tv The Pulse Bloomberg June 30, 2014 5:00am-6:01am EDT
>> guilty as charged. bnp is expected to enter that plea today and pay a record fine. argentina is expected to miss a debt payment. it could default. it is going to be the second time in 13 years. maserati. wethe carmaker turns 100, see if it has achieved its huge ambitions. good morning. good evening to those in asia. a warm welcome to those waking up in the u.s.
i am guy johnson. this is "the pulse." we are live from bloomberg's european headquarters in london. let's talk about euro zone inflation. 0.5% was the expected number. it has remained at exactly that. we saw some data from germany and that maybe gave us a hint of what was to come. the problem is it is not strong enough to offset what we are seeing in other parts of the eurozone. anyway, if we can bring up the euro for you, i will show you if there is any currency market reaction. not really much of a reaction. 1.3653 is where we are trading at the moment. let's get back to our top story. bnp is said to be planning to to end alty today criminal investigation into u.s. sanctions violations. european commissioner for financial services says the french bank will be able to handle that penalty.
caroline is in paris with the details about what we can expect. guy, we should expect that france's largest bank will plead guilty today to u.s. criminal charges. the u.s. department of justice will reveal the details of the penalty and the fine later this afternoon in washington. to final fine should be up $9 billion, the biggest u.s. fine ever on an overseas bank. one of the reasons for that big fine according to bloomberg sources is that bnp paribas didn't fully cooperate during the investigation. we should also expect that the dollar clearing than that -- ban that bnp is facing could be delayed by six months. that would give bnp paribas more time to prepare for it. and maybe find a partner in dollaro conduct their
clearing transactions in the future. guy. >> caroline, what are the implications of this? >> first it will probably wipe out this year's earnings. bnp paribas has already set aside more than $1 billion. february when they first talked about that case. they only told me that provisions could be much higher and shares since then have already lost about 15%. the shareholders will of course there much of the cost of this. this could also impact dividends. according to the wall street journal on friday, dividend could be cut or even suspended for up to two years, which would be a big hit her shareholders considering bnp paid about 1.5 euros per share for dividend
last year. oncould see an impact capital ratios. we will know more about this on july 31 when the bank reports earnings. one analyst we talked to said that capital ratio could go down from 10.6 to about 9.5% this year. >> caroline, we will leave it there. thank you very much indeed. we are expecting that announcement later on today. let's get more on the story. jesse westbrook joins us now. he covers financial crime in europe. we talked about the bank liquidity, what this is going to mean for bnp in terms of ongoing operations. the question i want to ask you is, regulators one culture to change. short-term hits to liquidity, banks can survive these. there is going to have to be some finagling but they will get
it done. does this change anything these are the bnp paribas? >> that is hard to say. numerous scandals at other banks and cultures don't seem to change. it is really culture of the individuals and their desire to make money. barclays went through something similar with libor. you had politicians going on and on about the broken culture. now that they have got a new scandal with their stock exchange in new york. culture, i don't know. the big issue for bnp paribas as i see it is client retention. it looks like they will survive with paying these fines. it doesn't strike you that liquidity is going to be a huge issue. if in six months they start it is anients,
important service to service your clients. if you don't have that, people leave, go to other banks. once they have seen what the culture is like at another blank , do they want to go back to your culture if they are getting everything they need from a competitor? that seems to be the big issue. >> this is why i asked about culture. this isn't going to change until culture changes. the regulators will continue to bang their heads together until culture changes. you will end up in this cycle of more and more fines. >> what do regulators one with culture? they want banks do not want to make money? >> they clearly want some sort of change. >> it doesn't seem like it has been that well articulated what regulators once. they don't want banks to break the law. do they want to tame the animal spirits?
i haven't heard it well articulated. >> what is your best judgment? what do regulators want here? they are dishing out some pretty big fines. we have a lot more to come. bankshink they one the to pay big fines and stop breaking the law. anh the envelope, have aggressive culture, but don't rake the law i suppose. >> that sounds quite a hard line to walk. i guess it is going to take an awful lot to get that line to be walked. jesse, you're going to be back here a lot over the next few months. plenty of things still to come. are we in the middle of this? are we still getting our arms around this? >> it depends on where you mark as the starting point. if you mark 2008 as the starting point, we are probably near the end of that. doing business with sanctioned countries, that is
sort of a whole new topic area. >> we are not done with libor yet. we are not done with fx. we are not done with high-frequency trading. >> 10 years from now, there will be scandals we couldn't even imagine. it is the cycle of banks. they are always in the dock for something. >> good to see you. ok, let's talk about another bank story. bulgaria's banks are getting a boost from the eu. the eu has approved a $2.3 billion the quiddity support for the country's institutions. let's get more on this story. michael joins us from prague. we have these considerable concerns surrounding the banks. are we talking about bank runs today? are people queuing around the block to get their money out? to what extent is this lifeline helping? >> guy, there are no lines in front of banks this morning.
