Transcripts For BLOOMBERG Countdown 20140408

Bloomberg reporters standing by across the world, ready to deliver the stories that will drive your day. Ryan chilcote has the details on rising tensions in ukraine. Jonathan ferro is digging into samsungs second straight decline in profit. Tensions heightening again after armed men stormed government offices in three cities in Eastern Ukraine. Ryan chilcote this here with the story. If you take the surrounding area, youre talking about a couple of million people, the fifth biggest city in the country. Donetsk is an interesting place. It is very important to ukraine. Ukraines secondbiggest city. Armed men moved in. You were running battles throughout the night. The ukrainian interior ministry, representing the federal government, has just posted that they have taken that building back. We will have to check that. Then there is another city called lujan scott luhansk, another building was taken. Not sure if theyre Still Holding it very all in all, this is an area that includes 10 million people. Majority in the cities or ethnic ukrainians . Ukrainians, perhaps. I dont know the answer to that heard it gets messy, you have ethnic ukrainians who speak russian and ethnic russians who speak ukrainian. Ukraine says this is russia trying to pull ukraine apart. These demonstrations and the seizures of government buildings is basically what happened in crimea and as a pretext of them moving in Russian Forces. They say they will take these territories and these buildings back. Russia, for its part, has come out with some extraordinary statements calling on ukraine to halt military preparations to the east of the country, saying that americans have dressed themselves up as ukrainian americanorces and that private Specialist Security Service people are working in dont ask donetsk. To the peoplee it in Eastern Ukraine if they want to join with russia. We have not heard from anyone higher up in the white house, saying that if the russians going to Eastern Ukraine, there will be more sanctions. What has happened in moldova . The former soviet republic a region called transmr. They got a bunch of Russian Forces. It is a world of its own. Yesterday, the president came out and said they to are seeking to join russia. Ryan, see later. Isng demand is curving curbing prices for samsung devices. Jonathan ferro is here. Let me give you the breakdown of these results. We only have headline numbers. As expected, First Quarter after christmas for these tech. 3panies, we expected a trillion. 8. 4 we expected 8. 3 billion. We got 8. 4 billion. Youre squeezed as well by chinese producers. Exactly. Hows it going to play out, the samsung apple, smartphone space battle in 2014 . Samsung absolutely dominated its market. Samsung took on 31 of the industrys revenue. Apple took him about 15 . Samsung is still very big right now. This is what will take the headlines. Apple inc. First is samsung electronics. We talk a lot about innovation. 25 of samsungs workforce is in research and development. It is huge, absolutely massive. When we talk about tech innovation, we talk about fingerprint sensors. The likelihood of it s five being waterproof. We talk about disruption like there is no tomorrow. The me make it simple for both of us. This year could just be about screen size. The s five comes out on april 11. Samsung have dominated this market. There produced big screen phones. The asians and especially chinese like a bigger phone. This led the likes of apple. The story can really build up by september time. It doesnt matter what goes into the iphone at this point, but they could release to iphones. They could release one at 5. 5 inches. They could really dominate china and asia with that. They could put the squeeze intentionally on samsung. Jon, thank you for that. Japan is resisting extra stimulus. With this months sales tax hike , it is expected to trigger a contraction in gdp. Details. He the economy is growing moderately. No change there. Going up. Us is one change was in fact the use of fluctuations. At the beginning of this month, it will continue to use until the inflation target is stable. By april of next year. That theonfident recovery even after the sales tax rise will continue. Boost we have a very Important Development here. The alternative is looking to perhaps increase etfs as an alternative to stimulus. It may be happening in the next week or so. The crucial thing today, is the its of japan beginning first Live Press Conference in about an hour and a half. To the liveard press are coming up shortly the live presser coming up shortly. We have trade numbers out today as well. Is the first surplus in five months. What was the catalyst . The reason for that was investments. Oil, ironamely crude ore, electronics. January was a record deficit. So far, the surplus is one of the brighter lights of the economy right now. Look at thed, we bank of japans decision from a different angle. Us. With time for todays company news. The banks Wealth Management business in the region jumped 38 in the past two years. The recruits will boost the number of ubs client advisors and asia to the biggest pool since ubs started its operations in the region. The stake is a reflection of the confidence in the companys future. The stake was valued at 1. 3 billion euros at yesterdays a combined 9 billion after a u. S. Jury found that they hid the cancercausing certain medications. The biggest fine since 2009. Having refrain from the stimulus program. Joining us now is global strategist. When is it going to change . I will go with may. People of got a bit excited coming forward. It seems the bank of japan is in reactive mode. It wouldnt take much to get them to do more. They want to anything until we get the first reports on what is happened to retail sales since the beginning of april. It is only a week since the sales tax has changed. You want to get a bit of a look. Will hard to believe there wont be a negative impact from a higher sales tax. We want to see what it looks like after at least one month. How about the tinkering of the monetary how much of how much tinkering of the monetarybased you want. He warned against that, didnt he, the boj governor, early on . See with happening, decide what they need to do to offset this. The yen is pretty much unchanged since november. One of five to 101 since november. . Hat breaks the bottom range was 101. Started tost rates move lower. All that snow weather. More confident that we would make a move up to 105 toward something more between 105110. Of u. S. Interest rates grinding ever so slowly higher again. I think everything is in place for that to happen. I expect to see dollar yen by july. 05 