anti-woman whoever claims that she was assaulted will have to listen to this all over again. >> that is a real tragedy. we stick around, we will be back after a short commercial break, talking about what happens when massastry marker has to go market almost overnight. it is a sweet story. >> hosting a party this holiday season? of worse you are. once we treat maker is tempting you, just not where you would expect. julie investigates. >> this classic french confection has become the new dessert. not just in the spoke a currys. the macaroon has officially gone mainstream. know?ou >> i was further surprised. right. is those macaroons are heading to a walmart near you. martha anne frank started the business in 1987, baking out of their apartment and selling treats to restaurants in san francisco. they began freezing the desert to ship nationwide, later cultivating its work. as the financial crisis hit corporate sales, they turned to aocery stores, cooking up retail brand. in july of 2013 they brought their products to the fancy food show in new york, where a walmart buyer took an interest. >> he was really knowledgeable compared to other buyers are talk to. he knew stuff. he said he thought that mainstream america was ready for macaroons. >> this will be their first holiday selling macaroons, tear me sue, and loose to the world's largest retailer. they have had to ramp up production. >> not just to bring in the people. >> they have also purchased equipment, including $260,000 machines to cut through the high-pressure stream of water. besides the questions of logistics, there is the challenge of a small company dealing with a large one that of accounts for 35 percent sales. >> are you worried that they will come in and dictate to you something that you are not comfortable doing? >> there is not really anything like that available. we are working together or it will not work. we feel that we are the specialists, we have been doing that for 25 years. >> the high-profile partnership has opened doors. >> we are meeting people constantly, but we are getting approached as well, they are seeing it. >> sales have risen 40% this year and they will match that next year, meaning further growing pains. >> all right, julie hyman is .ere to talk about looka dealing with walmart is supposed to be a nightmare. doesn't sound like it. >> they seem generally pleased with how the relationship has been going. one of the things they talked about was, with so many other grocery chains that they dealt with, they required a lot of fees to even get on the shelves. marketing and advertising. she said that walmart required none of that, that although they pay the company is essentially for transportation and shipping. they have to get their stuff to dallas, where there is a walmart distribution center it is then shipped out to smaller centers and stores. basically they collect more of the profits because of that. >> do they have to cut prices? >> i asked them about that too, pricing pressure, which is what you would expect. >> there is a bit history down the apartment, -- down the block for me, i cannot imagine -- they are not cheap. >> they are still not cheap, but not extraordinarily expensive. you could buy a box for less than a chore corner bakery. the products that they have developed have been specifically developed for walmart. it is different for the different clients they have. >> what do they have to do to keep walmart happy? keep selling? >> i asked them about that, too. i asked if there was a contract length, how does it work. they said that as long as there is demand they expect the relationship to continue. >> you story. sweet story. it is approaching 56 minutes past the hour. that means it is time for "on the markets." --brent crude, below is below $65 per barrel. it is the weakest in 12 years. there was a brief flurry yesterday that went by the wayside. the chart has been devastating if you are long on oil because of the tumble it has taken. brent is down 16% since they decided not to cover production. on to u.s. equities like yesterday, a deep decline with lower energy stocks leading the way. the group was down 3%. all of the energy stocks are falling at least 1% this morning. keep an eye on that sector. the dow industrials are off by 137 points right now. a global selloff with european stocks under pressure this morning. off by one third of 1%, certainly not the losses that we saw yesterday, but we should mention the stock exchange, off i only 1% this morning. the athens stock exchange closes much earlier than ours, so that looks like it for the decline right now. >> thank you for the update, scarlet fu. "market makers" will be back in a moment. learned aboutr we the giant scam, could we see another bernie made off? i will take this opportunity to say thank you very much to my guest host for the hour, bill cohen. thank you very much. sheila is already here and she will be with me for the next hour. a lot to look forward to. two minutes from now, will will be back. stick around. ♪ >> live from bloomberg headquarters in new york, this is market makers with erik schatzker and stephanie ruhle. banking'so rock world, pure to p lender lending club is about to disrupt the industry with its ipo, maybe the second largest of the year. and what is to keep scam artists from coming up with another ponzi scheme? reference -- unnecessary roughness in football, its parents were throwing -- it is parents who are throwing the flag. stephanie is on assignment this week. i have reinforcements here. she lives here from bloomberg businessweek magazine. we will begin with the global stories of the morning. let's start with the following, everybody. then q mobile, goodness me, more problems for the private by they firm targeted voting block. the company says it has fallen 76% when carson block accused enqueue mobile of overstating its revenue. mobile of overstating its revenue. heated e-mails between the top movie executive and the movie's producer saying "you have destroyed relationships with half the town over the wave behaved on this movie." earnings may rise an additional 25% next year, according to the international air transport association. giving credit to a stronger economy, at least here in america, and of course, cheaper fuel. tony tyler spoke to bloomberg. >> we will see oil prices coming down next year, saving the industry some amount of money, but of course, as all prices come down, so will average fares. relatively good global economic growth. that's the main driver of the results. >> airlines of north america expected to have the strongest earnings performance this year. that should not surprise anybody, given that it seems to the only developed economy that is growing. looks, his car booking service is getting sued or band. the cities of los angeles and san francisco are suing over background checks. in spain, they said huber cannot -- uber cannot operate there. this all comes after a week of anding that netted uber whopping $40 billion. next year, the cartel expects to produce its mullahs little of expects next year, opec to produce its smallest level of crude in years. $61 30 five cents. it hit $60.88 earlier this morning. brent is trading below $65. want to know how low it can go. no idea where that is. an's put the question to analyst in houston, chad. and she lets here with me, as is the new bloomberg markets editor. like every agouti analyst right now, you are having to make the macro calls on oil. like every energy analyst right now, you're having to make some macro calls on oil. where does this go? >> ever since opec handed us the thanksgiving turkey a couple of weeks ago, we've been in freefall in the markets. and we don't see much support until they act. that is the great unknown. that's why we've seen stocks selloff, and oil selling off as well. we recently put out a report 2015rday, but done are price forecast to $70 per barrel , took that down by over $20. and again, don't see any settling out in the next quarter or so. next chad, there has been talk that part of the reason opec -- >> chad, there has been talk that part of the reason opec did not cut production has been supply and other places. how long before we see the straight line production in u.s. turnaround? >> they are talking up their own. the short-term energy output put out yesterday, we already seeing it turnover next year. budgets are cut on the order of 20% to 30% into next year. we are already seeing that forecast come down into 2016, and expect to see that growth will over. we already there. already there. >> what you are talking about is the marginal cost of production, right? would you put that overall for american shale. -- american shale? ford and what the is it for the permian basin? >> it is clearly coming down. we took down a long-term forecast from 95 to 85. a victimtry has become of its own success, just as we've seen on the gas side. we've gotten so good at drilling these wells it has driven our marginal costs down, combined with an inflationary environment. producers are in some of the sweet thought -- sweet spot of these plays. you mention the permian and others. based of have very nice breakeven costs and prices here. there are still a lot of our producers who can turn very nice profits in those plays. in looking at specific names, caruso is one of our conviction picks right now. asset.- they are a core it's one of the last places we are doing here in the u.s. they have a great balance sheet that prepares them for more prolonged downturn if we are in that environment. but also, pdc energy. a great balance sheet. still able to generate some very nice returns in that play. picksare our conviction right now. >> there has been a lot of panic about the oil producers and how it's hurting the various oil companies. what does it mean for consumers? gas prices are lower than they've been in four years. it seems like it cannot be that from that perspective. will you think how that will affect people's spending and their own balance sheet? >> absolutely. this is great for the u.s. consumer. we are seeing that already. more importantly, to what the impact to oil is, we will see that in -- that demand uptick as oil becomes cheaper. on the other side of that, another beneficiary is the refiners. we just saw this morning the ande or a report come out, while the crude number was low, refinery utilization is at an all-time high. the world ino lead exports of petroleum products based on this surge of production weeks -- we have seen. by shale and that's have a thing. >> at this point with error winners and losers and it's easy to price in the market consequences, and the market has done that fairly effectively, maybe overshot in some cases. i know you are looking principally at emp, but is there anyone in your universe that stands to benefit? arms are technological dealers in your industry, and now there will be those who employ technology to drill shale cheaper. >> to your point, we have overshot to the downside. indexou see the benchmark down year to date we are flat over five years. the beneficiary being the refiners, the end-users, the american consumer. the investors are those that have missed out. i think there is a lot of opportunity in emp stocks at these levels. and the emp industry in the u.s. has shown over time they are resilient, and they are able to deal with this downturn, lower their cost structure, and become and will continue to outlast and survive in this downturn. >> you still have a number of about angs and you talk couple of conviction picks. what are the risks with those ratings? >> the biggest risk is the uncertainty, how long a downturn this will be. theing out to 2015, even at $70 price environment, a lot of our producers are very well hedged into next year. and pd -- casale and pdc being two of those. riso 2016, we are still in the 50 dollar or so environment. see expectations based on m&a activity. flex it is just stunning to it iss oil spurt -- >> just sending to in his oils precipitate decline, especially in light of the opec meeting you mentioned. -- oil path precipitous the decline. coming up, we are looking at lending club. plus, are there others like bernie madoff working out there? and if so, do regulators know how to find them? ♪ >> out of the shadows and into the lights of the public markets. that is what is about to happen to lending club's so-called pure to p are or marketplace -- pee r-to-peer marketplace. the could disrupt the highly the highly regular and powerful banking industry. to help us sort out the details, leslie picker. pretty optimistic about lending club. >> it is. we have never seen a p eer-to-peer lender in the marketplace. it is very new. it is said to be very disruptive and has the potential to take over banking. whether it is able to achieve that is still to be determined. but people are very excited about this one. >> it seems very similar to a lot of other companies that people have been paying attention to recently, like uber , cutting out the middleman. but lending is different from a taxi ride or buying a book on the internet, or anything else. why should people be looking at the same way they look at those other businesses? because it is a much riskier business. >> i think what you are referring to is the sharing economy, the on-demand economy as people refer to it. these market places do not actually hire people to do the work. they contract out, such as huber and airbnb and others. where lending club is different is that it is a financial institution. they have certain risks that are specific to them, which include different types of regulation. regulated like a bank per se, but they have been regular did by the sec and they have been disclosing that the -- there financials well before the sec requested it. >> i know one person who will be watching lending club's ipo very closely, that is, sam hodges, because he runs another lender,ace lending -- not really a competitor because it is focused on the business market rather than the individual market. testhow much of a litmus if you will, is lending club's ipo, broadly speaking in your industry? go -- can you hear us to sam, can you hear us? fixedry to get the audio on this. >> i do know his thoughts on this because i've talked to him and there are not many other examples in the public market first of the valuation that the public gives to lending club will be used as a barometer for these other types of alternative lending platforms. we have on deck, which is scheduled to price its ipo next week. we have other businesses considering private sale or an ipo. this will help them determine which way to go. >> but funding circle highlights the variety, if you will, of business models within the marketplace lending industry, because you have lending club, which is the peer-to-peer lender . it matches lenders with borrowers. hang on. let's get sam back with us. leslie was answering how much of a litmus test -- let's get sam back with us. leslie was answering how much of a litmus test this idea will be. give us your take. >> absolutely. think you for having me on the show. the lending club ipo is a bellwether event. thehows the maturity of segment and chose these businesses can have staying power over time. it is a must a generational shift in terms of how consumers and also businesses get access to finance. we are watching it very carefully. we hope they do well. >> can you explain how funding circle is different from lending club and on deck, another company that leslie mentioned that will be going public soon? >> sure. there are two dimensions posted the first is borrower focus. there exclusively focused on small business owners. we have designed the business to be bottom-up in providing capital to small business owners. whereas lending club has been much more focused on consumers. segment.ry different with regard to on deck, the difference is more around business models. on deck has historically been a balance sheet oriented is this where they are lending out money makes with equity and debt directly. more working is capital and shorter term financing for stop at funding circle, we focus on more expansion capital. an institutional investor thinking about buying a bunch of these shares, what is the big risk? what is the event i should be putting into my model to look at how things get run? because everything looks great right now, but as we have seen with these other companies, and unpredictable event could turn things south. what is the number one risk factor in your view? >> the biggest thing is that we all have to be responsible about how we think about credit. if anyone of the market place lenders come a lending club, or funding circle or others, were to fundamentally change the way we give credit and suddenly loans were not performing, that a serious liquidity problem. the providers of capital at individual institutions who are lending through us would go away. that, andlot about managing the business in a responsible way. i i were in equity investor, would be digging in on the credit funds. addresse -- poised to -- we are poised to address a massive market. >> sam, that makes perfect sense, but i would go back to alan greenspan testimony before congress in the aftermath of the financial crisis most of you said the cardinal mistake he made as chairman of the federal thatve was in expecting bank ceos would husband their own capital and not make irresponsible loans and do irresponsible things, like load up on stuff they plan to warehouse and turn it into ceo's. clearly, what you are doing and what lending club is doing is different, but what is there to make sure you do not make the same types of mistakes? you talk about the importance of credit. they forgot about the importance of credit. marketplace business model has an advantage over a bank or balance sheet lender in that way. ultimately, our lenders are keeping us honest. -- our credit. erc the loans we are doing fundamentally change, they will put the -- if they see our credit change fundamentally, or the loans we are making change fundamentally, they will stop giving us funding. we are pricing in a way that is attractive and because we have a variety of different providers of capital lending through us, that provides a powerful force to make sure we're doing things responsibly. >> i'm curious about whether these types of business models can weather different types of business models. the different difficulties missing pop up after the financial crisis, how well can a stressful financial environment? >> in lending club's case, they've already weathered it. they started in 2008. in our case, we got started in 2000 9, 2010 in the u k and i was a bad year in the u.k. economy. in both cases, we know how our credit book should perform under some level of stress. beyond that, we think about what would happen in a down cycle, when it hits. the two things we care about our, number one, credit performance command and the way we think about pricing our loans and the pace at which we lend out and how that takes into account our view in the credit cycle, and we are in constant dialogue with the lenders about that. and the second element is the liquidity, the amount of capital that can flow into these marketplaces. what really seen the last 18 months or so him and in 2015 at think we will see more of it, is a real diversification in the types of capital put to work through platforms like lending club. there are forms of capital that are a bit more permanent, but they will help us weather different type -- parts of the cycle. >> sam hodges is cofounder of funding circle. a company in the marketplace lending business. you are getting a lot of attention with lending club due to price its ipo tonight. and leslie picker will be on the lending club case tonight and tomorrow as well when the stock makes its trading debut. we will be right back after this short break. ♪ >> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> i'm erik schatzker. stephanie ruhle is on assignment, but sheila is here. she is the features editor for bloomberg businessweek. have a look at the camera, so people can see you. >> hello. >> we've got a topic to take up that i know is of great interest to you. six years ago this week, bernie madoff's two sons told authorities their father was running in $19 billion ponzi scheme. course, what happened to him, 150 year prison sentence. just this week, a former employee was sentenced to six years behind bars. his too good to be true returns were just that, too good to be true, made up. job? he sec do better next guest is currently director at berkeley research group, a consulting firm that focuses on securities market regulation. david, you have seen the sec involved in the six years since the ponzi scheme was uncovered. what do you think of the sec today? there is no question the sec has changed, has gotten better. when i did my investigation there, not only did we do a report as you mentioned, about about why they missed the ponzi scheme, but we also did 300 recommendations top -- totom to include improve the enforcement. there were significant changes put in place by the sec. >> i've spoken to a lot of people at the sec. there are many hard-working, ernest, well intended attorneys they're working their butts off. however, the agency continues to be criticized for being too weak, not being aggressive enough, the -- public in the wrong kinds of cases. a cultural problem? is it a bureaucracy problem? what can the agency due to unleash those people who are really trying who are there? >> i think it is a couple of things. i think it is a bureaucracy problem. you are right, when i was there i saw many talented sec employees. and i also saw some not so talented, some not so hard-working employees. they don't always did the best job dealing with the employees who are not doing their job. resource issues, i think the sec has resource issues. i also think they don't manage their resources necessarily that well. in general, i think the fraudsters are ahead. it's very difficult to keep up with the fraudsters. the sec tries its best. i think it could do a better job managing its resources. that in the end, it's very difficult to keep up with new schemes, new frauds. >> i think you are right that people on wall street are not afraid of them and there was a time when wall street traders were scared of them. they showed up in the movie "wall street" and everyone started sweating on the trading floor. what do they need to do to reinvigorate their reputation and make itself a feared regulator? think they are bringing some cases. the high-profile cases, you know, sometimes the sec gets criticized for bringing the cases to the press. i think the high-profile cases are important. and i also think their new approach of not allowing people -- or forcing admissions in important cases, i think that is important, too. you don't want a situation where companies pay off the sec as a cost of doing business for stop you want to be more aggressive with enforcement cases. and they need to do a better job internally. no one was fired as a result of the madoff ponzi scheme. they need to make sure everyone is doing their job and that you don't have the week. on a case. you have a situation like made madoff, where the investigators were not experienced and did not really understand his ponzi scheme or trading, and it caused a huge scandal at the sec. you can have a lot of good people, but if you also have weak people, he may run into trouble. >> there is no shortage of criticism for the sec for some it's the nature of the job. it is what mary jo white has to deal with. criticismsard some in particular that i want to share with you. i know you've heard them as well . i want to see what you think. the first criticism is that mary jo white is overly focused on itemizing, or at least quantifying the number of enforcement cases it brings and the amount of money it collects in fines, penalties, and disgorgement. what we heard from the now retired assistant -- excuse me, trial attorney who worked at the sec and on his labrador said the sec is "an agency that polices broken windows on the street level and doesn't touch the top dogs, but just the worker bees. what do you think of those two criticisms echoed >> -- those two criticisms? >> they also missed another ponzi scheme and the reason for that, they were focused on statistics. congress helps them greatly to be -- it helps them to go to congress and being to say, look at how many cases we brought this year. and congress gives them money as a result. they are in a bit of a catch 22. the do need to focus on most important cases for step in terms of the kidney issue, i don't know that is fair. has tried to go after some of the bigger players in recent years. i think mary jo white has tried to reinvigorate the enforcement program and that was act. some of these cases take a long time to do. i'm not sure that is entirely fair. but i do think there is still room for improvement, without a doubt. >> one of mary jo white's hardest jobs is that she has to go to congress constantly and justify the agency's existence and begged for more money. if you were advising her, what would you tell her to say? how can she get the budget he needs to make the changes to make the place were more robust and more effective? flex i agree. i think the problem is even further, that then they get new responsibilities. what happened after the bernie madoff pontes can team -- ponzi scheme? dodd-frank comes out and gives them all kinds of new response abilities and maybe not enough money to deal with them. i think the sec approach should be, look, we will do things well and we are only going to do things that we have the resources to do. we will not get into all of these new areas and new responsibilities if we do not have the resources to do it. i think that hurt them with the made off ponzi scheme. there were people who went to bernie madoff and said, i don't believe this is real. your returns are impossible. and he would say, the sec was just here and just gave me a clean bill of health. the fact that the sec examined bernie madoff over and over again lead to more people being fooled by his ponzi schemes. the sec needs to do what it does well and needs to have the resources to do it and should not take on additional response varies that they cannot manage for mary>> good advice jo white. david cox is now the director of the berkeley research group. coming up, football has an image problem and it's not just in the nfl. we have an exclusive poll for you on parents and whether they would let their son play the game. ♪ >> if it feels to you like what has been happening off the field in football has made headlines more than on the field, you are not alone. critics say they have not dealt with a long-term consequences of things like brain damage. most americans don't want their sons to play football and few think the game's popularity will grow. for moore, john heilemann is .ere, bloomberg managing editor we also have scott sosnick from cover sports. >> we asked two questions, what people thought about football's future and whether they thought it would be more popular, less popular, or as popular. the majority of people think it will be just as popular or more popular. i kind of lumped those two together. aey see football as having bright future for it is the dominant sport in terms of revenue. was, if youuestion have a son, whether you would want them to play competitive football. to my mind, this is a conversation of people like us. i certainly hear more people say in the wake of the concussion stuff -- not the ray rice stuff or anything else, but the wake of the concussion stuff they say, i would rather have my kid pay -- play soccer or lacrosse, or something where they were less likely to be knocked out. it raises the question of whether a lot of parents are certain to feel this way and what the future of the sport is long-term. >> it seems to me there are no other sports that have suffered the kind of brutal pr that football has recently. everywhere you turn every day in the newspaper there is some horror story about some player in the nfl. how will they recover? how can you convince a mother to let her precious little child to get his head bashed in or whatever else? flex the chilling effect. -- >> the chilling effect. they are getting e-mails and calls at schools saying, what are you doing to prevent concussion? and the athletic directors are saying, do you know the concussion numbers behind women's soccer? it's almost as high as football. are you ok with your kids playing soccer? are you ok with your kids playing lacrosse? oh, you are? these are but the numbers say. you are only seeing football on the front page. noton james saying i will let my son play football. or barack obama saying it is harsh. a former football player. >> lots of former football players are saying it and that is the message getting through. >> it's pretty powerful to have a former player come out and say -- it's like steve jobs saying, i will let my kids have an ipad at home. concussions, or is it the culture around the sport? there are some really hard behavior issues among football players that have tainted the culture. >> i don't think most parents are assuming that their kids are going to go on and be professional football players and have to deal with some of the culture. but all for stats, regardless of what the those otheray, sports don't have had on head contact in the same way. players's soccer team blowing holes in their chests. >> and with long-term damage. >> participation should be falling, correct? football,igh school even with all the headlines, the first time in five years participation in football has gone up. 6600 more people play high 2013-14 thanll in the previous year. >> in the markets come i think that is called a lagging indicator. and who knows yet all i know is there is a question. people say, you have never seen a big, important sport go out of business. i say, look at boxing. it's a sport that is not nearly as big a sport as professional football, but in our lifetimes was a sport that millions watched. -- muhammad ali and george frazer and muhammad ali and george foreman. but more or less, people now basically say, too barbaric. it's too brutal. i will not watch it. it has become a niche sport. it does not generate huge headlines and huge heroes. the question is, could what happened to boxee happen to football? system?about the feeder if he goes away at the high school level, then there is a problem. where the nfl benefits is it is a nameless, faceless sport. interchangeable parts, spare parts, and that is how the players are treated. if you could put anybody out there in the helmet and have the star quarterback throw the touchdown pass, everybody would have the fantasy team and they benefit on the weekend. >> and we also broken down by subgroup. the strongest group that does not want their kids to play in competitive football all rich people and college educated people. the most educated, wealthiest in the, it's like 62% over $100,000 year college educated. most professional football players are not coming from families of brain surgeons or top wall street traders. opportunities will still be great. you will still get plenty of elite high school players, college players heading into professional football player -- football. but what happens when a football player dies on the field? be a moment. it will happen in the next 10 years. it will be a huge nfl monday night game and a player will end up dead. what will then happen to the sport? >> many do not view the helmet as the protective device, but a weapon. waiting for the fallout from that. >>, to better are the helmet from five years ago? >> not much. click are there any parallels to hockey? i asked eric, the canadian. >> he is a canadian with all of his teeth as far as i can tell, so he may not know. -- >> is look at the lacrosse and women's soccer numbers, do they want their kids to play? >> you know that the enforcers on the ice, some of what has happened to these guys, it's not that different. it's terrible. today, "all due respect" and of course, stop -- scott soft neck, our sports guy. -- scott sosnick, our sports guy. ♪ flex that will do it for "market makers" today. forla has been my co-incur the hour. thank you very much. >> my pleasure. >> when stephanie is off once again, you will have to join me. >> absolutely. >> tomorrow, we'll will have the ceo of lending club. the market place vendor is pricing their shares tonight. an exclusive interview with the chairman of the ford motor company, bill ford. that is with matt miller. you will not want to miss it. i will see you tomorrow. ♪ >> we are slowly approaching 56 past the hour. its 55 past the hour, but we can still do on the markets. major averages in the red for a third consecutive day. yesterday was a little iffy, but definitely for maybe down -- firmly down today. the dow jones industrial was a loser yesterday for sure. again today, 17,672. and the nasdaq, which was up yesterday is now down at 4749 as tech stocks fall. the s&p 500 is on pace for its worst three-day slide in two months. we saw a little change at the end of yesterday. joining me for the options inside, scott bauer, senior market x -- market analyst at trading advantage. we had more than 2% losses across the board in europe. in the u.s., a rough morning, but came back to finish strong again. do you see that happening again today? to geterday, we tried some people in the market place to pick a bottom and we saw the inflows coming in. i think the volume is light and will be light through the holidays. anything goes. i don't think we are going down much further today, but i don't think we are coming back all the way up either. i don't want to be on both sides of the plate here, but i don't see the volume being the of the test behind a move here. we got some negative news overnight. notnews out of china is great. it is probably a bit of a continuation of this minor correction. >> i was talking to mike from philadelphia trust this morning and he said people were selling what they could to try to offset losses this year from energy shares and people who own the underlying commodity of oil. obviously, oil is having an amazing down day again today. what do you think about that idea? will that ruin the santa claus rally? >> no, i don't think so. the energy sector, as big as it is, it only makes up about 8% of what the dow is. i think you are seeing some selling in their two may be offset gains that people are getting elsewhere. and oil is almost at that capitulation point because we are seeing large volume there. but again, i don't think it will knock the rally off its wheels. >> we're watching oil closely. $.71 per barrel is what we are looking at for nymex crude. if it -- if it comes below $60 per barrel, is that what everyone is calling you go >> yes, if it gets below $60, people will freak out and say, oh, my god for some but i don't think it will get much lower -- oh, my god. but i don't begin to get much lower before buyers come in. >> you mentioned the expectations for economic growth , but also for yum! brands. they cut their forecast because of the chicken scare. what do you think about yum! brands? verye options market is bearish. this is the second time, like you said, that they cut their earnings expectation based on the chicken scare or the crabby patty scare, whatever it is. the stock is in the 73-73.5 range. the stock has some short-term struggle -- trouble here. i don't see any sort of rally between now and the end of the year. -- theopposite of opposite is true of lululemon for sub you think they have room to run after a couple of days of smooth sailing. >> absolutely. earnings tomorrow morning, a lot of upside pressure. 30% interest. i will put on a weekly trade and buy one of the 50 calls, sell two of the three -- two of the 50, 3.5 strike. what that allows me to do is to take advantage of any appreciation on this upside swing. and my brake side to the upside is all the way of 257. if we get up to 37, i want to short the stock. i want to be short there for sub it's a huge resistance point. i do think it is going up. at 57, i'm shorting. >> thank you very much, scott bauer. we are on the market again in 30 minutes. ♪ >> welcome to "money clip." opec slashes its forecast. we break down the winners and losers. the nfl suffers another blow to its image. the results of a new bloomberg politics all the fallout from the torture report. senator john mccain says it was the right thing to do. six years on from the bernie made off scandal, -- bernie madoff