the eu lifeline has given a boost double dare he and markets. its decision follows events over the past two weeks. the first was placing under administration bulgaria's fourth-largest bank after a major depositor withdrew his funds. the second involved the third-largest lender. arrested sevene people that they are accusing of spreading rumors and starting the bank run through sms messages, e-mails and facebook. they say they have adequate liquidity and they are handling the situation. >> what is the politics of all this? affecting the political stage? >> yesterday, the president called an early election for october 5. the government is under a lot of pressure to resign. they did very badly in the parliamentary elections. theng these campaigns,
finance ministry has called on opposition parties to stop attacking the banking system. this is mostly in response to the biggest opposition party, which is alleging that the banking system is in a more serious state than the government is letting on. this comes against the backdrop of a 1996-97 banking crisis in which 30 banks failed and many bulgarians lost their savings. >> michael, thank you very much indeed for your time. still to come, argentina on the brink. will the country default for a second time in 13 years? we discussed that story when we come back. ♪
>> good morning. you are watching "the pulse." let's take a look at the currency markets. zero point 5% is the story on euro zone inflation. not the news you would hope for if you are mario draghi. the continuing story seems to be that you have ok numbers from northern european nations but a big drag from the rest of the region. the euro is trending upwards of little bit. 1.3658 is where we are trading. u.s. data a little bit later on as well. it is a fairly quiet start to the week. data pretty much in line with expected. as we wrap up the quarter, probably worth taking a look at where we are. quite a quarter from an m&a
point of view or in equity point of view. nick nelson joins us now to give us his take on where we are. equity markets, you are trying to figure out which is the least of the asset classes. there is not a lot to choose from. markets have marched on. as we head into the next quarter, are there any trends that are worth taking into the next period? >> i think your analysis is right. you get nothing on cash, negative returns. government bonds are incredibly low. spain trading below. i think by default, people have said equities. you still have in europe about a 3.5% dividend yield which is reasonable. i expect equities continue to go higher but only if earnings comes through.
should i be about the earnings story? if i look at what cfos are doing, they are biting back a lot of stock. that means i have to take a cautious look at my numbers to see if they reflect decent growth. as i looked through the numbers, how much of it is real? 2% of this.s., about growth rate is coming from share buyback. not really organic growth. what we would like to see is more topline growth. we would like to see expansion. i guess m&a which has picked up is maybe a forerunner for increasing cap ex, . companies need to do something a little more expansionary than just eyeing back shares. we may take a little bit more of a cautious feed on the m&a
story. >> the transatlantic ones clearly had those as potential drivers. they may also boost the tax driven ideas. you are still seeing some in market murders in the u.s. you are seeing some smaller ones across europe. numbers are slightly overstated by deals that may or may not be tax driven. >> if we see the u.s. start to become more hawkish and we start to see the yield picking up on the u.s. 10 year and you start to take a look at your equity yields and your bond yields and that relationship starts to become tighter, do you think that would change people's perception of the equity markets? >> it would give us risk. we have record low volatility in fx. very low volatility. you look at the vix in the u.s., all three asset classes have low volatility. if you see treasuries spiked up a little bit which is what we
think happens in the second half, initially that would be bad for equities. your opportunity cost would be higher. ultimately it would be good. if bond yields are rising in the u.s., bond yields are rising because corporate are feeling confident. that would be sort of your extension of the bull market. >> talk to me about the stocks and sectors in the areas that i want to be going into. below the surface, quite a lot has happened. talk to me about what happens in the next quarter. >> we had this brutal sector rotation. we saw a lot of people going back into the fences. some consumer staples did very well in europe. utilities which had been a three-year underperformer where the best-performing sector. exposed to they periphery. a lot of the stocks are listed in spain, italy, portugal. the second half of the year, you
probably want to switch that around. we want to see more cyclical stocks, maybe financials. i would be looking for eurozone banks, eurozone cyclicals, those kind of things. somethingat tell us about the carrier, the search for yield? does that start to abate? it is going to affect your treasure restore a. yesterdayn a meeting and they were telling me that european high yields make them nervous because the yield 3.9%. that is not high yield anymore. mayink that hunt for yield start to ease a bit as we get proper topline growth. >> walk me through the reasons for that. the fact that economic growth is picking up, should be long-term, good for equity markets. that is what we are seeing. >> the u.k. is almost a victim of success. we talk about the goldilocks
