Francine welcome to the pulse. I am Francine Lacqua. Medical i am manus cranny. Burberry shares plunged 12 at last check in. They revealed the retail sales rose 2 , far short of the original estimates which were a percent. Francine the company says the growth was impacted by the challenging environment for luxury, especially in china. It is about the fed. Lets get to mark barton. Mark multiple issues for burberry. First half sales missing estimates. The slowest pace in three years. Becoming indicated profits will drop for a second straight year. Get in here, have a look at burberry shares. Sinking as much as 13 . They are now down 12. 5 . That is the most in three years. Its company gets more of thats more than 30 of its revenue from china. Japan, very only gets 2 of its sales. U. K. , 40 of its european sales. Dollar shoppers are heading to the euro zone take advantage of a weaker euro. Barberi on track for its worst year since 2008 with shares sinking 23 . 13 lower right now. Have a look at what is happening to gold. As expectations for u. S. Rate hike get pushed further away, gold is rising. The longest winning streak in eight months. Come in close. Gold rising for a fifth straight day. When gold sank to a low in august, the odds of a rate hike in october were 55 . You know what is happening to the odds . When you get a rate hike, gold is less attractive, because gold is not pay interest or dividends. 200 daye above its moving average for the first time in five months. That is a positive trend on the upside for gold. Manus likes his golden sovereign on yields. Manus, check this out. This is the bloomberg golden developed sovereign bond index. It measures all sovereign bond deals good come in close, sovereign bond deals have sunk to a five month low. , low expectations. Interest rate hikes keep getting pushed further away. Chart of the day for mr. Manus cranny. Francine it is not the chart of the year. If youre a traitor at the moment. Were getting breaking news out of china, this goes back to marks point. We have so much low inflation coming in from china. It is hard to see if the pboc has a firm handle. 1000300,000,000,001 manus i001 dont know how that comes out, when it comes to money supply. It is rising by 13 in september. Francine lets bring in Andrea Williams. Andrea, great to have you on the program. When you look at the portfolio, i want to talk to you about burberry. It incorporates the fears we have about china. Buy inyou pick what you this type of environment . Andrea china has high exposure to u. K. They seem to be struggling. Our exposure is fairly limited. Conditions ther other day. A week cognac and spirits were strong. Is going to the austerity measures in china. This lack of desire to show the bling are the money. Fran manus that is been a recurring thing for the past 15 to 16 months. Andrea well get through that cop. Youll see an improvement. There are other things going on. The u. S. Is still strong. India is strong. China is picking up. It is not a percent gdp growth. It is not 8 gdp growth. Boon for auch a big lot of companies. We have to adjust to that lower base. Lets talk banks. Bank of america has reported betterthanexpected thirdquarter earnings. 4. 1. 5 they had profit of 4. 15 billion dollars. Eric sat down with the ceo about the impact of a fed rate hike. Up,n the u. S. If rates go we make 4. 6 per year for the first move. Francine monahan says the bank will continue to cut costs by setting jobs. Downe headcount will cut will come down. The question is how the do that . For a while, we had to do that very quickly, because the costs were coming down fast. We have 58,000 people down to talk thousand. We have to build it up and bring it down. Fran manus earning season continues with goldman sachs. Goldman is expected to reach their earnings at 12 30 p. M. U. K. Time. A half hour ahead of citigroup. Francine andrew is still here. Thank you so much for sticking around. Talk about banks and the fed possibly hiking Interest Rates, this should be a positive for a lot of the banks. We are seeing you as banks are. Rying to cop down we have some as concern about capital, leverage ratios. Andrew if you look at the result that was announced before about a bill is that is in full swing. The o be unveiled by jpmorgan, Banks Like Bank of america. [indiscernible] rates, it could just if the fed hikes rates, it could have an impact. Manus if we look at the banks in terms of the reporting season, we expect this is going to be tough for the Third Quarter. , they assume that Bank Valuations in the u. S. Will not see any rate hike until 2017. Europe, in andrea jpmorgan is struggling , which areasues theyre going to compete in. You have the retail banks. He have that huge range. Struggling. Spanish there is no real loan growth. Also low Interest Rates. It is difficult. Violation that looks attractive. Francine when you look at loans , a lot of these banks are not passing through these low Interest Rates on to the economy. There is so much regulation and they are burdened by Capital Raising needs. Are you confident that after the u. K. Banks are a step ahead the rest of europe . Andrew lloyds is a commercial they have been good [indiscernible] notwithstanding the bank of england. Been quite they have good in diversifying the source of income. Something we served in the continental europe. Andrea italian banks have been very thats switching funds switching funds. There were a number of banks that have managed to do that. Manus we saw the switch we saw the swiss raise the leverage ratio. E are going through so much sche, big deut change. To grab have the chance their marketshare . The challenge for the , theybig ones in europe have different challenges. I think Deutsche Bank is short on capital. It has Outstanding Litigation issues. Christie with the new strategy is. C with the new strategy is. I think Credit Suisse is in the middle with these guys coming on. They have a strategy going to tweak. We need to have that discussion, where do they feel they can compete. Francine Andrea Williams thank you so much. Medical his a look at what else is on our radar. Netflix shares fluctuated wildly in afterhours trading. Profit came up short. , belowvice finder expectations of one and a quarter million. International subscribers grew by 2. 