Transcripts For BLOOMBERG Countdown 20141001

Welcome to countdown. Onat a 6 00 a. M. In london this wednesday morning. Today was a day of commemoration in Hong Kong Thomas at least for the beijingbacked authority to the 65th anniversary for the peoples republic of china. Demonstrations against chinas influence in the city continues. They call for the citys chief executive to resign and a successor to be democratically elected. They spend another night on the street undeterred by both thunderstorms and statement from authorities saying their demands wont be met. For more, we go live to one of the protest sites in hong kong shari isoomberg news standing by. Whats the mood like there today . Right now, it feels a bit relaxed. People are resting under their umbrellas. This is being called the umbrella revolution. Last night protecting them from the rain and today the sweltering sun. The mood is pretty relaxed at the moment. They are gearing up for a long day and it looks as though it is organized but there is a system. People have been supplying protesters with watery and crackers, anything to keep them going. The number of people given to publice because its a holiday. Weve already seen families coming out with children so we are expecting more people to show up. Already, behind me thousands and thousands of people. Protesters sitting on the ground. Shery, we heard from the chief executive this morning. Whats the reaction to that we are you are . Right now, we are speaking about a more relaxed move but earlier in the morning when they were giving out a speech on chinas national day, he was holding a ceremony and said one country two systems would benefit hong kong. People were not very happy but it was border tense. One country two systems will not work if china interferes with the elections coming up. They want to beijing to drop plans to set candidates for the hong kong elections in 2017. They also want him to step down. They are willing to wait here in the process all around hong kong until they see some kind of. Esponse from the government midnight tonight hong kong time is the deadline for the response. Shery ahng news live from hong kong. Theets take a look at markets in asia. David inglis is in hong kong looking at the effect this is having on the markets. Good morning. Lets keep in mind that hong kong and china both having a national holiday. Thats why we are expecting a lot of people to go to these protests. Lets get back to the markets. We do have some of the other major markets up and running in asia. With opening a little over some kind of list midmorning. 110laryen shot up above since midsummer. Its not been doing too well. We are still down. This is released from quarter by the boj 10,000 japanese firms. Generally it was good, better than expected. The headline number was 13 and we were only expecting a reading of 10. If you look across these other industries, some are doing better than others. We were just talking about the japanese yen. The general assumption right now im a lot of these companies is 104the yen to be at 100 now. 110. E at it does benefit the exporters but it also does the opposite for those who import a lot. Among those who have the lowest in business sentiment, papermakers utility, Petroleum Companies in japan. We also have another piece of data coming out today, chinese pmi. Really, it was nothing special. 51 point one still showing expansion, more optimistic than pessimistic, but no change really from the previous month. It was just a tad higher. If you do compare that to the median forecast, steady as she goes in terms of the chinese economy. And it is is shut golden week. The big stories were following are the ongoing protests. You were talking with shery, a 10 minute walk from the bloomberg studios in hong kong. David inglis joining us there from hong kong. , its ipo day for zalando europes Biggest Online fashion retailer. It has been priced at the top of as range valuing it as much five point 3 billion euros. They kickoff one of the biggest german sales in almost a decade. International correspondent hans nichols joins us from berlin. This is one of those bellwethers. Theres obviously a healthy appetite out there. Just how going to see healthy the appetite is among investors for shares in European Online retailers. In the case of rocket, they are in everything and international. Focusing on the european side of the equation, we know what happened with alibaba in the 40 pop. If profitup even has not been there. Rocket seeking to raise one. 4 billion euros and a little bit thenthe line, zalando, and tell a columbus later ron. They are just fashion but they think of themselves as fashion, tech, and retail. They started out as a flipflop company. 16 brothers invested have a stake. They will be priced about 21 euro per share. We will see how many millionaires there will be if it really pops, taking off like zalando. The brothers may be worth one billion euros after today. S, you read through the prospectus. Good for you. Theirs their arguments of ambassadors . This is a tough space, isnt it . Its a tough one to win. One, growth. Increase in look at whether growth has been going back to 2011. At that point revenue was about 500 million euro and now they are up to 2 billion euro. You are talking about 40 potentially 60 profit margin. Look at the entire fashion industry just in europe and its around 450 billion euro, a massive market. What slice of the pie will zalando get . Will they be continuing to grow . They are only in 15 countries, mostly european, and most of their profits are in the german speaking countries. They go,ee how far what their expansion plans are. We will get a look at investor appetite and i might buy you a pair of flipflops. Form always in the market a pair of flipflops. Hans nichols in berlin. Cranny. Del you wear flipflops. Why do you get the special flipflop treatment . Email. E sending him an join the conversation on flipflops or anything else on twitter. Flipflops Something Else in other parts of the world. We will let you tell us what they call them. We willd to the break, have more on the strong dollar and what it