welcome to "countdown." obama says he is ready to walk away from a nuclear deal with iran if it does not meet his conditions. we will bring you the latest on the talks. plus the reaction in tel aviv. let's start with europe. stimulus and greece. mario draghi launches his fight against inflation in the eurozone with an unprecedented program of qe. the ecb begins its asset purchase program amounting to 60 billion euros a month. >> the greek finance minister said if the country's creditors make requests that are not acceptable to the government the greek people might be asked to decide on how to break the deadlock. the prime minister signaled the referendum option could be on the table. let's bring in david powell. he joins us bright and early this monday morning. good morning to you, david. let's talk about the start of qe . we have been talking about it for years, it seems. other central banks enacted it years ago. can it live up to expectations ? >> we saw the reaction in the markets after the announcement from mario draghi last thursday that today would be the start date. stocks went up and the euro went down. he managed to strike a tell him that was cautiously optimistic. -- strike a tone that was cautiously optimistic. >> remind us david, how much they are buying, what they are buying, so on and so forth. if you have been asleep for the last few weeks. >> they are going to be buying 60 billion euros worth of assets per month and that will be mostly government debt. a few other sites in europe as well. that is going to go on until september of next year. the only -- the other detail was they will not buy anything with a negative yield. >> things look a little bit fragile for greece. various ministers in greece including the prime minister and the finance minister about the possibility of going back to the polls if the greek proposals do not manage to convince european creditors to give them the next round of aid. what concerns you? >> it is a negotiating tool. a couple of years ago, the europeans were very upset about the referendum in greece. essentially it even though the greek -- to a certain extent it would depend on how the question is worded. if you do not give us a little room we may have another referendum. they will have that in mind as they go into their meetings today about the next steps. >> how precarious is greece's financial position, david? >> if you run the numbers, it seems like if the aide were to come through as planned, they would be able to meet their financial requirements. that is contingent upon -- the real problem they face is cash crunch the tax receipts were lower than expected. possibly as a result of the election turmoil. they really do have to make those payments. they have tried to explore a few avenues, increasing the issuances of t-bills. the ecb said no to that. it is dependent on the generosity at this stage. >> greece probably will not receive any aid in march they stop on the latest proposals. those proposals have been described as amateurish, not substantial enough. what are we looking at? what more details do they need to come through with to convince their creditors? >> two weeks ago, they said it was vague. they will want more details on how exactly they will implement the reforms. >> they were suggesting they could have tourists posing as tax collectors. that was an off-the-wall suggestion. >> china's exports have seen a massive boost, soaring 48% last month. in let's go to hong kong. >> good morning. >> exports, quite a number. talk us through it. >> 48% jump, yes. what we are seeing is a combination of factors. more shipments to the u.s., the shipments grew to 21% in the first two months of this year. they are trying to follow the u.s. economy. a 3% boost in the u.s. economy does lead to an increase in chinese exports from eight to 9%. distortions because of the chinese lunar new year they fell in february and companies were trying to get orders processed ahead of the holiday. because of that, we are going to see exports this month in march grow by less than 10%. analysts look at the trade figures for january and february combined. those numbers were up 15%, which is still more than double the government target. exports leading to a record trade surplus of $60.6 billion. >> imports in china have remained weaker than exports in recent months. did that trend continue? >> we are seeing another month of weakness. imports falling by 20.5% in february. that was the fourth consecutive month of declines. this was the sharpest drop we have seen since the global financial crisis. this not only reflects lower commodity prices, but also weak domestic demand. the domestic investment momentum is not there. producers seeking to maximize exports in order to make up for that week domestic -- weak domestic demand. the economic data has added some pressure on the yuan against the dollar. it will only help exporters marginally. given that it has risen against other currencies. >> staying with asia, japan's rebound from recession was weaker than first estimated. gdp debated -- let's move on. today we get the details on the new apple watch. tim cook will try to convince us why we need his new product at all. here to help us cut through the speculation and the hype is caroline hyde. >> the day is the event, spring forward. 10:00 a.m., it is an invite only guest list in san francisco. another event is going on in berlin. we know that they have three models. we know it starts at $349. it has touchscreen, two different sizes, aluminum rose gold. still so many questions. that is going to be what people are going to be sending out tweets, the price point. $349 is where it starts. some speculation that it could go anywhere up to $20,000. >> for a bit of bling. >> 18 karat gold, apple promises the gold to be twice as strong as any other standard gold. it has a polished sapphire crystal screen. the addition will start at close to $5,000. the average will cost about $7,500. price point is what everyone will look at first. we will want to see that you can wear it all day. when we you be able to plug the sin? -- to plug this in? we understand -- tim cook has been speaking in other press reports. he wants to be able to open car doors with this. apps will be what makes this the must-have gadget. >> how will tim cook convince mark barton that i need this gadget? >> back to the ipad we have not seen them become you can -- become ubiquitous. with the help of apple, this would become the must-have gadget. we expect them to sell 14 million of them this year. they have to convince us why. >> open secretary-general says the global crude oil market will balance out in the second half of this year after a glut of 2 million barrels a day sent prices plummeting. opec will not cut production because of the rise in shale output. few answers to questions surrounding flight 370, which went missing one year ago on sunday. authorities found one unusual detail, the expiration of a locator beacon battery before the plane took off. it is unclear whether that hampered search efforts. a russian court indicted five men on sunday in connection with the murder of boris nemtsov. one of the accused admitted a role in the murder. the charges come just over a week after his death sparked protests in moscow. results congressional heads denied involvement in the country's largest corruption scandal -- brazil's congressional heads denied involvement in the country's largest corruption scandal. the politicians allegedly took kickbacks. the president said brazil is learning from the scandal. >> with courage and pain, brazil has learned to practice social justice in favor of the poorest as well as applying the harsh hand of justice to the corrupt. this is what has been happening in the investigation. >> the block should have its own army, he told the german sunday newspaper military force would give the eu more credibility and show russia it is determined to defend european values. >> we will take a short break on the program. it will be another big week in british politics. the u.k. business secretary will be joining us this morning. we will be speaking with horace johnson later on -- boris johnson later on in the program. we will take a break, see you on the other side. ♪ >> welcome back to "camp ountdown." let's bring in the ceo of armstrong investment managers. thank you for joining us. q we starting -- qe starting seems like some of the data around the eurozone is picking up. what is it doing for your strategy? >> it is going to continue well into 2016. growth is expected to pick up from zero to 1.5% next year, 1.8% the following year. however yields are responding will be a question mark. if you need to follow examples of the u.s. and u.k., we have high yields. japan, progressing buying by the japanese central bank resulted in even lower yields. since the qe was announced, the bond yields, negative yields with a maturity of over a year. now we have something like 1.6 trillion of those bonds, investors are paying to lend money. we will see how the yields pick up. global yields are increasing. equity markets have been responding quite well. we have seen an increase in different sectors in european equities. all of this will have a further weakening of the euro and this is good for quite a few exporters. >> if you are holding a bond and someone offers you a good price and then you have to reinvest that money and you look around and yields are negative, what do you do? >> a couple of investors are betting they will be selling those bonds. over a trillion of european bonds will mature this year. that money will have to be reinvested. >> it is interesting. there is a link between who owns the european debt and what that does to the currency. because so many foreign investors own eurozone bonds, if they can be persuaded to sell them to the ecb, that could put downward pressure on the euro. >> that would be great for european companies. the euro was at a 11 year low versus the dollar last week. that pattern will continue well into the year. this qe will have a good impact on the european economy. i think the ecb is on track to achieving that. another market that is quite interesting the japanese market. based on the initiatives of abe. his policies seem to be working. >> that was the date of easing but also a lot of talk -- quantitative easing but also about big investors in the japanese market would diversify. there was another angle in that story. >> it creates exposure to something like 35%. qe had a great impact on equities in the u.s. and the u.k. >> how much of the structural side of the equation will be carried out by eurozone governments? is most of the weight going to be taken on by the euro to give a lift to the eurozone economy? >> manufacturing needs to be put in place. there are two countries not participating. eurozone thinks they have already contributed to 68% of the debt of the greek economy. there will be pressure to conduct some of those structural reforms in addition to the monetary stimulus. >> you mentioned japan. you have some investments there. the japanese economy as a result of qe. we got some gdp data overnight. big companies in japan are reluctant to invest fearing the consumer does not have the confidence they thought. what is your latest take? >> japanese companies are going to corporate restructuring. they will increase transparency. they will have discussions with shareholders. it is a big transformation happening in japan. it is a slow process, but they are getting their. -- getting there. they have been doing business in the same way for the last 100 years. they are cautious when it comes to investments. pension funds, sovereign funds, they are looking to increase exposure. >> you have been upping your exposure to russia, you've been adding to your position. since december, it has been a good bet, up 44%. if that trend going to continue? >> it was based on the fact that the situation in ukraine is working itself out. oil trade is something we are looking to increase over the next months. we think this is a good entry point. next to go long oil? -- >> to go long oil? >> we believe this is a good time. >> what makes you think that oil will had higher? -- head higher? >> you would buy oil at the price now? >> we are looking to build up a position slowly over the next month. >> outside of russia, he would added to your u.s. momentum -- you have added to your u.s. momentum basket. the u.s. has certainly had some momentum. >> based on the sovereign debt momentum driven. we are looking at the strength of the buying and the quantitative overlay. it is a lot of noise in the market. markets have not been driven by fundamentals. the news about greece has had a big impact on the market in general. >> ana, thank you very much for joining us this morning. >> you can join the conversation on twitter. let us know what you think of the show. tell us the stories you want to hear about. >> it is 6:26 a.m. in london. the deadline looms, but the deal is not inside. we get the latest on the iran nuclear talks. we will go live to tel aviv and get reaction as america's middle east ties are tested. ♪ >> you are watching "countdown." let's have a look at the bloomberg dollar-spot index. that is how it has done over the last 12 months. it has gone in just one direction. a 17% gain. what happened on friday was fairly special, because the dollar rose by 1.1% on the bloomberg index after the u.s. jobs report. it was the biggest one-day gain since november 2011. it ensured a record high for the bloomberg dollar-spot index. after the jobs report traders see a 23% chance of a u.s. rate hike in june, with a 17% chance at the end of february. the index is up for nine consecutive months or is it -- it is on track for its ninth consecutive monthly gain. interestingly, investors were getting slightly nervous about the dollar's performance in february. those who stuck with the dollar through its worst months since last june have been rewarded. hedge funds and other large speculators reduced positions benefiting from dollar gains for a fourth consecutive week at the start of this month. if you step by the dollar, you've been rewarded with that 1.1% gain. when you look at the dollar against the broader array of currencies, 31 major peers year to date, the dollar is up. just for currencies are gaining against the dollar. they are the swiss franc, the russian ruble, the indian rupee, and the taiwanese dollar. the dollar today, slightly lower on the bloomberg index, but after that rise following the u.s. jobs report that was not a big surprise. the biggest one-day increase on friday since november 2011. >> the top stories on bloomberg this hour -- with 60 days to go until the u.k. casa general election, labor leader ed has told voters in scotland that supporting the scottish national party risks handing power to conservatives. miliband said the election is set to be closest in a generation. >> every vote cast for another party including the s&p makes that prospect of a tory government more likely. it is just a matter of arithmetic because everyone less labor mp makes it more likely the tories will be the largest party. >> u.k. green party later natalie bennett called for a "peaceful political revolution" at her party's conference. she called for in and to what she described as the failed experiments of austerity. the leader of the welsh nationalist party leanne wood is seeking an increase in funding for the welsh government. he says he's calling for an additional 1.2 billion pounds a year. we will be covering all of the major parties taking part in the u.k.'s general election bringing you every result as we get closer to polling day on may 7. london's financial services companies are set to step up their hiring. that is according to a recruitment firm. the company says that more than 3000 new jobs were created in london's financial district integrate. >> negotiations continue between well -- world powers and iran over the country's nuclear program. the latest in the dispute included a meeting between u.s. secretary of state john kerry and french foreign minister fabius. the two leaders met this weekend to relate the status of the talks. joining us now is bloomberg news correspondent, and in tel aviv, elliott gotkine. what has been the reaction in iran to john kerry's latest travels? >> normally, the iranian media try to play up the government's line, which recently is to say things are positive by and large, but in the same way that obama tends to speak for the u.s. audience, it is the same in iran. iranian officials, their rhetoric tends to be geared towards concerns in iran domestically. >> what would be a good outcome as far as the iranian government is concerned in terms of the limits imposed on their nuclear capabilities, the amount of oversight they have to agree to? >> one thing the iranian government is quite determined to secure is a complete removal of sanctions and repeatedly, iranian officials particularly the foreign minister and the president, have said that it is a redline for them the complete removal of sanctions. that is one of the sticking points in the foreground of the talks. many of the technical issues have been, according to iranian officials, have been ironed out. they said last week that the stand up on the technical side has been removed, and this week we have some iaea inspectors in the country. those talks are always going on. > give us an idea of how sanctions are affecting the economy. >> the economy has been extremely negatively hit by sanctions. it hasn't helped the fact that the mismanagement happened under margaret of the -- mahmoud ahmadinejad. a lot of the structural weaknesses in iran's economy were worsened under his tenure. sanctions have definitely made things worse. they have increased inflation. they have slashed oil exports. it is pretty bad. > should we get out to elliott? thanks for joining us. last week, israel's prime minister benjamin netanyahu urged lawmakers in the u.s. to be tougher on iran. he took his argument to american tv, as well. >> i think if you are based in the united states, you would've had to have been living under a rock to have missed print -- prime minister netanyahu's arguments. that controversial speech to the u.s. congress controlled by the republicans, much to the chagrin of president barack obama. yesterday, i talked to the u.s. network cbs where he reiterated his arguments, which he has outlined not just last week but prior to that as well, and focused on where he and present obama or on the same page, and where they are not. >> i do not trust inspections with totalitarian regimes. it didn't work with north korea. they violated it and played a good game of hide and seek. >> what netanyahu wants three things -- he wants to extend the length of time that it would take for iran to get a hold of a nuclear bomb the breakup time. it wants to limit the amount of nuclear infrastructure that iran is allowed to have, and the third point -- this is the one that is least likely or most likely to fall on deaf ears as far as the negotiations -- it wants iran to stop calling for israel's annihilation and to stop supporting other groups like hezbollah if those sanctions are to be lifted. it doesn't want sanctions to be lifted if iran still continues to call for israel's disruption. >> how much of netanyahu's rhetoric is related to the israeli election on march 17? >> i suppose it is fortunate or unfortunate if you like that the next rounds of nuclear talks begin on march 15, this coming sunday, and the israeli elections take place two days later. it is impossible to have these elections and not be talking about iran, especially when netanyahu is the prime minister. from his perspective, he's being seen as much more tough on security matters. going on about iran doesn't lose him and he votes, at least among his core constituency. as the anti-netanyahu rally on saturday night demonstrated there are plenty of people who want change. they don't want to see a third term. they are more concerned with things like sky high house prices, the high cost of living and they are concerned that the netanyahu government inevitably would have to include ultra-orthodox parties who might then secure more privileges for ultra-orthodox jews, just when this current government had been making inroads into getting ultra-orthodox jews more included in the economy, making sure that they serve in the army and the like. a lot of people are more concerned about these other humdrum issues. the opinion polls, they say it's too close to call. the zionist union, which contains the labour party, more and more -- more or less in the. it comes down to who can make the negotiations with the smaller parties to get the numbers to form a government. >> bloomberg's elliott gotkine in tel aviv. >> you can join in the conversation on twitter. let us know what you would like to see more of on the show. still to come on the program britain has had a coalition government since 2010. is the country headed for more of the same after the general election in may, and who might the powerbrokers the? analysis is straight after the break. we have a couple of political heavyweights joining us on programming on bloomberg this morning. u.k. business secretary vince cable will be joining us first and we will stick to the conservative mayor of london boris johnson. all of that is coming up on "the pulse." ♪ >> top stories this hour. u.k. investigators called and former traders from barclays and deutsche bank for questioning surrounding a probe into the rigging of libor rates. former traders are being called for interviews under caution of a procedure that indicates the authority have a reasonable suspicion of wrongdoing. general motors plans to announce it will buy back shares and settle with activist investor harry wilson who will give up his request for a board seat after agreeing -- after reaching an agreement with the automaker. tesla is cutting jobs in china and poor sales are being blamed. "economic observer" says the electric carmaker will cut 180 of its 600-strong workforce in china because sales haven't met expectations. tesla entered the chinese market last year. how's this for a record attempt? a solar-powered plane has taken off from abu dhabi, aiming to become the first aircraft to fly around the world without a drop of fuel. solar impulse is the name of the plane, and its pilot is andre borchard. the journey will take months and some parts of the trip crossing the pacific and atlantic oceans will mean five or six days straight of solo flight. >> we have 60 days to go until the u.k.'s general election, and there is no clear winner insight. let's bring in our guest. he says a coalition government is the most likely outcome after polling day. a coalition rather than a looser, less formal minority government. you still think there is room for a coalition. >> i think there is room for a coalition, but the most likely outcome is one of the two things . one thing that is entirely clear, no party is going to win an overall majority. it is all going to come down to who can build some form of majority coalition in the parliament. at the moment, everybody is saying we don't want coalitions. coalitions aren't that popular after five years that conservatives have led them. in fighting and arguing. once the numbers come in after the election, those assumptions might need to be revised. >> is it fair to say right now looking at the data that the snp are the powerbrokers? >> they are very well placed to become the kingmaker in parliament, looking to make huge gains in scotland, anywhere from 40 up to 50, 55 of the scottish seats, and that is really what could put a labor minority government potentially with support from the liberal democrats over that magical 326 seats figure. >> it is probably international -- important for an international audience to bear in mind the numbers. it is one thing to look at percentage support numbers amongst the electorate, and it is another thing to turn that into seats. it's amazing to think that if you cap and the greens could take around 20% of the vote, that might only be a handful of seats, and get the snp, with less than four been percent of the popular vote, could take him 50 seats just because it is so important to have your support concentrated in geographical areas. >> exactly. some polling indicated that ukip were polling between 10% and 15% of the vote but could come second with around 100 seats which goes to show you need that concentration in certain key areas of the country. >> how likely are we to have another election within a certain period? i know there is this fixed term which is set into place various conditions. remind us into -- of those conditions. >> exactly. before, of course, it would be much more likely to have another election if there was a hung parliament, but with this fixed term parliaments act, there are really only two ways. it's other if the government loses a no-confidence vote, and you have another two attempts to form some kind of majority government and win confidence, but if that doesn't succeed, new elections could also, if two thirds of parliament vote to dissolve itself and call into election. this essentially means other the conservatives and labor have to agree in order to break the deadlock, we need new elections -- >> which is unlikely. >> it's unlikely. or coalition talks, some form of deal talks fail, and successive prime ministers need to lose a confidence vote. that could happen. there is some talk that conservatives are planning for a second election as a contingency. at the moment, it's on the balance unlikely. >> lord baker was floating the idea of a grand coalition to save the union. he is a tory. , of course. david cameron, a tory prime minister, has been saying, you can't allow a party that wants to break up the u.k. into u.k. government, in reference to the snp. where does that had? is the threat of enough to bind together the tories and labour? that seems a momentous event. >> it would be a momentous event an almost unprecedented in the u.k., whereas grand coalitions happen and other european countries such as germany. currently, it's unlikely. it's notable that labor over the weekend during the scottish conference went through great pains to not rule out a coalition with the snp or some kind of deal. they didn't explicitly say no, whereas the leader of scottish labor specifically said there would be no coalition with conservatives. that is partly because, in order to win votes in scotland, you have to say you won't work with conservatives, but i think snp and labour could find enough common ground. >> we mentioned ukip. maybe the sound is bigger than what might actually happen to ukip. the talk was as much as 20 seats, but the reality might be far fewer. what sort of power will they post if they get as few as five seats? ultimately, they want a referendum. that is their pledge. >> i think ukip's power hasn't been about how many mps they are going to get. one is putting pressure on the conservatives about any referendum, making their back-ventures quite nervous that they are going to lose support. secondly, it could affect the vote in many marginal constituencies where conservatives are facing a challenge from labor or live jams -- lib dems. >> adrian, thank you very much for joining us. >> i just remind you u.k. secretary vince cable will be joining us later. we will also speak to the conservative mayor of london boris johnson. he will be running for a seat in parliament in the election. >> fascinating conversations to on "the pulse." before that, we will be looking at our favorite stories from bloomberg's digital output including u.s. companies sending more than $2 trillion offshore to avoid taxes. more on that when we come back. ♪ >> 6:54 in london. what have you got? >> i've gone for a story about tax. how much are you as companies stockpiling abroad to keep away from the taxes? the total is now more than $2 trillion. five companies account -- five companies with the most profit stored overseas account for nearly 20% of the total. just five companies make up 20% of that 2 trillion dollars. ge, microsoft, pfizer apple and ibm. their combined tax liability if they brought the money back would be more than $90 billion. that would be enough to fund for three years nasa, the commerce department, transport, labor, and energy. we are about enormous sums of money. it seems that microsoft is suggesting, we are fundamentally a global business. that is their rebuttal. google says, making reference to how much they need overseas to make various investments, and cisco going as far as to say that the tax policy is forcing them to make investment decisions they would not otherwise be making. >> it is something i often do on monday, look at how films did in the u.s. the number one film over the weekend is a film called "chappie." it is a sony film. it's an r. it's about a robot top that learns to think and feel. the director directed district nine, which became a big hit. it only opened -- i say only because this time of year we are approaching the biggies -- next weekend, we have "cinderella." it's the sort of call before the storm. it made $13 million, which for a film produced for 49 knowing dollars -- sigourney weaver is in it, hugh jackson is in it. "the second-best exotic marigold hotel" opened in third place. >> "countdown" continues in the next hour. we will be live in athens. stay with us. ♪ . anna: the european central bank launching qe. european officials lifting platforms as an adequate. we are live in advance. mark: the back of a u.s. economic recovery but japan's emergence was weaker than estimated. anna: apple launches its first smart watch. but will it be a bigger hit as the iconic iphone? mark: the crude market will balance out in the second half of this year and we take a look at what it means for oil prices. ♪ mark: welcome to "countdown." i am mark barton. anna: i am anna edwards. mark: he said he is ready to walk away from a nuclear deal with iran. we will bring you the latest on the talks and the reaction from tel aviv as american-israel ties. let's start with europe. two big themes -- stimulus and greece. mario draghi with an unprecedented program of qe. today is the day that the central bank up against asset purchase program and managing 60 billion euros a month. in brussels, the eurogroup finance ministers meet terry anna: yanis varoufakis said if the creditors make requirements of that are not acceptable the greek people may be asked to decide on how to break the deadlock. and tsipras signaled a referendum option could be on the table. let's bring in david powell he is chiefly euro area economist at bloomberg intelligence. he joins us. good to see you. let's talk about the data coming out of the eurozone. it has been getting better, hasn't it? this qe really needed? david: it has been getting better and part of the reason of confidence and etc. but inflation is at a record low. record low, so inflationary pressures have never been so weakened in the euro in terms of qe. mark: a yet they ecb meeting last week and the forecast was for inflation to get back to its target of the forecast period. are you confident will live to the threat in the eurozone? david: they looked optimistic quite convenient over the horizon and brought us to the target of close to 2%. it is an extreme had went and elevated. essentially unemployment as bad as it was in the u.s. after lehman brothers does not stand up to the size of the fed's program which is one trillion euros short of that. it is not as great. there are doubts. anna: what are all of the applications of quantitative easing from the ecb? countries not in the euro area, do that manifest through currency and exports? david: currency markets have been the number one focus and you have seen dramatically, the s&p toward the end of is peg and euro and peg between danish krone is in question. we saw that last a month that intervention of by the central-bank of denmark. a lot of volatility, i should say a lot of pressure and in the u.k., here, too. mark: finance ministers meeting and greece could call a referendum. euro area membership but on the outcome of talks between greece and a euro. part of the games taking place between all sides. david: another negotiating chip they do not like referendums a you know that from the past. and the threat of the meeting today. mark: david stay there. david powell. thanks, david. let's talk about -- breaking news. a company led by martin sales crossing the bloomberg terminal. revenue beat estimates. making up for slower emerging markets a revenue rising 6.6% to 11 billion pounds compared to 11.3 billion pounds average by bloomberg. taxes gaining 1.1%. that is interesting. in october wpp they recorded that sales grew slower. and the strong pound was hurting. and said at the time that it was on track for sales growth of 3% for the year. it has said that 2015 revenue will rise over 3%. anna: sometimes over the weekend around greece and some of which we told you about earlier and achieve has called the proposed -- and the economic chief is called the proposal in adequate. good morning. how are fellow greeks on a resolution to today's meeting? it seems like the two sides are not on the same page. >> it is true. finding solutions today has faded. asking for a financing of some sort and should be asking for the gift but -- got between the two countries and it is incomprehensible that after the last meeting it is deemed as far from complete. and in adequate from the eurozone partners. it either means that europe has not been clear or greece has not been clear to europe of what it can actually provide. the communication needs to be [indiscernible] the clock is ticking down. we are running out of time. greece will face a liquidity crisis very soon in a matter of months. i am afraid it is less than a matter of weeks. varoufakis said patients and we will see about the rest. and i do not know the greek economy can handle a tough situation for a long time. anna: could the referendum floated by the prime minister actually be a reality? could we see some kind of referendum? vassilis karamanis: indeed prime minister tsipras said on saturday the referendum asking if greeks want to back their dignity could be place. varoufakis said a referendum in general might be needed. well, i think after the end of the day, it will be a pro europe or not kind of referendum. and then we will see another round of outflow in greece. much faster pace than we have seen so far. a liquidity will melt even further inquiries will probably enter a more severe recession. maybe after the end of the day, bring a resolution but time is of the essence. i do not think we have that much time. anna: thank you for joining us vassilis karamanis . for more over to sheri ann, what is driving up the numbers? sheri: that was one factor why chinese exports surged by so much. shipments to the u.s. jumped to 21% in the first month of this year and analysts say they intend to follow the u.s. as the boost of the u.s. economy of 3% what it leads to an eight -- 8%-9% bump. another fact there was the distortion caused by the chinese lunar new year which well in february. companies were trying to process orders ahead of the holiday and that affected the traded numbers. goldman sachs saying because of this, we will see march exports likely to grow by less than 10%. analysts look and agenda where he and february combined in order to smooth out the distortions. when you combine them, exports rose by 15% which is more than double the 6% government target for this year. you are seeing the exports helping chinese traded data trade surplus reaching a record in february of $66.6 billion. anna? anna: imports are weaker than exports. how did they do this time around? shery ahn : -- shery ahn: they didn't do any better. slumping 25%. that was the sharpest drop since the global financial crisis and sharper than analysts had estimated of a decline of 10%. it is not only lower commodity prices but analysts said it reflects a weak domestic demand. they say it is relieved that exports have surged so much because he you are not seeing that domestic investment momentum. analysts saying they may be seeking to maximize exports to give them the weak domestic demand we are seeing. back to you, anna. anna: shery ahn thank you. mark: weaker than first estimated. the economy grew less than the preliminary reading of 2.2%. we get the details on the new apple watch. chief executive tim cook is to convince us we need this new product. here to help us through, cutting through the wall of speculation caroline hyde. what is the biggie? carolina bike we have -- carolina bank we have the details. we were told that a new product would be unveiled and we have spring forward. also one going on in berlin. finally we get to know the nitty-gritty. we know there will be three types of watch. a sport and high-end and gold and rose gold. we know there are two different sizes. what we do not know are the various price points and what is the timing it will go on sale. we are going berserk on the price point. what does it go up to? could it cost and outrageous $20,000? some are expected that for the high end gold. they are promising solid gold. polished sapphire crystals and could see a very luxurious device. anna: it takes apple into a different market? bordering on luxury. where else are we going to be looking for details? what are they going to tell us to convince us we need the internet on our wrist? caroline: we need to know the battery life will be significant. anna: som believes it to last the entire day. what about the apps? messenger devices calendar. what about health? what about cars? caroline: tim cook said you should be able to unlock your car with its just -- with this device. bmw is working with apple on this. the apps will be crucial to how well it sells. and where they sell it. we have seen the product already on the china. officially, they said it will only be in the united a spree of tim cook has been traveling to berlin. -- it won't be sold in the united states. -- it will be sold in the united states. clearly, it will be sold worldwide. going back to the tablet, it was a relatively new genre of products. yes, a few others had been in the markets. our got in on the tablet making the ipad -- apple got in on the tablet making the ipad. last year, we saw less than 5 million of these iwatches sold it with expect that to go up to 22 million. mark: a fraction of the amount of smartphone sold. caroline: we see apple ramping up in owning half of the market. remember, iteration after iteration this product will improve a be more useful. i think tim cook will go the stage and go into details on why you need an iwatch. anna: caroline hyde, the latest on apple. opec secretary-general said the crude oil will balance out for the second half of busy year after a glut of 2 billion barrels of oil a day have sent the price plunging. he maintains opec will not cut production because of the rise of shell output. an report by malaysian a safety investigations team gave if answers to questions surrounding flight m h 370 which went missing one year ago yesterday. they found one unusual data. it is unclear whether that hampered search efforts. families held vigils and protest. a russian court indicted five men in connection of the murder of opposition leader boris ne mtsov. one admitted a role. it is one week after nemtsov's murder prompted protests. denied a role in allegations of corruption. they allegedly took kickbacks. the top court does not have authority to probe brazilian president who said brazil is learning from the scandal. president: with some pain brazil has learned to practice social justice and apply the hand -- that is what has been happening in investigations against petro graph. anna: and juncker said -- and should have their own army. he said of military force would give the eu more credibility. mark: join the conversation on twitter. tell us what you think of the show. england has to win to keep their chance of progressing to the quarterfinals bring it to matter to me even if it does it matter to any of you. @mark bartontv. anna: if it matters to you, it matters deeply to me. we have the interviews. u.k. business secretary vince cable will be joining us this morning that will be later today. we will be speaking to the conservative mayor of london, boris johnson. he will be running for a seat in parliament. all of that to come later. we will take a short break on "countdown." ♪ mark: today is the huge bond buying plane. the ecb convince qe will boost the eurozone economy substantially. joining us as a senior economist . good morning. thank you for joining us. was draghi fortuitous when the economy seem to be turning? guest: it will be much more effective if the economy is turning around and asked to the tailwind we have any way also in terms of political resistance, very because as of january, we had a week data we were talking about and the russian risk and germany it seemed as since the 22nd of january we have had all types of hostage of surprises from germany. if you remember, the retail sales in that context would've read much more different to announce a large-scale program. -- would have been much more different to announce a large-scale program. economically, clearly the right thing to do. anna: just how strong is the eurozone economy? i am looking at the german factory orders and they are weaker than estimated. you see a very clear, positive picture? christian schulz: these numbers are so strong, you take retail sales for example, the monthly retail sales were 3.4% above the average. that was suggests consumption was around 2% quarter on quarter. we are one part 3% up. -- we are 1.3%. 