and 110 this was the meeting when in the conference afterward suggested that rates could be raised six months after the end of tapering. What will we learn . We would love to know how much conversation that was around the detail of what came out, in the sense that we have all these dots. Thatve a sneaking feeling it is not all preplanned and scientific in terms of how theyre doing it. Minutes might confirm that. My sense is that they are more interested in making sure the markets are comfortable with the idea that the final destination for rates is not too high. Something below four percent. Time, prepared to prepare us for the idea that rates are going to go up. To get from zero to four you need to have a brisk pace for the middle of 2014. Have investors not caught on to that . How close are investors to that do you think . Market rates pretty close to the feds path. Equity markets have been pretty strong, credit markets have been pretty strong. Money is flowing back into emergingmarket assets. They were all quite alarmed by from last year. They dont want to repeat. Theyre being very careful. Why the volatility . Dropping to the lowest since july 2007. The forward Interest Rate in the states settled since last july. The train 3. 5 and four percent in five years time. Ever since we have been in that very benign range, current see volatility has been following. The idea that Interest Rates are going to stay low, high that without a year ago, but still low, is like pouring oil on the waters of markets. Fororcing investors to look places where they can earn some yield. Themeand some Central Banks dont mind too much of that. I think now money is flowing back toward some of the emergingmarket currencies in a pretty steady fashion. Do have faith in that or not . We had a big rebound in emergence in emergingmarket currencies since january. There is a huge split. Some have weaken so much that theyre not expensive heard others still are. Beenouth african rand has bedeviled by politics. It is so low you would not necessarily sell it. The mexican peso is still competitive. The turkish lira has fallen far enough. Ruble, mostssian obviously, which is still pretty expensive. There is much more of a spread in terms of valuation. Overall, what investors are looking for our places were the yield and the carryon market currencies are compensated for some of the volatility. It is appealing that the most youre going to get in the u. S. Is 2. 5three percent. Not very much. Matters closer to home will be our focus next. More about events within the eurozone, too. Ecb, lots going on there. Stay with us. Welcome back, this is countdown. The ecb, we are told, has been theyre deliberately getting it out there. , it increases the probability that they will do something at some point, particularly if we see inflation surprise them on the down sign. Which a couple of the policymakers yesterday said, we are ok on deflation. They are going to have to say that, arent they . They had numbers that were lower than expected. You can see fingers and toes crossed underneath the table on their part. I think the odds of them coming in with something, certainly more easing is very likely. As in a rate cut . Quantitative easing gets much easier for them to do and much more likely if we slip into deflation. What form would take . Private assets, government bonds . What would be palatable to both parties . You can do more government bonds. Quantitative easing only works if you go in pretty big in terms of trying to boost the economy and boost asset prices. You have to buy them in the right ratios for no one to complain. You still have to get through some of the hurdles of what theyre allowed to do and what they cant do. I think in the inflationary environment, the hurdles get lower because a price stability mandate matters. My only question with all of this is that given the quantitative easing, the most bond yields and boost asset prices didnt affect quantitative easing. As with lt ro the first time around, if what you do is boost violations of european assets, isnt that how the euro went up as furnished as foreigners came in and bought up assets. Has it peaked, or can we revisit the size . It think it is piqued. I think the euro is 1. 35 and 1. 39 for another six months. The euros future will be determined by fed policy to much greater degree than the ecb policy, unless ecb come in was thing like economics, a massive program aimed at weakening the currency. That qe news or threat of qe pushed bond yields lower right across the periphery, didnt it . That was the one that stood out. Is this a time to start questioning some of the performance of the periphery or not . Is been like our earlier conversation in the sense that peripheral european bonds or the safe harbor for the kerry investors in europe. Spanish yields are lower than when they lost their aaa status, and obviously they have not got it back. We have seen a huge amount of money flow in. Volatility is very low. Some equity valuations are very high. Has a potential to jolt the market . Yes. I dont think the likely bad news in the next threesix months comes in spain and italy. There are other places in the world with the news could get worse. Now, thatorried doesnt get away from the fact that the longterm structure looks unsustainable. Right now, we are probably not going to get any shocking bad news. Our arsenal going to reach a Champions League places . Not going on losing games at arsenal. I fear. It is that simple. 6 26. More people around the world become smart phone owners. Companies are faced with this problem. Well see whos in the best position to steal customers from its rivals. Lets go over to Jonathan Ferro for the assets check for the fx check. This one right here, the secondbest performing major currency so far this year. What happens over the next nine months . One of the best forecasters over the next over the last 12 has been invest x. Many analysts, the weakness comes from outside of australia. A broadbased u. S. Recovery driving the dollar higher. More significantly, slowing growth in china. Waiting on the ozzy dollar, as well. Im mark arden in london. These are the Bloomberg Todd headlines top headlines. U. S. Is warning moscow about a very serious escalation in Eastern Ukraine. The white house says there is evidence that are testers were paid provocateurs from outside ukraine. Is refrainingpan from extra stimulus. The Central Bank Says the economy continues to recover, even with last weeks sales tax increase. Banks say proposals to overhaul risks choking securitization walk lashing with efforts to boost lending to businesses. Deutsche bank says the rules seem very punitive. Barclays settles