means for the markets after the break. Stay with us. Welcome back. I minutes cranny. News. Ow for some company a german privacy regulator ordering google to change the way they handle personal information. The authority is the state of hamburg or during the tech giant to limit how they can use data to find out customer personal preferences including marital status, sexual orientation. The company has been ordered to modify its privacy policies or users can determine how their data is used. Ebay will spin off paypal to create two separate companies as they step up the use of smart phones and computers to pay for purchases. An independent paypal will be worth 47 billion aced on the valuation of rival companies and alliances with retailers and other financial firms. S fromtrying to axicces Mainland China seeing restriction amid protests at hong kong. It was an accessible for some parts of the country according to a group that monitors internet censorship. Currencies,anies to the u. S. Dollar just had it strongest quarter from 2008. For more, lets bring in senior fx strategist from commerce bank. The doves are not attracting much attention as far as the u. S. Dollar is concerned. Risk tolerance is to the upside. Even though people think its a going higher, it could go higher than people think. With kind of interesting for me at least is if you look at what the fed is saying compared to the market expectations, the short end of the u. S. Yield curve, its quite obvious its being very in place at. Look at the fomc projections themselves, theyre basically saying it is by summer 2016 that rates will be one point 25 . There is scope for a pretty aggressive correction which will lead to a broadly stronger dollar from here. You psych this sort of slow, gradual move by the fed. Small . So you do not have that ratcheting effect. You think we will get a timesheet 2015 and rates a punchy 201 . From a yield curve veryective, it is complacent in my opinion. If you get a good market positioning, literally we still have a very large dollar short position until july of this year. Remember. We are coming from seven years of having a very, very structurally weak dollar. With every other Major Central Bank still renting money, its hard to avoid the conclusion that the Dollar Strengthening of the dollar index which is above 70. It any figure above 70 means an asset is overbought. Its trading at 86. Its been above . 70 august. What is that telling us now . Weve had an aggressive correction but its been for good reasons. The two sides of this equation, its pretty clear to me now the ab, their key target is Weaker Exchange rate. We can forget about that. With the data weve seen from the u. S. , its pretty much clearer a perfect storm is building for eurodollar. I would not be surprised to see a trade there by yearend. Looking ahead to the ecb meeting, italy cutting its growth forecast. They are pushing back its balanced targets. Could a weaker euro be enough to help turn around economies like italy, structural reform being much talked about . Whats the medicine here . Talking about it is one thing and doing it is another and thats the problem with the eurozone. We talk about making tough choices. Thats been the case for a long time. In italy, this is a country thats basically had no reform for about 30 years. Certain they will help. Rate cut was perfectly aimed at the Exchange Rate itself and its been successful thus far. The question really for now is certainly if you look at the inflation data we had yesterday at 0. 3 , very low levels, its quite clear that the markets are starting to price in quantitative easing from the ecb which we think could happen in the first half of next year. Theres a story this morning that draghi is trying to to buyge his cohorts into junk bonds. Ae headline like that is pretty hard sell to the germans and even the north europeans. Is that what we need to happen . What type of asset cap Security Program do we need to shift the momentum . The initial Program Announced could be a pretty successful program. You can accuse the ecb is many things but not in action. They are out there trying to do what they can. They are not moving forward with quantitative easing. You might be a little slow but they do eventually do it. The key problem here in the eurozone zone is the banking system. Cap this credit Mediation Program and it could be successful. Is there more scope to have the ecb surprise us to the downside . The we have had so much in recent months. We are just getting abs details. Itthat would by and large be. We will have to see what the uptake is in terms of the decisions. To be fair though, we did see it was rather poor. Peter, stay there. More on the currency markets. We will talk about the yen. The First Time Since august 2010. Peter kinsella, senior fx strategist from commerzbank, staying with us after the break. Welcome back to countdown. Im manus cranny. Still with us, senior fx strategist from commerzbank, peter kinsella. The yen weakening below 1 10 of the dollar, the First Time Since 2008. Of me. Very unfair its traveling lower. A lot of the yen has already come out. Where are we . What happens next . Its not just dollar yen but euro yen as well. Are i. T. Dev very different trades to look at. There are two very different trades. Wire we seeing the yen weakness and why now . Recent ecb easing that we saw, risky assets and you saw that lower yield little bit. More to the point, if you look at most of the more recent japanese data, Second Quarter gdp etc. It is still at quite low levels. Doj may be forced to do even more easing. Its kind of becoming a bit of a oneway trade. It is very easily doable, i would say. Thats pretty much where we are going there on that trade. Can we talk about where we are on russia . People familiar are suggesting that the central bank may be considering capital controls if it continues to intensify. Do you think its likely . Its unlikely shortterm. The capital outflow it is slow during q1. About 70 billion shed. My assumption would have been they would have done it then rather than now. Capital outflows do not seem to be that significant. The