1.3% quarter over quarter, we have doubled our forecast from 0.3 after 0.7. germany and the moment is growing 23% annualized in the first quarter. that is pretty strong. mark: if inflation picks up, is it -- or not? christian schulz: as a whole, we have a large amount of slack. unemployment is still high. unemployment will probably fall back around 2020. that is a long way away to get to the level where the u.k. economy and the moment which is unemployment rates closer to precrisis. for the ecb, we need to entertain potentially in some point in the future non-rising rates and we have to watch. anna: can i get your thoughts on greece? to quote your colleague rarely has a new government donna so much a dad mitch so quickly that are done so much damage so quickly -- pretty squad -- done so much of damages so quickly -- saving. christian schulz: the uncertainty came in and that numbers a we have had so far suddenly deteriorated and confidence is plunging, consumer confidence is increasing in greece for the first time in a long time. consumers expect these nice presence from the government but somebody has to pay for them. and it seems to be business and businesses are running scared. it is a pretty miserable record for a government that has only been in place for couple of months. mark: and popularity for the party is declining from 80% to 50%. christian schulz: read the letter a letter they sent us on friday to the europe. to read what they are proposing, the ideas. mark: called amateurish, is that fair? christian schulz: reading it, it seems to be in the case. in the letter, you wouldn't expect these types of errors. a letter we have been looking at and everybody has been commenting on. if you are geek and a government that represents you in negotiations -- in -- if you are greek and a government there represents you in negotiations. anna: mario draghi has gone out to's l out the support the ecb is give -- has gone to great lengths to spell out the support the ecb is giving to greece. a great reliance, but what should we watch out for? christian schulz the ecb's rules-based. they cannot bend the rules. they have been to the rules in the past but did they have to have political cover from the eurozone and concerned countries. back in 2012 they extended repayments from the greek government i'm raising the limit -- by raising the limit. that was a repayment from that the -- greek government to is self to the ecb. it was a good-faith negotiating deal. that is not a worm we are right now. the greeks want to pay teachers and pensioners and not to the ecb. -- that is not where we are right now. mark: they are going to run out of money in a week or two. christian schulz: essay are going to run out of the money but the gap can only be plugged by the ecb. the imf is not going to come forward. it has to be the eurozone. it means a weaker negotiating position for the greeks. anna: thank you very much. christian schulz senior economist. common up -- the deadline looms. the latest on the iran nuclear talks and the likelihood an agreement can be reached. we go to tel aviv to get reaction. all of that coming up on "countdown." stay with us. we will take a short break. we will bring you coverage of that story when we come back. ♪ ♪ mark: you are watching countdown. time for a look at your foreign exchange. the dollar against leading global something quite spectacular happened on friday after the release of the u.s. jobs report. the index rose by 1.1% its biggest gain and since november 2011. the index as a whole hit a record high while a trade after the jobs report at 23% of a rate hike in june versus 17% at the end of february. the bloomberg dollar index is up for a record going back to when it began in 2005. some investors were a bit cautious, reticent of the string of the dollar in february. february was the week of the month for the dollar spot index going back to last in june. hedge funds and other large speculators reduced positions of benefiting from dollar gains for a fourth consecutive week. those stuck with a dollar game through the worst month since june have been rewarded. following from that stronger u.s. jobs report. when you track it against all 31 all the major peers, only 4 are rising against the dollar. the swiss franc, the russian ruble, the india rupiah, and the taiwanese dollar. slightly off the record high today said on friday. as you can see, after 12 months the dollar only heading in one direction. anna: top stories this hour. 60 days to the u.k. general election, ed miliband has says supporting the scottish national party threatens handing over power. he said it is set to be the closest for a generation. ed miliband: every vote cast for another party including the s&p mays our prospect of a tory government more likely. it is just a matter of arithmetic. every less labor mp makes it likely the tories will be the largest party. anna: the green party leader calls for "a peaceful, political revolution," she called for an end of what she calls they'll field austerity desk for the field austerity and said the poorest has been blocked -- for the failed austerity and set the poorest have been a blank. calling for an additional debt and sat in the poorest have been -- and she has said the poorest have been blamed. let's move on. the first and were -- the first anniversary of malaysian flight 370 is a reminder that last year was a challenging year. when a goes to the rate of just accidents, 2014 has the lowest in history and that is according to a report published. joining us is the organization's ceo, tony. thank you for joining us. in interesting picture painted the insurance industry no doubt deals and lost. everybody thinks of the number of lives lost. 2014, not such a strong sorry -- story in that sense. tony: the number of fatalities went up as slightly over the ivy year average. let's put it in context. the industry is a safe and these terrible tragedies occur so infrequently one year or not the other a makes a huge number to the number of fatalities. let's remember, it was a safe year and improving safety. only one flight in 4.4 million had a serious accident. that is a lot better than the five-year average of 1.7 million. we have to keep it in context and recognizing that any fatality is one too many. anna: one flight not included in your record of air accidents ismh17 and that wish -- is -- i s mh17, that was shot down. has enough of been done since then to make sure such a disaster can never happen again? tony tyler: we are on track to make sure their flights become safer. the international organization, itaa, is going to set up a system to disseminate accurate information to airlines. and make sure it is unequivocal information so they can know where they can fly's daily. the other thing we have been calling for is weapons that can bring to down aircraft pretty you have a regulation on about chemical weapons and nuclear weapons, it is important of landmines and so on. it is important, we believe, regulations brought into this area as well. anna: mh 370 disappeared a year ago today and people still do not know where it went. it's a enough being done on their front to locate it -- if enough being done on that front to locate it? tony tyler: i think the government is doing a fine job in locating it and it is important they do the searching through to a successful conclusion. when we do find the aircraft, we will be to solve the mystery. again, the industry guided by our overall regulator are moving towards a more organized way of tracking aircraft where war would be looking at a implementation that will lead to aircraft every 15 minutes. and that is something the industry except as a positive way forward. anna: tony, you have years of experience and do you think mh 370 will ever be found? tony tyler: it has to be found. we have to find the aircraft free it continues to be a serious challenge. -- aircraft. it continues to be a serious child. anna: one of the initiatives is using data to improve safety and you have a data management system that you say is aimed at doing it. what is the potential of mining that data to find out what to make flight safer than others? tony tyler: it is very important. the way their record -- the industry has built its record is looking at accidents. once the wrinkles are determined, fix the problems. it is such a safe industry. these terrible accidents are so rare. we need to learn what happens in safe operations and where nothing untoward has happened. and we learn from the experience of the flight. that is why we are calling all of the information in. and make sure what diagnostic tools and stop them before they happen, prevention has to be better than cure. anna: tony, thank you for joining us. tony tyler. mark: to us what it -- tell us what is grabbing your attention today. you can join us on twitter. anna: almost. mark: keeping an eye on the england again. anna: you are preoccupied. mark: it is bart chart time. stay with us. ♪ mark: time for bart charts. is euro-dollar parity imminent? at the start of 2015, 93 analysts we surveyed forecast the euro would finish the year at 1.18. that forecast has been cut to 1.10. on friday, the euro closed below 1.10 -- below 1.10 four the first time since 2003 after the u.s. a jobs report signaled the fed might hike rates. it has dropped 10% or more than $.10. it only has to fall another eight cents to reach parity. the drop since the peak last year you see that green circle at the top left of your screen? that was the peak 1.39. that was a 2.5 year high of the euro of this the dollar. since then, the euro has lost a quarter of its value. it is on record for its9th -- it is a record for its 9th monthly drop. it is possible the euro can drop to parity after draghi called the bond buying program, which starts today, the finals date -- a set of measures. who a person and rbs said we do not have corporate investment or government investment and we are relying on our feds to do our job. chris is bearish and said euro-dollar should break lower as we should expect. you was short-term rates start to move higher, over cutting parity should be reached by the end of the year. the last time the euro traded below parity was in december 2002 and a sale to a record 83 u.s. cents. in present, there is now one endless with a formal forecast this quarter. rbs has a 1.06 forecast. most bearishness 1.03. some are forecasting parity as is td securities. the fourth quarter is when it gets interesting. some call for parity including barclays and morgan stanley goldman sachs, and citigroup. keep an eye on those 93 analysts to see if they continue to slash their year end forecast. is it euro parity with the dollar imminent? anna: negotiations continue between iran over the nuclear power. the latest in a dispute including animated between secretary of state john kerry and french foreign minister. the leaders met this weekend to review the status of the talks ahead of the deal's deadline set for the end of the month. joining us is our analyst and elliott gotkine. let's start with you. what has been the reaction in iran to carry out the latest? reported bank -- reporter: there is not be anything official to what kerry has said. they have repeated the previous on the talks and they tend to sound a more positive note is a lot of the rhetoric coming from congress in netanyahu's speech amplifies the dangers of some americans feel about the deal. i think iranian officials are stressing these talks are important and have to continue. what do the iranian side is extremely important. mark: the rhetoric from netanyahu was firm when he spoke to congress. golnar motevalli: the rhetoric in iran, there are -- there are harder lines. there are opponents of president rouhani in the same sense there are opponents in america, who oppose the policy of president obama. it is interesting, on both sides they are very loud and they make their voices strongly heard. but whether they reflect how iranians generally fill across the board is debatable. from the iranian side invariably very much the talks. they want essentially de-sanctions and normalization of the relationship. anna: let's bring elliott dokken. last week, benjamin netanyahu urged u.s. to be tougher on iran in took it to american tv. elliott: that is right. the controversial speech last week, yesterday he spoke with cbs, the u.s. television network and effectively repeated the concerns of which of themselves were not necessarily anything new. and also noted where he and president barack obama agreed on iran and disagree. now to stop iran from getting a hold of nuclear weapons but disagree on how to go about it. benjamin netanyahu: i do not trust inspections with totalitarian regimes. it didn't work with north korea and they violated and played a good game of hide and seek. it didn't work with iran. elliott gotkine: she was three things to be included. worst of all, a longer -- first of all, a longer time for iran is able to get a hold of a nuclear bomb. and wants to reduce the amount of infrastructure that iran is allowed to have. finally, it could be a sticking point it wants the lifting of sanctions against iran to be conditional on tape run -- tehran stopping the destruction of israel. one more point, in a letter written from republicans in the congress to iran's leaders warning them even if they reach an agreement with president obama, once he leaves office, it could be a change. it could be changed at the stroke of a pen. anna: anna -- netanyahu's frederick, how much is related to elections later this month? elliott gotkine: the presumption of these talks and the so-called p5+1 resumed on tuesday -- sunday and two days later, netanyahu is stronger on security measures whether in regard to iran are palestinians, no surprise netanyahu is mentioning that. at concern faced by many as israelis, a number of israelis evidenced by anti-netanyahu protests over what a change. they do not want to see a third term of netanyahu. they are more concerned about the skyhigh cost of living and house prices and do not want to see netanyahu remaining in office after next tuesday's election. anna: elliott gotkine and golnar motevalli here in london. thank you to you both. we will be back in a couple of minutes. ♪ mark: living in the heart of the action comes at a cost. prices going through the roof. in many places the added pollution. however, john dawson checking out a healthy eco solution. john dawson: i am in downtown hong kong with streets and they go back to the 1850's. a german eco developer has developed apartments for the healthiest of living. it was rewarded in the category was being the most green and most sustainable. >> what goes into the flat creates a healthy or can create a healthy living environment. john dawson: a kitchen island? >> it is 50% recycled materials. and what a lot of people do not know is it can -- the number one cause of -- lung cancer. we went for green materials even to the level of adhesives. we install professional water purification on top of that. it is fully automated. it has led lights, energy-saving lights. and light can help you not only fighter jet lag but make you much more alert. it is more effective than a cup of coffee in the morning. john dawson: what is your favorite? henning voss: if you want me to pick one gadget that has transformed my life is my -- which really helped me to train and work. we like to save time and on money and a great way to combine 2 things. it helps. sitting is at the new smoking basically. john dawson: it is not cheap is at the snack break it comes as a cost. the sourcing materials and expenses. how expensive is it? henning voss: if you focus on the basics, that is 10%-15% more expensive. costs would tumble if more jumped on the bandwagon. john dawson: he is working his legs for the next big marathon maximizing his time and so we'll call it german human engineering. john dawson. anna: you think if i have a word with engineering, they will get us one of those treadmills? mark: i like it. anna: "on the move" is next. the launch of qe. we will see how the equity markets react. we will leave you in the hands of "on the move." ♪ jonathan: good morning and welcome to "on the move." i'm jonathan ferro. minutes away from the start of european trading this monday morning. let's get to your morning brief. qe kicks off. the european central bank begins buying bonds at a rate of 60 billion euros a month. the purchases will continue until at least september 2016. referendum risk. eurozone finance ministers meet in brussels. greek ministers float the prospect of a referendum if there reforms are rejected. japan lifts out of recession. readings show gdp expanding at 1.5% in the fourth quarter, much less than the 2.2% estimated as companies in japan unexpectedly cut investment. and a bittersweet anniversary. six years ago today marks the start of the u.s. equity bull market as u.s. stocks comes off losses. they are three of the things i'm watching this monday morning. futures pointing a little bit lower. dax futures off by 46 points. are we set for a lower open? let's get your market open with caroline hyde. caroline: just 20 seconds in, let's see how we are opening up. v-day for the ecb, bond buying begins. europe and the u.s. so stark and their contrast to what is going on. we opened down 0.3% of the foot to 100. we start that bond buying, the ecb sounding very
.> and i'm abe-nomicm anna edws manus cranny has the details. israel lost the stanley fischer may be heading to the fed. elliott gotkine has more from tel aviv. to settle over sanctions violations and more people will be flying in the next four years. caroline hyde has the latest numbers from the international airline transport association. plus, the russian race to become the next market for online video. ryan chilcote has more on the content wars. >> bringing you some big interviews today on bloomberg television. the ceo of viacom international media net work joins "the pulse." you don't want to miss that at 930 a.m. london time. >> pleasantly but here from the international air transport association chief executive, tony tyler, joining bloomberg at 10:30 a.m. gone public in the ipo priced at $20 per share $2.35 billion. what are investors getting? >> real estate and a darn good franchise. that's how you wrap it up. arehis valuation, they beating starwood which is seen as a much more upscale brand but have a look at some of the brands they are getting their hands on. i know it's a franchise company, but errors the waldorf astoria. the bulk of the business is done doubletreeonors and and that is where blackstone is playing the trade. they will keep 76% of the company and they will be committed for many years, they say. 7% unemployment and 60% of the business and help that is done in the united states but it's getting better. >> revenue per available room. you just can't beat him. >> we've tried. that was something of a boom for private equity, wasn't it? deal ofwas a great chastisement. top of the market, you are buying a big cyclical play like hilton but they are connoisseurs of property. $69 billion under management. upscale the growth story and ticket to china going from six hotels franchised in china. they are building 171 and they have boosted the rooms by over 30%. why? this is one hell of a cyclical business. when things get better -- >> they are saying it could last for a few years. this is when you begin to look at it. they seem to be the masters of the timing and terms of flipping property deals and indeed locking value. doing iskstone is taking that opportunity. it's the best year for ipos since 2007. shall we have a stat from the day? great function. i don't know where to begin. the biggest ipos in america. >> there are 109 of them. >> the first one according to bloomberg is fs global credit opportunities. >> i think what you've got here, foreign ambassador, shall i have a bit of star word, hilton, where should it put my money -- marriott? you will get a bit of a sugar rush only opening but this is a growth story. the valuations are risk. can it fly? after it goes live today. starwood has the boutique w brand. >> hilton does not have the boutique brand. >> could it be that you take the real estate they actually own and put it into a real estate investment trust he? that opens pandora's box. >> for more on the story behind the hilton ipo we will talk the ceo and the man behind its turnaround at 3:00 p.m. london time. >> family fischer looks to become vice chair of the u.s. federal reserve. president obama has already offered him the job. elliott gotkine has more. is this a surprising choice he? >> where you put as your greatest drawback, your greatest asset. it's great to just drawback in terms of being nominated to the position of vice chair of the fed. greatest asset. during his eight years at the helm of the bank of israel he was widely edited for sheltering is real from the global financial crisis. economy kept growing throughout. they did not have any times of contraction. decisive.at he is he bought foreign currency by the boatload to export from strengthening shackle as well. widely expected it is crime- fighting ability. he told him one or two dubbed things because he was his mentor and he also incidentally taught mario draghi, ecb chief as well. pre-k's you have to decide whether you give dates were conditions. that is more appropriate and it should be the forward guidance. that means you have to understand that there are lots of things i could happen. >> that was official comments on forward guidance. he's not been a huge fan. what the models are telling is by giving the forward guidance in the first lace. manyu've interviewed him times. what's he like cap though >> very patient when he gets asked the same question why journalists like me all the time. he's self-deprecating and witty. here.n be just north of they had a farewell dinner in to honor and they went back to where he used to serve. humble,a man who is very well respected by investors, people who work with and you would be hard pushed to find anyone who has a bad word to say about stanley fischel. >> never be allowed to retire either. rbs is set to settle paying $100 million to settle an .nvestigation of violations they're accused of supporting regimes in iran and cuba. >> $100 million, this is real compared to some of the ones we've seen. drop in the ocean for something very similar. valued at 500 $23 million. in the summation about this, they did not disclose or payment hid in rbs saying that here in the uk there are written this -- instructions on how to evade detection. they've been accused of being business with these countries under sanctions and actively trying to hide it. >> it's been friday december in terms of the headlines. >> customers lose access to their accounts and the ceo has stepped down. thathave come out to say they have deep regrets for the .versight failures he owns 81% of the bank and it is one that probably want to sell at some point. you think they have serious questions to ask the management. >> coming up, digging into tre to online streaming in the airline transportation safety administration predicts airline nextl will be up over the five years. ryan chilcote in caroline hyde have more on those stories. ryan -- caroline? and airlines set to win out. domestic all about travel. china is really going to be feeling the growth but so will the middle east. i will dig into all the numbers and outline which carriers will be winning out for him the surge in passengers. notorious for pirated movies and music, the legal online media market is growing by leaps and bounds. very tiny now but it could be massive. of the talk to the ceo russian version of netflix and we are looking for clues as to what will happen next in ukraine. there is speculation that police or the government could try to use the military to clear the streets of kiev. we have the russian parliament addressing in a few hours and we will see what they have to say about his neighbor. >> coming up, i next guest says the fed, ecb, and boj will lower the rates. >> the news team is back. ron burgundy and his anchorman 2 crew have been doing allover america to create does for the film's sequel. keep it here. ♪ >> time for today's company news. montclair has priced the ipo at the top of the range. the value of orders from institutional investors exceeded 20 billion euros. shares will be priced at 10 euro $.20 apiece. microsoft said sales of the new xbox one console reached more than 2 million in its first 18 days on the market. they're trying to keep up with sony playstation 4. recently, they sold 2.1 million since they went on sale. will join the s&p 500 next week replacing teradyne at the close of trading december 20. they will also join the s&p 100. facebook shares climbed nearly 5% following the news. welcome back to "countdown. . am anna edwards dovish for guest is the fed, ecb, and boj. the head of fixed research for hsbc, good morning. will the big three succeed in persuading markets and interest rates will stay lower longer? the way we've come up with a title for the turtledoves, everyone is focusing on the date change in taking about events that might happen or data points to worry about. most people are quite negative because they're thinking about where things go wrong. it's always about what happens when they start doing this. if you just read through all the noise around forward guidance or around tape ring or what new measures the boj might bring, what toys the ecb has. if you look at those, they're not going anywhere and central banks are doing every thing possible to make sure they toerstand rates are close zero in the big regions of the world them they will stay there in the big developed market regions for a long time. >> what happens if data improves, growth accelerates? you're not including the uk is your big three for obvious reasons. thehe limit of yields in uk, for example, and in some way is challenging this concept of rates staying low forever. a cyclicald a bit of upswing in the data but it has to be sustained to justify the valuation. in the uk in the u.s. you have a 150 basis point shift upwards and yield in the last few months. the question really is cameo economy take this much tightening? they have done better than expected but can it continue next year? is on thee onus bullish view of the economy to prove that it will continue. everything that we are seeing is suggesting the data could start to turn downwards again in 2014. >> it's interesting you are putting these three together because currency people, on the program and talk about how they are playing the dollar off the yen in 2014 because they see central bank policy diverging. should it have been two turtledoves, the ecb and the doj? and then the fed different? >> i don't want to oversimplify but when you have zero rights, the hedging costs are zero. zero rate in japan, four four przybilla speculator, whatever, the cost of hedging is zero and it means the liquidity created by each of those three becomes a sponge. what's happening in japan as we look across acceleration to hit the 2% target, that means the yields are into the floor. is an outflow into the u.s. treasury market from japan and you can see it in the data. be a bigt there would flow from japan into the u.s. and europe and it did not happen. it went the other way because there is a big by of equities by foreigners. now you're seeing it. it's in the data each week and you can see there's a big influence of foreign securities. my point is the yen may move. it just moved about 5% in the last three months, moving down. all stuck in this range. 10-year treasury is still 2.8%. you would have lost 1.5%. >> thank you. >> more when you look at the european bond markets yet. global head of fixed income research at hsbc. ♪ >> welcome back to "countdown." . am mark barton > >> our guest is the head of fixed income research at hsbc. stanley fischer, people are suggesting he will be the number two out the fed. he is formerly the bank of israel governor. >> the reason it's interesting is because they are looking to see if the fed will become more act list. they would look at the personalities and the track record. i noticed in a september fomc iman tapering making references to emerging markets economies. >> the taper that never was. >> he's got someone who has experience with currency inflows and outflows and being quite activist on rates. he brings some experience to the fed from overseas and i think we should remember that something like 50% of the u.s. treasury market is overseas and has been a consensus view that the u.s. it just sets rate for the u.s. economy. you have many big emerging market locks that fix their currency rate against the dollar. by definition, we set currency policy over much of the world. having someone in theire -- about his attitude to tapering? it would be good to start but then saying it would be good to detract to gradually. a caveat.e has there's been forward guidance. he likes the data dependence rather than date dependence. it's about the institution more than the individuals. we like to play up the personalities but it's a big institution. >> what are the outlooks of the bond market next year and 42015? >> in a way, the corporate sand financials are a bit stuck in the middle between the u.s. and eurozone. it has put the uk at the cheaper end of the range. we are actually going overweight because we think it has been too much. when it comes to the spread markets, the uk is a bit the same and there is enough in the corporate sector, for example. that means the credit market is exposed to that. >> how narrow cabinet go? is that the lowest? >> you do not find many big liquid sovereigns that yield as much. between 1.5-2, you cannot find any big liquid sovereigns that yield so much and coming back from that point, they get more spread from just every emerging market apart from brazil. >> thank you for joining us. showingferrell has been up as ron burgundy all over intoca and we will dig anchorman's marketing. >> it you look lovely tonight. >> you, too. >> are you married? >> im. don got any ideas. ♪ >> these are the bloomberg top headlines. protesters have retaken the square in kiev. the demonstrators rejected a president for national dialogue. later today, russian president ladner prudent will give his state of the nation speech where he could address the situation in ukraine. restoring credibility over bank stress tests. over 90% of economists say they confidence in the ecb dan the european bank authority. rbs will pay $100 million to settle claims it violated sanctions against iran and other countries. u.s. authorities say rbs withcted transactions sanctioned countries and failed to disclose information about its activities. they say they "deeply regret" the oversight. hello. welcome to "countdown." >> 6:31 a.m. in london. resultsporting annual later on today and let's get over to european editor david tweed in berlin. share priceite a rally this year. what has been the driver react ? >> at 62% but you have to look at it in the context of radius years because of a graph from 2012 -- 2010, the share price is still down 41% and that is really a story about what's been going on with metro because it had not been keeping up with the times until they put their new chief executive officer into place at the beginning of 2011. let me just give you an example. huge cash and carry company and they also have electronic retailing with the brands saturn and media. until 2011, they did not sell anything on the internet. when amazon came in to germany, they absolutely cleaned up and left metro behind and they have put a strategy and place where they are now selling electronics on the internet and that's an important thing to be selling because at least you don't have to go try on a television set. that explain some of the share price and performance they've seen this year. also, speculation that they may sell their department stores here in germany. the real speculation is about what could potentially happen if they ipo off the russian cash and carry business. >> what might the russian business be worth, david? what would they do with the money they put it up for sale? >> this is causing a lot of speculation around the metro share prices because the russian business according to commerce 9.6 say it could be worth billion euros. metro's entire market capitalization is just over 11 billion euros which means you could in fact get the russian business, nearly 10 billion euros and the rest coming in for free. they are saying it is a valuation game. growingso the fastest- business for metro. it's a growing 20% per year. they might take some of that money out to expand another fast-growing markets. >> david tweed in berlin kicking off our retail discussion. >> in the next outlook series, talking retail and what does it mean for the likes of amazon, asos? bloomberg industry senior retail analyst, good morning to you. why are valuations so high for the likes of amazon, asos, then traditional retailers? greed always. the traditional retailers, people fear that the internet retailers will eat their lunch, dinner, everything else and just take them away. they are being reworded on sales growth rather than particularly on profit growth. people are sort of investing in them as well. they think these are proven winners were proven survivors and they have endless sales growth. people want to be part of that. it is feared you will not earn these stocks as they continue to outperform. >> david was just telling us the story about metro not selling anything online and it seems quite startling, but where are the companies that are ahead of manyurve and have so platforms for multiple devices and the companies that are behind? >> retro is a really interesting example. hadelectronics business this great business model through the late 1990's and early 2000's with a gave 10% to the store manager and he chose prices ended selection, which is great, but as soon as you go online, it creates this huge conflict because who is earning the online sales? who is setting the pricing policy? does the store have to match the range? that was the problem. they had tried it before but it had not worked. we are looking, there are some legacy retailers, some of whom are in trouble in other ways. it will be 20 years since tesco did their first online transaction from supermarket in gateshead. you speeds things up >> you plug into a phone line. >> you can look at next as well. i remember them setting up their internet platform and they asked how much they spent on that and a few hundred thousand pounds and they said it was not enough. you should have wasted loads more money. you have some of these people who have been really embedded into the business and then you have people who are moving much more rapidly and have decided they need to get online very quickly. what is the internet asset? asset- long time, it was light and amazon was the most obvious example with just one or two to warehouse and shipping everything but more recently as demand has gotten more competitive and people want things quicker, the accept amazon has just shot ahead and they need to build more warehouse is to where people are. their guidance for the next few years and now it's $55 million. thato sales ratio is not different from traditional brick-and-mortar now. cap x sales ratio is not that different. happy toareholders are fund the investment and sales growth. the question is what happens to the margins? will we see margins beat all of brick-and-mortar retailers as the amount goes up the? >> thanks, john. the comedy sequel from will ferrell and adam mckay opens next week in the united states but ahead of that release, ron burgundy has been on quite the promotional tour. >> let me get this straight. a movie that came out in nine years ago and earned a respectable but not extraordinary $95 million is spawning a sequel that maybe the comedy hit of the holiday season? >> that is without a doubt the dumbest thing i've ever heard. >> how did that happen? it was wicked funny and became a cult classic thanks to cable tv and netflix. >> i dig. we all dig. >> i don't know if it's any good, but already it's a marketing juggernaut. a year and have since the movie has been announced there's been a museum exhibit, a book, dodge , a mobile game, cameos. they even rename the college. ins are no new thing but they are taking things to a new level. >> this is ron burgundy reporting for espn or "espin." >> they are no strangers to digital media. their comedy website makes more than $30 million a year. the other reason is that ron burgundy is a character that comes along once a decade and he is genetically engineered to play him. ♪ i love scotch scotch, scotch, scotch ♪ >> we love that he is selling us a dodge durango, that there is named after him. it could tank but it probably will not and you can be sure to see this marketing push for lots of other movies but a strategy does not work unless you've got the goods. i don't know how to put this, but -- kind of a big deal. >> he's kind of a big deal. >> hits a little close to home. mark barton is kind of a big deal. have you been asked to endorse any dodge durango's? >> in my future career. scotch" man and scotch in it. it's butterscotch. plans to introduce cheap long- haul flights. is the model sustainable? we find out next. ♪ >> time for today's company news. samsung is said to be reaching an antitrust settlement over key patents that required only minor changes to win regulator approval. hasould end of the pro that lasted nearly two years. boeing beating airbus for a order valued at $5.6 billion. to canada chose the 777 replace the narrowbody fleet. online christmas tree sellers are seeing a sales surge this year. home depot began offering them online this year and said they expanded the lineup for this season. still, online sales make up nor more than 3% of the $1 billion u.s. market. "countdown."to i am mark barton. >> and i'm abe-nomics --anna edwards. is it sustainable? air shuttle. have not heard of it? it's been around since 2001 and its headed by this man. now he's trying to take the low cost model long-haul with cheaper flights to the u.s.. how's he going to do it yet though >> you need the right tools to do it. you need the right aircraft. the only aircraft that we have found possible to do it was airbus 350. toohey said the 787 is expensive to do low-cost long- haul. if he cannot do it with ryanair, how can you? >> he can if he gets it back to the aircraft. that's the problem. we started with the dreamliner. i know he's looking for it. aey are a lot easier to get hold of. >> norwegian air shuttle is not the first to try the no-frills long-haul flights. they offered cheap tickets on long-haul routes but 16 years later, it collapsed. now be more fuel- efficient, it still no guarantee the business model is sustainable. he's a fascinating man. a former fighter pilot. 498 pounds. we will ask him in a minute if it seems as much as it really was. i know it was not that it seems like it now. passenger growth is said to speed up in the next car through years as the airline industry recovers. they published the forecast yesterday and caroline hiatt is here to tell us what they said. 31% is how much we are going to see the number of passengers flying per year, how much it million seven9 about four years time. the average is about 5.4% per year and interestingly it's only domestic routes which will be ining the real ramp up usage. the strongest, unsurprisingly, emerging markets, middle east, asia and pacific. interesting where it's been divvied up. china is the single largest driver of almost a quarter of all of the new passengers, 31% increase going to be coming from china were largely domestic flights. china becoming the second biggest market in terms of domestic flights after the united states. internationally and middle east, that is ready most of them will be coming from. interesting countries really ramping up, ms. beck asked on. eckistan. the governments have realized the value of connecting aviation. africa picking up playing on their geographies. >> day with us because we will bring in john strickland, an siation analyst for jl consulting. paint a picture of the fortunes of the industry just listening to caroline talking about the latest forecast. what's your assessment? >> it's not surprising to her of the massive growth in these emerging markets. we have the old world and the new world. europe and the u.s., the market is in the doldrums and that reflects the wider macroeconomic context and what caroline said about the different attitude aviation. of capacity in airports, problem with air traffic control. if we look at a new world, much more embraced and seen as a tool for developing economies and massive rising middle class in laces like china and india antisurface has not even been tapped in terms of market potential. the longo you make of cost long-haul model? lots of established airlines said it won't work for a long time. it's not what passengers want but in asia it's been going for a little while. there has been some testing as a concept. interestingly, when i was talking to norwegian, i asked how it was going to work, if people would be able to survive without the tapering. would they really pay? they have a premium. when is low-cost and when is it not quite? lot of low-cost long-haul airlines have failed. kualaia is based in lumpur and it is said by air asia that has a number of affiliates around asian countries. they have been focusing very much on the growing asian market and keeping flights to a maximum sector. norwegian is going to some longer services, asia, europe, north atlantic. capacity is an important factor. he not going for larger capacity and these are quite small packages of seats but i think they have to be careful not to be reliant and placing all of their eggs in the low-cost backs it -- backsket. they are introducing 787 on a number of global routes. interview,d in the the likes of michael o'leary cannot get his hands on the aircraft as of yet other aircraft probably does not have the same operating costs but nonetheless it will be cheaper. >> he loves the 787 waxing their oracle. >> talking about the air quality. the 77 seven body was a big hit in dubai. 777x wide body was a big hit. >> they got off to a great start. what will playoff in the coming years is the new version of an already well established triple- decker versus the airbus offering. the a350 was originally brought into combat the 787. n.l. have a range of capacity sizes. they will be debating if the new one will take out some of the helpful fire in this new model. we see the ultra large aircraft, the 747 replacement and the airbus a 380 are struggling. the market is moving to more direct flights and they can offer smaller amount of seats at less risk that there'll be days where the jumbo was 400 plus seats and it seems to be much more limited, a far more niche martin where perhaps you cannot yet its bond so easily and if you cannot fly two or three a day. >> very quickly, when he launched the flights, which as we saw from the advert, just slightly below 500 pounds, it seems like a lot of money. >> in my recollection it was much less. he came in and offered a low price but it was not the same management on a cost bears to make sure that you could underpin those cost. he drew massive slack. iny did go out of their way the premium cabin, it's important to get higher average , the traditional carriers are not willing to give and have them steal their most profitable customers from them. >> back in a few minutes. ♪ >> john strickland is here. you cannot talk about airlines without talking about consolidation in the big one .his year can it avoid the pitfalls that have dragged down other mergers? >> it was given the green light this week from regulatory point of view. we now have three big legacy worldwide, two big low-cost carriers. the evidence in the states is that these mergers have worked very well. there's always a human element you cannot underestimate the complexity of putting two business cultures together and , but theyjob losses have delivered financial results. they have to be more disciplined in managing capacity instead of everyone fighting for market share. they're focused much more on profitable price and profitable equity. the message in the u.s. is a positive one and here in europe, we have seen consolidation to an players,at the major five groups, account for half the market. clark's will regulators announced consolidation? >> they need to see what happened across the atlantic. list tens of buying out smaller ufthansa buying-han smaller related. marriage., klm, mixed >> john, inc. you. >> lots more to come on "countdown." ♪ >> the following is a paid presentation. now there's a new way to completely cover your flaws. make you look 10 years younger instantly. >> people asked if i got botox. they say, your skin is beautiful. >> they said it looks like i had porcelain skin. >> the airbrushed beauty breakthrough, luminess air.