the first u. K. Lawsuit. The comes a week before trial that wouldve featured testimony from former barclays officials. Stalling demand in the smart phone market. Turnings andrecent posted the second decline in quarterly profits as the market becomes more saturated. Joining us now is francisco geronimo, Research Director of European Mobile devices. Thank you very much for joining us. How much of a big deal is this second straight decline in quarterly profits come a the First Quarter is traditionally week for technology companies. What should we read into this . This is something that we were already expecting. The First Quarter is ditionally much lower than on the other hand the market is saturated, particularly developed markets. Smartphone saturation is much higher than it was a couple of years ago. So most consumers in most unit users already have a smartphone. Is not about attracting the users from the very basic phones to the smart devices. It is about keeping them motivated to replace the devices and buy another one. That is what samsung and apple and the big guys are trying to do on the very high hand. Mark market is moving towards much lower price points. There is huge competition there, isnt it . Exactly heard samsung is being squeezed in the top of the range but apple. They have been able to come peaked with lower price points compared to the iphone. On the other hand, the market is going towards lower rice points. The chinese guys are as well squeezing samsung. Most of these new chinese guys and the Indian Companies are completely new names. Where not talking only about wellknown chinese vendors, were talking about completely new vendors. It is about low prices and good experience. They are not spending much on r d, are they . Exactly. The cheapestgo for phones they can. We often talk about this trend in emerging markets. Exactly. In western europe we are seeing the second wave of smartphone adoption. Basically, those users who never wanted a smartphone. Dont really need a smartphone, but at the end of the day they end up buying one because they have no other options in the stores. Most operators are pushing smart only. Most vendors are only selling and developing smartphones. So they need to buy a smartphone. But because he dont have a need, they wont pay the highest price for the best smartphone they can find. Is samsung the better place because they have the full gamut of smartphones from the high and to the low and . Apple just goes for the niche highend. Whos better placed . Betterung has a much portfolio. From the very top of the range to the very low end of the market varied of course, the low end of the portfolio does not give them the margins compared to the galaxy s5 or or now the stly launched x five. Five. On the other hand, they have been investing a lot at the pointofsale to promote their devices. As they do not have a brand is strong as apple, they need to give better commissions to salespeople and give more money to operators to promote their devices. That is when the reasons why samsung has been growing so fast in the last years. Lower price points for their devices, a huge market investment at the pointofsale, and this has been driving their market share and their position. Is not going to get any easier, is it . The apple competition will get they are set to unveil a bigger screen in the near future. On the one side, they cannot continueinvesting the same investments at the pointofsale. This is impacting the margins. Under the hand, one of the key things for samsung has been about launching new concepts like the galaxy note, the larger screen, because users are quite interested in larger screens to consume multimedia. , ore is supposed to launch is rumored to launch a larger screen in the near future. If that happens, again, it will continue to be squeezed by apple. Apple is still the dominant player on the highend with dominant prices over 600. Under the side, the chinese guys, the completely new players moving to develop in the market, they have a very Good Opportunity in the developing market for it they should focus on some of the new devices, the smart watches, for instance, which theyre obviously making inroads into, try to bring in new types of customers. That is what theyre trying to do. It is not about growing the pie, it is about adding more slices to the pipe. Oftrying to take advantage potential future strong tranzyme wearables, they may be attracting new users to the entire samsung system. The biggest of Consumer Electronic Companies in the world. That tv, their laptops, their tablets. That the full range of devices. It is in our homes. Userey manage to lock the into their own ecosystem, it is very beneficial for them in the future. That is why the smart watch and the tablet, etc. , they are investing on all fronts because he really need to lock the user into their unique experience. They will continue to pump money into r d which is a massive part of their business. They need to. At the end of the day, consumers ifl only pay a higher price they see value for the money. For thede them value money, they need to be novelty, they need to launch new concepts thedisrupt the market using senses of the phone. Theyre been trying that. The new s five comes with new sensors that are very to theiriated compared competitors. Innovation is key for them to keep in the top of the range, competingthey will be with the chinese guys in terms of price points, and the margins would definitely erode. Fascinating to talk to. , researcherronimo hector at idc. It could very nearly have been destroyed had it not been for an American Scrap dealer, now an accidental millionaire. Made entirely of gold, encrusted with sapphires and diamonds, this faberge eric is remarkable, but so is the story behind it. Asthis perhaps no object romantic as easter. Created by carl faberge in 1887 for the russian royal family, it was seized during the revolution and sold by the soviets. T vanished for half a century that was until an american man bothered at a junk auction in the midwest for 14,000. Down, buto melt dowit instead contacted faberge expert martha mccarthy. Kieren mccarthy. Lexi atticus arty been sold, reportedly for 30 million. Mccarthy would not confirm that, faberge ericnother went for 18 million. Of not just one lifetime, but a thousand lifetimes. These are the things we hunt all day every day. You be presented with one was the most spine tingling reexciting moment. The a goes on display in london from april 14. There are another two missing from this very same collection. Theyre out there somewhere, waiting to be found. Bennett, bloomberg. Coming up, flying in style and with disco lights. Inside the most anticipated