economy. in the u.k., the porridge is too hot. that is not good news for equities. you have sterling strengthening at close to five year highs against the dollar. that is not good for u.k. earnings. three quarters of u.k. revenues come from outside of the u.k. we have the scottish referendum coming up. we have the general election in may. this potential eu referendum in 2016. cker is happening with jun has brought forth some of these tensions. >> always nice to see you. thank you very much for stopping by. coming up, carlos slim makes a multibillion-dollar gamble. we will do that when we come back. ♪
charge electrical devices. i wonder how much. finally, oysters and clams are being harmed by climate change. the ocean is absorbing about a quarter of the carbon released by burning fossil fuels. that is causing ph levels in the water to fall. the waters contain less of the calcium carbonate essential for marine life. from the andgo governmental news to company news. -- environmental news the company news. holdings toing its meet requirements for a deal with directv which is now a competitor to slim. that's figure out what is going on. billionaires' managing editor joins us now. matt miller, good morning. basically these guys are going
to become competitors. >> it is going to be billions of dollars and more fortune for carlos slim because his stock is going to go up. it is going to be lots of headaches. carlos slim helu dealt with regulatory issues. mexican regulators have told him they don't intend to make it a more competitive market. he owns a company that is going to have to get more competitive. it is going to be a lot of headaches but expect it to go up a lot. >> so kind of a bit of a win for him. >> if you think about at&t, they were partners for a long time and now they have to compete with them. that is not necessarily a great thing. he has also got to compete with the mexican regulators. >> there is also concern about how much influence he has. this is really going to heighten that. >> it is something that people
weren't talking about when at&t was selling the stake because of the value of the thing. tolos slim has been believed be a monopolist in mexico for a long time. whether he is, he exudes tremendous control not only on telecommunications but on mining and banking. this is going to be a lot more headaches for him. >> here in europe, we have watched him carefully. divert attention by doing other things? >> diversify his portfolio beyond mexico and latin america. that is one way he is able to diverse of five the holdings of america mobile. one way is to go to europe, not to the states because there is too much competition. other places he might think about investing in assets that would allow him to say, i do control a huge swath of latin america but i also control other
places. maybe that is a way to hold onto the controlling stake. >> maybe he will try to exact his revenge. maybe that is the way he gets by. matt, nice to see you. matt miller, bloomberg billionaires managing editor. as we go to break, we are going to bring you today's one unholy hotshot. these competitors are tearing up the course during the international motocross federation's world championship in denmark. wouldn't want to get that wrong. just a reminder, you can follow us on twitter. only one of me today so only one twitter handle to follow. olivia is back tomorrow. francine will be back in a few months. follow us all. we are going to take a break. see you in a few minutes time. the markets this morning reasonably quiet. we have had data out of the
>> welcome back to "the pulse." i am guy johnson and these are the top headlines. guiltyd to be planning a plea interviewer sanctions violations. the bank is said to have won a reprieve, which gives it six months to prepare for a ban on handling certain dollar transactions. the year-long ban could affect oil and gas transactions. warning from the central bank says theym the bis
should not delay exiting from emergency policy measures, even they won't market into a false sense of -- lulled the market into a false sense of security. this is the first concerted by isi oh.orces let's get more on their story. were joined by elliott for the latest. are we seeing progress from the iraqind military -- military? >> weird warplanes and tanks all dissenting on tikrit. very symbolic place for whoever is holding up, be at the rebels or iraqi government. he security iraq forces, they seem to have
cleared them from the central town as well. rebranded the islamic state. it has been impeded by the improvised explosive devices they have been scattering across the city. that has been slowing the part of the iraqi military. they seem confident they will retake tikrit. a stagingthem to have , whichd go retake mosul fell to the rebels earlier this month. a quick word on the rebranding of isi l, they've changed their name to the islamic state. they declare their leader is the new leader of all jihadi groups are on the world and say all other jihadi groups are nonpoint
and should submit to the islamic state. >> features over the weekend of .ussian jets talk about the relationship and how that is evolving. >> this is interesting. we are the new the u.s. was getting assets up to 300 special forces to help with intelligence. said even be helping with this assault on tikrit. the american say they were always going to be delivered in the autumn, but the iraqis went ahead and got some secondhand fighter jets from the russians instead. the two delivery of the first five over the weekend. there's another 20 to come. clearly, we have a case of russia also providing advisors, really trying to, if you like, try and get itself more involved with what is going on inside iraq. it is very big and long-standing