the ipo could value the company at $4 billion. welcome to countdown. to the secondome hour of the program. truell be talking to the phone ceo as his company launches a service they say they want to put an end to roaming charges. that is coming up this hour. >> the airline ceos are in qatar for the annual meeting of the global association of world airlines. what is hanging over the events is missing flight 370. i talked about the technological issues. >> it is feasible to track aircraft in real time. there are solutions available today that will do that. ofestablished a task force producers of satellite services and the number of representatives. sure weorking to make are doing it in a way they can afford because we cannot to let this happen again. we have to make sure aircraft can be tracked all the time. we will be coming forward with proposals on how to do that. >> let's bring in elliott gotkine. >> good morning. >> good morning. >> i think elliott can hear us. i am not sure if elliott can hear us. >> i can hear you. >> fantastic. >> you have been taking the mood on the ground. tell us how the executives of the aviation industry are feeling right now. ceo isn tell you the at thely speaking opening session. they are really pulling out all the stops from the mind-boggling airport which has just opened. rising to 50 million next year. two last night with a waterfall tumbling down from the ceiling. close to chance to get movers and shakers in the aviation industry. they are celebrating 100 years of civil aviation. a lot of them have let their guard down in the last few hours. i have been chatting with the freshfaced ceo. he was telling me about his recent encounter with barack obama. everyone was here. the industry seems to be in pretty good shape. delivery ofpecting the superjumbo very soon. delayed as they fine tune certain issues. the fact he had a minor car crash before this event as well. not everything is going completely to plan. the missing malaysia airline are also hanging over this conference. >> you mentioned some of the celebrity appearances that have been made. have you been taking some selfies? >> i am very hard-working. i eventually found myself there with the celebrity guest as well. down with a lot of executives dancing. she was doing whitney houston and coldplay as well. i managed to introduce myself so i could show my wife i was working very hard. >> the evidence is there for all to see. you look like you might have been singing. tesla in very many people's minds this morning for different reasons. newspapers of renewed allegations of alleged corruption surrounding the world cup. what are you hearing on the ground? >> it's not something executives want to talk about. latin america's largest airline is gearing up for the brazil world cup. there is not any suggestion of them propriety or bribing to win the right to host the world cup, but this follows reports of allegations of mistreatment of he.ers, a death and that the head recently said it was a the world award them cup. they focus on the positives. it's not every year they get to talk about their industry when it is in good shape. >> thank you very much. >> asian stocks getting a boost. better than expected manufacturing data from china. boost.ets are getting a we have asia-pacific up the highest in months. when you look at government data we see it 50 point eight better than analysts were expecting. they do ss 3000 companies. it looks like they are doing both. if you look at the hsbc they analyze the company. many people feel this is a truer estimate. it seems to be the medium-size businesses faring the best. the smallest businesses are showing contraction. this is what the chinese government is worried about. they want to grow the smaller businesses. they have been trying to boost business. they are trying to spend their money that much quicker. they may cut the reserve equipment -- reserve. >> where does this take us in terms of the government target for this year? >> still missing it. we saw gdp of 7.4%. the projection is still 7.3%. that's the general consensus. since 1990. that is going to be on the communist party's mind. they need to try to hit that target. the employment gauge still seems to be following. there is no way we can be relaxed about china in general, but the many stimulus does seem to be working out. may is the month we start to see turnaround. >> rocket internet, the berlin is filing an ipo on the stock exchange. our international correspondent is there. it sounds like it is a good copycat company. >> that would be a fair point. i say, are you just a copycat. the answer is always the same. being a copycat or being a clone here is whatcult. they do. it is run by three brothers who are famously quarrelsome, interesting characters. they invest and offer their own advice in companies. likebig names, companies groupon. that got turned into city deal. b&b, eharmony. here are the numbers we are talking about. range for theuro valuation. we don't know how many shares or how much. it's interesting for so many reasons. tech ipo.irst berlin they sell it back to the original founders. they did that with ebay. they did that with groupon. this marks a move going out into public market and said of going back to the original. it will be interesting to see what this goes -- what this does . will there be real organic companies that are able to profit somehow through the ecosystem? russia and ukraine are due to resume talks in brussels today on a deal that would keep natural gas flowing between the countries. conflict over separatists in eastern ukraine trying to break away from the government. ukraine announced it repelled an attack on its border in which soldiers were winded. -- wounded. ryan has the details. >> free parties. you have the russians, ukrainians, and european union mediating. this is the third round. we are 23 hours away from the deadline. the russians say if the ukrainians haven't paid off we will cut off their gas. far the ukrainians have paid $786 million. why such an odd number? they paid for february and march. that was when their gas was right that $286. now they are asked to pay 80% more. we won't pay that. they want to negotiate that price down. they want a lower price for the future, whereas the russians are saying, that was the price then. will there be a deal? we don't know. considering a six of western europe's gas goes through ukraine. it would be bad for ukraine but also western europe because twice before.s >> if you are a follower of geopolitical events, this week is about as good as it gets. >> it's very exciting. you have president obama flying to warsaw. thes going to meet president-elect of ukraine. he is going to meet the leader of almost every eastern european country. g7 meeting inthe brussels. you also have nato defense ministers meeting in brussels. on thursday you have this curious moment where a law and is going to be meeting with e isident -- where holland meeting with resident putin and then obama. he is going to have two separate meetings. >> will they cross in the core door on the way out -- in the core door -- corridor. >> then they will run into each other on thursday. it's d-day. will they meet on the shores of normandy and try to hash out defenses? it should be interesting. >> the first earnings we are covering since the credit crisis. our next guest sees green shoots and europe's economy. the question is will they survive the winter. >> time for company news. they have set conditions for a in tale investment italia. the board will have to decide before they proceed. ubs is being probed by belgian authorities over allegations of money laundering and crime. the magazine says ubs employees of code -- approached wealthy taxpayers and encouraged them to open accounts in switzerland. the report says the belgian arm helped organize the transferred to switzerland. to the maker of the super jumbo. for would be a major boost the program that struggle to gain customers. boeing/reduction -- production of the plane following lackluster sales. london is 17n minutes past 7:00. china's manufacturing expanded the fastest in five months. we talked about how it is busy for geopolitics. the ecb and the bank of england will be meeting to discuss interest rates. that's put the weeks likely events in perspective with the cio alan hagans. thanks for coming in so early. , how do youou sit see the world? you are cautiously optimistic on .lobal growth >> there is global growth. there has been a huge rally in bonds. there has been a bonfire. >> is that telling us growth is not as strong as we thought it was? wax to a certain extent. in the eurozone the zero rate structure is going to be there for a long time. yes, growth isn't as strong. so many investors are caught on the wrong side of it. end of last year the big consensus was you avoid bonds and be underweight. we have suffered by not having as much. we bought certain portfolios. bought hundred year mexico. those long dated bonds, long dated credit is probably underinvested in. a hedge against equities. >> 100 years. that is a lot of visibility or a long life expectancy. the i intend to wake up and see my bonds mature. >> of all the things you will think about when you go to sleep and wake up. >> i haven't seen that for many years. what is to tell us bonds won't outperform from here? wax they have come a long way. map -- mathematically it becomes the capitallt. gains mean your future income is simply less. of bondsarting level it is less interesting. the head of the ecb is tempted to let some debt go. just thinking when i get back to the office a lot is priced here. we go back to draghi. i don't think it is going to be as dominant this time. it is going to be the rate cut everyone expects. i noticed 46 out of 58 economists expect that. it is very murky. there is no way they can buy asset backed securities from the market. it could disappoint a bit. lowflationt mean tends to be a big problem? wax the big step to refuse to do is bank of japan style qe. they don't want to do that because they have to buy so many different bond markets weighted by gdp or huge amounts of italian bonds. i think that is what we will hear from draghi. >> more from alan hagans when we come back. it is 7:21. we will take a short rate. -- break. ♪ >> i am mark barton. 7:24. what is your biggest worry? >> good question. this bond rally has a deeper in the sense that what we saw turns out to be global. i think markets will come through that. it is so unusual. i have never seen that before. the direct payout is higher than many corporate bond yields. if the deal went ahead five the --ld have issued a huge pfizer would have issued a huge bond deal. m&a dynamics and the long return investing on the string of income. this year it could be that bonds outperform equities. >> when do you see rates going up? >> u.k. or u.s.? just before would be controversial. we have been a low inflation house for some time. bank lending is negative. we have never seen that before. we saw it in the u.s. see negative bank lending. for us that keeps inflation low. will dominate, and he is very dovish. we saw from the brick countries, bonds stocks and currency markets, all three have an rallied on a monthly basis since 2010. when it comes to emerging markets, they have had a good rebound, haven't they? stock?e time to take -- a neutralute , soile where we made money we stayed in the currency, and we are in the bonds. that worked out ok. em equities are valued there. they are trying to understand that. >> inc. you very much. we will take a short break. -- thank you very much. again he -- >> welcome back. .et's head to caroline >> i want to take a look at the australian dollar currently trading down 6/10 of a percent. we saw building approvals forpectedly fall 5.6% april. that came as a bit of a shock. we see the australian dollar theng its value against u.s. dollar. house prices fell the most in almost five and a half years in australia. you have got spending cuts. you weighing onreases the consumer and not looking to snap up buildings. they are not being built. the avi dollar up 6/10 of a in london. 7:31 let's talk about airline to tell you a little bit about what is going on. qatar foros are in the annual meeting of the association of airlines. the ceo talked about the current economic climate. it is on an upward path. that is good but it is still very in. profit margins of two and a half percent are nothing to write home about. it is salvageable. have seen consolidation and developments in the international market between assist in the movement upwards. it is very vulnerable to a number of shocks. the main one would be economic growth, but it is vulnerable to fuel price rises and any other thing that can affect the , whether it is subsidies or natural disasters. let's be optimistic about this. the industry see structure is improving to the extent airlines are generating slightly better returns. still below the cost of capital but heading in the right direction. the venezuelan government is locking $4 billion of airline funds from reaching the -- leaving the country and going to the country of airlines. this is the airlines money. we are calling on the venezuelan government to release this money at the exchange rate in which it was generated and to do so quickly so we can resolve this. already to have stopped. areow many others considering this. to dotivity is vital business in today's world. if they need to keep delivering it a need to be paid. i call on the venezuelan government to do what they need to do and release the money. >> at these annual events the association produces their forecast for the year. they are cutting their profit world trade and developments in china. they are cutting it by a small amount. the net income will be 18 billion. they are saying the overall industry margins will be 2.4%. there is a lot of variation. they vary greatly. they are predicting net profits of 8 billion. improvements against last year driven by the u.s. air travel markets according to these numbers, but they are bringing down their forecast by a little bit from 18.7 billion to $18 billion u.s.. >> true phone is the mobile phone operator without country borders. the firstto become carrier to cut roaming and international calling charges in 66 countries. here is steve. good morning. tell us about true phone world. >> it is a package which encompasses 66 countries, but it's not just about roaming. when we travel as business people it's also about service quality. when i am in the u.s. quite often i want to call somebody apart from the u.k. it means all your calls, all your data to between those 66 countries is included as well. >> how does this fit in with eu roaming regulations and changes due to be brought in in the future here in europe? a handfulope is only of these countries. pose a problem for you? >> not really. validates a way it it. we feel what we're doing is right. waitnths is a long time to for businesses. a very important part is service. we see a huge growth in data. one thing about a way the product is delivered as we have a network that attaches to these countries. it means you get much better speed and much better voice quality. >> why are you just adding this to businesses? >> we want to focus on businesses. we are a relatively small business. are a small business you focus on the parts of the market where it is most appropriate. we don't want to compromise service. there are dangers in growing too quickly. >> how does your business model work? do you negotiate relationships and each of these countries? how does it work? >> our business is based on the global network we have no. it's based on a british invention. we have a civic art that can hold many identities simultaneously. locale connect to networks through a series of partnerships. sometimes it's a direct partnership. sometimes it's through a third-party. that isan industry forever changing. how will you be swept up in that? >> it's one of the questions we are often asked. the thing we like to concentrate on is building our business. we feel we are building tremendous value. it's great to exploit a british invention globally. as long as we focus i think there are going to be lots of different opportunities in terms it'sit plans or ipos, but not really for today. >> are others trying to do what you are doing? >> what if you have tried but not many have succeeded. unique. i remember i used to work with a scimitar. the problem is not knowing which number you are on. there are ways of addressing some of these issues. we think the way we deal with it is the most elegant and holistic. >> with one being able to text for free with the way the industry is evolving. will there be a time it will be so cheap it will be free to offer some of the services you offer? how will you have to change with the time? good point. i think the key is innovation. it's all in our dna. we look forward, and we have lots of things we are going to be doing. withe going to integrate gsm. there are lots of exciting things you can do with ip technology. is ip.re your pbx we can integrate that with our mobile network. there are lots of exciting developments in the future. from you know your pbx your ip? you do now. >> i am getting the internal phone system. >> they are all together. it's all one thing now. promotion, you are not everywhere, are you? >> no. >> how do you even all? >> that's the not wait -- that's not the way we are going about it. competeot trying to with the big guys. it's really about having a special product that is very relevant in the market. we think the market will take care of itself. >> thank you very much. the ceo of true phone. >> amazon workers in germany are striking today. we will tell you why and a couple of minutes. >> welcome back. >> time in london, 7:43. germanyorkers in striking today. joining us from berlin is our international correspondent. this isn't the first time the german amazon workers have walked out, is it? >> we have been through a year of strikes. aty are demanding workers the distribution centers all from 9000many employees, they want to get the average retail wage which is north of 10 euros an hour. amazon says people are doing logistics and should get paid like adjusted workers. they have reached a fever pitch. or is some threat packages would be delayed. amazon insisted they wouldn't. wills between of amazon, which has been hostile at union movements. they have been very good at inventing unionizing. this, amazonl of is building plants in eastern europe. whereember when i went to one of the facility centers is, the concern is about amazon's long-term plans for germany, they are going to move the shipping centers to eastern europe like: and the czech republic. they won't have any centers in germany. amazon denies that. they say they are expanding. it's really an interesting story, a test of wills and how this american company adapts itself to what may be more continental work laws. some of take a look at the top corporate stories we need to be aware of. caroline hyde is here and has her eye on the mining sector. >> look at minors to rise half a percentage point. why? china got better than expected manufacturing data. if you get anything over 50 it shows expansion, and official government data showed it was in expansion. we have a figure of 50.8. if you look at hsbc and market data it doesn't show expensive and. -- expansion. it was the strongest in both areas. >> minors will be among the laggards this year. the fourth worst performing industry group. >> that's hard to say on a monday. >> it has been an interesting month for stock markets, hasn't it? a good month. >> even though we had political tensions and concern about russia and ukraine that is going to dissuade people from pouring $64 trillion.t. that is the record value of stock markets around the world. that's a phenomenal figure. it just shows we are getting a conviction that economies are turning for the better. contraction for gdp. that's just a blip. it's going to be much stronger in the second quarter. we are likely to see even stronger for the second half of the year. set to rise. >> the caveat is volumes are at multiyear lows. they have numbers of companies at a 52-week high. this market many doesn't have far to go. we will see. keep your eye on volumes. >> what is the function? v and v go. >> coming up is their value behind the recent run of ipos, or are we seeing a bubble? we will have more. ♪ >> this is countdown. is 7:50.me in london set. buick joins us on tell us a little bit. what are your thoughts on the ipo market? europeanue to focus on business and u.k. business in particular. how much appetite is there? >> we have had a real surge on what was pretty decent market sentiments. we are now suffering a little bit of indigestion. i think it's only temporary. you can't keep coming to the well unless you offer something special. it's completely different. there is this element of evil being suspicious that they left town and i am being left to pick up the trash. you have to get away from that. to do that you have to offer value. there have been a number of online companies. >> they tell us this is a healthy development compared to what happened in the 1990's. >> this is positive. that he criticized would deny 100%. there was method in his madness. as we know we have lloyds banking group at the end of the year. copious tank rights issues almost certainly. you can't give people the opportunity of saying that is value. going to be a question. >> it is interesting some of the ones who have been sold -- polled, they are not technology businesses. theymight sell online, but are not difficult to understand. this is a clothing retailer. >> stuart rose is a very market investor. he couldn't find that. they announced the retail that he doesn't care. he doesn't care what happens. ipo.illion we will hear details later this week. he is up and running. have 75an ipo, they countries supporting it. they are confident. they're confident they can get it away. it is down to valuation. that.ve to do better than >> talk to me about the ecb. let's try to find an angle we haven't discussed. what would surprise you? what could they do to surprise you? >> after all this chatter mario draghi did nothing. you have manufacturing data. europe. iive about you can dobelieve this. they have taken greases bond rate down. and others down from nine to two and change. have things improved that much? i don't think so. germany, they have given us growth rate of 2.3%. need to see something hugely positive. this threat of deflation, i think it is definitely there. if he either doesn't do a or something i would like to see -- don't just buy more bonds. be more specific. go in for corporate bonds. >> how will success be measured? no doubt people will want to on whether or not he has delivered. there could the a longer-term deal. it is about turning inflation around, isn't it? >> it is, but he has got to create inflation. you have to give the stimulation that is going to want industry and commerce to reemploy people. unless they can see the demand thethe political will -- political will is much more important than anything else. they have turned to the right. >> 30 seconds on the bank of england. they are saying we need a hike sooner rather than later. >> interest rates will have to go up a little bit. still in the recovery process. >> thank you for joining us. happy monday to you. >> it's the turn to maestro. >> more on after a short break. >> good morning. welcome. from thements away start of the european trading session. optimisticre feeling after a pickup in trading. caroline, let's start with you. china posted its strongest manufacturing data of the year, sending asian stocks higher. first, over to you. >> russia and ukraine will sit down in brussels to see if they can cut the deal. should they do that, russell says they will cut ukraine supplied this time next week. >> we will be looking at rocket. it is more of a. clone instead of.com. we will break down their numbers. >> thank you very much indeed. ofare waiting for the start the trading day. we are counting down the last few seconds. we are waiting to see what the read will be, but we had a strong session coming through from asia. we are waiting to see how europe is reacting. let's kick off with a little fx news. you couldn't kick off the sunday papers without everyone looking forward to what the ecb will do later in the week. will mario draghi help incentivize lending to smaller busisses? rate negative?e the euro trading at oe dollar 3629. get more of an idea of where the euro is compared to the dollar. the aussie dollar currently trading lower. it is all about housing. have seen house prices also falling to the most in almost five and a half years. the aussie dollar is currently off. copper, it's about the chinese manufacturing data. 50.8, driving up metals. let's have a look at what it is doing with european equities. they are likely to open higher. the last was $64 trillion. the global value of stocks was a record high last month. currently we are starting june in the green. imilar gains in the u.k. ireland still in the red. let's have a look at industry groups. i am thinking miners might be higher on the back of the manufacturing data. if we're going to be playing ball this morning. an update i am sure mining will still be up today. >> we will go to technology a little later. what islk about happening with russia and ukraine. talks continuing. talks taking place in brussels. conflict between the countries very much continuing. brian is bringing it all together. talk about today. >> a big day. what is at stake is half of ukraine's gas supply. all of the gas to the european union comes through ukraine. the russians say that the todline has been pushed back this time next week. by then they want to see ukrainians paying the remainder and the number of the new price going forward. this is the fourth round of talks. these are trilateral talks. this week they are happening in brussels. so far on friday the ukrainians agreed to pay just under $800 million for february and march, basically paying off their tab for the first quarter of the to payut they have yet for april and may. the russians say you have to pay for april and may or come this time next week we will require you prepay any gas going forward. hadl then they have effectively a running tab. the russian said they have to stop that. so far they just agreed to pay for the months where they were getting heavily discounted gas at $286. now the russians expect them to 480 six dollars. the ukrainians are balking at the bad idea, but they have another week to hash out their differences. >> it gets a lot busier to the back of the week. >> it gets incredibly busy. we have president obama going to pull out a lot of the action. he is going to meet with the president of ukraine. he's going to meet with the leader of almost every country we havern europe. then the g7 meeting in brussels. we have nato defense ministers meeting in brussels. meetinghave hollande president putin in paris just meets president obama for dinner. he has to keep his appetite for the second meeting. will there be an attempt to get the u.s. and russia to sit down together? that conversation moves into friday, the 70th anniversary of d-day. president putin has been invited. president obama will be there. president poroshenko will be there. none of these are scheduled to meet together but that doesn't mean they couldn't have an informal sit down on the beaches of normandy. that is what we are going to have to watch this week. a huge week for geopolitics. --take you very much indeed. thank you very much indeed. let's get back to china. this is the story that may be moving markets more than anything else. the data is strongest in five months. could this be a sign that china's efforts to counter the economic slowdown are gathering traction? expansion. this is the purchasing manufacturers index. the best we have seen in five months. hsbc's number does show slight contraction. we are getting very close to expansion territory. if you look at government figures 50.8, better than many were expecting. it seems to be medium enterprises that are doing the are. those businesses showing growth. >> you break it down. i see export regions doing much better than those less dependent on exports. it is also interesting. you see what is happening to the korea want. six-year highs. the chinese have been lowering their currency. having aee the state pretty big impact. >> it certainly is. it's all about this mini stimulus. they don't want to have the same problem where they create a bubble like in the equity market. this is tentative stimulus, saying they may cut reserve requirements in certain lenders. they need to get money into smaller businesses in particular. people from the bank of china same he may set up a real ending facility. they are still set to miss their target of seven and a half percent growth. it still may be a little bit needed to drive the economy forward. they're really pent-up in terms of the credit they can get a hold of. >> thank you very much. we are going to take a break. someone from fidelity investments will be here. plus we go to doha off. see you in a moment. ♪ need to bethink we too concerned about a hard landing. i think the government will manage its way through current issues. landing meanhard something little different. that was chief executive tony tyler addressing concerns about china. ceos are allne gathered. elliott gotkine will be bringing the latest from that meeting. the talk of the town is what is happening with the foot all football world cup. we will talk about that. ubs is being investigated by belgian authorities over allegations of money laundering. they say ubs employees approached wealthy taxpayers and encourage them to open accounts in switzerland. tiger air fell the most in four months after they said they are considering a plan. they're grounding planes, canceling orders, and reviewing an investment in indonesia. in southeast asia has pushed fares down recently. they are paying attention a great deal. samsung has unveiled the tizenry's first smartphone. .t comes with a super hd screen it is an operating system. you probably have android. this is a new system. samsung is getting involved. it is the german investor credited with putting germany's tech scene on the map as well as giving it a reputation as the copycat capital. now they could be nearing an ipo valued at $4 billion. let's find out more. hans nichols joins us now. >> it's really fitting the first is one ofrom berlin these copycats. when i go to a berlin startup. you always throw this charge a them. what are you doing that is new and innovative? it's very you're saying we are a copycat, but it's also unfair because it's hard to take these models and translate them into local markets. wherever they are doing it. 75 investments they have made. they bring in staff. they help bring everybody up to speed. they did the german version of ebay. then they did groupon. it is big in asia, also singapore. story on fascinating so many levels. their oldreaking with model, which is selling their company back to the people who came up with the original idea. they will get a sense for how much appetite there is for --sumer facing benefit businesses starting here in berlin and elsewhere. they are pretty elusive. they are quarrelsome, but they are going to get a big payday if this does go to market. start a lemonade stand in london, and i start the same m ionade stand in berlin, a a copycat or starting my own business model? >> i don't know the answer, but it's clearly lucrative and pretty successful in this environment. i know people who have started a business by going to the states. it translates on this side of the atlantic very well. i guess the model can't be completely dismissed. tommy what this says about the ipo story. one thing london is grappling with is getting these tech ipos to market. what does it say about germany? >> this will be the first big ipo here. exit's, buteen there hasn't been an ipo north of billion dollars. because this is more of a holding company you cannot say this is going to start other., ipos or startup ipos. the other thing -- the interesting thing is they are in so many places. is one ipo away from taking off. you have money and capital and rich entrepreneurs. the problem is this is just going to make a couple of brothers very wealthy. it is unclear if it will have derivative influence like everyone hopes it will. >> that is what they want to achieve here. we will catch up a little later. thanks for that. we are going to take a break. theng up, will could target boot? we are going to look at the corruption allegations that could cost the country the world cup? details in a moment. >> welcome back. airline ceos are in qatar for the annual meeting of the global association of world airlines. elliott gotkine is in doha with more. is following another big story which is problems surrounding the world cup. i guess this is what everybody is talking about. the talk of the town has got to be the world cup. >> very much so. they are looking to chat about anyqataris are denying suggestion of impropriety, although this does follow a pattern we have seen from the legend treatment of workers. they were talking about it being qatarake to award it to in the first phase. the ceo of latin america's largest airline. football world cup in brazil isn't going to do much for them either. >> we will have traffic in one direction. ofare going to have a lot flights to one city where we move people to a-game. >> i should say the mood among airline executives they are celebrating 100 years of aviation. it's very buoyant. everybody is talking about is being profitable. globale talking of profit of $18 billion. they are talking about dealing with 3 billion customers billions to the economy. they are doing much better. ,hey're doing unbelievably well in part to the detriment of other airlines in europe. ceos just talking to the about how they are looking at ,otential he big investments and if the opportunity comes around they would be in the market for potential acquisitions as well. whether this is a chance to get right up close to the movers and shakers in the industry they are feeling optimistic. the host feels optimistic. it was announced yesterday it was going to be delayed. nursing a slaying. -- sling. all the guy who set this up, what did he have to say? >> there are three main challenges to the airline industry. to be safe and to be secure. he says there are other challenges. venezuela was mentioned as one of the big issues. they owe quite a large amount of money to various airlines, a couple of which have stopped flying there because they are owed money from venezuela. they are expecting draft proposals on how to avoid a similar scenario in the future. a shot at air passenger duty. anything that can impair their profitability doesn't make them too happy. overall this is pretty good news. >> things for wrapping it up. let's carry on the conversation. we are joined by john strickland. good morning. this is what i think represents the legacy long-haul carriers. it doesn't represent low-cost carriers. they are feeling buoyant at the moment. is it a sweet spot? >> it's worth mentioning. it i say mrs. a profit margin of two and a half percent. it's the right time in the cycle. things are moving upward. it does vary by region. the middle east is leading the world. aher areas are still going at slower pace. he was in a car accident. we were sorry to hear that. him, i know it has not been taken away, but the mood music it's more negative. if you are taking on a new airline is there a possible positive spin you could put on this? it, andybody could do listening to him talk before the proud.oke, he is very qatar airways continues to be successful. on thate model is based model. what the world cup would do if it still takes place as planned in doha off would be to bring traffic into the country. that was to be canceled for any reason he would simply go back to his normal model of selling through the hub linking different parts of the world through an international airport. doha or qatar airways continues to deliver. i think they would continue to deliver. aboutk to me a little what happens next. ways a benigny environment from the input story. the demand is ok. the input story is well-managed. -- jet fuel prices are fairly benign. they are fairly stable. what are they looking for? wax i think more broadly they are looking at government. in some parts of the world there is a more positive approach recognizing the role aviation plays. i saw a tweet saying here is the part of the world that gets aviation. we have shortages of infrastructure, problems. >> if europe overregulated in your mind? >> i think it is. a given.safety is it has to be maximum regulation. they are shackled in paperwork and bureaucracy. being shackled on things they .ould do >> thank you for joining us. we are going to take a short break. after that we will be back. we will see you in a few moments. ♪ . . >> welcome back. you're watching "on the move." the markets open around 30 minutes. when it comes to equities, how are things shaping up? let me step out of the way and you will see. probably positive. asia very positive. they european markets coming up nicely and some of the same things running through what drove asia and what is running europe. let's find out the details. let's talk to caroline hyde. >> thank you very much indeed. let's check out what is moving. the key movers today, at the top of the charts is a ryan. this is a finnish drugs company. it struck a deal with bayer. it is now up 15%. treatment.veloping a they raised their profit forecast for 2014. they will get 50 million euros up front and are eligible for royalties. rio tinto also higher. the miners are outperforming this morning. chinese manufacturing data coming in stronger than anticipated. we saw expansion if you are looking at the government figures. 50.8. it is the biggest demand area for the likes of copper, metals. so miners going higher, up 1.5%. on the downside, alcatel lucent. they are selling debt that converts into stock. if you have more stock on the area, the share price is going to go down. off by 1.5%. but it is a positive story. they are taking out their convertible debt to repay loans. >> thank you very much indeed. that may bring you some of the others. chinese manufacturing expanding out the fastest paced in five months. the purchasing managers index rose to 50.8 from 50.4. the data could be a sign of efforts to counter economic slowdown are gaining traction. the export sector did very well. the billionaire investor carl icahn says he knows of no investigation into possible insider trading. at the new york times and wall street journal have reported that icahn was the subject of a federal probe involving him. ahn calls the journalist reporting inflammatory and speculative. is qatar 2022 world cup bid cooperating with an investigation over its selection. the sunday times reporting qatar paymentsid following to fee for officials. let's get back to the markets. china and big theme this morning. let's talk to trevor, the head of asset allocation at fidelity investments. he helps oversee billions of assets. good morning to you. china starts to improve from here. how important is that? >> it is definitely a positive. i think what we are seeing is stabilization rather than big stimulus policy. the big issue for china is a lot of the increase in capital spending to gdp ratio, the building of residential units and houses. they built so many houses, they basically built a new house for everybody in china since 1998. that is not going to carry on. we are going to see this gradual slowdown. i would say a gradual slowdown in china is positive. you don't want to see china booming at the moment. a gradual slowdown means, the prices stay low. it is good for stocks. >> good for stocks, good for consumers as well in certain ways. technically you are or cautious right now. >> we are more neutral. we are lots of underweight stocks but we have the smallest degree of extra money put into stock market at the moment. we had this very big run-up in stock markets. we see indicators for global growth looking soft. housing in the u.s. in particular hasn't really recovered properly from the taper tantrum last summer. we would like to see signs of housing going up again in the u.s. and a bit more stimulus. take a look at the curves, the market has priced out the amount of rate hikes coming through from the fed over the next 12 to 18 months. we have now got the ecb potentially cutting the deposit rate. all of this based on the things you have been talking about. thexactly, it is just like 1990's. it is based on this environment where growth is good but inflation is on the downside. pictureis your policy looking like right now? some ofets have drawn the tightening we have seen from the fed. what are you basing your models on right now? >> i think we will see a gradual tightening of monetary conditions in the u.s. >> how gradual? >> i think they will carry on tapering at the current pace. they've decided that printing money isn't the way they work anymore. ofy are working in terms expectations management about when the first rate hikes might come. a very big shift in communications policy and away from money printing. as one of those people who were short government bonds anyway, i just don't see a lot of sense having a big position in government bonds when you know zero interest rates make no sense. >> it has been a hard rate to make. >> yes, it has been a little bit painful. manager, beinget underweight government is fine as your overweight stocks. we like u.s. equities best of all and we are underweight commodities. >> what is the dollar story in your mind? investor, a nondollar how do i factor that in? >> i think the dollar will be strong. all the other strong currencies, it is not looking too bad. entirely a joke because if you look at the euro and sterling, they have been the surprise success stories of the last 12 months. the euro because it hasn't blown up and the sterling because there has been this tremendous housing boom in the last year or so. if you ignore the european currencies, the dollar is actually fairly strong. >> you think they are going to peter out? you can make quite a strong case for it beginning to run out of steam. >> i prefer sterling still. i like dollar and sterling. i think they u.k. will need to raise interest rates. i reject the idea that we are in the early qualifying stages of the world cup. i think rate rises should come earlier so they can be more gradual. sterling looks good, the dollar looks good. i was underweight the swiss franc in my currency positions. i think the swiss may have to follow. ir excess banking reserves are 50% of gdp. they are huge. >> talk to me about the other sectors you like and why. h at thee neutral-is moment. we still like the technology sector. we like as a structural sector play. we are underweight energy and materials because of his continued chinese slowdown. we are also underweight utilities because we expect yields on vonleh its to go up. basically underweight the commodity and bond-sensitive sectors. >> how broad -- how big is the spread? >> it is fairly wide. we are in an environment where you don't get big moves in sectors. multiples generally creep higher. not must this version going on. >> one final question on europe. how difficult is it now? .> it is more difficult depends exactly where you look. we are neutral to underweight european markets. the value doesn't look great. in the 1990's, this inflationary the.com ended up with valuations. >> nice to see you as ever. thank you very much indeed for taking the time to come and see us. we have been talking about airlines throughout the morning. let's take our focus back that way now. leaders are meeting in doha. the last thing on your mind one getting from london to new york is probably your seat. i am not sure i agree with that. thousands of hours have gone into making you comfortable. angus bennett takes a peek inside the secretive london design studio where airline seats are being made. >> a team of designers pour over 3-d models and intricate plans. they are working on the next generation of airline seating and it is top-secret. >> can show you that, i am afraid. pa designpark shed up j years ago when we were all flying in the equivalent of dentist chairs. his firm helps change that, designing seats that fully reclined. >> our challenge is to make something that is aesthetically pleasing, that is functional, and that satisfies all these requirements. it is quite demanding. level,00 feet above sea in below freezing temperatures, this is a hostile environment for luxury. seats can't just feel nice, they have to be safe. >> safety is king. tested,are rigorously made to endure a process called de-legalization. halization.t product isshed unbelievably expensive. a single economy class seat toss the airline as much as a small car. a first-class seat, try your house. >> we have worked on a number of products which have been award-winning, which have gone on to sell great numbers. therefore the yearly cost comes down but they are nonetheless expensive. >> something worth thinking about next time you spill a drink. angus bennett, bloomberg. >> nice story. we are going to take a break. as we leave you, we leave you with this. sergio marchionne now has a decade leading fiat. it is the right hand side of that chart that tells the story. we are going to break down his accomplishments and look ahead to his ambitions. ryan chilcote will be joining me. see you in a moment. ♪ >> welcome back. you are watching "on the move." you are looking at live pictures speech i former british prime minister tony blair. people are beginning to question europe's ability. it is going to be a controversial crusade for him. tony blair certainly wants to take on the mantle. we will get any headlines -- if we get any headlines, we will come back. let us move on, change gears. sergio marchionne has marked his 10th anniversary in the driver seat. the year he joined the company, it lost 1.6 billion euros. turnaround, the aggressive plan for the company's future, let's find out what is going on. ryan chilcote is here. it has been a bobby ryan. >> he comes into 2004, wearing a suit with a black tie, talking about saving the company from the brink of bankruptcy. not only did he lose 1.6 billion, but in the preceding , they have lost 8 billion. fast-forward to the end of that tenure. fiat has acquired chrysler. fiat is profitable. marchionne has tripled revenue and he has tripled the share price. clearly it wasn't the smoothest of rides for the share price, really nosediving into thousand nine. his new plan introduced in may to bring them to 7 million cars a year, punchy. 60% more than what they are doing right now. spending a lot of money to try to pull it off. that is where people are now skeptical. >> when did he lose the suit? [laughter] wearing jumpers isn't it? he never wears a suit. >> he is an italian that spent almost his entire life outside italy. he comes back, he thinks he needs to look formal. but when he turns a profit he is like, going back. >> he has got a lot of work to do. people say this is aggressive. he pulled the two companies together. he now believes he can leverage both of their advantages in europe. is,hat the skeptics say clearly you are a good turnaround guy. he has demonstrated that. but you need to show us that you can sell cars. they have done very well with the fiat 500. he brought it back into thousand seven. his master plan now is to take the jeep, sell it in europe and romeo and sell it in the united states. >> the problem with all of that is, does he have the money? the company is so up to here with that, does he have the money to make it work? >> that is exactly the problem. the plan calls for him to spend 55 billion euros between now and 2018. stretch the balance sheet to as much as $11 billion. thate the affects of all capital expenditure really kick in and he starts selling cars. according to him, the debt level goes down to one billion. after he gave his big presentation, five analysts left the room and changed their recommendations from buy to sell. the share price has gone down 10%. the critics are out there and he says he just has to work and deliver. the sweater is back on. he worked yesterday which was his 10 year anniversary. he does fly in by helicopter to his office. i don't want to say he is and all work guy but he is party much and all work guy. >> ryan, we will leave it there. " is coming uplse next. olivia sterns joins us with a look at what we have got. >> first of all, i would like to say that i do think marchionne's lacked jumpers are pretty chic. we are going to have a great show. we are going to speak to ryan chilcote again but he is going to be talking about the ukrainian gas talks. tos morning russia agreed give ukraine an extra week to pay in advance for gas. is that some kind of meaningful step towards a bigger deal or is it some kind of temporary twist? we will put that question to one of our guests. plus we are going to be talking about tech. in san francisco apple is going to have a developers conference. all of the buzz is about this push into smart homes. we will be talking about what devices are next in your home to be wired up and what this potential $3 billion acquisition of beats could mean for wearable devices. finally, we are talking about planes. we are going back out to qatar. bloomberg spoke to the ceo of the industry-leading group. he says he is going to see a 70% surge in profits but that masks a bigger issue. a lot more coming up on "the pulse." >> i think olivia just called me a plane spotter. we will see you in a minute. thanks very much indeed. what other companies are on the move? of the swiss drugmaker's expansion into gene sequencing. roche says the business will reduce the price of sequencing while increasing speed and sensitivity. -- oil will sell its norway unit to the norwegian company det norske. the deal is expected to close in the fourth quarter and will be subject to the necessary approval. "maleficent" had a surprise opening weekend. the live action twist on sleeping beauty pushed 21st en"tury fox's latest "x-m film down to second place. as we head into break, the countdown is on for the biggest sporting event on earth. we are 10 days away from the start of the world cup and ahead of the games, check out bloomberg's 2014 predictions. to create their own bracket addiction. you will find that website at bloomberg.com. see you in a moment. ♪ >> welcome back. you are watching "on the move." let's show you one of the stock rionrs this morning, o is working on what is described as a novel prostate cancer therapy. doing so with bayer. the stock is up 12.63% on the back of this. it is an oral treatment. obviously this is a huge field. a lot of people paying a great deal of attention to it at the moment. up 12.7%. what else are we watching? caroline hyde is back with me. the chinese data having a huge impact. >> miners are the star performers. china's manufacturing beat, the strongest in five months. the official government number shows this stimulus starting to work. >> trevor had a different take on this. he was saying this is a system with stabilization and china. we are slowing down, but we are stabilizing. it is not falling off a cliff. while that may be positive in the short term, he is saying in the medium term it will keep downward pressure on commodity prices. >> certainly because growth is not going to be hitting targets. 7.3% is what everyone is expecting. the government target is 7.5%. saw medium-size enterprises really starting to grow in the numbers. that is really where the government swallowed. they are trying to loosen up lending from the banks, trying to get them to stimulate growth in small businesses. >> big data coming out of the europe and states. >> the state is going to be key. manufacturing date of there as well set to be the biggest so far. it really does make the chinese number pale in comparison. china got 50.8. the u.s., 55.5 is what we are expecting. certainly going to paint a picture that first-quarter gdp was a blip. we are going to see strong growth in the second quarter. maybe markets priced out a little bit when it comes to the fed's tightening story. we have seen the german data flashing up on the screen as caroline was talking. this is the final pmi reading. a little bit disappointing versus the expectation. this is the final manufacturing data coming through for the last period of may. still growth, still north of 50. 52.3 versus 52.9 estimate. >> it is all going to be on the back of the ecb. will we see money going to the businesses in europe? >> on that note, we will leave it there. we are going to take a break. after that, "the pulse." ♪ >> will qatar get the boot? to rerun acalls world cup vote amidst allegations overshadowing a major airline meeting in doha. >> preparing for left off, and value a techd startup at $4 billion. >> china manufacturing expands its fastest pace in five months. good morning. welcome. you are watching "the pulse."