airplane of 2014. Time for todays company news. Google is Licensing Hotel booking software from room 77, a byrt up and tested in expedia. They have an airbag defect connected to deadly accidents in its chevrolet impala, a safety group said. A Software Fault can misread a renderers waste and airbags in operative. A producer of dishwashers and medical device components is planning possible acquisitions to compete with google in the realm of connected devices. Wash already owns technology such as door sensors that regulate Room Temperature bo sch already owns technology such as door sensors that regulate Room Temperature. Armed men stormed government offices in three cities in Eastern Ukraine, similar to events that preceded russias takeover of crimea. Armed men are seizing buildings in three cities in Eastern Ukraine. They are then saying that theyre forming the peoples. Epublic of donetsk on the 10th of may they will hold a referendum where they will ask the people of the area if they are prepared to join russia. Donetsk is an interesting, very Industrial City come set up by a welshman. This area is really the industrial heartland of ukraine. We heard from the interior minister over the last couple of hours same gift taken other buildings back. Altogether, these three cities and their surrounding areas comprise around 10 million people. It is about a fifth of the ukrainian population. It is exactly what we saw happen in crimea. First, a season of a government building and then a call for a referendum to join russia. Then Russian Troops came in and we had the annexation. This is not tolerable to her ukraine or the west, is a . No, theyre saying it is a pretext to bring Russian Troops in. We have so far heard from his books and from the white house saying that maybe were getting closer to sanctions. Have a listen. If russia moves into eastern either overtly or covertly, this is a serious escalation. Toall on president putin cease all efforts to destabilize ukraine. We just heard from russian saying that ukraine should halt military preparations and east of the country. 100 50 u. S. Ces, military personnel working for private military firm called greystone are in the east of the country and that eastern ukrainians should be left to themselves to decide what they want to do, whether they want to join russia or are they trying to disrupt these low separatists, the may president ial elections, what . Clearly disruption of the elections could be the case. If disruption means creating chaos in the country, then they have arty succeeded in doing that. I think the more serious allegation here is that russia is in fact looking to create an incursion to move into the east of the country. That is the big issue, i think. That would be a land grab. Is the disrupting their eu ambitions to join nato. Is interesting about the nature, and did we have at the same time if phone call between secretary kerry and the foreign minister of russia. Avrov said the ukraine must not be part of any block, it must eat a neutral territory. The sphereto do with of influence and cold war stuff. Just as easy for answer unfolding on the ground. Airbus has showed off its interior of the a350 for the first time ahead of its launch later this year. His companys weapon in its fight against boeings dreamliner. Jessica howard compares it to the competition. Msn2. It is a show and tell for airlines, a. K. A. , potential customers. Airbus offers superior level of passenger comfort. Boeing said the same thing when the dreamliner started flying back in 2011. How to these rival stack up . On inside. They caroline a cabin with of over five meters, means they will really be able to pack them in. The dreamliner has a max of nine across. It is just narrower than its rival. ,reathed easier on a350 flight thanks to a new aeration system. It changes the air inside the cabin every threefour minutes. Low cabin pressure at 6000 feet makes for more comfortable ride. Dreamliner said the same lower air pressure, to come up but are also equipped with special filters that suck up those smells from food or that guy sitting next to you who just took off his shoes. Taking cues from the euro disco scene, the a350 has a full lighting system that has 16 million color options. Not all in operation at once. Fancy illumination must be a theme because the dreamliner sports one, too. It mimics sunrise and sunset. Blues up, why do some want ever tend to lose. Want everton to loose . Se . Time in london is 6 53. Were going to start with a very sad story. Front of all our newspapers today. This is an image of teachers geldof, the daughter of bob geldof. Geldof. Aches her mother was paula yates. Her father the founder of whom. Own rats and band aid unfortunately, she was found dead yesterday afternoon. Her death is being treated not as suspicious at the moment. This is her mother who she lost to many years ago in 2000. Hern image of paula mother, i should say. Peaches has died. She was the wisest, wittiest and most bonkers of us all. Child. Beautiful how is it possible we will not see her again . You and i would remember paula yates. She was a revolutionary tv presenter. She was a partner of michael xs. Hins from in i have a story that is not as all serious. Received aple has greeting in wellington. A cheeky greek in new zealand. I dont know why were even doing this. How to lower the tone. It does. Prince george is the how does that not smack of colonialism . I dont know. Where is it going . Noticed inwhich i the sports section of the guardian today, moving away from ryans cheek. Blues, thehy do some answer is liverpool. Everton are finished. To become fourth in race to Champions League places, you might actually have to read manchester city, thereby handing the title to liverpool, his few are an everton fan, you hate the most. Would you rather everton come forth and liverpool winning the title, or everton coming fifth out of the Champions League and keep them from winning the title . Question. Big in of cheek from you both. We will see what is ailing the Worlds Largest smartphone maker. Stay with us. The u. S. Says russia is the master mind behind the latest unrest in Eastern Ukraine as proseparatists seized buildings in donestk and luhansk. The bank of japan avoids extra stimulus. Welcome to countdown. Bloomberg reporters are standing by across the world, ready to deliver the stories that will drive your day. Ryan chilcote has details about rising unrest in ukraine. John dawson is in hong kong today with more on the bank of japans decision after last weeks sales tax increase. Tensions heightening once again after armed men stormed government offices in three cities in Eastern Ukraine. Recedinges