tv On the Move Bloomberg April 10, 2015 3:00am-4:01am EDT
a $1.5 billion settlement deutsche bank is said to be close to resolving a multiyear probe into interest rate manipulation. of course, we will bring you more of that exclusive interview with yanis or a fact this. -- jan us varoufakis -- yanis varoufakis. futures indicate we could extend those highs. caroline: let's see how we are opening up, a three-day rally is the biggest we have had since january. similar news for the ftse 100. stock 600 up 19% this year. emerging markets stocks have been up. you talk about that japanese
nikkei, first time in 20 years they hit that spot. chinese shares also getting a wind of productivity this week as we see mainland investors crash into hong kong as well. clearly they are on a bit of a role when it comes to equities. yesterday it was all about the factory industrial reduction looking pretty rosy up half a percentage point. just a little moved to see how we are doing, generally it is flat against the dollar. interesting as we suddenly see a little bit of relief into what is coming out of varoufakis lips. he seems far more conciliatory when it comes to their negotiations with europe. with the dollar let's look at it on the week, because we are up on it comes to the dollar, up almost 2.7%. the first weekly gain in a
month. refocusing and we will still see that disparity in central banks. in europe we will see stimulus aplenty and we are still continuing to expect rate rises later this year as the dollar drives higher. the u.s. treasuries an interesting move, just down a little bit today and basically back flat areas we have seen a 10 year borrowing costs, the biggest weekly lost the u.s. treasuries in a month. oil prices go up so we see the potential for inflation and eight selloff in u.s. treasuries. money coming out of germany a little bit, that is the optimism but greece with a bit of release. 11.31% looking at 10 year borrowing costs, but it does seem that greece is inching closer to a compromise.
but will they make it a self-imposed date to agree on those new reforms. let's have a little look at some of the equities, deutsche bank actually rising as we hear they could be clearing the settlement with libel manipulation and manipulation of interest rates. the u.s. regulated $1.5 billion. the biggest retailer here in europe is the french-based up 2.7% because french sales and brazilian sales are doing well for the supermarket chain. they're helping offset some weakness in china. we will be speaking to the finance head a little bit later, down 4.3%. if you're looking at hayes numbers doing well on the permanent side of things. slightly slower in the temporary
unit but it feels as though this growth the have had is slowing ever so slightly. they expect strong operating profit growth for the full-year and the second half slightly better than the first. jon: two minutes into the session, the ftse 100 is higher in the dax is up by 82% -- 82 points. it is not just the rally taking headlines, i want to take the conversation further east because the moves in the chinese equity market have been nothing short of stunning. the shanghai composite and the hong kong hang seng have been 2008 highs. some of the recent data may not leave you reassured. let's get to bloomberg's stephen engle they march on, closing above 4000 points, when does it end? >> up 1.9% for the shanghai composite index today, hong kong
stocks have been on fire the last couple of days. shanghai, this is the highest this market has closed since march of 2008. chin jin closing today at a record. there is still some steam left in the market. we got some critical inflation data out of beijing today. we were expecting the disinflation to continue but it stabilized, the two rate cuts we got since november signed to work into the system a little bit, we have inflation the same as a february and march. remember a couple weeks ago, the governor said they have to remain vigilant about the specter of deflation as the economy is slowing faster than they expected. right now in asia, where are we going you go -- going?
most of the markets are green as well. we had japan and that benchmark index hitting 20,000 for the first time since 2000, where were you in april of 2000. it closed slightly down about 1/10 of 1%. jon: a market tote -- too excited about the nikkei, let's talk about hong kong, mainland china has taken all of the headlines. we started seeing the money flood across from hong kong, do you expect that momentum to continue? >> it is interesting, all we have to do is bring up the volatility or the premium index. it shows the discount that hong kong shares to their mainland counterpart have been trading at.
then of course the relaxation of the rules out of china and the flood of chinese investors we have seen for the last seven sessions in a row. it included a holiday in between up about 10.5%. it was up today but nothing compared to the last couple of days maybe a little bit of profit taking creeping in but this trend is continuing because that premium has now been whittled down to 24%. the traders and the analysts say as long as there is still that price cap differential there might be some room to grow for hong kong stocks. jon: thank you for joining us. stephen engle joining us live from hong kong. we are joined by kerry craig the global market strategist great to have you with us.