i am guy johnson. >> i am olivia sterns. also coming up, breaking away from android. samsung unveils the first new smartphone. >> plus, we check out the world's most luxurious first-class cabins. is facing calls to 2020 two vote for the world cup. allegations have surfaced that qatar won that it following secret payments to qatar officials. qatar says it is fully cooperating with an investigation. that scandal overshadowing another event in the country, the annual meeting of the airline industry's biggest names in doha. we have been speaking with the lat-am airline's. he says the world cup is actually bad for business. >> only we will have traffic in one direction. we will have a lot of flights to cities, moving people to a game. our middle east editor, elliott gotkine is on the ground. he joins us from the summit. let's start off talking about what everybody is talking about, this world cup story. what are you hearing? not the best of timing as far as qatar is concerned. great timing as far as journalists are concerned. it is when qatar wanted to show the world its best show. they have done that in the past few days with a new $17 billion airport. lo and behold, these allegations suggesting that people representing them bribed fifa officials. qatar is knowingly cooperating with the investigation. it denies vigorously that it did anything like this. unfortunately for qatar, there has been a pattern of negative reports. everything from the alleged mistreatment of workers on stadiums including a catalog of workers who have lost their lives. there are well-known concerns about the heat as well. the delivery of their superjumbo was also delayed. not the most auspicious start but certainly also not something that anyone is talking about publicly. >> some big headline numbers there. the ceo saying he expects profit to grow by 70% next year. a big increase but obviously that masks underlying issues. what are some of the other takeaways? much celebrating along with the rest of the airline industry, which seems to be losing money more often than it is making money. profit expected to the $18 billion. very reassuring numbers for the industry. as the boss of the organization that represents the world's largest airline, that doesn't mean the industry is thriving. >> clearly, profitability is on an upward path but it is still very thin. profit margins of 2.5% are nothing to write home about. we certainly have seen consolidation. and developments in the international market assist in this movement. >> what this also allows you to do is get up close with the movers and shakers in the industry. i was chatting very casually with the ceo of lufthansa. he was telling me about his recent one-on-one with president barack obama. i was chatting with the ceo of iag about improvement in spain, how they have and make amendments yet on their plan for spain but they are looking at doing so. something that willie walsh has never really shied away from. and if thehave means opportunity presents itself, then absolutely. ,> so you have spoken to iag lufthansa, anybody else you have been speaking to? >> some people are more chatty than others. i just chatted with tim clark, the ceo of emirates. bullish as ever. this is an airline that seems to be taking over the world. i asked about a potential -- he said that is an anathema to their model. of course, they have very ambitious plans but he doesn't keep them awake at night because they delivered on their plans and their ambitious targets in the past. they intend to keep on doing so. everyone just kind of milling around. we will be speaking with the head of air france later as well. qatar hasn't been as chatty. he just held a press conference alongside tony tyler. a lot of questions as well about potential tracking in the wake of the disappearance of the malaysian airliner. we are expecting a report on the proposal on how to improve things about september time. >> we will wrap it up there. elliott gotkine joining us from doha. with less than two weeks ago until the world cup, you can use bloomberg's 2014 tournament predictions. it allows users to create their own bracket divisions. you can find that on our website, bloomberg.com. >> it is the german investor and incubator credited with putting berlin's tech scene on the map. now, rocket may be nearing and ipo that could value it at $4 billion. here with more is hans nichols. more on the brothers behind the dot clone companies. >> good morning. 4 billion euros is a lot of money. but put this in a context of what some of the san francisco startups are facing. whatsapp for $17 billion. it is the difference in what this company is. this company is an accelerator. it finds good ideas in the states or elsewhere and helps incubate them here in germany and latin america and asia. that is no small task. and say,challenge them you are just a clone, they always have the answer. yes, but. the but part of it is, it is very difficult translating consumer models to different cultures. because they are just doing copycats, that is why this valuation may be lower than some of the true innovators that have valuations that are off the charts. look at some of the companies that rocket has incubated. an ebay version here in germany. groupon, they sold that back to the founders. their version of uber is called easy taxi. they have one for amazon. eharmony as well. the typical model on this is that they have sold in some cases back to the original company. now they are taking it public and we will see how much demand there is for the 70 75 portfolio companies that rocket has. rocket has a hard time explaining it. is it private equity? is it and incubator? the answer is it is a holding company. >> does that have any implications for the impact this ipo will have on the rest of the tech sector? >> if you think what an ipo normally does, it brings in a, a great deal of confidence. b, it mints a lot of millionaires. those millionaires talk with their friends and leave the one company and maybe start a new one. in that sense, an ipo from rocket want to do that. most of the money is going to go to these three brothers. it is not necessarily going to go throughout the company. in terms of spawning new ideas, unclear if that will happen as well. it will cross the threshold. people in berlin will finally have a billion-dollar exit. they may feel like they have arrived. >> mr. nichols, thank you very much indeed. our international correspondent joining us from berlin. >> it is an interesting company. it gives them a way to access investors because they are fun. normally you would only go in as a wealthy individual. if you are buying shares in the incubator, it lets you place your bets in a broader way. >> let's talk about another energy storage. samsung breaking away from android. first unveiled the smart phone that uses zed. the phone comes with a 4.9 inch display. it also includes a fingerprint sensor. >> so it is a bit to get away from android. >> why? >> because android only has a mere 80% of the smartphone market. >> why would you buy one? you can buy a samsung phone with an android operating system which gives you an ecosystem which has huge amounts of apps. why would you buy this one? >> samsung wants you to buy it because they want their own ecosystem. they don't want all the money going to google and android. do whaton't you just amazon does? amazon's operating system is also android but they tweaked it. it works just for them. it is an interesting one. >> i think they are both trying to get the hybrid going, winning in hardware and software. we all like the kindle but it is still a loss leader. are launching in russia first as well. >> they probably decided that before the ukraine crisis. >> staying in the region, china has reported better than expected manufacturing data. here with more, caroline hyde. >> signs of growth if you look at the official data. we saw manufacturing's strongest in five months, the best so far this year. it eked out 50.8. just in the expansion territory. -- theyeeing that analyzed 3000 companies in china and it looks pretty rosy. hsbcu look at the acb -- figures, not quite so rosy. nevertheless it is still the strongest in five months for manufacturing. we saw stocks rise. it is having a big effect on minors trading in europe. it seems to be the medium-sized companies doing the best. smaller companies, not yet feeling the credit coming their direction. more companies are still in contraction. this is what the government is trying to do. it is trying to get money going to the smaller businesses. they are promising to cut the reserve or carmen's. -- reserve requirements. they don't want any hard landing. >> we are seeing governments all around the world trying to figure out how to get the stimulus going in small to medium enterprises. a problem not unique to china. so far, these growth targets sending stats up today in asia. behindi is still lagging those official government target of 7.5 or send growth. >> we are likely still only to get 7.3%. that is what generally the consensus is from economists. will we see more stimulus, in? money quiteling out quickly into railway infrastructure. they haven't actually ramped up their spending. they haven't unveiled some big amount of money, largely because they don't want to have the same problem they did when they unveiled billions of dollars of money in 2008. that started fueling a property bubble. they want to keep property prices relatively low and they don't want to see the bubbles they forced last time. equally, they do need money to go into the system. mini stimulus is what it is called so far. >> caroline hyde, thank you so much for joining us. >> coming up, europe ipo flurry as more companies announced plans to go public. our investors as hungry as they were? we will talk about that when we come back. ♪ the issue of investment is something we look at all the time. what we did make clear was, you can't make an investment in a business if you don't believe it has a long-term future. >> willie walsh, ceo of iag there. rose tinted spectacles on our camera? maybe. conference is on an upbeat note right now. willie walsh is making big changes at iberia. rocketonline startup said to be planning an ipo later on this year that values the company at more than $4 billion. bloomberg was the first to report the plans. with so many ipos, how will this one perform? let's ask garrett. the morning. this is an interesting ipo. we haven't seen a big tech ipo in berlin in about a decade. do you think this is the right time to go public? do you think rocket is really worth $4 billion? >> i think in terms of timing, we are in a sweet spot for the european ipo market. there is a lot of talk about the amount of capacity in terms of deals that are coming. context is important and we are nowhere near the levels we were at in 2006, 2007. the timing is definitely a good one. you can bring a differentiated equity starry to the market and you will find a good audience. >> why should i go through the hassle of listing my business when i can sell it to corporate's? >> it is a question of options. we only have to go back to the second half of 2012 when the european ipo market reopened that you brought the ipo option back onto the table. it is a case-by-case decision. we are in a good -- >> is it 50-50 or is it ipo slightly edging out? ipo is slightly edging out. partly because the market is functioning again. we weren't in that position two or three years ago. picked flurry of deals up last year. what are your thoughts on the quietly of ipos that are coming out right now? have they declined? are the valuations still opportunities? >> i see this phase as a restocking phase in the market. the quality if you look at individual companies, i think is still in the very highest end of the market. these are getting existing investors new opportunities for differentiated growth stories which are difficult to find in the secondary market. we are not yet at the point where quality is deteriorating. >> what do you think the second half of the year is going to look like? >> we will have a pause in summer. we have 20 plus ipos live at the moment. if the secondary market continues to perform as it does and you have attractive valuations, i would see the market continuing to the what i would define as normal and functioning. >> we were speaking earlier about how the market in london seems to be a little bit offed. -- soft. saga priced at the lower end of the range. the ipo market in continental europe seems to be holding up really well. >> to your point, i think if you look at continental europe, ipos are up something like 17%. that has been a good story for the investor base. in the u.k. it has been a more mixed story. in the u.k. we have seen a very focused issuance calendar in the retail sector. the secondary market has had a tougher time since february. a lot of the mid-cap stocks have had a tougher time. that is why you have seen this dislocation and performance. >> where is the demand coming for these ipos? while stocks are near record highs, volume is low. are these retail investors going in? >> it is very much an institutional story. the european and u.k. macro recovery story has been key. i think it is very much institutional with international investors being very supportive. >> private equity obviously a big part of all this. 'sw far through the list of x they need to do are the gps right now? how far through our the funds? >> they are a big driver in the volumes we are seeing. we are probably 40%, 50% of the way through. they want to recycle. they haven't had a market to exit for three or four years. that is really a new factor. we are about halfway through but there is still further to go. does that -- >> does the flurry signal top the markets? >> perhaps. the ecb action is going to be critical for the next phase of the market. if you look at underlying indices, we are still at highs. >> thanks so much, gareth mccartney. ok, time for today's pulse number. $70 million. >> it is the amount that "frozen" brought in. your favorite disney movie. no, excuse me. the new hit, "maleficent." a live-action twist on the animated classic, sleeping beauty. men" to winast "x- the box office crown. >> i gave that to you because you are a massive disney fan. >> are you going to take your kids to this one? >> i think they are a bit young. we are going to take a break. see you in a moment. ♪ >> welcome back to "the pulse." let's see how the markets are trading. caroline hyde has your asset check. >> $64 trillion. that is the value of global stocks. it hit a record last month. in june, we are still sticking in the green. we had manufacturing data coming out. germany posted a gain. spain posted a gain. the euro zone general posts again. france doesn't. it is really about china today, manufacturing the strongest in five months. copper is trading up 0.75%. have a look at fx. euro just gaining a little. it is off by 0.2% but bouncing off its lows. down to 1.3607. much focus on the ecb. one everyone is betting for an unleash of stimulus. will he also reduce the refinancing rate as well? will there be money going to stimulate lending from the banks to smaller businesses? euro also get the aussie dollar down. newhouse bills surprisingly fall down 5.6% in building approval for the month of april. also we are seeing house prices fall in australia. off by 0.6%. let's look at stocks again. we are generally in the green. i want to look at the stoxx 600. this is your outperform her, minors. back to you. >> thank you very much indeed. you have had regional data from germany not looking good. coming up, marchionne's magic. the italian exec has spent years steering fiat toward success. what is in store next? that is next on "the pulse." ♪ >> good morning. welcome back. you're watching "the pulse." i am guy johnson. >> i am olivia sterns. here are the bloomberg top headlines. china says it will press ahead with territorial claims that it caused friction with japan and other neighbors on the south china sea. a chinese military leader rebuffed criticism at an international security meeting over the weekend. last week vietnam said china sank one of its fishing boats off of vietnam's coast. >> thailand's junta deployed circles -- soldiers. saidilitary leader has that a nationwide curfew will remain in place until order is restored. he also said it may take at least a year to return thailand to civilian rule. carlllionaire investor icon says he has no knowledge of investigations into possible insider trading. the new york times and wall street journal reported that icahn was the subject of a federal probe. d the reporting inflammatory. an impact on the pound. since then, the pound has come back a little bit. we have seen mortgage approval data coming through as well. that was a little softer than anticipated. we have also seen some fairly disappointing data coming out of the eurozone, particularly in germany. this is regional data on the cpi ahead of tomorrow's national release. that has been the impact on the euro. most other regions have had negative numbers. that is going to put further pressure on the ecb. >> let's turn to one of our top stories. sergio marchionne has marked his 10th year at the helm of the italian carmaker. after returning the automaker to profit, marchionne is again at a turning point. for more on his reign, let's bring in ryan chilcote. we know they call him the canadian. how did this all begin? >> 10 years ago, he comes in, june 4 2004. rto has just passed away. they were the owners, he was the chairman. he was very active but in the two years while he was still in the seat, the company lost $8 billion. he comes in wearing a suit, black tie, look somber and says, i am going to try to save the company. that he does. not only in the last 10 years have they acquired chrysler, but he has made fiat profitable. he has tripled revenue and he has tripled their share price. various skepticism about his next plan which basically calls for them to produce 7 million cars a year, 60% more than they do now, and make about five times more money than they are now because they are going to focus on the higher-margin cars. little problem, debt and they have got a lot of it. >> everyone looks at him very successful as being the turnaround guy. very good at deals, but can he sell cars? the fiat has done very well. there is a car that he brought back in 2007. his new plan to make alfa in italy and sell them to americans and make jeeps and sell them to europeans, it is going to take a lot of money. 55 billion euros is what fiat expects to spend between now and 2018 which would put that to $11 million over the next couple of years, which he says will come down to $1 billion once they start selling all of those cars. theysts heard the pitch on sixth of may and five of them walked out of the room and change their recommendation from buy to sell. >> stock tank ever since. >> ok, show us your car selling magic. >> he is mr. fix-it. is he now selling the type of cars we think are going to resonate with customers? >> he has had some success with the maserati but he hasn't had that success with alfa yet. he is going to redo the whole line. think there is a big question mark. there is another car they are going to slim down to just one model. that is a very low margin car. it does ok in southern europe. so we will have to see. >> can't wait to see. will we see suburban moms driving alfa romeo suv's? >> i definitely see you in an alfa. >> breaking news coming through the last couple of minutes. we now have in spain one of the leading newspapers reporting that the king is said to abdicate. this is being reported that mr. mariano rajoy is saying this. he is the prime minister of the country. this is a royalty that has been hit i scandal and scandal and scandal. from elephant hunting to his daughter being involved in a series of court cases, this is the latest we have on this story. that willreport have huge implications for spanish royalty and the constitution. >> the big names in the airline industry are in qatar for the annual meeting of iata. elliott gotkine caught up with an iag ceo, willie walsh. >> is your investment something we look at all the time. what we did make clear was you can't make an investment in a business if you don't believe it has a long-term future. we are now convinced that iberia as the basis to justify significant investment. we have not made any commitment at this point. we have options on various different aircraft types and we are evaluating those. >> now spain is back on track. would you be looking for more acquisitions in europe? >> we are always open to an opportunity but we are not actively pursuing anything at this stage. we have still got work to do to complete the turnaround at iberia. i am pleased with the progress we are making but at this point, we are satisfied with the size and structure of iag. we are ready if the right opportunity presents itself. we are ready and capable of making a move. pink so he is obviously happy about life. he talked about the fact that he still has work to do in spain. that has been really tough. >> of course. getously the play was to those fast-growing south american economies to fuel the growth of iberia. >> maybe not growing as fast as he would have hoped. fewopefully he is selling a tickets for people going to the world cup. >> let's listen to the guy we spoke too early on who ran a brazilian airline saying this is not having much impact. >> he said he thinks the world cup is not going to have a positive impact. once again, strength in that trend. >> case in point. >> what makes you think i flew here business? >> i didn't say anything. i just lead you down the road. one of the last things -- i completely disagree with this intro. one of the last things on your mind when jetting from london to new york is your seed. i would say the most important thing. >> i particularly like when they make the bed. some airlines make the bed such as virgin atlantic. some airlines that won't be named don't make the bed. >> that is an important point. if you are running an airline. if you are on the overnight and you get some shut eye before that meeting, probably quite important. anyway, those seats don't invent themselves. thousands of hours go into creating one of those seats. essence of making olivia comfortable. i guess and it takes up the studiothe secretive where the seats are dreamt up. >> a team of designers pour over 3-d models and intricate plans. they are working on the next generation of airline seating and top-secret. >> can't show you that. >> james park set up jpa design 20 years ago when we were flying in the equivalent of dentist chairs. his firm helped change that, designing seats that fully recline with luxurious materials. maker challenge is to something that is aesthetically pleasing, that is functional, and that satisfies all these requirements. it is quite demanding. >> 40,000 feet above sea level in below freezing temperatures, this is a hostile environment for luxury. seats can't just feel nice. they have to be safe. >> safety is king. tested,are rigorously made to endure a process called de-lethalization. >> if you were to experience the testing limits these seats are tested two, it would be quite unpleasant. >> the finished product is unbelievably expensive. a single economy class seat costs the airline as much as a small car. a first-class seat, try your house. >> we have worked on a number of products which have been award-winning and which have gone on to sell great numbers. they are nonetheless expensive. >> something worth thinking about next time you spill a drink. i guess bennett, bloomberg. >> that is the first thing i have ever heard that has ever made me think that the fares for first-class might actually be justified. half $1 million for one seat. >> they are pretty expensive. both the seats and the fares. the question is, do you want to go first-class or business-class? >> who travels first-class anymore? where is that customer? --y are just making digs its digging business-class bigger. >> back to our breaking news. it has been speculated about, now it has been confirmed. spain's king is going to abdicate. this according to the country's prime minister. we have more on this story later. there is going to be an extraordinary cap netmeeting tomorrow. there is a lot of protocol that needs to be gone through. the 46-year-old will now become king on the back of this. more details when we come back. >> also coming up, crunch time. the clock is ticking for ukraine and russia to resolve their dispute over gas prices. we have the latest on those negotiations. ♪ >> welcome back to "the pulse." russia has given ukraine an extra week to pay for this month's gas supplies or risk a shut down. both countries resume talks in brussels today. the negotiations open a week of international engagement over ukraine. for more we are joined by otilia dhand. thank you so much. big week for negotiations. gass talks continue but meanwhile we are looking forward to these awkward photo ops we expect to see for the gathering of the d-day reunion when we see putin bop into obama. they are expected to have dinner with the french president. do you think we are going to see any progress in terms of a gas deal? >> it might not be close this week due to the complexity of the talks and also due to the busy schedule that these countries will have in forthcoming days. we still have three problems on the table. the outstanding debt, the pricing and the question of advance payment. what we got last week was a partial payment. of the first three months 2004. that is something that is probably going to be on the table. then we are looking towards negotiations on the price itself. not, thatey agree or is probably not going to come this week. that is going to come later on. the price will eventually likely 400ettled at around 370 to per thousand cubic meters. that isfast do we get still the main question. >> so a gas deal will be likely here? no crisis? >> ukrainians themselves are already counting on the possible distraction. that is why the process might meet some bumps along the road. it is not going to be a disaster if we see a temporary cut in supplies. it would be much more complicated if the cuts -- >> let's get into game theory here. how does this fit in to the overall story that we are talking about? the u.s. officials are saying more about sanctions. we have this meeting coming up later this week. putin, the master of positioning, how does he use this as part of the wider story? gas pricing in itself and the demands on the debt have been used as a political leverage over ukraine. as we see these talks unfolding, there will be further talks about, how does europe, u.s., russia see their individual interest in ukraine and how does the ukrainian government itself see it. gas will also be used as a leverage in getting what russia wants in ukraine. perhaps more powers to the regions. federalization. depends on how the violence in eastern ukraine will develop. the way we normally see the gas price is a sort of expression of political alignment of the given country. the crisisation of will probably be the most important. >> thank you, otilia dhand. >> let's move from ukraine back to spain. breaking news. king juan carlos will abdicate the spanish throne, this according to the prime minister. bloomberg news reporter -- joins us now from madrid. this had been widely speculated. i had seen a number of websites talking about this. now the reality has come through. how big a surprise is this? say for the spanish people it is not a surprise but a shock. the king has been on the throne since 1975. he is the only head of state that many spaniards have known. he has led the country from dictatorship through almost four decades of democracy. having him no longer there is going to be a big change for many people. that said, his health has been deteriorating quite noticeably, particularly over the last 18 months or so. surprised that he decided to call time. i think what this shows is the that theconfidence spanish establishment has in their handling of the situation, particularly with the decline of the rich premium. they feel they are now in a position to manage this transition. what theo me about recent scandals have done to accelerate this. we have seen elephant hunting, we have seen his daughter in court. to what extent will this clear some of that away? >> i think that is the big question. the king's reputation has been tarnished over the last two or three years. prior to that he was seen as a national hero. now he leaves with question marks over him. there are question marks over the financial affairs of his family. philippe a, the prince who is going to be taking over, as not being drawn into any of those scandals. i think the palace has been very careful about protecting felipe. d thee a now has to lea family and deal with those ongoing scandals. his sister is likely to be in court facing tax evasion charges. >> we will wrap it up there. thanks for the update. we are going to take a break. back in a couple of minutes. ♪ >> in today's new energy, apple is expected to launch its new smartphones software at the upcoming build conference. the future of the so-called internet of things is larger than just our thermostats and refrigerators. it is becoming increasingly important to also future-proof our cities' infrastructure. joining me to discuss is the ceo of atkins. thank you. atkins, a leading engineering company here in britain. let's start with this concept. what do you mean by smart cities? how the cities is about living environment is going to be shaped in the future. think about how it all fits together. it is not only about energy efficiency. wasteall about water, management, the transport system of the city has to come together to enable a kind of living environment where people like to live and work in the future and to design that, to have a holistic approach to that urbanization trend. >> the numbers you sent over are staggering. urban populations of south asia and sub-saharan africa set to double in the next 20 years. that is more than half the population on the globe. what are the key things that cities need to do to the able to take a holistic approach to support this development in a green way? >> that is the important approach. the city approaches it from a general sense of looking at the infrastructure. just think about london. a victorianto infrastructure. clearly, cities in china or africa now have the opportunity to really think afresh about how architecture should look in the future to future-proof a city for future urbanization. -- think about that in 2050 we will have 75% of the world population living in urban centers of the sort we are used to here in london. it is about thinking through not only the transport and architecture, but also how is the social environment going to be shaped? that is what we mean by a holistic approach. >> what about the so-called internet of things? when you tell me that my thermostat is going to be speaking to my garage door, that suggests that everything that was once mechanical is going to be wired up and perhaps you could be draining a lot of batteries. do you think the internet of things is going to drive energy efficiency? >> absolutely. what applies to the large infrastructure of cities applies to your home environment as well. naste recently acquired for $3.2 billion. to thewhat applies larger environment applies to you as well. it is not only about energy efficiency. it is looking at the whole environment at home and how you can be more efficient in using it. >> our thanks. guy, let's get over to you. >> let me talk to you about what is coming up. for those listening on bloomberg radio, the first word is up next. for our viewers, it is a second hour of "the pulse." spain, the economy back on track. now is the time that king carlos decides he is going to abdicate and leave the throne to his son. what will that mean? out bothmadrid to find the economic implications and the royal implications. see you in a moment. ♪ a thief faces calls to rerun a world cup vote. corruption allegations are overshadowing a major meeting at qatar. hourig story over the last , spain's king juan carlos is abdicating the throne. we will be live from madrid.