events russias annexation of crimea. The first group of armed men seized a government building in donetsk. They said they will have a referendum on the 10th of may where they will ask the people of the region if they want to join russia. Same situatione in another city. Federal Government Forces have taken that building back. Hansk. They in lu total population at the two about 10 million people. This is the heartland, this is where it happens. This is a bit of what we have seen before with crimea. The same thing, we had the building seized, calls for the referendum and then Russian Troops coming in to secure Russian Forces so the referendum could take place. The concern is that we may be looking at the same thing all over again. The ukraine have said this a pretext to move Russian Forces into the east of ukraine and at the minimum to disrupt ukrainian efforts at stabilization. Have a listen. If russia moves into Eastern Ukraine, either overtly or covertly, this would be a serious escalation. Andall on president putin his government to cease all efforts to destabilize ukraine. We caution against further military intervention. The russians are accusing the west and ukraine of escalating things with military activity in the east of the country. Presumably, these actions to take back the buildings, we know rkiv is dealinga the seizure of two buildings. Hundred 50 menat are working for greystone and are dressed up like Ukrainian Special forces. The Foreign Ministry is providing the evidence of this charge. Accusationggering itself. Rush is saying that the Eastern Ukraine and the people in these buildings are peaceful protesters. If there are more sanctions, were talking about sanctions against various sectors. That is correct. A socalled third wave of sanctions that would be directed at bush and financial services, the Russian Defense sector, asian metals and mining broad part of the russian economy. As with United States and european union, notably germany, have been threatening if russia was to go into the east of ukraine. Ryan, thank you. Company express a second straight drop in quarterly profits. Jonathan ferro is here. No divisional breakdown. That comes later in the month. Headline numbers, operating profit comes in at 8. 4 trillion. You can call the operating profit 8 billion. Everybody is calling it a slow down, down from a year earlier. Markettalking about saturation. There is a squeeze, isnt there . It is. Samsung is selling more of the cheaper phones at the entry level. This is where there is a lot of competition, especially in emerging markets. They are selling a lot of phones. 90 million, is it . There selling a lot. Look at their market share. It is pretty smart it is pretty dam good for smartphones. Was outlook, what are the big scenes . Where is the battle taking place in 2014 in the smartphone industry . Apple on one side and samsung on the other. The bottom line is, we are not all tech nerds. You can obsess over innovation and technology. Samsung has spent a lot of money on innovation. 25 of their budget is in research development. You can talk about finger and technology and smartphones. This year, only thing anyone is talking about is the size of the screen. If apple comes out and releases a five and a half inch iphone, that could be a big deal. Look at this stat. Some analysts are saying that 40 phones sold in china carrying Google Android at a minimum measure five inches. The iphone is four inches. This could be a big deal for the likes of china and asia. The s five, which is going to be inig phone, that could come september, traditionally the month of the iphone is launched. I could put more of a pressure and squeeze on samsung. The bank of japan and refraining from adding extra stimulus as officials assess the impact of this months sales site. Hike. Es tax Jordan Dawson is in hong kong. Good morning, john. 70 chilean yen is what 580 billion equates to. No surprises. The wording used, moderately growing. There were moderately stays the same. They have added to the same statement. The sales tax rise earlier this month is up to eight percent from five percent. This is what they call fluctuations in the economy. Statement, overall mark. Theyre on track and say theyre confident about reaching the two percent target of inflation after many years of deflation. The current inflation is one point three percent. No need for extra stimulus. By july, next years tax rise are see 10 heard many forecasting stimulus between may and july. It will be the First Time Ever that the bank of japan governors get a Live Press Conference. Look forward to that press conference in an half an hours time from now. A big breakthrough for Japanese Central banking as we go to that Live Press Conference. On the current account, what was the catalyst . Is really about overseas investment driving that fall. Electronics, iron ore, metals, steel. Deficit. S in a row of january was a biggest on record. They may go back again in march because april sales tax were hit. So far, the good thing for abenomics is that they have a surplus. Quite encouraging, two. John dawson in hong kong. Building on the success of tax city, Boris Johnson once the for capital to be the hub life sciences. European Business Correspondent Caroline Hyde is live at Imperial College, london. Good morning, carolyn. Good morning, mark. We have all heard of tech city now. To coin a new phrase, they want to have midcity. They want to add london in terms of expertise to the arty successful areas of oxford and cambridge in the u. K. To build in four the foremost area the world for life sciences, to take over the likes of boston. You can check out some of the labs behind me now. Hopefully going inside a couple of them. Dying my white lab coat. Currentlyng you why already the u. K. Has 50 billion pounds worth coming in file lifesciences and how it works, to grow that even further. Thanks, caroline. Stay with us for analysis of emerging markets with a p morgan asset managements chief Investment Officer richard to therington. Ti time for todays company news. The banks Wealth Management business in the region jump 38 in the last two years various the biggest pool since ubs started its operations in the region. In carrefours. At 1. 3 billioned euros in yesterdays close. Combined 9id a billion fine after a diabetes mayor medicine fell as much as seven pennant a 7. 