of the syrians. the russians want to be there, suppose also to temper the american influence in iraq, but at the same time, set themselves up nicely perhaps for future military contracts with the iraq he's. a lot of interesting things going on behind the scenes. battle, jockeying for position between the americans and russians inside iraq. >> elliott, thank you very much. let's go to south america. argentina is on the brink of a second default in 13 years. what is the story surrounding this? the head of global emerging market strategy joins us. nice to see you. this is a technical default because there's now a grace. that could follow after this. what is going on around and below the surface? it is not looking
particularly good. see what happens. it is going to be difficult for both parties to reach an agreement. i would say it is still very negative from the sentiment standpoint. i would make the point this time paynd, the willingness to more this time than last time. they made an attempt to pay some of it. >> from the previous default, but they did not pay the holdouts, which is why the us courts have gotten involved. is it likely be holdouts will ultimately get paid? >> that will go with the negotiations. still uncertain territory right there. it is a bit too early to call. >> let's talk a little bit about what the message is, the
underlying message is coming out. there seems to be the argentinians want to get back into the global financial system. setting --s, they're selling things, trying to get maybe financing put in place so they can realize the potential, shale potential, the energy story. is it your sense point is our lease -- when is our lease wants to get this done? >> i would say baby steps. notink in terms of credibility of the framework and the way they manage the relations with international carpet of markets in the past, there's more work to be done to be properly back. baby steps. some positive signals. let's wait and see. >> you talked about the buying
opportunity. is it in argentina or elsewhere? >> i would say elsewhere. engineeredthorities the currency back in january, all currencies in that time actually dropped off her little bit. to me, that provided a grid of buying potential. the sentiment might be reduced again in that time. going toin argentina assets. >> interesting. thank you for stopping by. let's turn our attentions to the markets closer to home. a final day, let's find out what has been going on. >> a mixed day for trading, certainly in the equities market. if you look at how we've done so far, world equities heading for their fifth straight monthly
advance. if emerging market stocks on track for the best quarter in a most two years. u.s. stocks close to the longest winning streak in 16 years. be aware, they're raising the alarm today, saying we're getting out of ourselves. central banks will have to stop moving -- start moving quicker. we not taking risks into account. the stock still treading very much near their six-year high, currently flat on the stock 600. utilities currently up. as is oil and gas. financials trading lower. bnp purdue much on everyone's beinghead of the case settled, close to $9 billion have to be paying up. take a look at some of the stocks on the move. easyjet, basically the worst are former in the stock 600 this morning. this is bank of america, merrill lynch say it is heading for an earnings per share cliff. they say 2015.
it could be half of where the market consensus is. why they struggle to see they say how low-cost airline shares will out perform. if capacity currently going higher. lower yields and higher fuel rates. easyjet the lowest since december. vestas, the world's biggest maker of wind turbines. 225 machines will be providing for edf renewables. it is all about kansas and new mexico. philips up. it analyzes assets, just starting to move away, separate out its electricity. about 1/5 of sales come from the automotive lighting business. 1.2 billion euros in sales per year. they won't -- they may bring in
some third-party investment. grow the areas they're so focused on. focusing in on the lighting just purely for phillips. reorganizing, making more efficient at sliding unit, currently up some 3%. a mixed day for stocks. bank of international settlements and we have euphoria in the market, not taking into account the emergency policies which will have to be executed at some point despite the bumpy road. hand for mario draghi and janet yellen. >> thank you, caroline hyde. turning 100, but showing no signs of slowing down. best days maybe just down the road. ♪
carmaker turns 100, but has no intention of retiring. targets inself huge the years ahead. quick a century ago, family of italian brothers set out to build cars that were the most beautiful and fast, designed for motor racing as well as the road. 100 years later, maserati's plans are even more ambitious. they are aiming to lift sales nearly fivefold by 2018, a tough
task, but her on task to do so. to do so. on track they doubled sales last year and said to do again. good news for the fiat group. they need to counter poor sales out of europe. maserati is eyeing the growing asian and u.s. markets, introducing six new models including this one named after one of the founding brothers. is stillited states our biggest market. i expect the united states to account at the end of the year for one third of our sales. china and the asia-pacific region is the second strongest center of gravity for our business. years, wea couple of sold 800 cars in these markets in a year. thesenow we're selling
amount of cars and a month. >> winning american and asian hearts won't be easy or cheap. this year, the company pay top dollar for an advertisement in the super bowl. confident.i ceo is >> we're competing with outstanding products. fiat's acquisition of chrysler completes, the italians see this as a perfect opportunity to seduce new markets. the chief executive of maserati's parent company fiat chrysler. let's find out exactly why he likes it so much.