it aircraft turned back, but we are not sure whether it is the same. that signal that comes up on the radar screen that shows it's a turn back, we calibrate with the radar of this and to a certain extent we saw something too so it raised the possibility so yet we are not sure. if it turn back, you know, the speed of the aircraft and so on, if it goes there and there is no response by sending some there, just in case i have got to do something. i protected my minister, sir, this is what i think. i would like it 49er form a search which is already in the we west. it went through the night and where we suspected the aircraft would be and the next morning at first light we said you scour the area, do you see anything? no. it is a possibility and the slightest responsibility must response for the sake of them and their honor. 370. >> were you tracking this in real time, this unidentified object going across the radar, were you tracking it in real time? and if you were, why did you not -- >> no, we did not. we saw a recording of it. we were not sure. it just so happened when we saw the recording of the data, we have to have response. >> you said you were looking for the aircraft, you're also seeing civilian authorities and the need for help, why not release the raw radar data? >> we did to calibrate this with other radar, with our -- >> the plans for the radar data? >> yes, we plan to release it as long as i know that actions are being taken for the conduct of the search and rescue operations. the next day we contact our friends, please, activate your search which they did immediately. >> if faa and ntsb can confirm that the flight from the raw data on the flight -- >> yes. [ speaking foreign language ] >> take it one at a time. >> okay? >> yes? >> i've got question. you see the flight -- >> well, there you have a press conference which has been going on for about 25 minutes now with the transport minister there on the right. of course, the director of civil aviation there on the right and to the right of him or to his left you've got the chief executive of malaysian airlines and on the left you had a general, one of the senior military officers. one of the things that i think is important to raise here, there are 42 ships, 39 aircrafts involved in searching 27,000 square miles of sea and land. largely sea because nothing's been found on land. we can go to a map to remind you where the plane is going from from kuala lumpur friday night heading northeast towards beijing, the 6 1/2 hour flight. at that point it stops trans ponding on the radar. what we've heard from the director of civil aviation is that they were track -- they could track it on the secondary radar until 1:21 in the morning and then it disappeared. this is all retrospectively, disappeared at 1:30. we've also heard from the military because there are separate radars here that they had a track on the plane until 02:15, 45 minutes later, and they had a track on what they think might have been the plane. if you look closely at the map, about 200 miles northwest of tanang, which is towards the east of where the s is on malacca straits. that means the military has tracked something they believed was a lane until 02:15 local time 200 nautical miles northwest of tanang. that's c 70 with a direction of 295. now 295 means it's just north of west heading, in other words, northwest. that's what we've just heard. it doesn't result in anything of a mystery. they have found nothing in the last five days. let's go to the bbc's jonathan head who joins me from kuala lumpur airport. jonathan, you've been listening to that. five of the most key people who are obviously desperate and they have literally no information, apart from a degree of speculation based on the primary and secondary radars they've been looking at. >> i think the biggest problem there was a rather frustrated and hostile media who have been here for five days waiting for information. one of the points was why haven't they released information more clearly. back on the weekend i remember the air force chief, the same man sitting there next to the transport minister, telling us we have some information that suggests the plane may have turned around. that was it. he wouldn't say anymore. now he's telling us there was a plot that the military tracked way off to the northwest into the malacca straits. he couldn't confirm what it was. they weren't tracking it real time. they weren't tracking it real time. they've looked at the plot. he's explained it fairly well today just how little information they have. we have a plane vanishing from civilian radar. communication devices apparently switching off and an hour later a plot that maybe that plane, maybe not, that they found later on recording of military radar and nothing else and that's really extraordinary. it tells you something pretty drastic must have happened to the plane for all of those communication devices to be turned off. bearing in line, it crossed the peninsula on a clearly wrong flight path for an hour or more. beyond that, it tells you how difficult it's going to be to find this plane if they have absolutely no idea where it went down. >> jonathan, there is an intensity of use now of aircraft with the norma legacy airlines and the low-cost airlines. there's now an intensity of flight in that reasonable gone. is this becoming really quite extraordinary that there is literally no tracking on radar in real time and they're still struggling five days on to even look at the plot of what was going on at the time? >> well, i think if what they're saying may have happened turns out to be the truth, somebody would have to ask some questions about flight safety. you're absolutely right. the explosion of low cost carriers in this region, 600 million people with rising incomes connected strongly to northeast asia and to the subcontinents as well. you have 2 billion people flying more and more every year, and every single country has got vastly more airlines flying now than even five years ago. these flight paths have to be managed. the one running between singapore and malaysia up through thailand to northeast asia and across vietnam towards the coast of china, these are some of the busiest flight routes anywhere in the world. it does seem extraordinary to us. there's so much we don't know. the malaysian authorities have been struggling with an immensely difficult problem but their communication, the information has been so sparse. you can see the frustration there. general is sayi journalist is saying, if you knew about this plot but couldn't identify it, you could have told us this. there are other incidents. they only confirmed the stolen passport people the other day where we know they had that information many days before. >> jonathan, thanks for helping us at least understand why there remains mystery and frustration. as he said, it is quite overwhelming for them. let's head to south africa. a full scale model where his girlfriend was reconstructed has been shot dead. the paralympic athlete is standing trial for murder. that's where reeva steenkamp was shot dead in the early morning hours on valentine's day. let's go to bbc joined outside of the courtroom. latest developments please. >> reporter: well, we are hearing from the courtroom now that the defense attorney is now cross examining the state forensic expert who testified saying that it appears that oscar pistorius may have been on his stomach when he tried to break down the door with a correct bat. that contradicts the statement that oscar pistorius made to the court when he was applying for bail in february of last year when he told the court that he accidentally shot reeva steenkamp through the door and then went back to his bedroom to put on his prosthetic leg and then tried to kick the door open. when that wouldn't work he said he went back to his bedroom to fetch a cricket bat and then tried to open this door. that's a clear contradiction there. so cross examination has now started in court and from what we are hearing is that based on media reports last year that the police may have taken the door and may have removed the actual door from the crime scene and locked it away at a police station for safekeeping, that may come into play here because the defense attorney is likely to ask the court to disregard the information, all the testimony that was given by the state forensic expert here because there are questions surrounding how the evidence was preserved to this day. >> yes. and we're seeing at the moment the courtroom with that expert where he was actually physically using the cricket bat and you see him on his knees replicating pistorius with his stump and what would have happened if he used the bat standing up. >> that's correct. they tried to make measurements in how tall oscar pistorius is and where the mark on the door would be compared to the demonstration that you just spoke about now where we saw him on his knees trying to make a demonstration in court showing where pistorius -- the mark pistorius would have made had he been on his stump when he tries to break down this door. so basically the evidence that we're hearing from court today is suggests that there was a fight between the couple and reeva steenkamp may have locked herself into the bathroom and oscar pistorius took his bat and tried to break down the door to get her out of the bathroom before shooting her which is a totally different way that oscar pistorius explained what happened during the early morning hours of valentine's day last year. >> what we're seeing is live from the courtroom and you can see the forensic colonel standing to the bottom left. he's moving across with the cricket bat again to show what happened at the door. let's now move on to aaron who joins me with the business. mr. gouing, on to business. yours and mine, airlines. demand is up but so is the price of fuel. that is certainly the outlook. these airport transportation. in fact, the organization says the global airline industry is on track for increased profitability due to increased demand as well as air cargo. the group has revised the overall profits down with airlines set to make a billion dollar less than had earlier been forecast. the culprit, i've kind of said it, haven't i, the higher price of oil which has pushed up the cost of fuel. we're going to be speaking with the director general. we have more questions on the airline industry and also the 777 malaysian flight. make sure you stay tuned for that one. the ukrainian prime minister is arriving in washington to meet president obama. he's called on western nations to defend ukraine against russia, a nation he says is armed to the teeth and has nuclear weapons. obama will show the support for the new ukrainian leader, but what can the u.s. and the western allies do to help this near bankrupt country. again, we've got a special report coming up on that one. we have a lot going on. also, wages are on the up. some of the biggest rises are in the auto sector. they're all announcing pay raises. nissan leads the way with 3.5,000 yen. how much is that? 3 bucks. the government increases sales tax. will they feel better off? we'll talk about that. follow me on twitter. tweet me, i'll tweet you back. find me @bbcaaron. >> thank you. aaron here on bbc news. stay with us for the latest news. chunky spicy chicken quesadilla soup. she gives me chunky before every game. i'm very souperstitious. haha, that's a good one! haha! 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(girl) piece of cake. ♪ (announcer) love. it's what makes a subaru, a subaru. . . . you're with "bbc world news." the malaysia transport minister says the search for the missing airliner is unprecedentnd and ever whelming. the oscar pistorius murder trial is showing the toilet door through which he shot and killed his girlfriend. coming up in sport, there are small encouraging signs. michael schumacher's agent hints at an improving situation for the formula 1 driver in a coma. diego's goals help the championship league quarters for the first time in 17 years. thick fog in sochi didn't cloud russia on tuesday as the gold medals kept coming. that's all coming up in around 30 minutes' time. thousands of people have gathered in istanbul for the funeral of a 15-year-old turkish boy who died as a result of injuries he sustained during last year's protests. there have been clashes in the last 24 hours. he died on tuesday. he had been in a coma for nine months after being hit on the head with a teargas canister. his death sparked more protest in turkey overnight. as we look at those pictures i'm joined from the bbc's turkish service. this incident was back last june. it's now reinflamed everything in istanbul. how passionate are people feeling now? >> people are very, very passionate at this funeral and very sad by the death of this 15-year-old boy who got caught up in police violence during the protests. at this current state turkey is highly politicized and very tense. their election is coming up in a couple of days' time. it's on the 13th of march. also on top of that, there is discontentment with the current government and allegations of corruption which involved the very key figures of the government and the people close to the prime minister. so in a way, this funeral comes as an expression of an accumulated anger and sorrow for the turkish -- most of the turkish people. >> obviously seeing here the tension involving teargas and there you can see the water cannon. it is a rerun from last june. what about the numbers involved? >> we can talk about thousands. it's not only particularly in istanbul where the funeral is taking place. it's also in the capital ankara and in over 30 other cities all around the country. so this makes it similar to the kez zi park protests. when we talk to correspondents, people who are taking place in this protest, they find resemblance because what they say is not that it is being led by a particular opposition, political government or union or ngo. this is rather a collective and mixed crowd that is just expressing their sorrow for the death of this 15-year-old boy. >> thank you very much indeed. the funeral now under way in is tall bun. ukraine's acting president has ruled out taking military action against russian forces in crimea. ukraine only has 6,000 combat-ready troops. alexander tu cheen nof says they must on the leave them. sweden's foreign minister was in the east of the country last thursday. he joined me here in london and i asked him if it's accepted by many that really ukraine has lost crimea to russia? >> in a legal sense we would never accept the annexation by force by russia, never going to be accepted or recognized by the outside world. if you look at pure military power terms, yes, russia is in command of crimea. they in the process of stealing it. whether they would formally incorporate it into russia remains to be seeing. >> do you have any leverage to stop that from having? >> long-term i think we have a lot of leverage. what will happen if russia does this, it's the first time for var long time that we've seen in europe a state, a grabbing and dismembering another state by military force. if that happens by russia and they go all the way, our entire relationship with russia over time across the board will be in danger. at the end of the day russia is far more dependent upon us than we are dependent upon russia. >> we can go back to last thursday. we have video of you in the eastern mining town. what was the impression you had then given there seems to be a shift towards the russian area of command. >> the industrial and economic heart of ukraine not really russian, but rigs speaking ukraine yeah, distinct from the russians in crimea. they have a separate identity, but within ukraine. they have issue, an element of dissatisfaction with kiev. but no wish whatsoever to take part in any scheme to dismember ukraine. >> president putin seems to have different ambitions. >> he seems to have different ambitions. it looks like they are -- some people are intent on stirring up trouble in the region to creating some sort of pretext for some other political intervention in order to go for probably some sort of federalization of ukraine with far reaching consequences or in order to influence and be able to have a leverage on ukraine as a whole. >> sweden's foreign minister, carl bildt. the family of michael schumacher says he's showing signs off improvement. he's been in a coma since a ski accident last december. hugh skoef fold has the latest. >> she says the family remains hopeful and confident he will paul through because there are these small encouraging signs from time to time. we've been speaking to a doctor who has been following this very closely. he says what that probably means is there are small signs, signs of reactivity on the part of michael shew mack kerr who has been kept in a coma and they're trying to slowly wake him out of this coma. what they're probably doing is stimulating him with, for example, music he likes, the presence of family members, maybe some touch, some physical stimulation. what's quite likely to have happened, this is the doctor speaking, is that he's showing some tiny signs of reacting to these stimuli. maybe it's just a question of an eyebrow raising or a twitch of a hand or heart rate going up or something like that. but these are enough to give doctors and the family the hope that he could still recover. because even though it's know nearly three months since the accident and, therefore, so much has been written about the pessimistic side, doctors continue to say, until a year has passed, every possible prognosis is possible. he could still come out of this and recover fully. >> hugh scoffield there in paris. let me give you the latest on mh 47 o 0. malaysian authorities are searching two areas, the staits of mall lack cac. military recordings say it probably disappeared around 2:15 heading northwest, away from malaysia, but not towards china. 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[ bop ] [ male announcer ] could've had a v8. two full servings of vegetables for only 50 delicious calories. scotts wraps each seed in a brilliant water smart plus coating, that feeds, protects, and holds in moisture to make growing thicker, healthier grass easier. now let's spread your newfound knowledge! seed your lawn. seed it! . lower profits expected for the world's airlines as tensions for ukraine push up over oil price. on a mission to gain much-needed financial support. the prime minister of ukraine heads to washington. hello everybody. i'm aaron heslehurst. welcome to the program. a fascinating and exciting watch in the world of business and money. we'll talk about that mission, the ukrainian mission heading to washington. first let's talk about this. demand is up for passenger and cargo flights, but so is the price of fuel, and that will hit profitability at airlines around the world in this coming year. combined the world's airlines are expected to make $18.7 billion this year, and all of this according to the international air transport association, iarta. it is less than previously thought. tensions in places like argentina and brazil are both expected to challenge airlines. there are still very few clues about the major airline mystery, missing malaysian flight 370. we're going to go hopefully to geneva and speak to tyler taylor, the director general. let's move on to the ukrainian prime minister is arriving in washington to meet president barack obama. he's called on western nations to defend russia, a nation armed to the teeth. just what can the u.s. and western allies actually do to help the near bankrupt country. michelle fleury has this report from new york. >> reporter: the symbolism of this meeting is clear. the white house stands behind this man, economic and lawyer, ukraine's interim prime minister. washington's support for him comes at a crucial time. not only are the people of crimea poised to join russia, his government is in talks with the international monetary fund for desperately needed rescue loans. >> the economy has been in recession since 2012, very high current account deficits, high fiscal deficits. >> reporter: beyond words, what action is the u.s. proposing? there is, of course, financial aid in the form of loan guarantees and attempts to isolate russia. but the options there are limited according to professor timothy fry. >> financial sanctions historically have not been proven to be a very effective method. they're a pretty blunt tool. not a lot of trade between the u.s. and russia. >> the obama administration played down reports that moscow might cut glass supplies to ukraine or other parts of europe in retaliation against u.s.-led sanctions. >> any disruption to russia's energy shipments to ukraine and through ukraine to europe is a lose-lose situation for everyone, most particularly for russia. >> reporter: it's also dismissing calls to export its own natural gas. showing the limits of american foreign policy there's little the u.s. can do in terms of economic measures to help ukraine which is why the tone and nature of president obama's meeting with ukraine's interim prime minister will be so important. michelle fleury, bbc news, new york. as promised, let's head straight over to geneva and speak to the big boss, tony tyler director of the international transport association. great to have you on the program. once again, the volatile fuel prices continue to dent airlines' profits. i want to ask you this, if airlines have their hedging right, that's where an airline buys its fuel for a set price for a set period of time, if they've got that right with these recent oil price rises wouldn't have an impact, would they? >> many airlines around the world, of course, attempt to hedge their fuel risks, but when the fuel price goes up, certainly some airlines who have their hedging right will benefit from it and won't have to pay all the costs of that additional fuel price, but many airlines will still be hit and over all the industry will suffer. what we're forecasting now is that fuel remain much the same price as last year. our earlier forecast we foresaw a small reduction in the price of fuel. but with ukraine and other pressures now make that unlikely. >> all the regions around the world, north america, asia pacific, latin america, africa, et cetera, all expected to post a profit. the biggest contributor will be the north american an lines. it wasn't that long ago that the u.s. carriers were all in a bit of a mess. how have they turned that picture around and any lessons for other airlines in any parts of the world? >> one of the main things that has happened in north america has been the consolidation we've seen over the last six or seven years. we've seen consolidation into the big guys, american airlines combined with u.s. air, we've seen delta and northwest come together, united and continental. so we've now got those three big airlines, plus southwest. there's still a few smaller airlines in different regions. the consolidation, the change in structure of the industry has made a big difference and then well-run businesses running very much as businesses folk kg cussing on the bottom line, on return on investment and they're showing some of the benefits of doing just that. of course, the overall strength in the u.s. economy las helped them as well. >> sure has. air cargo, typically always been a great indicator for the global economy, how strong are you expecting air cargo to be this year and what does it tell us. >> we're expecting it to be a bit stronger than we thought. although overall we've downgraded our forecast profit for the year by a billion dollars, that's actually a $3 billion cost in the rise of fuel in round numbers, offset by round numbers again, about a $2 billion in improvement in our forecast for cargo revenues for the year. so we are seeing some -- we're foreseeing a bit of an improvement in the fortunes of air cargo which has been pretty much flat lining since 2010 since it came off the post recession recovery peak in 2010. >> tony, while i've got you, i would be remiss to ask you your thoughts about this mystery about the missing malaysian airlines flight, unprecedented. five days and we still haven't found any sight or sound of it. with the majority of chinese passengers, could something like this have an impact on chinese travellers this year do you think? >> our hearts go out to all the families and loved ones of the missing passengers. of course, that is -- it's a terrible human story, isn't it? but, of course, the priority has to be to find out what's happened, find the aircraft and find out what's happened and then, of course, apply the lessons learned to make sure this thing can never happen again. let's put it in context. air travel remains an extremely safe way of getting around the world. i think most passengers and most potential passengers understand that. and we're not expecting it to have a significant impact on the trends of air travel growth. >> tony, great stuff. we appreciate your time. tony tyler, the director general of iarta. quick flash of the markets. all down in the red. not good. follow me on twitter. let's going on today. tweet me, i'll tweet you back. you can get me @bbcaaron. stick around, sport today coming up next. ido more with less with buless energy. hp is helping ups do just that. soon, the world's most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. multiply that across over a thousand locations, and they'll provide the same benefit to the environment as over 60,000 trees. that's a trend we can all get behind. but we're not staying in the kitchen. just start the slow cooker, add meat and pour in campbell's slow cooker sauce. by the time you get home, dinner is practically done. and absolutely delicious. everyone is cooking with new campbell's slow cooker sauces. hello. i'm nick mccormack, this is sport today on bbc. coming up, small encouraging signs michael schumacher's agent hints at an improving situation for the formula one world champion who is in a coma. costas strikes again. his goals help madrid make the champion's league quarters for the first time in 17 years. thick fog in sochi didn't crowd russia on tuesday as the gold medals kept coming. thanks for joining us. michael schumacher's agent says the seven-time formula one champion will wake from his coma. the german was medically induced into his unconscious state more than two months ago after a skiing accident in the french alps. in a statement released on wednesday they said we in the end remain confident that michael will pull through and will wake up. there are sometimes small encouraging signs, but we also know that this is the time to be very patient. it was clear from the state that this will be a long and hard fight for michael, we are taking this fight on together with the team of doctors whom we fully trust. the length of the process is not the important part for us, and we believe that he will win this fight. arson venger was involved in a wore afterwards, blaming for arsenal's champion's league exit. it was a 1-1 draw, but that condemned arsenal to their fourth successive exit at this stage of the competition. >> robin is very good at getting maximum of nothing and he's a great player, as well a very good diver. he gets in front of a play and slows down and goes down. the referee, if he gives him a yellow card on the first one when he goes down, he will not do it again. >> diego costa can take praise for help spain reach the last eight of the tournament for the first time since 1997. they beat milan 4-1. here is our football reporter john bennett. >> really good display particularly in the second half. but this wasn't as easy as the score line perhaps suggests. milan in the first half had plenty of the game. the key moment was a goal on 14 minutes which made it 2-1 on the night to atletico madrid. it was scored by the turkey international. dye diego costa scored seven goals in five champion's league appearances this season. he's the striker in world football at the moment. nobody will want to face agent let ka in the quarterfinals. they have a fantastic home record, only one defeat in 23 matches this season. they're in to the last eight for the first time in 17 seasons. as for milan, this ends a poor season for italian teams in the champion's league. for the first time, no italian side in the last eight. it was always going to be so, so difficult for arsenal. arsene wenger, so difficult from the first leg. a fantastic record at the arena. as soon as bassian shrine steiger scored the goal, the tie was over. arsenal did have a couple of chances, but it was by mun neck who in the end missed paneality at the end of well. thomas mueller missing the spot kick. munich looked so strong this year, closing in on the champion's league title. no team in the modern champion's league era has managed to reclaim the trophy two years. i wonder if they'll be the first to break that record. >> our football reporter john bennett. in the asian champion's league, al jazeera had victory at al shabaab the abu dhabi team went on to win 3-1. also in group a, the iranian side had a game to forget, especially the goalkeeper, a mistake here that led to the only go of the game. he gets the leap right, but sets up for easy into the net. they moved to the top of group b in uzbekistan. the qatari side opened up a 2-nil lead. the homicide pulled a goal back in stoppage time, but they hang on to win, 2-1 the score. iranian team fulad edged out al fateh. ramen any put away the spot kick. 1-0 the final skill. it's day five of the winter paralympics in sochi. the pair olympian org y'ally from russia has taken a silver medal. tatiana mcfadden is a wheelchair racer who took all titles in the ipc world athletics and holds all four major marathon titles in wheelchair racing. russia dominated day four of the sochi paralympics on tuesday winning four gold medals on the buy agent lon track in a hockey thriller. they enjoyed the joint most successful day of the game opening a huge lead at the top of the overall standings. despite being outshot 23-9, the russians got a 2-1 win that ensures they qualify as group b winners in the sledge hockey setting up a semifinal against norway. the u.s. also qualifies with canada. russia dominated in the buy agent l buy agent lon. russia won three more goals on the slopes later in the day. the first part of cricket's new indian premier league season will take place in the united arab emirates. that's because of security concerns surrounding the indian elections. big names are in this season including chris gayle there, la seat malinga, shane watson, kevin peterson and m.s. doane any. but to provide adequate protection, the tournament will be split into three parts. it will start in the uae on the 16th of april. the second part played in bangladesh or india if certain states have completed election polling. the final leg is locked in for india from may 13th. you can get all the latest sports news at our website and those paralympic results from sochi. bbc.com/sport. for me, nick marshall-mccormack and the team, thanks for watching. we'll see you soon. bye-bye. 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[ male announcer ] it fills you up right. polling. we'll see you soon. ♪ it's the first start in the caribbean islands. all ages came out to celebrate the queen's fashion in bridgetown. this is some of the barbados rugby team. a couple months ago they were not going to the commonwealth geems. they've been called up last minute because nigeria dropped out. now they've got a real race to get ready in time. we're facing some of the toughest teams in the world. >> these players have come a long way since bar day does was placed last at the caribbean championships a few years ago. >> one more. >> reporter: to help with training they've put together a back yard gym at a friend's house. fat chance. that's under the midday caribbean seen. what better place to train? >> get your speed training in earlier. >> reporter: this is how you get your training in off the pitch. >> yes, off the pitch, everyday stuff, get what we need. >> reporter: barbados will be up against new zealand, the commonwealth champions. their first game will be in a stadium of 50,000 teams against the home team scotland. >> it's going to be amazing. it's a big, big thing to see your idols, watching them come up into manhood, to step on the field and have them teach you something, it's a big, big thing. we joke around. as a child you want to be looking for somebody. now we have to come back and say i'm going to be myself and put my best foot forward and play against who i looked up to. >> reporter: the team includes students, a mechanical, a teacher and a delivery driver who are preparing for the biggest competition of their lives at glasgow 2014. >> to have that mentality from the beginning that we have to prove ourselves. that's the mentality that we're going in with, that we have to prove our worth on the stage. >> my dream was just to improve myself. but through improving myself i've gotten into rugby and released a lot of things i didn't have planned. this is just excellent. >> reporter: the >> where's the third guy. >> reporter: coach joe whipple is confident his players have what it takes. >> good excellent speed. we have athleticism. our trump is that we're bright. we've got some bright guys. this is an intelligent group of guys. they've adapted very quickly. they've built a very good comradery. one of the key things to do in sevens is to build that ethos and their own values. they've done a nice job of it. >> reporter: these players might be amateurs, but doing all they can to train like professionals. whether or not they can win against the odds in the game of rugby seven where speed counts, these caribbean sprinters will certainly be hard to catch. that allows you to eat all that you can. the hotel gym is short for gymnasium. the hotel pool is usually filled with water. and the best dot com for booking hotels, is hotels.com. it's on the internet, but you probably knew that. or maybe not, i don't really know you. bellman: welcome back, captain obvious. captain obvious: yes i am. all those words are spelled correctly. hello. i'm nik gowing with becomes world news. our top stories. air-sea search on an unprecedented scale, over 27,000 square miles. still no crew as to what happened to the missing malaysian airline passenger jet nearly five days on. >> each day passes, i fear that the search and rescue becomes just a search, but we will never give up hope. the reenactment in court at the moment oscar pistorius tri
we're about to learn a whole lot more about apple's latest device. >> hello and a warm welcome to all of our viewers in the united states and all around the world. glad to be with you. i'm zain asher. >> and i'm errol barnett. this is "cnn newsroom." >> okay we begin this hour with the latest out of russia. a man suspected in the death of prominent activist boris nemtsov blew himself up. that's according to russian media. it happened in the capital of the chechen republic as police tried to arrest him. >> meanwhile, five other suspects arrested in connection with nemtsov's killing face adjudges in moscow sunday. two were charged, including a former chechen policeman. >> i want to bring in our senior international correspondent ivan watson who was just in moscow covering this investigation. he joins us live now from seoul, south korea. ivan, just explain to our viewers what possible motive these chechen men could have in terms of murdering boris nemtsov. >> that's going to be one of the -- that is in fact the very big question here. the six men believed to be of chechen descent all named as suspect in this killing. what possible motive could they have for killing one of the most outspoken critics of the kremlin in what appear to be a very coordinated assassination that took place within basically 100 feet of the heavily guarded and monitored kremlin itself. now, what is interesting is that the president of chechnya who is a close ally of the kremlin actually came out in public speaking almost in defense of at least two of these suspects one of them zaur dadayev who was charged in court this weekend, and then he also referred to besland shavanov the man who reportedly killed himself with a hand grenade when authorities were trying to arrest him. now on his instagram page which he often uses to make announcements, basically said that zaur dadayev had been a lieutenant in the police in chechnya. he quotes i knew dadayev as a genuine russian patriot. he served in the very first days in the formation of a regiment that was part of the 46th battalion of the interior ministry of the russian federation. the russian president went on to describe shavanov, who reportedly killed himself as also being a brave warrior. so a lot of questions here why the chechen president is defending these men while also calling for their investigation to be completed into their alleged links to the murder of boris nemtsov on february 27th in moscow. zain? >> this is indeed a mystery. so many questions surrounding this man's death, boris nemtsov. but some people have said because nemtsov was half jewish- and because he supported the cartoonists, that perhaps muslim extremism, islamic extremism is to blame here. that theory gaining much traction there? >> well kadyrov, the chechen president in his statement did point out that zaur dadayev, the former police officer had perhaps been upset about the paris shootings, the massacre at the offices of the cartoon, "charlie hebdo" in france. supporters members of his political party which often came out in criticism of the kremlin, they very much question this there is a lot of skepticism there. in fact, one of nemtsov daughters has told cnn that she wasn't surprised that chechens were among the suspects rounded up in the week after the murder. and it's important to note that nemtsov supporters and family members have been very quick to accuse the kremlin of basically being responsible for nemtsov's murders. and they point to the long list of critics of the kremlin, of critics of vladimir putin who have been killed over the course of the last decade and whose murders were never really solved. and that's part of why there is so much suspicion about this, even though the kremlin has denied having any links to the murder and even though russian president vladimir putin came out calling this a shameful act of political violence that took place right next to basically, his offices in the kremlin in the heart of moscow. >> yeah despite all the theories flying around a lot of people are still pointing their finger at the kremlin. and a lot of people are certainly skeptical of their investigation. okay ivan watson live for us there in seoul, ivan we appreciate it. >> earlier poppy harlow spoke to christopher dickey he is a foreign editor of the daily bees who says members of the russian opposition are understandably feeling intimidated now after nemtsov's death. take a listen. >> we may not be quieted, but i can tell you they're very damn scared. they feel that their lives are on the line. and some of them are speaking out boldly and saying okay i'm going to double down. i'm going to take even more risk ball. lot of people are intimidated. i know people in russia who are getting calls from their parents who are saying don't go out anymore, please. >> really? >> absolutely. >> people who aren't affiliated with the opposition? >> people who may be affiliated with the opposition in one way or another. >> and despite all that theory i want to make it clear that russian officials have strongly denied any involvement in the killing. frustration is only growing for the families with loved ones on malaysia airlines flight 370. >> exactly one year after the plane disappeared, a new report from investigators gives very little new information about the flight. no word on what may have caused the plane to suddenly disappear off the radar like that. no word still on where that airliner might be. >> there is one new detail though. the battery for the flight data recorder's underwater beacon expired more than a year before the plane went missing. that news could make finding the airplane much more difficult. anna koran in kuala lumpur joins us live. almost adds insult to injury the fact that one of the batteries had already expired. the airline saying they have checked all the planes now to make sure they all have batteries in them. if anything, this report doesn't comfort families, but show real incompetence on the part of the national carrier. >> i think as far as the battery incident goes, yes. it shows incompetence. incompetence as far as the maintenance goes as far as that particular aircraft. it's important to point out that the battery expired only in the flight data recorder that in the cockpit voice recorder it was still operational which meant that it would have been sending a signal for the 30 days after the alleged crash. but certainly, as i say, it highlights an oversight by the maintenance crews and perhaps a failure in their system to update or allow the airline to know that it needs to update and put in new batteries. i think the other piece of information that came out rather scathing of this independent organization is the confusion in the initial minutes and hours once they realized that mh 370 had disappeared from the radar there is a transcript of the communications between the air traffic control tower in kuala lumpur, vietnam and singapore. and really, if you read it no one has any idea as to what is going on. the confusion is understandable because a plane had simply vanished. but there is emergency protocol in place, and that was not followed. hence, the search-and-rescue operation was not operated until at least five hours after the plane's disappearance. that's something that should take place within an hour. so once again, as i said a scathing criticism of the way the malaysian authorities handled that. the other nugget of information, errol, that came to light in this report was the behavior of the captain, captain zaharie, his copilot as well as the crew. they said that none of them was suffering stress, that their behavior was no different to what it had been in previous flights. they had monitored the cctv footage from previous flights and found it to be no different. so that really eliminated that rogue pilot theory which as you can imagine for the families of captain zaharie, they were very relieved. >> anna koran live for us in kuala lumpur with some of the new information out of that recent report. ten past three income the afternoon there. anna thanks. zain? >> most of the 239 people on board the missing airliner were actually from china, and family members there are certainly not giving up hope. cnn's david mckenzie joins us live now from beijing. so i understand that these families had gathered in beijing to mark the anniversary of when this plane went missing. they also wanted to pay their respects at the llama temple. but then they were clamped down on by police. explain what happened here. >> that's right, zain. and certainly very disturbing to see the families trying to commemorate this one-year anniversary of their loved ones going miss and then being treated like this by the chinese authorities. certainly the families have faced harassment in recent weeks and months because they have been pushing sometimes quite assertively to get information from authorities. and that's at times been seen as a threat by the government here. the chinese government for its part say they will help the families in any way they can and push the search for this plane. but for the families, this is a terribly traumatic time. and for over a year now, they haven't had any closure. >> reporter: a mother relives precious memories of her son. she shows me her favorite photo. "he looks so handsome," she says. with each day he is missing, the pain is worse. he was doing construction work in singapore, saving money to start a dental practice. but like 239 souls on board mh 370, he vanished. one year on, his mother still hasn't lost hope. if it is one year if it's two or three she says i know he will return. i know he is still alive. families here won't believe what anyone says about mh 370 until they have physical proof. there is no wreckage no luggage, no cargo is found. they are alive, says his father. my eldest son held the family together, he says. he really loved and respected us. he is modest. he is better than our second son. >> his younger brother looked to him for support. they were best friends. he shows me where they used to sleep together on a small bed, where they kept their toys. when he was here everything was okay with our family, he says. now everything is up to me. i hope he is alive. i hope he is somewhere alive. i just know he wants to come back home to us. the mother says she cries at every meal. the family stuck in a cycle of grief as they wait for their favorite son and brother to return. we spoke to his family about the report and they say they don't really trust the information so it's not that useful do them zain. certainly that lack of trust has been there since the very beginning. the families don't want to believe anything that they're told and that means they're just struggling to move on. zain? >> i'm sure that report actually contained virtually no new information. didn't help either. okay. we appreciate it. thank you so much, david. now, as isis works to control more territory, more countries are trying to stop the militants. but some are concerned about iran's growing involvement in the raging battle in iraq. we'll tell you the latest. also ahead, some members of a college fraternity in the united states are accused of singing a racist chant. we'll show you the video that got their whole chapter shut down. stay with us. 