sanctions you seen him posed are actually starting to have an effect and thats pretty clear. Its becoming very expensive on a one or two year tenor. Likewise it is basically inverted. They are getting close to a recession. Its a pretty difficult combination in russia and the ruble as weak as a reflection of that. You talk about the dollar side of the equation but what about emerging markets with the asset class . From august and in every major currency down against the dollar in the last month. How do we trade emergingmarket assets . Is got to be selective, to be frank. Currently it is underperforming and when you see Commodity Prices fall. Thats exactly whats happening. Lira, they are the obvious underperformers and thats been the case. Is not touestion become too bearish on them. Thats what the easy thing that comes to do. Remainder of the corridor, we will have more of a dollar bias and we will see a slight underperformance. Any favorites . 1130 are trading at around to 1160. I think the west turkish lira could move a little higher. Peter kinsella, senior fx strategist at commerzbank. U. K. Supermarket chain facing stiff competition from the discounters. We will tell you how they are fighting back next. You are very welcome back to countdown. Lets look at the fx market. The Asian Session is over. Dollaryen and we just had a conversation with commerzbank. Nexteady for 120 in the few years. Dollar yen just getting back to the 110 level. Euroyen is the other part of that argument. It seems to have dissipated in importance. Lets have a look at the aussie dollar because its a 12 punch. Have a look at this chart. Levels that we have not seen since january of this year. Had overall Dollar Strength and missing estimates this morning coming in at 1 10 of 1 . The market was looking for a number and again the momentum building here, bloomberg strategists have said get ready for aussie dollar that could get. 8545. O about that would take us back towards. 8660, the january low. That is the bloomberg strategists lviewview. Jeered by protesters after arriving at a National Day Ceremony marking the 60 fifth anniversary of the formation of the peoples republic of china coinciding with a sixday prodemocracy protest. Hundreds of thousands took to the streets once again last night in hong kong demanding that his replacement to be democratically elected. Earlier this year, italy had predicted 0. 8 growth but now sees gdp shrinking by 0. 3 percent. Renzi has also pushed back his inance target as they remain recession. The cdc has confirmed the first u. S. Ebola case in dallas, texas. He traveled from liberia and arrived in the u. S. On september 20. He is now being kept in isolation in an intensive care unit. Governor hasl bank been speaking to bloomberg tv and the are warning that the near zero Interest Rates in developed markets may distort prices without any real gains. Weve had ultralow interest point, it onlyme goes so deep in terms of asset to getand any attempt out of this has an immediate effect on asset prices. Its a price that we are willing to pay or to get going, but if real activity is not responding as easily to monetary stimulus because of other impediments of infrastructure change, you may have the distorted prices without the gaining. Sloww the sainsburys down. We look at sales of the uks secondbiggest retail chain have slowed more with Bloomberg Intelligence reporters. We focus a lot on dave lewis, the tesco ceo who has only been there for one month but its easy to forget sainsburys ceo has only been there less than two months. Going to have some pleasing samestore sales numbers, is he . The expectation is for a drop of more than 3 , the worst unadjusted figure ever possibly. Even in the dark days in the early 2000s when they were getting like for like increases harshly because inflation was higher. That was one of the big problems, overall food prices are barely moving up and possibly falling. You are running up and down the escalator trying to get sales increases. We know its a story about the discounters. I was amazed to read a statistic that more than half of u. K. Household now shop at aldi and little. Why is a gaining such traction now . Obviously one thing the quality as well. Most people are now convinced that the quality is good enough and this is one thing thats really frightening the supermarkets. They all have these budget rants which were originally there as a discount fighting brand but the quality of those brands is often not as good as what little or aldi has in their mainstream product. Some people are substituting that. It is not just one part of the shop they are discounting but every single part of this. Back netto, bring the danish jv. You have mark sand spencer simple stores, sainsburys, in t he tube. . Hat will it do for sainsburys what does it add . They cannot directly fight the discounters but they think theres room for another chain that would be slightly different with much more fresh fruit orientation than perhaps some of the others. They will try to do it in an area where sainsburys is relatively weak, mostly in the north of england. They hope it is taking shoppers away from their mainstream competitors well it will not necessarily hurt sainsburys itself. Whos in a better position, tesco or sainsburys . Is down to about 16. 2 . Whos in the better position to tackle all of these issues . Difficult to say. Tesco themselves have identified the fact that the very large stores of which they built so many in the late to thousands are particularly disadvantaged at the moment. People do not want to do the very big shop and they do not want to be tempted to buy nonfood. , in that sense, has more of what you say are the than size stores for today tesco has. Maybe in two were three years of income starts rising it will flip around. S Bloomberg Intelligence Charles Allen. He will be back with us when we get the numbers at the top of the hour. This may be set to revolutionize the way that cannabis or marijuana is taken for those suffering pain. Elliott gotkine has this report. Aviv drug lab, medical marijuana is getting a makeover. It is moving to a new 3dprinted hot puffing device that will not get you high pot puffing device. It is a cannabis inhaler that has a resolution all while using the raw cannabis without any additives which allows us to penetrate existing regulatory systems today. No expensive clinical trials. Uessing how much cannabis they need to reveal pain. They hope the real money spinner will be this, a cannabis inhaler for home use. They hope to have it in israeli homes next year and into the allimportant American Market one year later. 