8 in tokyo. Welcome back to countdown. It is 7 13 in london. Despite emergingmarket volatility, our next guest says emerging markets are still the place to invest. For more, were joined by therington. Alanis changed since january. Sentiment has reversed, hasnt it . We had nearly two years of outflows from emergingmarket equities. Just in last few weeks youve seen money starting to come back into it. Was behind the first change in two years . A couple of things. In the first place, valuation. People recognize that emerging markets are cheap. Pessimists would say theyre cheap for a reason. Coming. Equity market off its peak a little bit. People are looking for alternatives. Thereve denver well in developed markets and are looking for other places. Youve have done analysis and could have high double digit returns over the next 12 months. Back then up for us. If history is any guide, from these valuation levels over the last 20 or 30 years, those are the kind of returns that you have made from emerging markets. Lately, whenever you are at these valuation levels, people always say it is different this time. Usually, its not. High volatility, will it continue . I think it will. You have to accept emerging markets are volatile asset class. Theres nothing new in that. Volatility on the upside, they get very nervous about it on the downside. Use a look at companies, not countries. That is important, isnt it . Well, obviously you need to be aware of the macro background. But ultimately, as an equity investor, youre buying earnings per share and dividends per share from companies. Youre not buying gdp. Where are we finding the best evidence of that within the emerging markets face . A good example of that over the last 12 months is you have seen how well things like Internet Companies have done. Macau gaming companies. More cyclical areas like car companies, domestic consumption plays will come back into their own. Comparisonsnt draw between the two . Technology stocks are having a bit of a rough time. At a good year, didnt they . Sugared up parallels between emerging markets, tech stocks and clearly, theres a relationship. I think it is more from emergingmarket perspective. Youre seeing people rotating into the sectors that have underperformed. People looking for what is the not what wasity, the opportunity from last year. How this election cycle affect our thinking, richard . Many of these big emerging markets have elections. India started yesterday. Yes, i think people generally overestimate importance of political change. Much is really going to change in india postelection. View, sentiment point of a new government generally get people more optimistic about the future area i think whether youre talking about india or indonesia or even the recent local elections in turkey, it gives people more confidence about the future. What about the future. Reduce emerging markets are a reliable source of income . Think people have tended in the past to think about emerging markets just as a kind of Capital Gains story. Get highyou can dividend yields in emerging markets. Tolong as you are prepared be diversified. We have seen the currency risks. Yes, it is an interesting area. We focus on it quite a lot both him and return standpoint and also as a means of testing corporate governance. Dividend is pretty good. What are your biggest risks when it comes to emerging as many fear14, russia could invade Eastern Ukraine. That is clearly a risk. If you have international tension, whether it is geopolitical or macro economics, emerging markets will tend to suffer pairs that is one risk. Another is currency. Weve been through a. Of currency turbulence. E think that has peaked actually, currency was last year story rather than this years. Clearly, that would be another issue. Will bea final point china. We are relatively optimistic about china, but china continues to disappoint, that will weigh on investor sentiment. Richard, always good to chat. Up, we will have more from the launch of midcity. City. Med i mark barton. This is bloomberg television. Seven 22. Building on the success of tech city, london mayor Boris Johnson once the capital to be a hub for lifesciences. Is our european Business Correspondent Caroline Hyde. She is live at Imperial College london. Areline, how important lifesciences to the economy . Wealth ofto have a expertise across the board. Look at the labs behind me. Theyre helping drive forward the development of drugs, the development of breakthrough issues in terms of illnesses and disease. Issue as to why we are driving this forward in oxford and cambridge. Now, london wants to join the party. Party,wants to join the particularly with the flamboyance of Boris Johnson and his pr tactics. He is deeming it med city. Already, 50 billion pounds has been brought through in terms of revenue for the u. K. Almost 170,000 people are employed. Perspective, that is double the revenue that one of the biggest supermarkets brings into the u. K. We have the expertise. It is now about bringing london together and cambridge and oxford you make the u. K. One of the driving forces in the world to overtake the likes of boston to help drive forward the curious for certain diseases. Why would london be a good addition to the expertise of cambridge and oxford . It prove a good addition because of its proximity, but also the wealth of universities that we have already in london. We have Imperial College here, we have University College london, as well. Kings college. The expertise is phenomenal. They want to bear, to add to oxford and cambridge. It was the u. K. That founded penicillin and the like. They want to build on that sort of expertise, that sort of rich history that we have in curing certain illnesses and bringing london as well. When youre looking over from internationally, it does seem that the three are very close. We can form a cluster, a socalled Golden Triangle is what theyre calling it today, mark. Other signs of growth for the uks lifesciences industry . Interesting. There certainly are. Seen theuddenly s inest initial share sale registry. It raised more than 200 Million Pounds overall. It is helping formulate ways of tackling allergies, particularly to cats. It is being followed swiftly by another Company Called horizon discovery. It, too, is helping breed cells that are being used in the use of drug testing and the like. It am a too raised money on his mother listing raised earlier. We are getting that building up momentum. Interest from investors should be a virtuous circle. What are the challenges to building such a hub in london . Say rents many would are going to be one of the key challenges going forward. Its prominence there. Is it too expensive . If youre talking like football teams, especially when you have rivalry within one city, what about Imperial College looking at Kings College as a rival for money for investment, in attracting top students. S and generally, i think today is all about consolidation, about collaboration, about working together, about london working with cambridge, with oxford, to just build an area of expertise once again. Back to you. We often rank countries by gdp, but what about by social progress. We will show you which country tops the list. It may surprise you. Welcome back to countdown. Lets get over to Jonathan Ferro for the fx check. Your second bestperforming major currency so far this year is the ozzie dollar. Out towards the end of the year. Invest tech, one of the best forecasters over the last four months. It could fall down to . 