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>> well, zain we want to get to iraq now where after a week of battling for control of tikrit joint forces appear to be nearing their goal. fighters are trying to retake the key city from isis which took control about eight months ago. sunday iraqi forces were just about a kilometer away from palaces. isis has been putting up tough fight there militants have planted ieds on roads and a bridge that cross into that city. isis of course is a common enemy for groups that once fought each other. for example, iraq's sunni and shia militias. iran is also playing a big role in the fight against isis in iraq. and as becky anderson reports, that's a big cause for concern in the region. >> reporter: the operation to retake tikrit is the biggest undertaken by the iraqi government thus far. a fighting force in excess of 25,000 comprising iraqi troops and importantly an assortment of both sunni and shia militia, hoping to wrestle back the strategic city from isis. and playing a prominent role, this man. kasem sulimani head of iran's elite quds force. attest to iran's role in iraq's internal affairs. >> as a former member of iraq's national security council told me recently prime minister abadi is the prime minister of the green zone. he believes general sulimani is the de facto prime minister and the supreme iranian khamenei is the political influence. >> a military force through sheer militia beyond the capital. they were built up during former prime minister maliki's tenure and have a done a fair amount of the fighting against islamic state militants in iraq. >> under maliki the iranians were able to fund equip and organize their faces in iraqi territory with impunity. now we're seeing that program come to fruition. >> reporter: but as military engagement groups the group says so too the revenge attacks against sunni civilians attributed to shia militia. the dangers that revenge attacks stoke bitter sectarian divisions which have the potential to derail the fight against isis and wreck the country's fragile future. the presence of general sulimani on the outskirts of tikrit even if it means putting its own troops on the ground. but it will likely strengthen the belief among certain region 'nam powers like saudi arabia that iran has longer term expansionist ambitions. becky anderson cnn abu dhabi. >> meantime the british government is moving to stop airlines from carrying passengers who are heading to join isis militants. the proposed laws going before parliament tuesday would force airlines to flag so-called, quote, high risk passengers and stop them from actually traveling to join terrorism-related activity on routes such as those into syria. just a few weeks ago, three girls left london to join isis by going through turkey. now archaeologists and iraq's tourism ministry say they're unable to protect the country's antiquities in isis-controlled areas. they blame the international coalition for not acting faster to -- hammers and drills. some are now call it a war crime. the united nations declared the destruction as a turning point in what they call quote, an appalling strategy of cultural cleansing under way in iraq. and two american tourists were actually arrested in rome after vandalizing a wall at the coliseum. this is according to an italian newspaper. other tourists spotted the women carving out their initials into a brick wall inside the historic amphitheater using a coin. >> now, they were turned in to security but apparently took a selfie with their work before they were arrested of course. the women could face a big fine. just last year a russian tourist was fine in order than $21,000 for carving his name into the famed landmark. absolutely idiotic. >> yes. i've been to the coliseum. it is absolutely stung. okay. we're going take a short break. when we come back, a flight around the world, courtesy of the sun that is what two pilots are hoping to accomplish at this very moment. they are mid flight right now. plus, a baby survives a car crash into frigid water and is found more than 30 hours later. her amazing story of survival is after this break. you think you take off all your make-up before bed. but do you really? 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[ female announcer ] neutrogena® makeup remover. a groundbreaking attempt at history is being made at this very moment or maybe it's sky-breaking zain. two swiss pilots have begun the first leg of what they hope will be the first solo powered flight around the world. about four hours ago, solar impulse 2 lifted off from abu dhabi. >> the thing is this flight travels a lot slower than your typical jumbo jet. some 17,000 solar cells power this aircraft. you see it right here. they'll supply enough energy so the engines can run off battery power at night. the 35,000-kilometer journey will take roughly around four to five months. >> ooh, that's a long time. but the flight will make stops in oman. that's its next destination, then india, myanmar and china. >> after that flying across the pacific ocean and into the united states stopping in hawaii phoenix, also somewhere in the midwest, and then new york. the impulse will then cross the atlantic ocean, stopping in southern europe or north africa and then make its way back to abu dhabi. >> i hope the two swiss pilots get along. you don't want to get into an argument. >> apparently they can only take 20-minute naps. u. >> bust of luck. an incredible story. a toddler was found alive after spending at least 30 hours in a car that was submerged in a frigid river. >> a fisherman found the upside down car on friday. this is in the u.s. state of utah. the baby's 25-year-old mother was unfortunately dead already in the driver's seat. but 18-month-old lilly, her daughter was still in her car seat and hadn't been underwater. just incredible. lilly is in the hospital right now. and her family actually started a go fund me page a little campaign for her medical expenses and for her mother's funeral as well. they say that they have already surpassed their goal. almost $10,000. >> fantastic. okay. who poisoned jagger? that is the question being asked at one of the world's most prestigious dog shows. jagger is a 3-year-old irish set they're died one day, just one day after placing second in his class at the cruftis show. >> the dog fell ill before he could be treated by a vet. an autopsy revealed cubes of beef found in his stomach were laced with at least two types of poison. that's horrible. well going to take a short break. when we come back, a college fraternity in the united states gets shut down after some of its members are accused of singing a racist chant. we're going to be showing you some zurich video after this break. welcome back to our viewers here in the u.s. and all around the world. thanks for staying with us. this is "cnn newsroom." i'm errol barnett. >> we appreciate it as always. i'm zain asher. a check of the headlines. a man suspected in the death of prominent activist boris nemtsov blew himself up as police tried to arrest him that is according to russian media report. five other suspects were hauled into a moscow courtroom sunday. two have been charged, including a former chechen policeman. iraqi fighters are advancing on isis militants in strategic town nears tikrit right now. the joint forces say they're dealing with ieds on roads and a bridge that crosses into the city. the iraqi army and other fighters have been battling for a week to retake tikrit from isis. and the unit at australia's sydney airport stopped two teenaged brothers suspected of trying to go and fight with isis. the boys' parents didn't know they were even traveling. they've been returned to their family while authorities investigate. now this story is really picking up on social media right now. a college fraternity in the u.s. state of oklahoma has now been shut down because some of its members are accused of singing a racist chant. >> and this chant was actually caught on video. and now that cigna alpha epsilon chapter at the university of oklahoma is paying the price. here is our george howell. >> reporter: the audio on this clip is disturbing. a group of young men and women on a bus who don't seem to know they're being recorded chanting this -- >> [ bleep ] never be [ bleep ], there will never be a -- >> the clip reportedly shows students from the university of oklahoma using a racial slur the "n" word sing about their fraternity sigma alpha epsilon. it was allegedly filmed saturday as the group headed off to a date night. within hours of being post and shared online the national headquarters announced it was closing its ou chapter and suspending its members. in a statement, the fraternity's leadership says quote, we apologize for the unacceptable and racist behavior of the individuals in the video, and we are disgusted that any member would act in such a way. it goes on to say, quote, we are hopeful that we can reestablish the oklahoma kappa chapter at some point in the future with a group of men who exemplify our beliefs and who serve as leaders on campus and in the community. the university president, david boran also promising an investigation, saying quote, this behavior will not be tolerated and will be addressed very quickly. the response online to this clip has been sharp. one group called unheard on twitter, planning a rally monday. others changing their profile pictures. some students on the ou campus came together for a prayer circle sunday night, denouncing the chant that had some in this video laughing. >> there will never be a -- >> no one is laughing now. george howell cnn, atlanta. >> pretty interesting that one of their own members actually had the courage to film them and place it online. >> it wasn't for that, they wouldn't have been suspended. now a year has gone by this the fate of malaysia airlines flight 370 still remains a complete mystery. >> and the disappearance highlights the weaknesses in aviation tracking technology. andrew stevens is joining us live now from hong kong. it's been a year since 370 disappeared. tell us about the changes in technology now to make sure that a boeing 777 doesn't just disappear off the radar again. >> well it's still a very much work in progress at this stage, zain. when mh 370 disappeared, the transponders were sending back at an interval of every 30 minutes information about the location of the plane and its general well-being as far as the aerodynamics and the engines were concerned. so that would go back every 30 minutes. now the transponders were then turned off. so nothing went back. so what the global authorities civil aviation authorities are now work on is to get that 30-minute interval to cut back to 15 minutes. so every 15 minutes, there would be a signal sent from the airplane to the ground stating its position and its general status. and if that plane deviated from its flight path in any significant way, that interval could be cut down to just one minute. so there would be bursts of information going back every minute. now i say could, because this is the plan. it is not yet in operation. the 15 minutes is in operation in some airlines notably malaysia airlines itself. they have taken the lead in this. they have gotten ahead of the curve, if you like. and other airlines are hoping to be compliant with these new rules by the middle of next year. so it's going to take some time. now, that is where we are at the moment there is also a whole new style of technology which is a bit more on the horizon. i spoke to the head of the international air transport association that is the trade body for all the airlines or certainly about 90%. i spoke to the head of, that tony tyler and asked him about this new technology. this is what he had to say. >> there are a number of new technologies being developed which will greatly assist the tracking issue. and one that the industry is very excited about is the development of what's called space-based adsb pardon the jargon. this will be a technology which will involve a lot of low orbiting satellites which will be able to pick up the transponder signals from all commercial aircraft and will be able to track. >> anywhere in the world? >> anywhere in the world, yes. we're told within the next three years this system will have global coverage. >> there is a key phrase in there, zain, or key word which is the transponders being switched on. of course mh 370, the transponders were switched off. and investigators believe that was a human intervention there. so if these transponders are switched off, still that information is not going to go down. i asked tony tyler about why don't they make transponders in a plane which cannot be switched off by the pilot. and he said that is a debate that is still very much alive in aviation circles because there are good security safety reasons as to why those transponders should be allowed to be switched off by the pilot. but that debate is still going on zain. >> andrew stevens live for us in hong kong with what you could say is a bit of a silver lining of better track planes. >> thanks andrew. south korea's president has made a surprise visit to u.s. ambassador mark lippert in the hospital. lib pert is recovering from surgery to put 80 stitches in his face. a hospital spokesperson says he will be released on tuesday. >> now authorities say a man opposed to joint u.s.-south korean military drills slashed lippert's face and arm with a nice on thursday. you see his reaction, just in shock. now officials from the international atomic energy agency and iran will be holding a technical meeting in tehran today. while nuclear talks continue the burden of economic sanctions are taking a heavy toll. but some iranians are hopeful an easing of the sanctions will bring a better life. cnn's fred planken reports from iran. >> reporter: the mechanics at this garage in tehran take pride in their work whether it's a wreck or a breakdown, they say they can repair pretty much anything. but the international sanction against iran often told them back. they have to order most parts through middlemen, which is expensive and time consuming. but owner says he is hopeful all that could change soon. >> translator: we will provide even better service for our customers, he says. we will repair higher tech cars here for sure. when the sanctions are lift, we'll have much better opportunities. other sectors are gearing up for possible sanctions relief as well. 200 construction workers are currently employed building a mall and office building. owner and building designer hameed sahid says he could get the complex done even faster if he didn't have to deal with restrictions ordering and paying for deeds. >> usually a shopping mall like this should be taken about three years to get. but right now we are already in the year three. so it takes a lot of years to do it. >> reporter: make no mistake, iran's construction sector is already booming. the company says things could heat up considerably if the nuclear deal comes through. the lifting of the sanctions wouldn't only help iranian firms, it would also open this country up to investment from outside. and many believe that the potential here is gigantic. iran and the u.s. acknowledge there still is a long way to good before a potential agreement can be reached. the west fears iran is seeking an atomic weapon while tehran says its nuclear program is only for peaceful purposes. the investment firm turquoise partners is trying to attract investment into iran. its ceo tells me many foreign companies are already making inquiries. >> i'm sure as soon as the sanctions are lifted especially the banking sanctions, you're probably going to see the floodgates opening and hundreds of million, eastbound billions of dollars coming into the iranian market. >> reporter: but for now the mechanics at the garage are still using their old tools, trying to make up for a lack of high-tech equipment, hoping things will change soon. cnn, tehran. >> thanks for that report. meantime in the united states, the police are looking for whoever shot and killed an iraqi immigrant in texas as he watched his first snowfall. our nick valencia has the latest on the investigation, including video that may show the killers. listen. >> reporter: police say this surveillance video from a camera posted on a nearby school shows the four men who may be linked to the murder of ahmed al jumaili. bullet holes outside his apartment show where the 36-year-old iraqi immigrant was shot and killed. >> trying to find a decent job to start his life. >> reporter: through tears, his father-in-law says al jumaili recently left iraq to escape the growing threat. in north texas, he would also be reunited with his wife after more than a year apart. her excitement for their new life together was no secret. on thursday night, jumaili had gone outside with his wife to watch his first ever snowfall. >> we're looking for safe place, well educated environment, good environment. but what we got was one bullet in his heart. >> there is no shortage of sadness for the loss of this beautiful young man who has only just come to his country 20 days ago, and we don't as texans want that to be his welcome. >> reporter: members of the muslim community say they want to know the motive and whether al jumaili was targeted because of his race. police are pleading for the public to help. >> tests are ongoing now to determine if one or more rifle was fired and whether the physical evidence that we have been able to get from the crime scene is related to any other offense. as you can see, we have little information to go on. >> reporter: for now, this video may be the best lead police have to find the men responsible for the death of a man who left the threat of violence only to become a victim of it. nick valencia, cnn, atlanta. well 50 years later, thousands of marchers head back to the u.s. city of selma, alabama, to commemorate an historic event. details next. plus tech fans are count do you think to apple's next big reveal. we'll have details on the watch the company is expected to show off in today's media event. stay with us. let's take a look at your credit. >>i know i have a 786 fico score, thanks to all the tools and help on experian.com. so how are we going to sweeten this deal? floor mats... clear coats... >>you're getting warmer... leather seats... >>and this... my wife bought me that. get your credit swagger on. become a member of experian credit tracker and find out your fico score powered by experian. fico scores are used in 90% of credit decisions. sunday marked the 50th anniversary of a very significant moment in american history, the march of course on the edmund pettus bridge in selma, alabama, of course known as bloody sunday. >> the images from that horrific day 50 years ago ultimately led to the passing of the u.s. voting rights act of 1965. brian nobles takes a look back commemorating that fateful day. >> reporter: they came in the thousands. people from all over alabama and the entire country made a pilgrimage to selma to honor the sacrifice of hundreds of protesters who were brutally attacked by state troopers in 1965 a day ultimately known as bloody sunday. congressman john lewis was among the leaders of the march. >> and i want to thank each and every one of you who march across the bridge on bloody sunday. you didn't have to do it but you did it. >> reporter: and in the ultimate sign that their efforts made a difference it was the first african american president who thanked the marchers for their contribution. >> we gather here to honor the courage of ordinary americans willing to endure billy clubs and the chastening rod, tear gas and the trampling hoof. >> reporter: while there was lot of talk about the past and what honda this bridge 50 years ago, president obama made sure to emphasize that there is still a lot of work to be done. >> all of us need to recognize as they did that change depends on our actions on our attitudes, the things we teach our children. >> reporter: and president obama's comments were echoed by those civil rights leaders still working to make a difference like martin luther king iii. >> we are no longer doing voter education. i think voter education with voter registration ultimately creates voter participation. >> reporter: a black president speaking freely and marching across the edmund pettus bridge a dream many thought impossible. especially those those were in this very same spot 50 years ago, under much different circumstances. in selma, i'm ryan nobles reporting. >> of course as president obama said even though we have come a long way since 1965, we still need to make certain changes as well. >> using ferguson and the doj report illustrate that perfectly. a documentary on china's air pollution seems to have vanished. under the dome went viral online with more than 200 million views in less than a week. >> but it appears sensors have now removed it from all major video streaming sites. one analyst says the slickly produced video likely caught senn censors offguard. what has been a brutally cold week. >> deliver sop good news. now be upbeat by some of the other anchors here. >> i just got back from washington, d.c. it was initially snowy and it calmed down. >> it's starting to get better, right? days are getting longer. the sun is getting higher in the sky. you can't help starting it to get warmer. that's going to be a trend for a lot of people across the united states. look at the setup. the arctic air had been a big discussion. that's over a portion of the labrador region and northeastern portion of canada. but cold air pushing out of the northeast and kind of taking you from monday to tuesday, wednesday, really warms up across the southwest and the western u.s. and the mild weather even stretches into portions of saskatchewans into british columbia in canada. a pretty expansive region of mild weather in place. and more good news for a lot of people. look at this. this is the next two weeks. the climate prediction outlook keeps below normal temperatures only in texas and very small areas of the northeast unfortunately as a lot of people live around the northeast. but generally speaking the vast majority of the country will deal with mild weather. now, with all the good news, there take a look. we do have a lot of moisture coming in. we'll not just necessarily be sunny and warm. wet and warm for a lot of people mainly across the gulf coast states. well together at least 11 million people under flash flood watches from san antonio towards houston, eventually towards corpus christi. throughout the next two or three days. 2 to 4 inches around houston into shreveport jackson mississippi northward. a couple more inches in the forecast by thursday and friday. birmingham out towards southern tennessee. a half a foot of rainfall could come down. flooding definitely going to be a concern. you see how it expands over the next three days as it pushes in towards the midatlantic. here we go out west. enjoy it. it will be warmer in portland potentially than in san diego in the next 24 hours. mild weather around the pacific northwest. some records certainly in place as well. here you go. seattle should be in the 50s. we'll top out into the upper and mid 60s by week's end. some showers come back in wednesday and thursday. potentially heavier rain there on wednesday afternoon. but i want to show you what is happening across areas of alaska because it has been well above in parts of alaska. the famed iditarod race taking place in the next couple of days. this was the ceremonial beginning in anchorage on saturday. as you can see, there was a lot of sun, a lot of slush, and really warm. they've only seen 1/3 of the normal snow in anchorage. and the official start typically is in a town called willow alaska. they have moved that to fairbanks which is 200 miles more north than willow because of how mild it is even in alaska. >> hear the dogs barking there. >> absolutely. >> good job. thanks very much. >> thanks, pedram. okay apple fans listen up because you and apple's rifles srivals will be closely watching the media event later today. >> we'll ask a tech expert if apple can make a case for its new wearable technology. you're not you. tylenol® pm relieves pain and helps you fall fast asleep and stay asleep. we give you a better night. you're a better you all day. tylenol®. 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>> i spoke earlier with david pierce, a senior writer at wired. i asked what apple has to do to make this watch a must have. >> yeah i think the thing about the apple watch and the thing that apple really has to do tomorrow is sort of answer those unknowns there is actually a lot more we don't know than we do know. we don't know specifics about battery life. we don't know which apps are going to be available. we don't know how these apps are going to work. we don't know a lot of things about some of what the sensors can do. there have been these rumors about the fact that there might be fewer health features than we thought. i think the real thing that an apple has to do is come out and answer what this is for. >> they described why it's beautiful. why it works, that it exists. and now i think the question that everyone still has is why do i want this? what is it going to do for me? how it is actually going to change my life. i think apple's big challenge tomorrow and that is a bigger challenge than they've had in a long time is to answer that question. >> yeah because we all know it's cool. all of us who are interested in technology will want to see it and maybe have it. but the key question they'll need to answer is this necessary. now another important question we don't know is the price that will determine whether people will want to buy this thing. we think it may need to be linked to an iphone 5 or later and will need the latest software. and you mentioned battery life. as far as we know we don't know for sure yet, but it looks like it could only last for a single day and will need to be recharged every day. what might we hear about its price and its necessity? >> well so what we know about the price is the cheapest one, the sport edition is going to start at $349 sway relatively accessible price. it's not a cheap watch. very carefully it's not a cheap watch. but it's something i think a lot of people especially those who typically buy apple products will be able to afford. and then there is the apple watch, the flagship product that apple expects most people to buy. and my guess, and that is just a guess, it's been fascinating to watch everybody have different opinions about this. but i would think that's going to be somewhere between $600 and $700. and then a watch that is gold something ridiculous that will tell for $5,000 or $10,000. truly a luxury watch. >> what is your gut telling you with the few seconds we have left? do you think apple will make the point this is something we all need or will it be another shiny, nice to have? >> i think so. i think apple has to help people understand that this is designed to not be used every second of every day, that it's designed to make you use your phone less, to give you the information you need and to get out of your way and to be a help, not a hindrance not to have a screen in front of your face all the time. it's a hard pitch to make but if any company can do it, it's apple. apple has a real shot at making a really compelling case for this tomorrow. >> it's not tomorrow. the event is about seven hours away 10:00 a.m. pacific, 1:00 p.m. eastern. >> we shall see. okay. thank you so much for watching everyone. i'm zain asher, and i'm errol barnett. have a great monday. are you ready to feel the difference of truly hydrated skin? new neutrogena hydro boost water gel. discover our newest breakthrough and bask in the glow healthy skin hydration. see what everyone is raving about at neutrogena.com worst fears rearlized in the fight of terror. how can the west slow the terror and brutality? now president obama says he is willing to walk away. he is warning tehran has to agree to a reasonable deal. we will tell you where the president draws the line. and five suspects appear in court. a sixth suspect blows himself up as police close in. all the developments this morning. good
>> well, i'm delighted by my honorable friend managed to slip the point in at the end. i won't urge any i will friends to make their way to support the reelection and the campaign. but the point, the point that he makes is very important, which is we need to look through every aspect of how we welcome people to our country, and make sure why we must to be fair, we must not be a soft touch. so i am making sure we look at our health service, we look at housing, we look at benefits. with that illegally, we look at all other things and make sure proper and tough controls of people who want to come and live here. >> the treasury was required to -- [inaudible]. if he believes in openness in the in hs, why has this government allowed the size of its playoff to be kept secret? >> well, i will look very closely at this issue that he raises. i know there have been particular issues around foundation trusts in the area which he represents, and i will make sure that health secretary looks at the issue. >> recently, large numbers of my constituents have taken a great interest in political campaigning in the neighboring county. my belief is it's always best if local people have a strong, independent voice, particularly if they're in favor of controlling immigration, making welfare fairer, and in being referendum. does the prime minister agree with my advice at the people of east lake will be well advised to vote from -- [inaudible] >> i want to thank my honorable friend for his hard work and for the ingeniously managed to get a question in order. just -- spent you shouldn't keep yelling from a sedentary position. sarah palin, she is not a candidate in peacefully. the prime minister. >> if you have any luck in getting the auto member to shut up, then do let us know how it is done. [laughter] let us know how it's done spent the prime minister shouldn't bother boning me. >> thank you. thank you very much for that, mr. speaker,. [laughter] perhaps we can and primers of questions on a similar note to that which would begin it with, with recognizing the appalling views of the labour candidate in peacefully. he said this, he said this about the war, one of the proudest moments of this country's recent history. i settled, he said come on the convoluted position of wanting great britain to lose a war for the good of great britain. this candidate endorsed by the leader of the labour party has shocking lack of passage for national pride. >> mr. speaker, the prime minister has run away from the question as to whether he will personally benefit from the millionaires tax cut. it's a simple question. when the top rate of tax is cut from 50 p. to 45 p., while he personally benefit? >> the topic of tax under this government will be higher than any year under his government. that is the change would bring about. when they introduced a 50 p., they lost 7 billion pounds in tax revenue. they are not only a socialist, they are incompetent socialists to boot. [shouting] >> order. point of order. >> following the advice you gave on monday of this week, mr. -- >> we leave the british house of commons as to move onto other legislative business. you've been watching prime minister's question time aired live wednesdays at 7 a.m. eastern while parliament is in session. you can see this weeks question time again sunday night at nine eastern and pacific on c-span. for more information go to c-span.org, click on c-span series for prime minister's question. >> i'm of the opinion that based on how they acted in other instances, they would've grudgingly favored a bailout of lockheed, because the supplied the united states at the time with its top fighter jets and its top reconnaissance airplanes. i think you can make an argument that they would've supported, for example, the bailout of chrysler back in the 1980s but not the bailout of chrysler today. what's the difference? chrysler back then made tanks. they made the m1a1 tank. in fact, they were our only tank manufacture. and it's interesting when chrysler comes out of debt and reduce a government loan and 10 comebacks -- comes back to health, the main way to do so is by selling off the tank division and plowing the money back into the company. >> author and university professor larry schweikart will take your calls, e-mails, faced the post in tweets on the founding fathers and other key events in american history at in depth life sunday at noon eastern on booktv on c-span2. >> u.s. airways and american airlines have proposed merging the companies. yesterday, house judiciary antitrust subcommittee look into the proposed merger. hearing from airline executives and legal analysts. if approved by federal regulators, the new airline, to be known as american airlines, would become the largest in the country. this is two and a half hours. >> good morning. the judicial, judiciary committee on antitrust regulatory reform administrative law and bankruptcy is in session. by way of introduction, this is the first hearing of the year for the subcommittee. chairman kohl at has give give e great privilege of the chairing this great committee and under -- under a static has jurisdiction, the jurisdiction to me has a duty to examine the competitive impacts of significant transactions on the marketplace. it is a responsibility that i take very seriously from the standpoint of consumer choice and the functioning of free markets. today's hearing is to specifically examine the proposed merger between american airlines and us airways. the resulting airline, with a 24% market share, would become the largest of what might be called the four legacy u.s. carriers. the department of justice will conduct a detailed review of the proposed merger under the hart-scott-rodino act. there will be several other layers of scrutiny both here in the u.s. and in europe. this hearing is intended to provide information to the public, not to state a subcommittee policy position. although i think there'll be independent, i think each member will have independent opinions, and are obviously free to state those. the airline industry has been in a state of near-constant change and innovation since federal deregulation in 1978. we have a marketplace in which familiar names that i grew up with, like pan am and twa, no if you traveled overseas or in the south, eastern, southern, no longer exist. to either merge, bankrupted or have gone out of existence. but we have also seen the emergence of new carriers with different business models like southwest and virgin. the embracing of electronic technology has created online booking and instant price comparison tools that have greatly benefited travelers by expanding choice. that is the competitive free enterprise system at work and it is the cornerstone of our economy. however, there are questions that naturally arisen during the airline mergers. and today's hearing offers an appropriate forum to pose them. the issue that many consumers would be interested in knowing about, to the extent it can be answered, is the potential impact on their cost of flying. service routes are also a who will -- concern as are the levels of service that will be offered post-merger at the current hubs of american and us airways. from a broad competitive perspective, there is the issue of airline market share at individual airports, the overall market share held by major carriers, and the prospects and implications of future consolidation. our goal today is to facilitate discussion. just as consumers are served by clear and transparent pricing when they shop online for a plane ticket, so are they served by good information and by comparing different points of views. we welcome all of our witnesses and look forward to your testimony. i now recognize the ranking member for his opening stateme statement. >> thank you. >> either one. >> i yield to mr. condit. i always yield to mr. conyers. >> thank you. >> he is mr. rose a parks. >> i served with them, too, and i would recognize him first. spent i thank you both for your generosity. we come in today looking at a very important part of economic systems that has -- this country, and i've always worried during previous airline mergers, and without prejudging the merits of the one that brings us here today, we should recall that both parties to this merger bear a higher burden in demonstrating the greater consolidation in the airline industry is warranted. one of the arguments advanced in favor of some past mergers, delta, northwest, united, continental, was acclaime the ct there was too much capacity in the industry which led to excessively low fares that prevented carriers, particularly so-called legacy carriers, with their higher costs from earning a sufficient income. we got to consider whether this is still the case. while america is in bankruptcy -- pardon me -- it is poised to successfully we organized with billions of dollars in cash and reduced costs as a result of we organization. moreover, u.s. airways posted record profits. these facts suggest that both airlines are, in fact, perfectly capable of surviving, even a thriving, as standalone companies. industry consolidation may benefit the airlines that remain by giving them power to raise fares and fees, but it comes with costs to the consumer. and as has been noted, it may result in higher fares, fewer consumer choices, particularly in of and cities where to carriers over love. in retrospect, the effect of the mergers suggest that, in fact, fares did rise on some routes, where the two merger partners used to compete. given the size of the big three, legacy airlines that would remain after the merger, it's not entirely unreasonable to suggest that they would have even greater power to tacitly agree to raise prices. undermining price competition and harming consumers in the process. indeed, if american and u.s. airways were to merge, more than 70%, by some estimates as high as 86%, of the domestic airline industry would be controlled by just for airlines. i fear that the flying public will see relatively few benefits while bearing much of the cost of this potential merger. another related issue is whether the low-cost carriers can continue to provide effective, competitive pressure on what would be the big three legacy airlines, should this merger of her. .. against large legacy carriers. there's reason to wonder whether southwest will continue to play the traditional role of an lcc on competing on ticket prices now it's part of a big airline. and finally, we must consider what impact this will have on workers at the two carriers. in stark contrast to previous airline mergers, the unions representing american and u.s. airways with the exception of the machinist have come out and public support of this merger. and the machinist have said they could support it but only after u.s. airways renews the contract with their own members first. in indeed americans unions have been instrumental in pushing for this merger. so i will submit the rest of my statement, mr. chairman, and thank you for your generosity. >> thank you. >> thank you, mr. chairman. i want to thank you for holding this hearing, and on an issue of that is great importance to me and my constituents, in a free market economy like ours, companies are general free to organize themselves and their assets as they see fit including by merger. there's nothing wrong with them including if they form big companies. competition spurs innovation and assures that the market allocates. it benefits consumers and fosters economic growth. because a free exacter cannot flour rich without competition. a merger that decreases it can gorped mine it. specifically section vii of the clayton act prohibits mergers that lessen competition or tend to create a michelle obama. -- monopoly. that is essential to a healthy market. recently two of the four legacy carriers in the -- and u.s. airways announced plans to merge. the results entity would be called american airlines lead by u.s. air's chief executive office. the department of justice must review this. it's a technical inyour i are and the department should be guided by the facts and the law. the basic question that the department should seek to answer is how this merger's impacts on competition would affect consumer welfare. congress has an oversight responsibility to insure -- ensure that the department of justice conducts it is in thorough, fair, and reasonably prompt fashion. the department should ask whether it would enable american to raise ticket prices or ancillary fees, or reduce services especially routes currently served by both airlines. it should ask whether there's sufficient competition on the routes such as from low cost carriers to keep a post merger american airlines in competitive check. it should ask whether a post merger a new carrier would move to an route served by american and begin to compete. to put it mildly, the airline industry changed a great deal since it was deregulated. new airline with new business models have sprung up to serve consumers. other airlines have gone bankrupt. some of the latter have returned from bankruptcy. others have merged and failed all together. ed in the last fiver years, the house committee held hearings on two major airline mergers delta southwest in 2008 and united continue then tal in 2010. five major airlines now control an estimated 80 percent of the domestic market. if the merger goes through the number will decline to four. should it be the last merger in the airline industry? would allowing this strike the right balance between competition and the bankruptcies that have occurred in the industry recently? a major concern any time there is fluxuation in the airline industry is how smaller airports which depend heavily on routes to and from larger hubs would be affected. for travelers leaving from my district, it is a major hub destination and. it is by no means clear the merger would have all or any of the negative effects that an airline merger can produce. american and u.s. air maintain the routes are compliment i are not overlapping and enhance it by giving the fourth and five largers airline a stronger competition which compete with the other three. congress has no formal role in the department of justice review process. congressional hearings provide important public venues to ask, debate, and identify possible answer to the questions which are of great importance. rather than rushing to judgment, my hope is that everyone involved will take care to vault the evidence and do what is best for competition and consumers. i look forward to the testimony of the witnesses, debate, and in the end a wise decision by the department of justice that ensures a competitive future for the airlines industry and protects the welfare of american travelers. thank you, mr. chairman. >> thank you. this time mr. cohen, subcommittee chairman. >> thank you, chairman. it's the commercial and antitrust law. we used to call it cow. i thank chairman bacchus for choosing the topic of the merger for a first hearing and i want to say i look forward whey hope and know will be a working relationship. the third saturday in october is not the only time alabama and tennessee get together. as an initial matter, i note unlike previous mergers the union represent workers at both of the airlines have expressed strong report. that's encouraging. some news account suggest that the unions were instrumental in agree together move. mr. chairman, i ask consent that the final joint release between the different unions be entered with the record. >> without objection. >> also i ask unanimous consent of a letter president of the association for professional flight attendant in the statement chairman of the pilots association expressing support be entered to the record. thank you. i understand why labor supports this it employs that both carriers forced to get a better deal. which is more than unfortunately for employees of -- as we consider the merit of the early merger we oughted to be look back with the certainly e similar searchers to to see what happens and while i respect the views of labor in support of the merger and recognize no two mergers of or airlines are necessarily alike. the merger of northwest and delta has shaped my image of airline mergers. prior to the merger, northwest operated a significant hub in memphis. given the closeness to atlanta. in this very room, in 2008, richard anderson delta ceo said about the future of the memphis hub, it will be additional. it will be more business for memphis not less. i expressed concern to him about reduced service or outright elimination of the hub and asked about continueuation of the memphis amsterdam flight. at the hearing mr. anderson testified there would be no hub closure and the merger would maintain international flights. he went further to say we can expect more international flights and suggest the memphis to paris is going to happen and more flights and enhance the status of traffic and service at the memphis international airport. he said it would add not delay take away from the memphis international airport. he said he knew memphis when northwest he loved the ribs, the city, he knew how great the airport and managed it was. how the time on the tarmac and taking off was less. they saved oil and the best connections they could have. those facts were true. his response was not. i ask u.s. air and america to look at his statement and understand the memphis international airport is a place they should be and when others airlines didn't come to memphis. it u.s. airways did. they added more flights for a price. we like that competition. when frontier airlines thought about coming to memphis. northwest cut the prices. that eliminated the opportunity for frontier to come in. later people expressed interest to coming to memphis. because deal that had a come that market share people didn't. the opportunity is there. there was 240 flights day before the merger. s a of december there are 40% of that service or simply 96 flights. it would not surprise me to see further cuts on saturday it looks like dodge city. ribs are plentiful. there's opportunity for u.s. airways to come to memphis and fly the routes. and to serve memphis. delta has used the base in memphis to lower not to keep carrier outs not have real competition. memphis consumer pay higher prices than any airport in the country. it caused businesses to not choose memphis as a place to come. federal express needs the service. it takes some of their product and puts it on the airlines. which can help your airline serve memphis. call fred smith, he'll tell you come to memphis. so do i. so there are plenty of reasons why when we look at the merger, i understand wonderful things i've heard about the two of you. and may need to look it at differently. we heard from richard anderson. but the basis