1. 4 billion worth could rise to 10 billion by 2018. Does the inhaler actually work . Injured invy seal lebanon was one of 10 israeli patients to try it. I would spend whatever it takes to have this device. To takeme decide how care of my health and be much more relaxed on the outside. The doctor overseeing the trials says it could change marijuanas image. Doctors reluctant to prescribe because of the stigma and the actual need to smoke. From now on, everyone is going to look at it as a medicine as opposed to a substance that people use. With approval in israel eminence, they look to raise up to 20 million to boost production of the device. If all goes well, they plan to apply this to other controlled substances such as opium. Elliott gotkine, bloomberg, tel aviv. 6 40 a. M. In london. Still to come a day of celebration shadowed in beijing as authorities commemorate the birth of the peoples republic in china. The prodemocracy protest continues in the street. After the break, we are live to get the business angle of the continued destruction. Stay with us. Welcome back. I am mark barton. Time for todays company news. Microsoft has revealed the first glimpse of its new operating system, windows 10 aimed at businesses that shunned the last version is being confusing and hard to use. It will run on desktop devices and allow separation between corporate and personal data on individual machines. Optionas a gold color for the fullsize ipad in an effort to boost a category that is supposed to be a decline in shipments. They are expected to have the larger ipad unveiled later this year. Sales have declined for the last two corridors and they are reviewing sections. According to reports, they may shut down the ondemand Video Service is a buyer is not found. Secondbiggest investor supporting a merge between brazilian unit area and it depends on boosting revenue and latin americas biggest market. It comes as telefonica agrees to acquire brazilian vivendi broadband acquire last month. Company last month. The sixth day of prodemocracy protests underway in hong kong. They want to be able to elect the newest chief executive without beijing approving the executive first. They are in major shopping areas and roads into the Business Districts are blocked. Losshave the worst monthly in more than two years. For more, joining us now the managing director of perry , david. Can you give us a sense of just how significant to the future of this Financial Center these protests could be . It will depend on how prolonged it is. We are getting to nearly one week now. Ultimately, we do not see hong a golden gate for china. We have the Hong Kong Connect Program coming online tween the Hong Kong Stock Exchange and shanghai solidifying hong kong where we had big fears of there being an international board. It looks like hong kong will be taking up that mantle which instills us as part of the gateway for the longterm. That heard from loreal they will be one of the First International companies to ban the stock traveling to hong kong. How disruptive for everyday business are these protests . Whether it is fortunate or not, we have lived through sar. Rstype is another sa event, its great to get exposure back to hong kong. We had exactly the same thing. Extreme. Ing to an we had Foreign Companies leaving. We had traveled bands to hong kong. We may be able to have parallels there. If you lived through it and did not take up the opportunity to gain exposure, this could be a mini event for investors. They are seeing the weakness as a buying opportunity on hong kong stocks as the opportunity. What do you see when you look at the 7. 3 loss on the hang seng. What does that mean to you . A unfortunately this comes at time where there is an accumulative event where we are facing headwind which is forward loading expectation of the differential for the u. S. Dollar. The u. S. Dollar firmness if you 1, a lot ofrp, qe it sloshed out here because they do not need to check the currency. We have already had as a portion of the asset inflation, some of that money coming out here. If there is the tapering of that money and then the differentials, we are already facing those. Downd already lagged preprotest and that was friday when people knew it was coming. You had some uneasy aspect of that going into the weekend but breaking down through the 200day and a touch into the psychological, we did do a test but we did not hold it. It did give us a better idea that some of these technicals, particularly 23,000, did hold. This being the prolonged aspect of what the effects would be for the cash equity markets. We have a purchasing manufacturers index sentiment out overnight, the official. Perhaps suggesting then the international exporting picture looking better than the domestic . Is that still where your concerns like . Tale but int of a certain respects they have been say and itsve a not liquidexpansion protected. They have been looking for easing measures and they have made it quite clear in their actions that they will only do the micromanagement heart of it. These readings where you have the new orders and orders that were still subdued but export expansive, thes mainlanders are still having issues and acceleration of growth. Gavin, thank you for joining us. Gavin parry, managing director of Parry International trading. Taking over at chanel fall fashion show. Attempting to empower women in todays newspaper segment. Welcome back. Its newspaper time. 6 52 a. M. Telegraph, to the over. Treme fitness fad is apparently we do not need to exhaust your self anymore. Its all about moderation. Jennifer aniston and gwen for exercisere big and