The explosions occurred in a popular seaside resort. Global news, 24 hours a day powered i our 2600 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Number west is next. Emily this is bloomberg west. Coming up, a millennium milestone. In the market, all three major u. S. In this is closing at record highs. We will break down the historic diversification at alibaba is starting to pay off. We will hear from the companies cofounder about its push into media streaming. And a new connection unveiled between dnc hacks and those targeting george soros and a fourstar nato general. To name a few. First to our lead, for the first 500,since 1999, the s p the dow jones industrial, and the nasdaq rose simultaneously closing at records high. Rosy earnings reports. Alibaba leading the comeback. A surge in Cloud Computing services. Discuss, cory johnson. It is interesting, revenue rising. Ipobiggest jump since the while at the same time profits dropped considerably. Businessis a great big growing at a rapid pace. Growth is slowing down in the science that is the weakness. Sales are there. They are breaking out more than they have in the past. Ultimately, Gross Margins jumped out at me. They are in decline yearoveryear. That is disconcerting. They want to be more profitable. Emily what about user growth in particular because there is so about theicism chinese consumer. How is that impacting alibaba . Cory is this about a slowdown in the chinese economy or the laurel the law of large numbers. Up but both are at ang at slow pace slow pace. They are pushing the boundaries of how much they can grow. Emily as you mentioned, they broke out revenues differently this time. They have been investigated. They are making different kinds of financial disclosures. What more did we learn from that we that we did not know last time . Cory they only broke out in two different metrics. Analysts would like to of seen a lot more information especially about the shipping platform. There has been an investigation. No new data about that. It is an area of concern. We do not know where the investigation is going but it is ongoing by the sec. It is a mystery. Unit. This no update from the company. Emily i did speak with joe tsai about that so we will hear shortly his answer to how that investigation is going. Is there anything else of concern or bright spots worth noting . A lot of the numbers are slowing down though it is still growing and it is still massively big. We still do not have a sense of what is happening internationally for alibaba get and whether that growth will help them or if it remains a chinese company. Emily jack ma has said he wants to get to 50 of revenue from international and 50 from china. I did speak with alibaba cofounder and executive vice chair, joe tsai after the Company Reported earnings. I asked him about the m a strategy and if there are any megadeals in the cards. Joe if you look at our core operations, 2. 5 billion of operating income in our core business that operating income is growing at 38 year on year. , it islook at our eps growing at 33 growth. It is robust. We did consolidate the operations t ofwo of the elements of two of these despite and even consolidating these losses, we are generating 51 operating margin in our or commerce business. It means that we have the luxury and the resources to invest very aggressively into new businesses and Digital Entertainment our new innovation initiatives. Uch as internet cards cars we feel very comfortable with our margins. We feel that we have a lot of resources and cash flow to invest in new growth. , goingspeaking of yahoo through a sale of its core business. Discussed with alibaba what it plans to do with the shares it holds . Is what they need to do they need to figure out what to do with the alibaba shares. They could also do nothing. But we are going to be fairly reactive when it comes to that. We will leave it to the yahoo board to decide what they want to do with the alibaba shares. The important thing for george uris to know is that if yahoo sold alibaba stake, yahoo would incur a huge Tax Liability and that does not solve the problem even if we are invited to a quieter the remain throw because we would not be will to cancel those shares legally. And we end up inheriting that big Tax Liability. It will be a very difficult question for us. Emily alibaba has been very inquisitive in the past, more than 24 billion in deals in the last year. In, softbank. Ked how open is alibaba to really big deals . Joe when you have 61 operating margin in your or business, youll have to think about how to smartly use that extra cash flow, that margin, to invest for future growth. When it comes to our m a strategy, we will be very disciplined about it. We have set ourselves several important criteria including growth in our user base, improving our customer experience, and also expanding in our categories. If you look at the large acquisition and investments we have made over the last year, they all fall very consistently into those principles. We acquired yoko because we wanted to get into Digital Entertainment. We partnered and invested with a Company Called which is the Largest Electronics retailer in china because we want to execute channelm and on the strategy to own the Electronics Retail space in china. Ofse are examples acquisitions that we have done. We are open to large deals. We are open to small deals. The important thing is that they stay consistent with our m a principles. Emily you guys made a big investment in a Company Called quick see to be paid over two funding rounds. According to reports, alibaba stopped paying. What happened there and how do other Companies Know that youre not going to do this to them . Joe we have actually fully paid our investment into that company. The fact is, by far, we are the