>> let's talk about the premium. we can talk about the overall moves but you think there is some room there even with that epic rally? >> the rally has been going on for a long time now you are seeing their trying to find those arbitrage opportunities. it will eventually evaporate but it will take some time. at the same time you have the investors hungry for stocks. jon: we also see global detachment, the economics in china is not so much right now. >> this is a story about market easing and military easing. there is expectation of bad news being good news. inflation numbers came out this morning and were a little bit better than expected but the number is still very weak it is stabilizing a little bit and
will be a challenging year for chinese growth. people expect more easing from the people's bank of china. jon: when you see a chart like this that looks like that how do you play this, bearish wages on a shanghai stock exchange have pre-much triple. we know the market kent state irrational longer than you can state solvent but there are moves in new accounts to trade these stocks. can you bet against this? >> it is a tough thing to look at a chart like this and say that won't come back it is very difficult to say if you're actually at the peak until you're coming down the other side but i think there are moves from further evenings -- easing to support this and you also make some changes in terms of what retail investments can do at the moment this is all due to
the fact that neutral funds can now exit the hong kong connect, if that gets expanded you'll see more and more people trying to take advantage of this. jon: we will talk europe. yanis says the deal between greece and creditors will be struck before the month is through. our exclusive interview is next and a little later on we will get a read on the u.k. economy from the biggest recruiting firm. then it is banks behaving badly the latest on two probes that will cost their biggest lenders billions of dollars.
jon: about 13 minutes into the trading session, extending those all-time highs in the euro is a little bit weaker. down by one third of 1% let's go to greece, or let's talk greece. the nation has secured a bit of emergency funding but it remains far from an agreement with its creditors. he says the deal will be reached before the april 24 deadline. that is what he told manus cranny and manus cranny joins us in paris.
why did he choose to speak now? manus: he has been attending for years long before he became a rockstar finance minister, i hassled him on a number of occasions. the issues, we are focused on numbers, you're talking gloria and he will help you put structures in place and what varoufakis is going to do is i just paid christine lagarde, we will work this out and hoping to get a deal by the 24th. >> when it goes to the primus
or, is it realistic to reach 1.5% this year? it is as long as this has stabilization of the economy and particularly the creation of the animal spirit as they say, then it is highly reachable. >> we need animal spirits but tax receipts are ahead of schedule. and every economy needs a bit of fair wind as well. he is talking a good group, interesting that the clips of video you showed earlier was separate, but his boss went to russia the day before. jon: a lot of people asked why considering they still don't have the money they need. great work yesterday, thank you very much for joining us, get out there and enjoy yourself. we talking about greece and a deal potentially april 24 7
billion euros, that just about covers some monster ecb bond redemption and then back to square one. >> this certainly is going to be a limited deal you will have a resolution, but will it solve the problems that greece has? not really. you will never get that msu see the debt pile. we've seen that in the past, it needs a huge amount of productivity to get through that so any deal that does come will be an ticking of the can and you will be back in a story where you have to repeat the process the longer that greece stays at the table, the more likely to reach a resolution. jon: at whatever is happening in greece is their problem, it is not spilling over to eurozone bond markets. the german curve, things are
getting ridiculous. just before qe started everybody said it was priced in and it wasn't. a month later to see the curve flattening. negative all the way to yesterday, minus 0.2% is what the ecb can buy out, too. even goes below that. >> can probably go further from here. this is all about the market surprise at how much impact the ecb had when it started. everyone knew what they were going to do what see the same thing reflected in the euro they would go from a negative to a positive rate in the markets have gone below that. all -- or they know there is enough institutions that will have to buy these bonds that they will make money that way. jon: what is the deal with j.p. morgan asset management? not just germany but even the war chinese two-year, the swiss,
10 year auction, negative yield, how long can this go on for? >> we will be in an environment of low yields for much longer. they pretty much said as much because basically the forecast did not even get to the 2% inflation target. we know they will continue it if not anything else. it is just going to push investors into risk assets and the corporate and high-yield bond market. jon: i could be flip it about it and say you buy everything. if i gave you the choice, where are you going? >> still a tilt toward equities. i think the valuation argument is so key. we know they have moved significantly, the u.s. isn't
looking as attractive as it once was because they're so concerned about the growth but for me there is a much bigger upside. jon: thank you for joining us the qe trade. equity markets record lows, it keeps heading south on the euro-dollar. still to come, the u.k. recruiter hayes posted numbers this morning and we will speak exclusively to the finance director, the stock is just trading off an eight year high. back after this break.