moderation instead of going full throttle. Forwen stefani are moderation. Excrutiating the exercise. And there were studies about doing too many sports because of the level of acidity in your tee th. Posh nosh. I thought we would do a little more food. Saying to eate your way out of a recession. No exercise. Cheese up 14 in terms of sales versus 2013. Wine and champagne up 7 . Dry, aged beef falling. Inyou can stick artisan front of anything, it will outsell 30 . What the science ar what definse artisan . More flour. Walnuts, raisins, focaccia. Feminism,he rise of giving a rousing speech at the yearend, now we have Karl Lagerfeld at Paris Fashion Week at chanel and he staged this at the end like a feminist rally. Its meant to be Karl Lagerfeld showing his support, his own plaque heard over all, he for she. This is a really good month in terms of feminism. Empowering men to empower women. Champions league continues last night. On ourht i would focus city rival, manchester city. In the second game, they did manage to be roma. This is the chap everyone is talking about, francesco totti. At the ripe old age of 38 years and three days overtaking the record of a man who used to play for manchester united. Totti is a bit of a legend. We were talking about buffers e arlier. Buff. No buffers. [laughter] hes looking a bit buff this days. Well done to totti. City playing two games. Well done. Youmoral of the story, might win your Domestic League but champions are finding it a lot harder. Days. Three i still have a chance to score in the champions league. [laughter] you have very lucid dreams. Buffering. Younger every day. Like george osborne. Join the conversation on twitter. Im sure there it is. Yay she gets her own. I need a buff graphic. Manus, go to his twitter account because theres a new post. Its rather buff. More details from sainsburys when we come back. The cities leaders call for calm as more join the democracy sit in. Survey saysn assessment among manufacturers improved. Onlinethe biggest retailer of clothing starts today. German techhe market. Welcome to Charles Allen countdown, i am anna edwards. The largest chain of supermarkets in the u. K. Just relay seen just releasing retail sales. Sales, a decline of 2 . Analysts expecting a drop of 3 . The third consecutive quarterly drop. Thats after nine consecutive years of unbroken growth. But not as big as analysts estimating. Been speaking and says the market remains dynamic and firstly competitive. Fiercely competitive. All you need to talk about are the german discounters. They are suffering from the where from the land alf of the household shopping saying they are cutting prices on thousands of projects products. Thesainsburys entering budget market. Loop desperately trying to hold back the tide. Manus . Breaking news on tesco. A blackng they have hole of a quarter billion pounds. This morning, the sca starting a probe. The u. K. Regulator going to have the most recent piece of news on this. Short statement coming through. They have commenced a full investigation following the statement of expected profits for the first half. Deloitte has been appointed to give an independent review. Many will be waiting for their investigation and now the sca investigation. This focused on profit forecasts. Was how fartion back this went. Was this something that went back further . Ceo said he was focused on this recent time. If the investigation further back. That sort of size and scope has yet to be done. That is why analysts have said they wouldnt want to get dont like tesco until he unveils his strategy for the u. K. Sharese took over, are down by 17 . He has had a tough month. , since of sainsburys taking over, shares have fallen. Sainsbury is one of the most shorted stocks. That is going to be a bit of a reprieve in terms of beating the numbers. Ofking about the format sainsburys and what they have said to us, in terms of what they are opening and developing, they hope to open about 75,000 square feet by the end of this year. Changing the shape of the Company Seems to be the folk this focus. Refurbishing 10 Convenience Stores. , they will deliver around 750,000 square feet of new space. Including two new Convenience Stores per week. Interesting what Charles Allen was saying earlier. Might be better placed because the shoppers were not shopping in the massive stores. Or three years, that trend may change again. It is a constantly evolving industry. Lets move to one of the other top stories. The day of commemoration in hong kong. At least for the beijing backed authorities. The formation of the peoples republic. Demonstrations against chinas influence in the city continue. Protesters calling for the chief executive of the city to resign and his sister has her successor to be democratically elected. More, we can go live to one of the protest sites in hong kong. We are joined by sherry and. Anne. What is the mood like . I am standing in the heart of the occupied district. Relaxed, vested even at times. I have been here for about three hours. In hongpublic holiday kong. We are seeing people from all different walks of life. Families bringing their children. Kids running past us right now. It may look a bit disorganized at the moment. You can be assured all of this is very systematic. Are heading out supplies, water and crackers, in order to help the protesters. Thousands of protesters stretching far back behind me, surrounding the whole area. They seem to be enjoying themselves. It is a different atmosphere from what we had earlier. That is where there was a chinese raising the flag. There, that mr. Was tense. We also had police officers. Atmosphere. Wase tense. We also had police officers. What is the reaction to the speaker . He was telling us earlier in the day that if a framework of one country and to systems systems, people are not too happy. They want to see him leave. Oneprotester told me country, two systems does not work if china interferes with the leadership. Protesters want beijing to drop plans to vet candidates for the elections. The government has until midnight, hong kong time, to have some sort of response. For demands