86, that is despite signs that the easing with the Australian Central Bank has ended. The weakness comes from outside of australia. A u. S. Recovery driving the dollar higher. Perhaps more significantly, slowing growth in china is weighing on growth and appetite for commodities out of australia and weighing on the ozzie dollar through the end of the year. Banks. The United States says russia is behind the new unrest in ukraine. This is called a very serious exhalation. These official buildings were taken over. The white house says they were paid provocateurs from outside ukraine. The bank of japan is refraining from adding extra stimulus. The Central Bank Says the economy continues to recover, even with last weeks sales tax increase. Settles the first u. K. Lawsuits filed over allegations that the bank manipulated libel. As comes weeks before the trials the scheduled start. It wouldve featured testimony from former barclays officials. Countries by gdp, but our next guest says measuring them by social progress provides a more complete picture. The more some more recently released program for social progress put a hundred 30 countries to the test. Our guest is the resident and of a foundation that measures the social progress index. Thank your joining us today. Tell us about this index, what it measures, what questions it asks. As you mentioned, we have been very good at measuring economic progress. As a result, we have focused on economic rye grass. We havenot focused, made marginal our social progress. As institutions have suffered, not only in the developing world, but in the developed world. We think it is time to bring these two indices together, gdp, are measures of economic progress, together with our measures of social progress. Paints a pretty clearly. This index does not automatically lead to social advancement. You have to look at some of the results. The china and india. 6510 ,onomies have grown but theyre very low in the rankings. Dimension is how well societies meet the basic needs of their citizens. The second is the Building Blocks for the societies to advance, and the third is opportunity. Countries may meet the basic needs of the citizens of but opportunity is not a strong. We are very strong and opportunity in the u. S. But we are falling down in the middle. Some countries are lower than you might assume. Usis sobering for those of who live in the developed world. New zealand is top of the charts. Is been pointed out to me that new zealand made a point of wrestling with its social challenges, its married population, for example. Should government start looking at indices like yours,ather than looking at pure gdp marry the two . We should. We like to believe that all aestheticians, business, civil. Ociety it is a tool for leaders and citizens. It is a tool for business. As a tool that everyone can adopt to really drive the social progress that is ultimately in their best interest. World for mr. The bring people together from all tots of walks of life advance Entrepreneurial Solutions to some of the worlds biggest problems. With sort of solutions i were talking about here . To these going back categories in the index. We are seeing social entrepreneurs who are actually addressing these big problems of society, problems in the basic needs area like water and sanitation. Problems in the central area like education, and problems of opportunity and rights. Organizations like a u. K. Inanization that has worked Subsaharan Africa for the last 20 years. It is really helping to advance opportunities for girls education. Ultimately, they will be consumers and citizens. They will have stabilize the country and help make it productive. What about Happiness Index . It is often talked about. Is it time to include it along with gdp . Should be included Happiness Index . I think it is actually being done. Bhutan lead in Happiness Index. It is actually more closely correlated with opportunity than with income. Of ours me think declaration of independence in the u. S. , where we are endowed with the right to the pursuit of happiness. Suggests to me that the pursuit of opportunity is clearly what gives people meaning in their lives, makes them feel fulfilled, makes him feel secure in their environment. That is where we should be looking. Can be a bit woolly, cant it, if you equated to opportunity. That is a bit clearer. It is something that is actionable. If you take a snapshot of your me at any given day, we may not be particularly happy, so all of these indices, many of them rely on surveys. The service actually may not be the best way to gauge what is in the best interests of citizens over the longterm. Sally, good to chat with you. President as ceo of the skol foundation. Most of the robotics on display have an Important Role in manufacturing, some are just for research. This jumpy little kangaroo is one such example. This is inspired by the real natural role model. Is elias knubben. I am the designer. The kangaroo is a very interesting and sympathetic role model because it is very energyefficient. Is able to store the energy of and retake it for the next job. It is able to get faster and faster without using more energy. Jumping is really something very complicated. It requires a lot of control. Interface, it can be mounted on the arm. Using the signals, we are able to detect several gestures. Those gestures are sent to the kangaroo. The robot is not for sale. It is just a concept at the moment. It will try to learn from nature and bring our knowledge and products to utility sales. Youll see some pictures on your screen of the bank of japan ceo. There are framing from adding extra stimulus. Policymakers did say that japan can maintain a recovery, even with last weeks increase in sales tax. Economists still expected the by july. Ost stimulus there is the boj governor here he took a rhoda hirohito will tellming up, we you which ice cream shop is giving away free cones around the world. That is coming up next in hotshots. The difference is visible. The ukrainian authorities in the areon and Ukrainian Police taking measures and actions to normalize the situation on the ground. Successful. Since this morning, the