largest capital provider to that company to the tune of over one hundred Million Dollars and we have paid on time. We have fully paid up. I think what you have seen is a report regarding a contract where there is some technology that the company was supposed to develop for us and the fact of the matter is, for the china market, it is a very different market and for the kind of products the company was trying to develop, it was very difficult to gain traction. Means, was there any kind of dispute. We have very Good Relationship with that company. We are supporting the entrepreneurs that are running that business and that is the approach we take when we invest in market in the u. S. We want to back entrepreneurs. Tsai, alibaba cofounder and executive vice chairman. New details suggest a massive hack on the Democratic Party is bigger than we originally thought. We will head to washington for more on that report next. This is bloomberg. Emily turning to Cyber Security and some big developments related to recent statesponsored hacks. The fbi has high confidence that the russian government hacked u. S. Democratic party groups. Have not been made public yet. High confidence is a phrase that intelligence agencies use to signal near certainty. Nancy pelosi called it electronic watergate. Bloomberg is the first report a connection between these hackings and a handful of other hacks including that of a fourstar nader four start nato general. We have the details. Great reporting, michael. What exactly did you learn. Like theit looks investigators probed the dnc hack. Earlier coming across iterations were the same Russian Hackers had taken information and tried to introduce it into the debate in the u. S. Seed media stories with it. They had found a certain website. It went up in june. Before the Wikileaks Dump of emails. Which tried to feed some of the information to the media. It showed that they had hacked a number of other targets including a top u. S. Fourstar had been involved, he was the chief military mander of nato, involved some hacks with the soros philanthropy. Internalgotten into an Network Communication for saurus. For soros they put out all of this information onto that website. All of the information tends to be associated with some sort of Russian Foreign policy interest. They did an effective job seating seeding that out to the military. They did have one story on the ourstar general in talking to powell and his complaints about the Obama Administration. An early iteration of these hacks. It suggests these guys have a lot of material and more is to come. Emily one thing you point out is that if russia is behind this, it is clear that Russian Hackers are not just trying to in lewins the election but trying to get secret information about the Obama Administration policy. How does this compare to patterns we have seen from Russian Hackers in the past . Is this more egregious or invasive than what we have seen before . Michael the Russian Hackers involved in this are associated with russian intelligence agencies. This is probably what they do for their day job all the time. They are probably trying to collect information all the time. Where they crossed into New Territory is they decided to take information that they have hacked from these accounts and figure out ways to make it debate,nd influence the influence the u. S. President ial election in november. It is called an information operation. We have never seen anything at this scale or where the stakes like the u. S. President ial election were at risk. Happeningause of this so publicly, what are the diplomatic implications . We are in the middle of a heated president ial election and any action might depend on the results of that election but beyond that, what is russia saying publicly about what we are finding here . Michael russia is denying any role in it. Wikileaks, which received this emails,ve of dnc Julian Assange has also said there is no evidence that russia was behind that leak. In a strange twist, wikileaks 20,000 dollar reward earlier this week for information leading to the suspect in the death of a dnc staffer who was killed tragically here in washington who was walking home from a night out one night and was shot three times. The implication seems to be that wiki leak was suggesting that the emails that come from russia at all but came from perhaps this killed dnc staffer at which has another twist implying that the democrats were possibly trying to get rid of this guy as a result. None of that seems to be substantiated by evidence. All of the evidence about the hack points directly to russia. Thatbi has high confidence this is a russian hat. I think the evidence is in that direction. Emily it remains to be seen if we will see more information leaked out as a result of this. Michael orielly, thank you so much for that update. How deep and impact has brexit already had on lending in the u. K. We will hear from the biggest start of lending when we return. This is bloomberg. Emily biggest decision to leave the eu is making it harder for the p2p lending business to attract investors. Funding circle says one part of the transition will not be as hard. The Company Holds individual licenses in each of the eu countries it operates in. It is more prepared to whether regulatory changes. Meetings. N with it is a platform for people can lend money directly to businesses across the world. SomEu Referendum has impact on that. For us as at business, we are extremely well capitalized. Toare in a good position whether a timeframe of economic answer uncertainty. More businesses are coming to us who previously would have gone to the banks as a result of the Eu Referendum. It is fresh. Could be 8 there could be a greater need for alternative such as our platform. Has thrown that into some uncertainty. Are