for democratic reforms. I will wait around we will wait and hang around until cover mice is reached. Sherry ahn live from hong kong. An online for retailer. It saw its trading today, kicking off trading for german tech sales. Hans nichols is an berlin. Berlin. Today, it is all about fashion. We see to what extent there onlinetite for german retail. It is a growth industry. We so what happened with alibaba in terms of investor appetite. Here is what we get this week. Rocket is the big one. Zalando gives us a better sense of what is happening in germany. What is happening with fashion, retail, tech. They think of themselves as being three Different Companies at once. When i visited their office, they have some remarkable data techniques. You take a look at what they do with trendsetters. If you are an individual come all and whatever you buy ans up they star you and preorder it. They are quenching a lot of data. 500 computer programmers. We will see how their appetite is today. They got their start making flipflops. Earlier, i said i was going to get you flipflops. Simple going to get a gift certificate. For mark barton, nothing will suffice other than birkenstocks. You can wear them german style with socks. German birkenstocks. With socks. I am there. I will take them. I like that. We are all very happy with our gifts, hans. Pumps. Like trainers. U. S. Lingo. During our conversation. Edwardsnews. Latestup, sainsburys strategy. We will talk to alan higgins about sainsburys. Stay with us. You are very welcome back to countdown. A german privacy regulator has ordered google to limit how it combines your date is a. Combines user data. Ordered to he was modify its privacy policies. Users can determine how the data is used. Toy will spin off paypal create two separate companies. The move comes as consumers step smart phones. In independent paypal could be worth as much as 47 billion. It would be able to make more alliances with retailers and others. Yahoo sing to access website. The government sought to restrict information amid protests in hong kong. It was inaccessible for some parts of the country. Just getting some breaking news from the finance minister in france on the french budget. Are, the budget deficit will be four point will year. of gdp this 4. 3 in 2015. No signs they will push it below 3 in the next couple of years. The newspaper said the goal will only be reached in 2017. But the finance ministry will cut spending by 21 billion euros in 2015. France does have a very High Percentage of spending to gdp. Giant supermarket sainsbury released earnings. The new boss has a task on his hand. We discuss these matters. Good morning to you. Reporting earnings, down 2. 8 read a little better than expected. Talk about the fiercely competitive market that they operate in. Interesting to think about the rise of the discounters at the same time the u. K. Economy has been on the rise. What do you make of the latest development in the supermarket industry . Youre right. Just looking at my trusty bloomberg, this reflects the small stores. Going back to my studies, ira Amber Michael porter. I remember michael porter. His key phrase was competing on prizes. If you are competing on price, you have to be really cheap. The germans are winning their. There. Sainsburys would have argued they were doing something sufficiently different and that is why they were outperforming. Didnt the ceo say that recently . Anytime they talk about competing on price everyone what would it take for you to buy terrors shares of sainsburys and tesco . That there be a sign are some sort of st abilization . Maybe it is convenience. Sometimes people dont like to go to the large outoftown stores. If they can hold of their business and pay the dividends, unlike tesco, there are some good to go for. Is a murky recovery story. Something we may look at at some stage. But we are not there yet. I want to talk to you about the quarter and where we go from here. A lovely line in our story. Bonds trounce stocks this quarter. America, you still like equities. And you focus on europe. Europe has had a long winning streak since 2006. Can it sustain . It depends why you are bullish. Emphasis on of relative value. , is theean by that direct payout from the hundreds of companies. Fear he unusual. A very unusual. That leads to income investing. The fact that companies can issue bonds cheaply. Better balance sheets. This kind of a lowinflation world leads us to invest in equities. It would be nice to see some kind of Earnings Growth in europe. So lagging the u. S. That is what we are looking at. For some sort of improvement in the european economy. But putting a lot of emphasis on the relative value. Bonds have been the place to be. But that doesnt last in perpetuity. Fourth quarter, nearly always good to be in equities. I want to follow up on that comment. Build gross bill gross left pimco. Stay with us for more. 7 23 and london. Still with us is alan higgins. We think this is a very interesting call for you. Buying all the ons alions. Pimco is 28 of their net profits . You are a brave man but we like brave. Fall,day after the big 4. 25 dividends earnings. We do by individual shares but etfre a big customer of the world and fund world. Pulling money from the pimco bond it is a matter of public records. I know there are some in europe. That is more of a u. S. Story. I cant speak for the whole of them. In terms of my world, the holdings in pimco funds that we have which are public the publicly available, we intend to hold. As it stands to day, based on what we know about the deep bench and the credit orientated comfortable ine orld holdingr w the investments. They have strengthened. The total return you, bill grosss fund, have bought into bill gross. No supplies. They put a talented team in their. You bought bill gross. But it had fallen by 70 billion in the last year. Init sold in the u. S. , europe, but it is a u. S. Oriented product. The other products, global high yields, the u. K. Credit fund, those are quite distant. Just like other big firms like black rock, they also have deep inches benches. For now, we are comfortable