jon: welcome back to "on the move." let's talk recruitment hays expect strong operating growth in the year. shares are as much as 5% lower. we're joined exclusively by the finance director, great to have you on the show. markets not happy. >> i don't read anything yet, we have 15 countries that did more than 10% and we have strong growth in the u.k., we are about 1% below consent which is within the rounding. if you haven't outperformed the numbers you may always have a little adjustment in the short term. jon: we put a chart up off an
eight year high, when i get into these numbers i see strong growth in the u.k. still, u.k. still performing the start to get what we call a dirty quarter ahead of the election? >> generally with elections what happens is the growth slows down a bit. and we have seen that, so in march there is no doubt in the public sectors, the key part is it is too late for them. all the regions grew across the u.k. and interestingly in the city of london which has been the weakest market for several years we grew by 8% which is the best performance in four years. there was always a positive. jon: on the positive side there been some serious fees, you expect that to continue? >> it is a very long up cycle. i don't see any situation when they continue to grow. because fundamentally what drives it is people changing
jobs. and people in england have been in the finance sector. if they have found it and they won't change or they are not going to change. that will continue. jon: on operating margins, last year a margin of 3.9% in the company was still doing well but that was a third of the peak. >> we don't tend to focus much on what is the margin versus turnover, we focus on how good we are and that conversion rate is 20%. the big positive last year is that wage inflation has started. we are seeing wage inflation of around 2%. i don't think any client will wake up in the morning and say we love you, i would like to pay
you 10% more for doing the same work. so what you need is wage inflation, strong economic growth and then what tends to happen is copies don't match what they pay biggest want to get it very quickly. in the short-term, wage inflation helps and in the long-term we might well see margin improvements. jon: at the bottom line, operating profits for 2015, your view versus the consensus view actually your view is below the consensus in the market. >> we have had this discussion before, the beauty of the business is that we have limited visibility and no revenue stream, we have a quarter to go. what we said today is we expect to make something like $165 million. we might do better but that is where we expect to be today.
a little bit of trimming and more importantly that would be more than a 25% underlying increase in profitability, that is pre-good. jon: election year, a couple weeks away. are you worried more about that what could potentially be happening? >> more between now and the election. we see it every single time. all you have is decision-making slows down a bit of the real question we discuss is do we have a decision and can we make sure we are not going to have a hiatus? it is always likely there will be a little bit less growth, but sitting here with the knowledge i have today i expect to be sitting on your show in three months time very it's not that the business has slowed further it will not accelerate back to 10, 12 and 14.
jonathan: good morning and welcome back to "on the move." i'm jonathan ferro. 30 minutes into your trading day. let's bring you a picture of the markets. the ftse 100 up by 0.4%. the dax pushes higher. you are looking at the eurozone equity markets. green across the board. the stoxx 600 extended into a record high. euro, a little bit weaker. it is the qe trade all over again. two tech titans go head to head today. the apple watch is in stores. samsung's newest galaxy phone goes on sale as well.