upon which he made these are vailed. it's a fine airport, great service, great weather. great opportunity to save on fuel. and a great city to serve. i appreciate your being here, i appreciate mr. bacchus scheduling this hearing. i look forward to the testimony and u.s. airways and american serving memphis, the great city. the great airport that it is. thank you, mr. bacchus. i give you a statement also, and ask you to answer this to enter a statement from mr. mcgee on the consumer union expressing concern. >> without objection. >> thank you. i yield back the balance of my time which doesn't exist. it's traditional to yield it back. >> i guess let the record show that mr. cohen doesn't want you to merge with delta airlines. [laughter] our witness, our first witnesses without objection, are the members opens statements will be made a part of the record. and this time i'll introduce the witnesses gary kennedy, representing u.s. airways -- no american. you go first. okay. senior vice president general could counselor in chief american airlines mr. kennedy districts all of american's legal affairs worldwide. mr. kennedy also districts american's corporate compliance program and overseas government ever corporate government -- corporate government matters before joining in 1984 he practiced law in salt lake city. mr. kennedy is a -- university of utah where he was a member of he received the j. d. from the university of utah school of law. we look forward to your testimony, mr. ken i did. as i'll tell you privately before be of the hearing started i have seen tremendous improvement in u.s. airways operations, and the staff and the service. it's been a real transformation. i compliment you on you and the management team at u.s. airways. you're american and i'm complimenting you. i should have been complimenting mr. johnson. but i apologize for that. no i'll get to mr. johnson and compliment you. mr. johnson, the executive vice president of corporate government affairs the u.s. airways where he oversees corporate, legal, and regulatory affairs. prior to joining u.s. airways in 2009, mr. johnson was a partner of indigo partners llc a private equity firm specializes in accusations and strategic investment and the airline and arrest -- aerospace industries. he earned the mba and jd from the university of california berkeley and the ba in economics from call state university and sacramento. thank you, mr. johnson for testifying. and what i said to mr. kennedy about u.s. airways, obviously applies to you. but it i did tell both of you all, i was thinking we're going testimony is going to be flipped, but it really is a well managed airline. i don't travel american. so i really don't have that many occasions to travel on american. but when i did, it was very professional. our third witness is mr. kevin much l with the -- mitchell. chairman and founder of the coalition where he advocates for the corporate travel community in north america, europe, and asia. he has over forty years of experience in many things. before joining founding the btc, mr. mitchell served as vice president of sigma corporation and he received the ba in international relations from saint joseph university in philadelphia in 1980. thank you for testifying. our fourth witness, professional sagers professor of cleveland-marshall college of law. he specializes in business regulations law. before joining the academy, professor sagers in private practice in washington, d.c., at the law firm of arnold and porter. he earned the jd cum university of michigan school of law. thank you for testifying, professor sagers. our last witness is dr. clifford winston, ph.d. at the brookings institute. senior fellow in economic studies there. the research focusing on analysis of industrial organization and regulation and transportation. he was the coed or it of the manual microeconomic edition of brookings paper on economic activity and has authored numerous books and articles. before coming to brookings, dr. winston was associate professor at m.i.t. dr. winston went university of california berkeley and the london school of economics. thank you for testifying. mr. kennedy, you are up first. your opening statement. >> each of the witnesses written's statements will be entered to the record in the entirety. and i ask each witness to summerrize the testimony in five minutes or less. to help you stay within the time there's a timing light on the table when it switches from green to yellow you have one minute to conclude your testimony. when the light turns red it means your time has expired. i'm more lenient than most. if you need to go on, that's fine with me. i now recognize mr. kennedy for five minutes. >> senator bacchus, ranking member cohen, thank you for the opportunity to testify today. my name is gary kennedy i'm the senior vice president for american airlines. i've been involved in both the chapter 11 restructuring of our company and the proposed merger between american and yairls. u.s. airways. the airline industry has experienced turbulence over the decade. the shock waives from the event of 9/11 treated enormous difficulty and the u.s. carriers grappled with the ways to survive create bid the terrible events. in 2003 american airlines on the brink of filing for bankruptcy protection. thanks to the willingness of our organized labor represents, take the steps necessary at that time to reduce costs, we avoid a chapter 11 filing fortunately next eight years we struggled to find a way to financial stability. despite our best efforts, our losses continue to mount reaching $12 billion over the previous ten years. in november much 2011, our board came to the painful conclusion that time had run out. the only viable path forward was to restructure our business under chapter 11 of the bankruptcy code. there's no easy way to describe how difficult our bankruptcy reorganization has been for the company and our employees. beginning at the top of the organization, we reduced our senior management ranks by 35 more than. we then moved to the balance of the organization making necessary changes including the reduction of 15% of total management staff. meanwhile, we began renegotiating secured obligations, our leases, and our contracts with venders. we also negotiated new long-term contracts with each of our organized labor groups. these new contracts include productivity improvements and changes in health and retirement benefits. at the same time, we increase pay for our employees, and mitigated job losses by offering retirement incentives. one of the most important objective we achieved was to freeze rather terminate the employee pension plans as a result, we now expect to fulfill the obligations rather than unload them on the pbgc has other airlines have done. of course, all we have accomplished was done in the context of the chapter 11 case and in consultation with the unsteered creditors' committee. by mid summer last year, we made sufficient progress that we decided in con jenture with the creditor's committee to embark on a formal process to consider merger with united airlines. it was -- u.s. airways it was clear from the outset that a merger with u.s. airways could create significant value for our stakeholders and bring substantial benefits to the traveling public. we have conservatively estimated that by 2015 revenue and cost synergy will outweigh cost dissynergy by over $1 billion. this combination will make our company a much stronger competitor against the other large airlines. we're under no illusions that mergers are easy or seamless. we have agreed from the outset to do e.g. in our power to learn both from the success and the mistakes of those who have gone before us. many of the most important decisions have already been made. the combined company will use a great american airlines brand. the company will remain headquarteredded in the dallas fort worth area and all hubs will be continue to be hubs in the the new american. our ceo, tom, and u.s. airways ceo doug parker will jointly lead both the transition team and the new american as it e americas from bankruptcy. mr. park will be ceo of the new company, and mr. horton will be chairman for the board. i understand and recognize that many members of congress are skeptical of promises made and concerned about industry and sub concentration. as for the former, we do not sphwoand make commitments that we cannot keep and as for the latter, it is clear that this merger does not create a high degree of concentration. above all, however, i would urge you to concert the facts with which i began my testimony. nothing has been more damaging for the airline industry, our employees, our customers, and shareholders than the years of economic turmoil we have experienced. this transaction is unique in that it is endorsed by all of our labor unions and embraced by management and the boards above companies. we know we have a solid obligation to implement this transaction with great care and thought. we're eager do so. thank you for the opportunity to testify today. >> mr. johnson? >> thank you mr. chairman. thanks to the entire committee for having us here today. it's an honor to testify before the subcommittee about the merger of american airlines and u.s. airways. the creation of the new american will be good for competition, consumers and choice. expanding the networking for the customers, employees, and shareholders is the motivation for bringing them together. integration of the complimentary networks will enhance competition in an already highly competitive marketplace. it will also deliver significant benefits to each of those constituencies. our customers and communities will benefit from more and better service. our employees will receive improved pay, better benefits, and job security. and mr. chairman, i would like to acknowledge the fact there's about 30 of our colleagues here in the room with us today who came to join us for the hearing and thank them for joining us. our shareholders will benefit from improved financial stability and $1 billion of synergy create bid merger. we are proud that the combination has won support from the 100,000 employees of financial markets and the communities we serve. the u.s. airways team has been a leader in delivering customer service. we have long recognized we can do more. airline passengers made it clear what they want are broader networks capable of taking them whenever they want to travel whenever they want to go. i beginning the system of american airlines and u.s. airways it will build the networking arc passengers want. one that will compete with the networking of delta and northwest and the low cost carriers like jetblue and southwest. the passenger benefit. new american airlines stem from the complimentary naimp. by beginning these we add origin, destination, and hubs to a networking with very little route dip indication. indeed out of the nearly 900 domestic routes whether he serve american airlines and u.s. airways only have 12 nonstop overlaps. also u.s. airways has provided extensive service. it will allow us to extend the focus to the american airlines system. combining these networks will create new exciting international opportunities. we will provide thousand of passengers better alternatives with over 1300 new routes worldwide. in addition the customers will have the potential to access -- sorry have the access the potential to access over 130 cities around the globe served by american but not yet served by u.s. airways and 62 served by u.s. airways but not yet by american. and by adding u.s. airways we will enclose competition on international routes by creating attractive opportunities for additional service. domestic markets will become more competitive. although it will be the largers airline in the u.s., the american airlines will have less than 25% of domestic available models and will compete against the nationwide model of delta and united and southwest each with 19%. the american airlines will also compete against southwest significantly lower cost structure. and host of smaller but fast growing lower cost airlines including jetblue, spirit, and virgin america. also important as we increasingly think about competing in a global airline business, the combination of american and u.s. airways will create a third thairl can compete successfully with major international airlines. the american airlines will be a financially stronger company. it -- of american will return that business to profitability and as a result of the combination we expect to generate over $1 billion as we increase revenue from new passenger taking advantage of the broader networking and improved service and reduce cost from scale and elimination of the system and management nap improved financial performance will provide americans bankruptcy creditors with an enhanced opportunity for a full recovery result unheard of in airline bankruptcy and create more financial stability in the extremely -- airline industry. that financial stability also provides significant benefits to our employees including better pay and benefits greatly approved job security and better opportunity for advancement. it's not surprising the merger has generated unprecedented support for employees of worth companies, the labor union, and the communities which they live. antitrust review is important and we are already working with the justice department to demonstrate the competitive benefits. woe appreciate the opportunity to address the issue with the subcommittee today and commit to working with you. we announce the merger twelve days ago. there are many issues to be resolved. i'll do my best to answer any questions you may have today. thank you. >> thank you. mr. mitchell. >> thank you, mr. chairman, and members of the committee. this morning i'm going explain one threat to price transparency enabled by the merger that has been agreed to by airlines but has not yesterday caught the eye of the -- i'm presenting the testimony this morning on behalf of the american antitrust institute. in 2008, i washed this and other committees in testimony of the dangers of the then proposed delta southwest merger. and what those dangers would hold for consumers. i remember well that northwest ceo testified that committee members shouldn't be concerned because the market disciplining effect of third party distributers such as expedia is so pervasive and important that they create this transparency, he said, that will keep prices low. he used this transparency to justify the merger and he was right back then about the effects of traps parent sei. -- transparency. today however airlines have agreed on a brazen new worldwide business model how to price and sell tickets. it's designed to destroy tries transparency which is the -- the model called new distribution capability or ndc and the airline trade group is spearheading implementation. it's designed to terminate by agreement among competitors the care and transparent model for pricing of tickets are fares are published and publicly available for comparison shopping and purchased by all consumers on a nondiscriminate story basis. one problem, it has decried publicly the comoddization search capability of the very online travel agencies that he talked about. for example, tony tyler, director general stated in a press interview we mark belie, and i quote, we have done a great job of improving efficiency and bringing down cost. we handed the benefit straight to the customers. as soon as someone's got -- instead of charging the same price and making a profit, they use it to undercut the competitors and end the value straight to passengers or cargo shippers. and you have to ask why said tyler. i think one of the reasons is the way we sell our product. it forces us comodtize ourself. that is in d.c. a binding resolution -- have agreed that they have the right to demand from consumers before they would be privileged to receive a fair quote, personal information including name, age, nationallalty, contact, details, frequent flier numbers of all carriers, whether the purpose of the trip is business or leisure. prior shopping and purchase travel history and and all things marital status. why is the program so toxics? air fares would no longer be publicly filed and available on a nondiscrimination basis for consumers and purchased through travel agencies. instead each price would be unique depending on the profile of the consumer. this personal information can be used to extract higher prices from less price sensitive travelers such ass by travel leers. in contrast today when a consumer wants to the fairs and -- are returned so she can easily compare prices without having to divulge personal information. it is this very price visibility that checked power of airline to raise fares unless they lose out to competitors offering a better deal. price transparency is even more important today because when he testified, there were six networking carriers then there were five and then four, now we're heading to three. by eliminating transparency airlines will have creates by concerted action a new system of completely opaque pricing and with it the ability to raise all fares across all systems. the nexus between this merger, this merger eliminates united u.s. airways it will be far easier to coordinate expressly among three networking competitors. and far easier to impose this model. especially given the clout that new american would have as the biggest carrier on the planet. the lack of transparency created by ndc further smiments the dominance of the mega carrier. and once in established here in the largers market, it's going to be lights out, game over for consumers. two remedy. dot has the authority to improve ndc. given the anticompetitive effects and innovation of privacy, dot should reject it without the condition. number two, doj, they should serve it and the members with spearheading the scheme with a cid to discover the purpose that objective of ndc and the process by which hornet horizontal -- thank you, mr. chairman. i would like to add that the american antitrust substitute is looking at ext ty effect. >> thank you, professor sagers. >> thank you very much. so my friend diana mass, told me i should be getting hazard pay for being here today. i am here, i'm afraid to suggest some reasons not to be so optimistic about the merger. i notice there are a lot of captain uniform behind me. i have to say when i'm afraid to leave here to go home i'm going to be a no-fly list. i hope that's not true. >> they are all friendly. >> i'm sure they are. i'm not going to say what airline i'm on. i'll notice dr. winston he's subsequently to my left and also going probably say a few things in disagreement with me. he's an imminent person. no person could study the antitrust treatment and competition in airline markets without studying his work. and yet he and i are going diseeg about few things. but the most encouraging thing i have heard today so far is chairman good lot goodlatte's statement. it's not ideological. i don't have any own feelings of supporters behind me. i don't have any staff to help me in support them. i'm only here to speak in favor of a policy that is supposed to protect everybody including us arch folks. and so guys like me come and talk about it a a alone. here is my basic thought in the brief time i have to describe this complex deal. i think that in policy consideration of transactions like these, complexity is the defendant's threat. it's the merging party's friend. it suspect the friend though of most other people affected by transaction. i want to describe a few things to me seem relatively simple. first of all, there will be a lot of discussion and seem complex because it seems to require a lot of understanding of complicated industry facts. it's not a complexity -- proported benefits. i'm not even really going to talk about the benefits. i personally don't think worth dwelling on. at least not here. because we all every single one of us has been to the rodeo before. we have seen many mergers in many industries and seen many americaers in the airlines in the years since deregulation. they have always been said to propose these same benefits or benefits like them, and quite often they have been disappointing. the promises are typical not kept and sometimes they lead to painful disappointment. i'm going start with something relatively simple the competitive effects. there isn't time for me to address it fully. i will say this, in the written statement i read last night, and i read them all the most remarkable statement was that in this merger, among the thousands and thousands of daily flights to cities across the united states, that are controlled by the two carriers, the only overlaps that matter in the whole beginned networking will be 12 overlaps or twelve flights. we could deal of in complexity. we should ask ourselves among the thousand and thousands of flights are there reasonable on 12 cities which the two carriers provide competition with each other. that will be lost in the merger? i don't think so. for a brief -- you can look at the white paper produced by american airlines institute attached to mr. mitchell's statement. they will say, unfortunately i have a brief remaining time to say it is that a dominating theme of all discussion of airlines mergers since deregulation habit economic difficulty of the carrier. the claim is we have to merge, we have to consolidate to strengthen others so we can perform. there are thoughts about that. the carriers have never offered any very plausible exflags why merger. it has to be merger that is going to solve our economic problems. it can be often have suggested a lot of detailed arguements. but again, i think the response is relatively simple one than is that we had a long time. we had 35 years of dozen of mergers every single one of which has been sold on the claim that synergy are going makes competitive. it hasn't worked. the airlines have remained the legacy mostly economically in dire straited throughout the whole time. thank you. >> dr. winston? >> sorry. thank you. i'm happy to be able to testify at this merger. i testified at the delta-northwest merger in 2008 in support of that merger. and i support this merger. we i have some new perspective to bring. i'm not just going read my own old testimony. and what i think i'll do in the short amount of time given what we've heard as packaged by written presentation and oral presentation beginning with my conclusion. mergers -- all mergers not just airlines involved in the trade-offs, that is mergers trade-off benefits from economies and lower costs. that's the mous claim to them. and then the ain't competitive concern that you're losing competitor and raise prices. traditionally when we think of them we start off with trade-off. naturally you'll hear them and you have heard them as expected. what i think is interesting about airlines and i didn't stress this enough before. i think it's true now, we don't have to think of these anymore as trailedoffs. now -- trade-offs i'll be bringing in an additional policy perspective. i think that was appropriately done by mr. mitchell raising the concerns about what is going on with how tickets are distributed. that additional policy perspective is the growing reality where this industry is going. and that's globalization. it's a global market. we have -- where are we to be going? something we have been moving toward and ultimately -- allowing for carriers to serve in the u.s. and, you know, if you think that is a strange policy, considering the automobile industry and imagine what if would be like if we if not have honda, toyota, et. cetera, building and assembling cars here. one wonders what is the case here. we don't allow british planes to fly in the u.s. ones you bring that perspective in to eye, things change radically. you don't have trade-offs. it's clear with the airline's job to be sufficient as possible, okay. and reduce costs, and what policy makers job to do is promote globalization and policy. promoting open skies [inaudible] that will give you your influx of competitors and make sure the e fresh sei improvement and largely transferred to consumers. the concern about competition go out the window once you think about that. but something else very important comes clear then. you get an more intuitive understanding why carriers are merging. think about what airlines involve. risky investment, okay, in billions of dollars in seats that are in the sky. all right. and it's risky because there are a lot of shocks we'll get to them shortly. what you want to do deal with risk is you want a portfolio. you can allocate the seats in response to shocks and risk. in a globalized economy you can imagine what people will do when things are tough. they'll move the capacity to another place. right. mergers enable you to do that. so i would suggest that the justification for mergers hasn't been semp -- emphasized enough is a way of dealing with risk. which is the inherit challenge in this industry. let me turn to why i think that. it comes out of deregulation. airlines operate in an low effective 55%. they have billions of dollars. they only use half of that. in retrospected you can see how crazy regulation was. what a waste. the same time airlines were shielded from the fundamental challenge that is matching capacity with dmeand and the shocks. you have to commit to capacity buy planes in advance and you think you know what demand is. you have to deal with fuel shocks, macroeconomic shocks, the gulf war, 9/11, and scwes ration. that's a challenging thing to do. what do you want to do? you want to have the ability to diversity and be able to allocate the seats. that's what mergers do and why the airlines have been doing it for the decades, i will contend. in the process of doing that, what do we see going on in the industry? what are the long run trend? real prices continue to go down. they continue to be below the reduced level in regulation to the benefit of deregulation preserved and most importantly low factors are going up. that's the key e fresh sei we want to look at. we are not operating at 65%. we're closer to 80 or 90%. i would suggest they are part of a tool. they're not the only tool but to deal in the long run with where the industry going and that's globalization. the airline should go along with it. allow us to spur competition in the industry. >> thank you. we will now proceed under the five-minute rule with questions and i'll begin by recognizing myself for five minutes. one thing, mr. mitchell an professor sagers didn't address. you talked about possible negative implications of this merger. but if it doesn't go through, there are some demonstrativeble negatives, very many, and i -- i wonder if you consider that a failure of american airlines -- [inaudible] whether it's been financially unsustainable. >> well, american airlines is exiting or will exit bankruptcy reorganization as a lowster cost carrier with billions of dollars in cash and cash e equivalent lens and new aircraft being on the order and the ceo has said countless times that they will be -- [inaudible] most successful earnings in the history. so i just don't buy to the notion that these are failing firms. it certainly doesn't apply as failing firm against the guidelines, the antitrust guidelines. they are able to compete, and to make the argument as you hear now that they need to be margin up to compete effectively with the new delta or continental united. they claim themselves they can compete against them. if you use the logic you have to get bigger compete with the next bigger carriers. we're going end up with two. the logic is flawed. there are many smaller independent carriers that do fine mixing it up. >> i would like to briefly add one thing. it seems like the biggest issue, right. if we have a huge business failure. my first point, i agree with mr. mitchell with that it's unlikely we don't see airline liquidation that off despite the huge financial difficulty the industry had in thirty five years. we have had a very painful unhappy experience during the past few years with this same basic problem, which is that we in the united states we don't have stomach for business failure. by not being willing to tolerate it once in awhile, we create a serious problem. which is that they will be rescued fail to learn how to compete in difficult markets. okay. in this case . >> we said this -- we have a bankruptcy law which allows you go in to bankruptcy and allows the creditors of a company -- the pension what the cbgc to agree on the best route out of bankruptcy. that agreement has been made . >> we have a bankruptcy law. but -- . >> what i'm saying. what these companies are doing is exactly what the law avails of any company. >> well, -- . >> they made a decision through the bankruptcy process that this is their best reorganization act. you know, you can argue on that, but that's -- they have availed themselves . >> i disagree -- . >> i know do you. one thing that -- and i have read your statements and what you said in them. but airline fares, you've talked about they have again up, they have as far as taking in to account inflation, they are one of the best, they are more competitive than they've ever been. the only reason they have been as cheap as they have is investors have pumped billions of dollars in to failing airlines. and i would say this, you both mentioned that they maybe had a few more compliment i are routes or not compliment but dop indications -- actually i can't recall a merger of airlines that had fewer dop -- coupe duplications than this. >> i'll reply if you'll let me. >> all right. >> okay. first of all, they aren't just doing what bankruptcy law allows. they are emerging with a merger. the subsidize we gave to the banks during the bailout -- . >> that is the bankruptcy plan. that's legal. >> yes, sir. >>, i mean, i took bankruptcy. >> they may well be. most people who emerge don't do it . >> most don't. that's an option. >> yes. >> and that's an option against them. and i would say this. i railroad attorney i remember rock island, and before the government continued to turn them down saying it was anticompetitive and you lost 10,000 miles of rail and stranded over 4,000 shippers because you didn't allow a viable merger. i can tell you that everything i've read, this is going to make a stronger airline, and i -- i say this. you could have stopped the mergers before delta and northwest. i'll agree with that. you could have stopped it before continental and united. you didn't and you created other airlines with a distinct advantage, if you don't let these two airlines merge. and the employees, the employees are for this. you know, we have received all sorts -- i have seen more favorable support from employees from unions. and in a time of deficit from the pension benefit guarantee program, which is not unimportant. >> mr. chairman, can i add one point? >> sure. >> from abc news, you know, we talk about the -- [inaudible] there are hundreds of cities that these two carriers currently compete on routes. that works out to 4900 routeds. >> let me say this, if you call competing with, -- which i saw a list. if youfully from birmingham and d.c. and you want to fly through dallas and take twelve hours as opposed to two hour. you can call that that they share that route. i don't know anyone that would take twelve hour flight or an eight hour flight when they can go nonstop. >> the real point -- . >> and that was -- . >> the real point is the twelve overlapping routes. they are generally not as important. >> thank you. mr. cohen? >> [inaudible] you all have? have you -- mr. mitchell is it nicer to be the memphis airport or the atlanta airport? >> every time i'm there i feel like i'm living a dream. any of the rest you think atlanta is a better experience for the consumers than memphis? mr. johnson? memphis is small, it's easy to get around. atlanta is huge. about only smell you get is maybe, you know, the jet stream and the -- [inaudible] i think -- [inaudible] both airlines serve memphis now. they serve memphis in a variety of our hubs. as you know from our testimony or written testimony, a creation of the networking that we will come about by the new american airlines will create opportunities to provide additional service to cities that we serve to the hubs. we're hopeful memphis will be among them. at this point in time we haven't had the opportunity to plan or talk about. it certainly memphis will be on the list. >> one of the things mr. anderson said or other said is the airport is better because the airlines have to stay on the tarmac -- they will, you know, stay away from any airport where expenses and charges are just a little bit too high for them. it makes it an impact on the decision making at the airline for sure. >> you supported with delta northwest merger. when you did so did you take any consideration that result in the city like memphis because the merger. no. i didn't. i had a broader perspective on a merger. i qualified the danger of prospective -- because we know after the mergers there are so many changes in the networking, entry and exit that may relate to the merger. in this case, as we know, probably has nothing to do with the merger because april 2008 was the one we had the hearing and the merger went forward and we had the great recession. how to can isolate what the merger did versus a great recession is very, very difficult. so . >> the great recession. the problem in memphis. >> shouldn't the great recession made memphis a better airport because the fact you save money and have less time burning fuel waiting to takeoff as you do in atlanta? and the great recession should have knead a more profitable airline? >> i think the problem with a place like memphis is other what we call not the larger hubs is traffic. again, if you're an airline you want to put the plane with people. and go where the people are. >> destination nevertheless airports have become like federal express. they use people instead of packages. they are places where you move people around. and memphis is a good place. mr. mitchell, mr. winston thinks it would bed good have international competition. do you are want have air shanghai be the carrier? >> i personally don't fly them. >> do you fly out of memphis? >> the notion that you can justify a merger based upon some future change in a marketplace such as open skies is really not responsible. it's not going happen in our lifetime. none of the 30 pilots or however many pilots behind me want to wake up find themselves working fur the spanish government. it's too complicated and certainly no justification for a merger. thank you, sir. >> i was -- [inaudible] repeatedly and i had a flight on u.s. airways and i had time. i was able to look at the scheduling chart and saw that american flew and american had better prices and deals on your frequent fliers going washington. is that one of the twelve routes you're talks about. is that one of the hundreds of routes that mr. mitchell mentions. >> one of the twelve. >> what will happen there? >> i imagine -- service to washington, d.c. >> will the price be u.s. airways or american airlines? >> i don't know. we haven't talked about that at all. as i said, we have announced the this merger twelve days ago. those are things we'll work on. >> it's not just memphis, cincinnati, pittsburgh, lots of hub cities who used those put a lot of investment in the airport. it was a business that was important to the community suffered because of mergers. mr. mitchell, do you see any hub cities that serve american airlines or u.s. airways seeing a similar feat as st. louis, cincinnati, or others? >> it's possible it's going to have to be fact intensive analysis by dha, philadelphia could be impacted, charlotte could be impacted, phoenix could be impacted because the geography of adjacent hubs. >> thank you, i appreciate my time. mr. johnson, when you come to memphis, let me know we'll get ribs and see mr. fred smith. >> thank you. when you started out you mentioned some of the airline had gone away. you have skipped texas airline i grew up. i mention that because it looks like the only thing consumers in the u.s. are looking at on airlines right now is price. you go back to the days when southwest was competing or -- and you see some very competition on something other than price. and really all you have now playing in that is virgin is trying to offer a little bit different experience. to me it really is the commodity. the concern we get the number of carriers down. you say there are 12 direct flights only 100 flights. to fly anywhere from corpus christy you have to change in dallass. they are the same boat. so how many routes with one stop are you competing on? >> i don't know the number. but what i can tell you is any route with one stop has significant competition. because everybody serves the routes on a one-stop basis. >> and . >> you have to . >> and i agree. i think u.s. air typically has a lower fares when i'm booking. i strong luxury i used to have being able to travel on wednesday. i have to fly on the busier days. you were talking about no hub closures. and looking at the map of the hubs, i have to agree with mr. mitchell. geography doesn't seem to make sense. and aa has history of closing hubs. you have nashville and raleigh and miami, charlotte, washington, philadelphia, and new york. that's a lot of hubs in a close proximity. how much assurance can you give us you're not going to shove one of those down? >> congressman, a couple of considerations. if you look at the geographic distribution of the hubs and the primary purpose of the service of the hubs, we have as we state publicly the high degree of confidence the hubs we have today will remain in place. for example, new york, which is the largest market in the world, that serves primarily for american. >> i'm not worried about new york or l.a. [laughter] >> just by example. new york serves as an international gateway. miami as serves as a gateway going south. when you look at charlotte, in north, south hub, and dallas when which is primarily midwest and going east and west, and you look at them. we find them to be highly complimentary of one another. i think it's unlike what you have seen in other merger situation. >> you are familiar on some of the blogs and messages boards like flier talk, you're getting 70 percent opposition to the merger from frequent fliers. do you -- it seems like you have the public against you on that. how are you taking that? >> congressman, i haven't seen those numbers. and the feedback we're getting from the customers, we're getting from the communities we serve is exactly the opposite. everybody is excited. >> let me get back to price competition. maybe mr. mitchell with you can help me out. i know, you expressed a great deal of concern about sites requiring a great deal of information from you to determine what fares you're going to get. and i think this is partially the airline industry's fault in they have made this so difficult with all of the ancillary fees. i get two free bags on united. my wife gets one bag. i'm a pheasant on delta so i don't get one. is there a way we can create a system where anonymously or semianonymously you can compare what the bottom line price between two airlines is going to be? >> well, first of all, with respect to the fairness, we have that system today. you can go to any online agency and understand the options. when it comes to ancillary fees like checked baggage and seat assignment and so on. it's an absolute mess. for five years, the airlines most important corporate customers have been demanding that these data on this be put to one place. >>let get the airline response. and save fifteen seconds to me. do you have a solution. >> let me say a couple of things. american and u.s. airways, we are strongly in favor of full transparency for consumers. that's what we've been about. >> i'm sorry i'm out of time. i'm concerned about the merger on a level as a frequent flier. we have given the opportunity to compete the other airlines. it seems to me with the mergers gone through. it's only fair to offer you the opportunity assuming you comply with the laws in place. i remain concerned it's difficult for new players to enter a competition. i yield back. >> thank you, mr. chairman. >> 98 percent of the bloggers think that we are incompetent. [laughter] you could do a scientific poll we only get 8% approval rating. [laughter] >> chairman bacchus, i want to ask a question you started off with. is this merger really necessary? i think that there is a general thinking that -- there is support for it, but i was -- i wanted to ask what if we really didn't have this merger going on, mr. sagers, what do you think would happen? >> well, as i said, we're not going see a liquidation of american airlines. i think in all likelihood. and i don't think we're going to see frequent liquidation of any carriers in the foreseeable future. we would preserve such competition as we have left for the near term, and i think we would see perhaps an additional degree of market discipline for cost containment that we have forfeited in our, you know, in our airlines competition policy. >> in mitchell, did do -- do you have a view on this if this hearing was not held and we were continue on with the business? what do you think would go on in the industry? >> if the merger were not to occur? >> yes. >> well, i think, you know, we will have a several networking carriers competing aggressively against one another. i think both carriers will do just fine. let's be honest, it's going really help creditors, it's a better deal for labor, but it's all about the revenue. we're going to -- if this merger were approved we're going three networking merger. the ability to coordinate fare hikes were unprecedented. fifteen last year ate were rejected. the probability they will be rejected in the future begins to go down when you have the three carriers and coordinated effect. we have the balance three networking carriers if it comes to it with more transparency in order to preserve the marketplace and competition. >> congressman? >> yeah. i was going suggest, mr. conyers and give you an extra minute to let the two airports of the airlines answer the question. >> congressman, i have been in the airline business for twenty nine years, joined american in 1984, in all of the years it's the most competitive business, i think, on the planet. it's ultra competitive. what is going to happen when these airlines combine that competition will remain. we simply are trying to become a stronger, more vibrant exeat tear against those already in place. it's important not only for i think it's important for the industry. it's important when you look at the international alliances, and the composition of both the star and the guidelines. it's going give consumers more choices, allow us to better compete with the airlines. >> well, there's nobody that doesn't think you're not coming out of bankruptcy. >> congressman, in my mind . >> yes. please. >> it's the case. i thank mr. mitchell for noticing how well they are doing recently. mesh had has a terrific restructuring and could easily emerge on a stand alone basis. that's not really the question. the question is why are we doing this? and for whose's benefit? our customers have been telling us they want a bigger networking. they want a networking competitive with united and delta. they want more choices and opportunity. they have been telling us directly and indirectly by leaving american airlines and leaving u.s. airways to fly on delta and united new bigger networking. we help our customers by the merger. second, we help the employees. u.s. airways is a smaller airline and smaller networking and revenue disadvantage. as a result to be successful we have to pay the employees less. we have made a bargain with the employees over time we can give them good jobs and benefits they're going to be less than those enjoyed by the counter part at delta and united. by merging and creating a networking like delta and united we can pay our employees more and we have agreed to pay them the same as delta and united. in addition, when we talk to people in the hubs we talked about so many times today, they don't talk to us about price issues or price concerns. they talk us to about finding ways for there to be more service to grow the hub, finding ways to create more december makes for travel. all of that can be accomplished by the merger, congressman. that's what we're trying to do today. >> well, you're both doing okay now. you know, what i hear you saying is that it may get tough for later, and we want to be prepared and so we're going merge now. and i'm not sure if goes along with the american antitrust institute. do either of you know what the economics scholars are thinking in terms of this kind of discussion, mr. sagers? >> yeah, i mean, there's a lot of study of airline fare changes, and it's in some dispute, but there's substantial evidence that on specific city pairs prices go up when concentration goes up. and we hear a lot, by the way, -- average prices going down and that's very misleading. >> mr. johnson, you respond and we'll . >> sure. first, i want to make sure that we give doctor winston an opportunity to respond. he's the expert on airline prices. after the merger it's going to be a very, very competitive industry. there will be four airlines with each having less than 25% market share and each with nationwide networks that are competitive. two airlines aca and jetblue that provide significant competition. >> there will be more competitive after the merger? >> i expect so. >> would it be if there weren't a merger? >> in fact, the industry is very competitive now, congressman, it's going to be competitive after the merger. after the merger, we will have southwest continuing as a low-cost, jetblue continuing as a carrier of the significant cost advantage, but three fast growing low-cost airlines. spirit, allee allegiant, and virgin. >> thank you. and i think that's what mr. winston and other's testimonies. mr. holden? >> thank you. i'll preface my remarks by saying that i'm a happy frequent flier of american airlines. it serves the roots that i travel on best -- route in this case travel on best. another airline that was emitted in the discussion which was piedmont airline which is a fine north carolina-based airline. it was a airline of the year in 1984. and i spent many enjoyable mile