holding. But there is a sec investigation. Your Favorite Song i do really recommended the film. I would probably say, barricades. Taking a short break. More on the french budget when we come back. You are very welcome back to countdown. Time now for an exchange check. It is all about dollar yen. Came, concord, you have the yen the euro is rising against the yen. Yenport came in definitely on the move. 120 on dollar yen over the next couple of years. Buts a look at the aussie dollar. Sales, missing estimates. This is the year to date performance. Encroaching on levels where you have the ability to encroach on levels you have not seen since january 24. Six 86. T is retail sales missed. In case you hadnt been listening the u. S. Dollar. These are the top headlines. The ceo of hong kong was jeered by protesters as he arrived at a National Day Ceremony. The the events marking the formation of the peoples republic of china coincided with prodemocracy protests. The protesters took to the streets. They are demanding the ceo resigned and his replacement be democratically elected. Italy has cut its growth forecast. The government had predicted 0. 8 growth. Now they see gdp stricken by 0. 3 . The Prime Minister has pushed back his balanced budget target by one year as the economy remains in recession. And the centers for Disease Control and prevention have u. S. Rmed that the first ebola case. A man begin showing signs of the disease after traveling from africa. He is being kept in isolation it an intensive care unit. Has beenndian governor speaking to bloomberg tv india. He warned her that near hero Interest Rates may disport distort prices. My worry isrates overcompensate for the deficiencies in other parts of the system. Alibaba shares soared on their first a day of trade, but is there appetite for staying . We will find out a little later today. Behindcholss went to the scenes. He took an inside look at the company. Biggest online retailer is preparing for a a debut on the frankfurt exchange. Getting the fashion shoot rice, everything is getting the product to market quickly. It is important that we have the so we can present the newest product quickly to the customer. Zalandos answer is a piece of the german and european market. Of sales six months increased. The cofounder started in 2008 by selling flipflops. It was nurtured by the brothers behind rocket internet to read speed and scaling either trademarks. We are moving through 1000 products every day. Before an article of clothing beposted online, in needs to shot by models. After that has been completed, it gets a still shot and can be posted. Addition to fashion and retail, they view themselves as a tech powerhouse. Leading berlins start up seeing the start upne to floor. We think of ourselves as a software company. Processes. We build many of these systems are self. Ourselves. There is always the danger it could fizzle. Like but for investors intrigued by continental Online Shopping with Profit Margins north up 40 percent, it is a chance to make a European Play even if the models are not that interested in you. Hans nichols, berlin. The french finance minister has unveiled a budget for 2015. Caroline is here. Are they closer to hitting the 3 deficit target . Expect thewhere they budget deficit to come in for this year versus gdp. That is less than the u. K. We have to put this into perspective. We have a 5. 8 deficit versus gdp. But they have the target to have a deficit of 3 . As does the rest of the you e. U. This is the third time they will have to get the waiver. In 2015. E 4. 3 their economy is not growing. They are saying we have to change our plans because of the week economy. The structural deficit is high. In we know they are trying to cut the tax burden on businesses. Monopoliese and in the service sector. Country that is having to detail 21 billion in cuts for 2015. That is a huge tilt to swallow. Pill to swallow. We have received warnings saying, it is inevitably going to be painful. They are going to have to take some tough choices in terms of businesses that have been protected. They won the longer be protected. That is going to touch many parts of french culture. There is a backlash as a result. They took the streets. They strike. They act. We have seen strikes on tuesday. Coming in terms of foods being affected. Pharmacists, notaries. We dont want the end of monopoly in certain services. We can go to the supermarket ad buy nonprescription drugs in the u. K. They wanted to make that happen in france. The pharmacist said, no. They are striking in that respect. Getting are you backlash from the population, you are getting a backlash from germany. Not saying, you do are not doing enough. Publicly, merkel has been positive. But it just got more difficult has wonthe far right its first seats in the senate. Lawsis going to delay the that need to be pushed through. Caroline, thank you. It is one of the most controversial drugs 80 dr. Ken a doctor can prescribe. Startupeli start off is set to revolutionize the way medical marijuana is prescribed. It isund and filtered, put inside a 3d printed pot puffing device that will not get you high. Microgramws 100 resolution. Penetrates us to existing regulatory systems. No expensive clinical trials. No much more guessing how much they need to relieve pain. The devices they are buying making are dusted for israeli hospitals. They hope the real money will be here. Accountabilities a cannabis inhaler for home use. Worth onecan market, point 4 billion, could rise to 10 billion by 2018. Hope to win a percentage of that. But does the inhaler work . Was one ofvy seals 10 in israeli patients to try it. I would spend whatever it takes to have this device. It lets me decide how to take care of my health and be more relaxed on the outside. Thehe doctor overseeing trial says the device could change marijuanas image. Doctors were reluctant to prescribed cannabis as cigarettes because of the stigma. You need to smoke. From now on, once approved, everybody is going to look at it as a medicine as opposed to a substance that people use. Imminent,e approval he hopes to raise 20 million to boost