here with more is caroline hyde. the usual frenzy, this is what i'm surprised about. i don't see it this time in london. what is the story? caroline: you are exactly right. there isn't much of a queue in london. there wasn't much in china. no one stood outside, maybe just 14 people lined up in beijing. in an area, a region, that apple calls its most important. tokyo got a little more excited. there are about 70 people gathered there. 100 outside the store in sydney. but there isn't a sudden race to get into the shops because they are selling them online. today, you can try it out, by appointment, you can try it on. see which one of the three
variations you actually want. if you want the sports style or the more luxurious addition which of the many straps you want. this is the new way in which apple is trying to sell its new device the first new device under tim cook. it is the smart watch. it has a hefty price tag. it called -- could cost from $349 up to $17,000 if you are going for the gold version. but it doesn't have this furor, these long lines that we saw with the iphone 6 that recently went on sale. you are only touching it, it doesn't actually go on sale until the 24th of april. until then, you can preorder online. interestingly, the sales aren't as much as we expect from the phones. piper jaffray think that about 300,000 preorders could happen
in the next 24 hours. people might be going mad on the internet. 300,000 to be bought today online in preorders. one million sales over the next weekend. sounds like a lot. compared to the iphone 6, 4 million preorders in the first 24 hours. over the first weekend, more than 10 million devices sold rather than one million expected for the apple watch. this is a new genre a new piece of kit. they've got to explain to us why we need it. jonathan: classic day of samsung versus apple. what are we expecting from samsung's new lineup? are we expecting seller sales? caroline: we are. they've decided to pit themselves against each other on the same day. you can go to the samsung store
touch, feel, and walk off with the device today. you don't just need to preorder. analysts are pretty euphoric about the sales. they think 55 million could be sold over the course of this year. potentially could be a victim of its own success. the chief executive saying, demand might outstrip supply of the s6 edge with the biggest screen and the wraparound screen. it could struggle to manufacture the flexible screen. they are expensive. if you are looking at the price point, you could spend up to $17,000 on the apple watch. the actual samsung phone almost $1000 is how much the s6 edgewood cost you. that is a lot of money for a phone. yes, it is stronger faster,
meant to give you better pictures, battery life as well. you can charge it wirelessly. samsung pay as going to be pretty novel. you can go into nearly all stores and pay via your phone. they go on sale in 20 countries. the apple watch is on sale in eight countries. more countries could get hold of the samsung, but we could see record sales. we have seen samsung move in that euphoria. it has gone up $18 billion in terms of its market value. jonathan: caroline hyde, great work. let's get the tech investors insight. hussein congee joins us now. we will start with samsung. talk about the hardware and the bottom line as well. the hardware is developed. will it help the margins? hussein: it has taken some cost
out of the business because they are using their own chips. that should help the margin. the biggest affect is the phone is more expensive, just like the iphone 6. they are changing the selling price. this is a company that historically did double-digit margins. it dropped into single-digit margins. analysts are saying they should be back to double-digit margins. jonathan: [indiscernible] hussein: that is the hope for samsung. this is a better phone. it looks more like apple in that case. there is a market brand for phones. there is a bigger market brand for the apple phones. the question for samsung is, can it go head to head with the low-end manufacturers? jonathan: i've got to bring apple into this discussion. we've been going back and forth
about apple, they need a new product category, they need it now, then q4 happened. the new product category went somewhere down here. the apple watch, is it just the fact that they've got one done now and it is the best available? hussein: this is a project they've been working on for a long time. it is not clear to me that this is going to be a remarkably transformative product. when the iphone came out there were a lot of people waiting for a browser to work on this phone. the minute that came out, the lightbulb went off. you look at the apple watch, it almost feels like a gadget. jonathan: the story you touched upon with the iphone, there was always something missing. you would always get it in the next one. what does this hot watch have missing now? hussein: it is very hard to refresh the screen. you can have it constantly
refreshing the screen, giving status updates. the limited processor power means that the apps are not going to be world-class. they are going to be somewhat static. jonathan: in terms of expectations what can that watch deliver to this company? hussein: good question. they are not projecting a ton on the bottom line. unless the cues are really big and this is a box -- a blockbuster product, i don't think it will be huge for apple. jonathan: fascinating debate going on about bubbles. i'm talking about uber, airbnb, the guys that run hotel companies without hotel rooms car companies without cars. what is going on with these valuations? hussein: most of these things would have normally gone public.