administration tilting in Administration Building in khar is back under ukrainian control. Thehat is happening in other two cities, donetsk and lu hansk . Corrected looks like weve lost the and action. Well come back to him in just a second. While i have you here, analysts are likening it to what happened in crimea. Is that a fair supposition . Well, theyre saying it could be like what we saw in crimea in the sense that crimea may have been a template. You have government buildings orzed and then armed groups the legislators of those regional governments coming in and saying were going to hold a referendum to join russia. Then at some point Russian Services or russian militia appeared to provide security to have the referendum and then rough and and then Russian Troops come in and annexed the area. In that sense, this could be very similar to what we saw in crimea. Certainly ominous, because this is how crimea began. Adjuster the ukrainian Prime Minister speaking. Tell us what is going on in donetsk. D the building is under control of ukrainian authorities. Separatists are still controlling the original administration. However, there greets to give up one of the buildings. Sayingeard from someone ukraine must stop original white house saying ukraine must stop what theyre doing. What do you say to the russians . Yesterday i had the chance to ov. I toldister lavr him that the big number of those people who are now protesting in Eastern Ukraine are not local citizens. Most of them have come from russia. Think about not to protecting them in Eastern Ukraine. The scenario that was used the russians and other parts of the former soviet union, for example, in georgia. To control position controlin ukraine the situation in the ukraine. Is not a military preparation, is a police that was involved. Calmolice were involved to the situation and normalize everything. Speaking of foreigners in ukraine, there are 150 u. S. Specialists, military aecialists, working for private Security Firm called greystone with links to the u. S. Ilitary this is according to russia. Is that true . No, it is russian propaganda, nothing else. Theres no proof of this. We have no information about this. However, we do have information and we have artie deported a number of russians who have been in the Eastern Ukraine provoking a situation. They are violating ukrainian laws. Ukraines acting foreign minister. Thank you very much for your time, sir. Thanks, ryan. Lets move it on. To talk about the macro themes of the day. The bank of japan governor kuroda is speaking now. It is live. Of expectations at the bank of japan . Youre talking about that news survey. Right now, dollaryen back to 103. One or 2. 87. Should gradually fade from the summer. Between the end of this year and the end of 2015, it is a central bank is looking to act right now. Theyre certainly holding their cards close to the chess at the moment. Theyre not giving an obvious reading. Supply and demand cap has closed considerably. Theres nothing here right now this is the central bank looking to act in the next coming months. Theyre not giving away much right now. Is it going to fade over the summer with the current policy . To be u. S. Monetary policy that moves dollar yen, not Japanese Monetary policy. Critics were talking about ozzy dollar earlier in the show. Dollar. The aussie fed minutes from the last minute will be released tomorrow. Coming up, tescos turnaround and Deutsche Telekoms german advance. We will talk to about the stocks to watch. This is countdown. The boj refraining from adding extra stimulus today. When will they add extra stimulus . Think . At do you many penciling in an increase in stimulus at least before july. It probably will get one before july. The Central Banks are all playing a game of chicken and eight. No central bank wants to move first. They want to keep their ammo there just in case you need to react to unexpected events. Think you will see events from the boj and the ecb in the first half of this year. Is tesco. Ck you like it is not a favorite among investors. It is down 24 in the last year. They luster cfo. I think that leaves phil clark is a last man standing on the original board. You are a fan. I am. I may neither fiveyear loan. Got itst really strategy right. It is suffered from a big discounts. Behink now it is going to focused on delivering value. Think it is getting a strategy. It is a big ship to turn around. It does take a long time. It is focusing on the u. K. I wouldnt want to be sainsburys. It is a Good Opportunity. One company that has been given a number of years to turn around is mms. Sales figures delivered on thursday. Sales up five percent this year. What can we expect from them this week . I think theyre wellpositioned for food sales. All eyes on its fashion and whether it can get its strategy right. It seems to be a bit of mixandmatch. Food is the key here. I think youll see a big expansion in its stores. See a potential upward trend in the dominant food market coming out of the better retail figures in the u. K. 20 seconds on the outlook for equities today. Big drop yesterday or one percent down across the board. What do you think . I think you will see increased volatility in the next couple of days, certainly before the u. S. Earnings season kicks off. The outlook for this week is volatile. Thanks, joe. That is it. On the move is next. See a nice and early tomorrow. Have a good day. I will see you nice and early tomorrow. Have a nice day. Welcome to on the move. Im Francine Lacqua at bloombergs European Headquarters here in london. Were Just Moments Away from the start of european trading and our markets team has everything covered from companies to currency. Manus. Lets kick things off with you futures are at saying today. Geopolitics is back at the top of the agenda. I think it is geopolitics and evaluations. Are we in a Technology Bubble 12347 do you see it as an that you want facebook is down 20 . People are spending more on online advertising. Is it an opportunity . Are you prepared to be brave . If you look at the technology industry, it is the consumer side that is under pressure. The it is the old Enterprise Companies that are not under as much pressure. The whole mood about whether in a Technology Bust is a bit early to call. Were certainly seeing a selloff. Of course earnings season kicks off a little bit later. Samsung talking up technologies. Very much in focus. We expected a little bit of a slowdown. The key one here is it is down from the year earlier. A lot of people saying look, the market is saturated. There is two things to talk about. Price point and entry level pricing. The cheaper smart phones weighing in on some of the