production. If all goes well, he hopes to apply the technology to other controlled substances such as opium. Aviv. God can tel we are going to speak to the head of global luxury for health hilton. Helton welcome back, i am mark barton. Im looking at the u. S. Tenyear bond and the german tenyear bond. I am comparing the two. Ignore to the right of this life. Look at these two charts. Going back to the middle of 2012, that is the yield. The bottom one for the german tenure 10year. The german is yielding less. Yields for both have been falling, ignoring the last week or two. The bottom part of the chart is the spread. The difference in yield before the two. En the difference has fallen. Ar ismeans the german 10ye yielding lower than the u. S. 10year. That spread has been widening 49 straight quarters. Every quarter, the spread has been widening between both sets of bonds. That is the longest expansion going back to win bloomberg in 1990. Lecting data that is because of diverging central banks. Will it continue to widen . The widest spread has made treasuries attractive compared to bonds. U. S. Nonfarm payrolls on friday will come. Watch out for the difference in the spread ahead of the events. First. Bloomberg. Conrad st. James will soon open its doors. Of luxury andead lifestyle at hilton worldwide. Tell us about the conrad brand. Where does it fit into the wealth of luxury options . We like to say it is in the smart luxury segment. There is a group of global elite travelers looking for luxury. London has turned out to be a fabulous luxury market. Luxury in london is glowing growing. In hilton, we have 4100 hotels. We decided to make a push in the luxury sector. We have two brands doing it. Waldorfastoria and conrad. First conrad brand in london. Appealing to these kind of plugged in global elite travelers. Around hyde park, there are a feast of hotels. It is a hard market. You have the savoy on the other part of town. How do you go after this smart traveler . What is it that is going to set you apart . Those are all great hotels that deliver service. Our alignment is with the global elite. We introduced something called the conrad concierge. It is more than just a nap. An app. You can get any service the serviceovides from room to ava leigh a valet. We still have people that will deliver service over the top. This aligns with what the smart luxury traveler once. Wants. Im sure you guys talk about them of the time. From brick countries. Casual in demeanor and address but demanding and service. In service. My brand conrad, this is my 24th hotel around the globe, if i can aligned to that brand, that would be terrific. Who is spending money in this type of hotel . What nationality . Any impact from russian travelers . Inrussian travel, the growth russian travel has been disproportionate. We have not seen any kind of legal to that. Wiggle to that. Really, it is about mindset. Similaritiese between a young asian traveler and brazilian traveler in the right to socioeconomic status. Strata. They have more similarities than differences. We are also exploding with the waldorf astoria. In china. Thank you for coming in. You are looking at a live shot of the city of london where equities are set to open in 10 minutes. To theoing to talk brokers market strategist. What is he to give the market . What does he think of the market . Breaking news. A multiholder program. Visionsrchases are in i like the sound of that. Tell me about the market. Biggest quarterly fall into been years. Fall in two years. More to come . What is interesting is the divergence of markets. You are seeing europe do reasonably well. The u. S. Pull back a bit. Emerging markets giving up a lot of those gains. The ftse, completely falling. Japan doing relatively well. Against this, a massively resurgent dollar. At the highest level in 4. 5 years. Investors fear exiting by the fed . Absolutely not. If you look at the ust curve, curve you might have thought. Policy was on autopilot. They are giving us divergent views on the economy. The bond markets have trounced equity markets in the past quarter. We have had a lot of news this morning. Tesco. St. Marys sainsburys did a little bit better. Where do you go in that space . What about retail in the u. K. . Torrid fewit has a years ahead. Difficult to see how they are going to escape a downgrade. Margin pressure is ongoing. Cash flow at sainsburys under pressure. Even some talk of them having a rights issue. One of your previous guests was talking about porters. Supermarkets, these big retailers, are trying to reshape themselves. It is an agenda driven by the discounters. Is about rightsizing the market. Rightsizing. As a nice word. , rocket. O a big week for the german tech market. Would you venture into buying these shares . I am very cautious about tech ipos. An interesting piece of research yesterday, 72 of u. S. Ipos have a make of that what you well. Thank you very much. Michael ingram joining us. On the move is next. We will see you nice and early tomorrow. Welcome to on the move. I am Jonathan Ferro in the city of london. We are moments away from the start of european trading. Futures are lower this morning. Let me tell you what we are watching. U. K. Supermarkets feeling the heat. Need estimates but like for like retail sales, including fuel, dropped 2. 8 . That aas been notified full investigation into their overstatement of profit as now commenced. As for the ipos, they keep coming. Today, it is delando. At 21. 50re priced european. You have u. S. Airstrikes in the middle east, tension with russia. A key oil producer. Dropped 16 oil over the last three months. That is the worst quarter since 2010. How long can oil prices they desensitized Oil Prices Stay desensitized to geopolitical risk . It is a miss for that. Shocked they are not making their budget target until 2017. It brings a much bigger debate about europe, which is loosening up the purse strings. A Bloomberg View piece was written that said spend. They are in naples for their meeting. That starts at one of the worst outlooks. That area has one of the worst outlooks anywhere on this map. There is more sentimentat