this is getting maserati to work , critical them. yes to make a lot of investments, but it is an example of what is possible, isn't it? >> yes. he's investing a lot of time, also, in trying to improve labor relations with the unions. traditionally, since he has been ceo of both chrysler and fiat, he is had a closer relationship probably with the u.s. labor unions. while in italy, this tough style, no-nonsense, not giving a heads up maybe two unions when he discusses the strategy change, that hasn't produced the same results. he has been to this plant twice down the last week. he made a surprise visit a week ago to try and smooth that relations there because some of the workers were not happy with this decision to add saturday shifts, to reduce vacation time in exchange for shifting workers from another large italian plant to ramp up the maserati production. so he still has some work to do
to get mentally investors on board with its ambitious plan, but to change the way they produce these vehicles at the italian plants. >> in terms of a long-term strategy coming out of italy, the high-end stuff back to italy, we will sue maserati's been produced there, offer romero, then you start to move some of the lower stuff to different parts of the world. from an italian point of view, you want to focus on the fantastic news. >> yes. as welllem he is facing as other european manufacturers is the european car market is not growing. fiat is losing business in europe. plantsre a dozen italian that are under capacity. what is he going to do it this? what he is trying to do, for
example, here this maserati plant, a shift production from the more traditional plant producing small and medium-sized vehicles into this luxury segment. obviously, maserati with sales rising get semi higher-margin. -- gives him higher margins. there's a big question about alfa romeo. will they be able to sell these , assumingn the u.s. he can ramp up the production and get the unions to agree with more flexible hours, reducing some vacation time -- which is trying to do -- you know, those are big hurdles he has to clear in the next few months. , this is an interesting moment in time. marchionne is an incredible dealmaker. he loves putting together big top-down story is really where he has demonstrated his strength in the past. getting down to the
nitty-gritty, getting on the shop floor, convincing unions have to go along with this plan, that is always been a little more questionable. i guess this is quite -- yes to prove he can do this as well. >> no question about it. did i and labor seemed, as you can imagine, -- the italian labor seen, as you can imagine, is very difficult. he is trying to get the more withate unions on board the strategy. frankly, in a country where unemployment is still around labor1%, these moderate forces are coming around to the idea, particularly, we have an italian prime minister who also comes from this moderate, leftist wing which is promoting rules.exible labor i think some of these unions realized the only way they will come out of this hole is by
supporting what marchionne is trying to do. >> dan, a key for your time. -- thank you for your time. let's get to other company news. the takeover will expand the company's business to manufacturing summaries and stop corvettes. tents and holdings has agreed to buy a stake in the chinese site. spending more than $700 billion for what the company calls 58.com. it tries to compete with alibaba. facebook researcher has apologized after conducting the experiment to influence what more than half a million readers saw on their newsfeeds. andbook alter the positive feedback.
>> something to look forward to. let's look at the currency markets. the euro coming up a little bit. better positioning, so be aware of that. inflation data out, which is what was expected. well below the 2% target. what else are we watching? bnp will be a big part of the session. let's get the latest from paris. >> i will be watching this onernoon the final details the penalty on france's largest bank. we expect a penalty to reach about $8.9 billion. it would be the biggest fine ever issued by u.s. authorities.
the question also will be on the dollar clearing ban, whether bnp paribas will have six months to lay on the injured -- delay on the introduction according to bloomberg sources. that means the ban would only come into place next year in 2015. but when the band comes, of to watch thel have reaction from investors and the shares. >> thank you very much. another story is argentina. you could see the country drink central default. period thatace follows it. and that is likely to result
jihadist make the rules. they name an islamic state. good morning, this is "bloomberg surveillance." it is monday, june 30, i am tom keene with scarlet fu and adam johnson. let's get to our morning brief. >> a brief week. june inflation rate stays at half a percent. in. mortgage approvals fell may. sort of curious. almost like a conflict of headlines. you would think borrowing would not be going up if inflation is staying as low as it is, tom. we are going to have to discuss this.
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