7 4 million. Topping out expectations. The ceo is confident about the future of the industry. Is better than linear tv. Consumers can watch when they want. The content has gotten better and better. Aboutndamental confidence largescale is because on demand is a better experience. The entire market is going to move linear to on demand. Internet television over the next 10 to 20 years. Francine it was also concerning news. As 4 . Ofit fell as much that prompted the ceo to defend his intent to revamp the company. He is positive on china. There is some pressure, but it is not a complete tether to what you read in the news. We have supercenters in china. Our sams clubs in china are doing great. Set desk now we have set the stage in china by creating a seamless experience for customers. Manus David Cameron will try to move his negotiation of britains membership on the European Union on to the next phase today. [no audio] francine welcome back to the pulse. Were streaming on bloomberg. Com, your tablet. Andrea, thank you for sticking around. We talk about luxury and the problems with china. We talked about the banks. This boils down to what the fed will do. Do you think the fed still has a thise of hiking rates year . If they dont, is it dangerous . Theres not much left in the punch bowl for central banks. Andrea i think we were ready for a rate increase a month ago. Everyone was kind of relaxed about it. We talked about it for so long now. 25 basis points. We feel the u. S. Economy is still pretty robust. Creation, the industrial specifics suggests there should be a rate rise. Im not suggesting a massive hike. Get ahead of the curve. What about the wider markets in china . Economy feel the u. S. Needs a rate increase to get a rateof the curve a increase to get ahead of the curve. Probably that is what janet yellen wants to achieve. Got brain art. All itching to hold back. If we look into 2015, the possibility of a rate hike in march is dropping. It was 66 . It has dropped to 50 . Andrea we stick to the line that the u. S. Economy needs a rate hike to get ahead of the curve. The data is sufficient to support a rate rise. You can say the same for the u. K. In europe, we feel that rates stay low for a long time. This is not a bad background for equities. Rates being low, oil prices consumer, so the u. S. It is great. The european consumer, the lets think about the positives. The weaker euro helping companies. It is not great for steel companies, but for Companies Using steel, it is good. Lets see what comes through in the q3 numbers. Francine how do you choose your markets . Were not sure how long the euro can stay week. If you look at the u. K. , they have a strong pound. Andrea we look at france with his regulation and lack of reform and think we look at sweden where the economy is strong. We look at germany, you have vw issues. I dont think it is a white issue to german industry. Theirill benefit with exports and the weaker euro. The regulatory background is still pretty poor pete were looking at companies where they have deregulated with the market. Where there is a cyclical element. We are not that gloomy. Manus Andrea Williams him ahead of european equities at Royal London Asset management. Francine can David Cameron push forward as he meets european leaders later . We talk about that next. Manus welcome back. This is the pulse. Live on bloomberg television. David cameron heads to brussels today where he will try to move the negotiations of britains membership of the European Union on to the next phase. Our correspondent hans nichols is in london. A very special day. Great to have you here. Osco i am getting on a train to head to brussels. Hans i am getting on a train to head to brussels. Ride with cameron, that is my advice. Manus what will be delivered over the next couple of days you hans it is been shortened to one day. This is going to start in the afternoon. You technically are correct, manus. I think the important thing to look at is what comes out publicly from Jeanclaude Juncker after. He has been quite critical. He says cameron has not been involved in the negotiation. It takes two to tango. I think it is important. Chancellor merkel gave mr. Cameron a little coverage. She says they are confident they can reach some sort of agreement. Cameronmerkel dynamic. See if they can anchor some type of change. Francine this is tricky. If you are the European Union, you say you dont want the u. K. To leave. We need to renegotiate. They also need to stick to what they call the red tape. If greek if europe is going to have roles, they have to stick with him. Manus there has been a overtory recall in germany diesel cheating. They are going to order a recall. Hans bill reported his earlier on anonymous sourcing. The idea that these vehicles were never going to be recalled is not that based in reality. The fact that the German Ministry is amending it puts a little more pressure on volkswagen. They have a Technical Software fix. 2. 