they are going to the private market. hedge funds and large growth investors are knocking on their door saying, take our money. i think there is so little yield in the world, and the tech industry does produce companies with a lot of that money sloshing around. jonathan: what is the exit strategy here, and when does it start to happen? in the late 1990's, you bought a company didn't have to deliver any profit. these guys are holding back. why? hussein: their balance sheet's are so strong. increased scrutiny, more regulation, more compliance. if you have more than $1 billion on your balance sheet, you are pretty much fully funded. there's no reason to go into the public markets. you are starting to see that. these guys delay their route to
come to public market offering. jonathan: do they stay that way or do we get to a point where they want to see the exit happen? hussein: eventually, we are going to see a shift. the question is, there is so much more money coming into the private market, so many more corporations. a year or two ago, we were surprised, and that you has only gotten longer. jonathan: when does it dry up? we have been asking this question for yields. at some point, these rates have got to go up. hussein: when there are other asset classes producing, the thing about this money is it is easy money. you should take it. the music could stop very quickly. that is kind of what we saw in the bubble era too. jonathan: do you think this is something similar? hussein: a lot of these
companies are real companies. they are generating real revenue. they are not concept, as they were 5-10 years ago. but, there are certainly inflationary prices on the later stages. in that sense, it is frothy. jonathan: hussein kanji, are you buying the watch? hussein: not just yet. i still have a blackberry. jonathan: thank you very much hussein kanji. coming up, banks behaving badly. deutsche bank reportedly close to a settlement of libor while hsbc is in a french tax probe. we have the details after the break. ♪
jonathan: good morning and welcome back. i'm jonathan ferro and this is "on the move." it is time to talk about some banks that behaved badly. deutsche bank is close to a deal to settle investigations into libor manipulation. according to people familiar with the matter, the deal would be with u.k. and u.s. authorities. hans nichols has the details from berlin. pons, put this into context. that is a lot of money. for a bank, in the context of some of these fines, maybe not much. hans bank they have said aside 3.6 billion euros for legal
costs. you compare this $1.5 billion figure, and it is probably north of that. you compare that to what ubs did, ubs previously had the high water mark. ubs was $1.5 billion. rob a bank were about $1.1 billion. barclays was at $451 million. remember, barclays didn't plead guilty. they cooperated quite early. lloyds bank is down at $383 million. this is all on libor. deutsche bank has already paid more than 700 million euros. that gives you a sense. what does it do to the uncertainty? it wipes some of that away. i was talking to analysts. here is what some of them said. the uncertainty is gone.
for deutsche bank, libor is one of the last egg legal disputes. this was a four-part deal. you have the department of justice, the cftc, the fca and benjamin lasky's shop in new york. they have been late to the party. they also been driving them up. there's a great deal of respect by the banks for mr. lasky's shop, in part because he's been pushing a harder bargain. if the bank is chartered in the state of new york, lasky then has jurisdiction. tilde amount deutsche bank has spent 7.1 billion euros. that is how much their legal costs have been. a lot of money. there's still some other cases out there. jonathan: hans, a lot of money has been put aside. on the libor side of things,
this is the u.s. and u.k. authorities. hans: we still have that currency probe. we did have a few banks that settled. that came to a total of $3.4 billion. we still don't know if deutsche bank are going to be ensnared in the iran sanctions violation. when we had bnp paribas, they paid iran, cuba, and sedan. they had a $9 billion sediment. this is getting there on the libor front, but we have to class through the foreign currency exchange. we don't have estimates on how much that will cost. jonathan: hans nichols, thank you very much. let's keep it on the banking sector. you hear about currency vines libor, tax evasion as well. hsbc is thought to pay one billion euros after being charged in a french probe about tax evasion. stephen morris joins us now for
a little bit more. you've got libor, the currency thing, now tax evasion. >> hsbc has faced a litany of regulatory issues. 1.9 billion in 2012. it is hopefully one of the last ones for the bank. jonathan: in terms of appeals what are the chances of success? stephen: we don't know yet. this happened to ubs, who appealed the decision. while hsbc is vigorously spending, it is unclear whether they will be successful or not. jonathan: talk to me about the size of the fine. you see some crazy figures. $1.5 billion for deutsche bank. multiples of that for bnp paribas.