you thinking of moving your base of operation . To be able to maintain access to that market . Funding circle we have offices across europe including london and berlin as our main centers. Those give us access. In terms of the actual threat regulations, we have to abide by the regulations in every country we are in. We do not run if it as a passport for our activity. The Eu Referendum result does not make a difference to how we behave in different countries. Insince you have launched 2010, the Global Economy has been relatively strong. How will that change if the economy swings . Number ofad a low defaults. Are you forecasting there will be more default . More default . S . Moree takes seriously than us. It is paramount to us. Clearly, we have only been in business since 2010 but the businesses we have lens that we lend to have been around longer. Clearly, we can model what happens to those businesses overtime. Process, wet system look at macro drivers like unemployment. Businesses with different wristbands. Those classifications may change and the models may change as you enter a timeframe of economic uncertainty. Two. Nding club and other businesses, how has that changed your business does it change what you rely on . It has been a challenging year. For all business. We have worries about the chinese economy and the lending culture challenges. And the referendum. At the lending club our challenges are isolated. Have a dedicated framework. For us, we are seeing Institutional Investors being more aware and asking us more questions about our risk framework which is quite right. They have been reassured with the answers we get them. It was reported last week that one of your chicago fund, and a u. S. Chicago investor it says the results were coming in below expectations. A Morgan Stanley report showed that some other funds were seeing some trigger losses. The market depends on using technology to mitigate risk and minimize these sorts of things why has this not worked . Every large investor in our u. S. Business have earned a nexis of 7 which is in line with our expectations. We want to be clear on that. In the u. K. , we are giving returns of over 7 as well. When you compare those to other investments at the moment, we think it is an attractive asset class and in line with expectations. Some of the comments are not quite right. We are here to correct those. Are you seeing a change in behavior . Are you having a harder time drawing in investors as a result of the different challenges that you are talking about which might include the banks or the hedge fund . Types ofe got multiple investors queuing up at the door. What has happened is that as we are going through the eu effort we have toendum, have frameworks and the time to get these investors on board is taking longer. That was Funding Circle founder and director James Meekings with adam. Up, with more drones comes more accidents. We are about the growing need for drone insurance. That is coming up next. This is bloomberg. Mark you are watching bloomberg west. Let us begin with a check of your first word news. Says there are horrible regulations facing the home industry. It is impossible for people to get mortgages. It is so hard. Unless you have a lot of money in the bank, and unless you do not need money, you cannot borrow. You cannot borrow. Donald trump also said he wants a major simplification of the tax code and added that h r block will not be happy about it. A source close to hillary told the Associated Press she will release her 2015 tax returns in the coming days. She has criticized donald trump for not releasing his returns. He says he is waiting for an irs audit to complete. The turkish president president s rating is at the highest it has been since he took office two years ago. This is in the wake of the military coup. According to a survey of an ankarabased poll. Willdent obama reportedly discuss the issue of disputed islands in the South China Sea when he meets with the chinese president at a summit next month. Thenikkei newspaper says president is expected to ask china to respect an International Tribunal ruling. In0 a. M. Friday morning sydney, australia. Morning. D we are expecting a bright finish to the week as you would expect after record high in the u. S. Take a look at new zealand. Than already up better 0. 1 . We are also expecting gains on the asx. Futures out of the nikkei are also up. Earnings fromng toshiba and a lot of data out of china today as well. Industrial production in july is expected to remain steady at 6. 2 . Percentight dip to 10. 5 in retail sales. It is still extremely healthy though for sales in china. We are looking for any potential fallout for china and hong kong over a decision taken on the ulster by the Australian Government to reject the sale of a power grid that supplies 1. 6 million homes. Sale sayingk that it was not in the National Interest and the parties have one week to respond. Emily this is bloomberg west. To grown use because it with the rise of these machines comes the rise of accidents. Look at the drone crashed that stopped the u. S. Open or the one that decorated the house lawn. The cofounder of the right hailing apple, a low is addressing this issue. Out offering hourly drone insurance. The ceo joins us now from new york to explain. This is a very nascent industry. Now we need on demand drone insurance . Tons of people are buying it. It is exceeding expectations. Let me put it in context. Drones are the democratization of aviation just like the cars were democratized transportation. This is the birth of an industry on the commercial and recreational side. What we are trying to do is lay down a fabric for insurance that makes sense for this industry right now. Emily what does it cover . Does it cover me . The drone . Covers damage to