8 million vehicles on the road. Francine 8 million vehicles have been cheating software. Have the cheating software. You dont know how much it costs. You take it back, do you price them . Hans they think there is a software fix in some jurisdictions. Youre going to have some sort of reengineering. That is going to be more expensive. Francine hans, think you so much. Thank you so much. [indiscernible] up next, we talk nike. Anna welcome back to the pulse, live from london. Manus lets get you some of our top headlines. Shares plunge this morning, down more than 12 after the luxury goods maker revealed that the first half of underlying retail sales rose just 2 , short of estimates of a percent. It was impacted by increasingly challenging environments for luxury, particularly among chinese customers. Francine netflix shares fell in afterhours trading after subscriber growth missed estimates. The Service Signed up 880,000 new u. S. Users, below expectations. However, International Subscribers rose by 2. 7 million. David cameron will try to move the conversation with its membership of the European Union to its next phase. The Prime Minister is heading to brussels for a second round of beating with the european president Jeanclaude Juncker and martin scholz, followed by a full summit of eu leaders, also scheduled to be raised. Francine we are getting breaking news on u. K. Banks. They are being told how they should be running their business. These are rules linked to expending. Two big spending. They have higher Capital Requirements under these bank of england rules on the separation of Retail Operations from riskier Investment Banking unit, the socalled vicars rule. The Regulation Authority estimates that socalled ring fencing could mean an Additional Capital requirement to between 2. 2 billion pounds and 3. 3 billion pounds by 2019, which is when the rules kick in. These rules, as i said, the is aidingvicars rule, to ensure if that crucial Financial Services such as retail deposits and payments will be protected of riskier units if they incur losses and have to be shut down. Essentially, lets not have a repeat of the 2008 financial crisis. The capital burden is due to the protected unit being measured on a standalone basis for its capital needs. Transactionsany between the ring fence unit and the other parts of the institution will be classed as thirdparty deals, meeting capital will have to be held against them. Banks face further capital means, so says the pra. Mark barton on the latest news in terms of Capital Requirements for the u. K. Banks. World may behe worried about china, but nike isnt. Is sports giant says it expecting huge growth from asia and anticipates revenue of 50 billion by 2020. The company has been running high this year with the share price around 30 . The ceo says china presents huge opportunities. We are not seeing it. In china, our brand is incredibly strong. The market is good for us in terms of participation. Is a mobile he connected community digitally, so that is good for our digital platform, which is doing quite well. Our reset over the last couple years and china has proven to be fruitful in terms of setting the foundation for future growth for us and china. ,onsumers want Premium Brands authentic brands, and they are voting every day and nike is doing quite well. We expect that the pipeline of innovation we have coming into the work that we have done to get the Operational Foundation set for years to, puts us in a great position in china. Haveine burberry shares plunged in London Trading after the Company Reported a sales miss this morning. Slowly growth in china has been identified as a contribute in factor. Caroline has a bit of a dive into these numbers. Caroline what a different picture than that painted by nike the optimism versus a company admitting that they are too heavily exposed to china and that is why it was hit so hard. 700 Million Pounds worth of market capitalization wiped out of burberrys market cap this morning, all because of underlying retail sales. Themarket wanted four times underlying retail percent. When you dig into the numbers in the second quarter, it is down 4 . The market expected to grow. For your profit is now being downgraded to where analysts see it. They have been downgrading for burberry and burberry admits that is where we are seeing it. That we will see a second year of pretax profit falling. It is all because of the economic volatility, they are saying, weighing on consumer sentiment. Notably it is waiting in china why is there such a concern . Because of their exposure to asiapacific. You can look at the way that the geographic mix has been working against burberry. Asiapacific underlying sales down 6 . Sales falling. S yet further pain coming they say it has amplified the overall consensus 30 of their sales come from china. On the flip side some other areas are doing very well. Japan and the yen are very weak. The same for south korea a lot of japanese and chinese tourists. But there are only 10 of sales coming there. They dont have any scale in 16se particular countries concessions opened in japan and a flagship in tokyo. Opening and south korea, the first of the year. Basically, they got hit hard francine we saw a 20 slump, francine, in chinese sales in the overall from the previous year. Caroline now we are seeing their Third Quarter seeing some relief. 5. 7 increase in sales, much better than expected. This is being health as the chief executive happily admits that the d stocking isnt happening anymore is a relief. But also they have taken action online. Think of the alliances that can be struck with the likes of alibaba, the presence in terms of online sales, getting into not just the maid lane cities but also getting into the region. That is the area they can start to ramp up. Far more of their other products, for example. But there are some alarm bells still ringing when it comes to unilever. At the moment, share prices are still up, and they are trying to talk the market into some sort of reality check. They continue to see soft, global markets. The cfo saying that uncertainty is rising in china and there is