for hsbc, what is the fine for this? stephen: we don't know the size of the total fine yes. this is definitely a show of force from french prosecutors, saying they are not going to ignore this anymore. hsbc is one of the world's largest banks. $1 billion for them isn't a break bank. jonathan: stephen morris, thank you very much for joining us. a quick check in on stocks and the euro. stoxx 600 extending a record high. we are up by 0.44%. stocks higher, euro lower. euro weaker again, down by 0.4%. we are heading to a dollar 06. we will look ahead to "the pulse " with guy johnson. we are back in two. ♪
jonathan: welcome back. 50 minutes into the trading session. u.s. president barack obama and cuban president castro head to panama. they could meet for the first time since they announced plans to work towards restoring diplomatic relations. the supreme leader putting a roadblock in new layer negotiations. he has said that economic sanctions on his country must be lifted.
those assertions contradict western framework announced last week in switzerland. france's biggest retailer said profits could rise nearly 4% this year after figures beat estimates. carrfour is ramping up investment to continue a turnaround. let's take you to general news and bring it back to the market. it was a four-day week for many of you. it wasn't short of headlines. here are three things to take away so far. new heights for the stoxx 600. it broke through an all-time high this week. during any other week, that equities story would dominate the headlines. then you've got china. the stock market their on fire. first, the shanghai spilled into the hong kong hang seng. only open for three days this week it gained more than 7%.
london not letting the fight down. monster energy deal, shell-bg group becomes the world's biggest energy company. not the biggest deal we seen, but it could be the deal of the year. we are joined now by guy johnson. you are getting happy with that. guy: you want to talk about the markets? jonathan: equities, record highs. the french five-year yield below zero. nevermind about germany. guy: i think that's the point. you and i are always bantering back and forth. we reached a point now where when the german bond goes negative, we are going to sit back in our chairs, jan, and say , that was exciting, wasn't it? this process is underway. jonathan: is that worrying? guy: it is worrying.
you've got to the point where the market is a little desensitized to this stuff. when you get a snap back, i think it will be quickly. but i'm really desensitized to this stuff. this is the ongoing process. that line has been going in that direction for some time. jonathan: look at you getting excited. guy: you know what, why am i excited by this? because i think this one in particular is a step up in terms of what it is delivering for samsung. the last one really wasn't that much of a game changer. i'm sensing that this is maybe a little more. in terms of the hardware, the software, i think this is definitely a step up. it looks a little bit cooler and maybe this is going to help. the difference we are seeing now, with this and with the watch, is that you are looking
at premium products. i think it probably is true. you see it in so many categories as well. people are trying to take it up the premium scale. jonathan: lofty price point. guy: but my concern for samsung would still be that you can buy a very good android phone at a significantly lower price point. they take themselves up the premium scale and try to improve the margin, but they still find life difficult when it comes to the commoditization of the android operating environment. jonathan: guy johnson will be covering that. smartphones and desensitized market headlines. that is it for "on the move." a quick check in on stocks. the stoxx 600 extending all time highs. euro-dollar, weaker euro. we are down by 0.5%. just briefly the five-year
guy: premium products. samsung and apple launch high-end devices targeting the luxury market. deutsche is close to a $1.5 billion settlement on libor while hsbc must pay a $1 billion settlement over a french tax probe. greek deal insight. they will strike an agreement within the next two weeks. we will bring you our exclusive interview. good morning. welcome.