KPN Soars on Slim’s Bid: The Pulse (08/09)

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August 9 (Bloomberg) -- On today's "The Pulse," Francine Lacqua and Guy Johnson provide commentary and analysis from the United Kingdom and the developing stories from around Europe along with a look-ahead to what's likely to dominate the U.S. business agenda. (Source: Bloomberg)

Billionaire carlos slim bids to take over kpn in a bid worth more than 7 billion euros.

That sent shares of the dutch phone company sure -- soaring.

A year-long investigation may be over for jpmorgan.

It is almost near a settlement over its london whale losses.

And bloomberg gets unprecedented access to the luxury jeweler graff.

We have no immediate plans to go back to the markets.

Still something that you would consider?

Anything is possible, but no immediate plans.

It is 9:00. you are watching "the pulse," live from bloomberg european headquarters here in london.

He begin with a potential telecom takeover from billionaire carlos slim.

His mexican telecom company plans to make an offer for the 70% of kpn it does not already own.

A deal could be worth more than 7 billion euros.

Manus cranny joins us with details.

Kpn for sting higher on this.

-- burs ting higher on this.

It is.

Carlos slim and kpn went and did this deal with telefonica.

All bets are off.

We have seen this sudden step forward by slim.

He supported the rights issue.

He has been circling.

All bets are off.

The one line in the press release, they are now going to review the deal that kpn has put forward.

The driver for mobile and carlos slim is selling the assets.

That is driver number one.

Number two, what is your competition?

This is not what the market needs.

The market needs consolidation.

In an e-mail i got this morning, there are five key players in the telecom space in europe.

The only way you will get us to spend more money is to wash out the system of competitors, squeeze the pricing higher.

That could be the other driver for it.

Also, he put $4 billion in this time last year and it is down.

He lost money on the back of it.

Now he is pouring in more money.

What is the attraction?

You already put 4 billion in.

Now you are going for the rest of it.

It is a well-established infrastructure presence that you get at a deeply-discounted price.

The argument would be that european regulators are not offering more value.

At&t has been touted as a name that wants to come in.

The view is this.

The regulators are keen to see competition.

They are keen to see everyone get a fair piece of the pie.

What there is going be more consolidation.

This is the view is -- this is where the view is that european players -- 23% of telekom austria.

What does it do to telefonica?

Will they still be able to do this proposed merger of the mobile business in germany or will carlos slim pullback from that and say, if you want to do that deal, i want more revenue?

He is number two.

Let's not argue over a few billion.

Thank you so much.

Turning to banking, a year-long u.s. investigation into jpmorgan's london whale losses may soon wrap up.

The bank is negotiating the final terms of the deal, including how much it will have to pay.

Ryan chilcote has more on the story.

Is it over?

It is not over.

One is the settlement financial aspect of this and that is still under debate.

Jpmorgan possibly having to pay some kind of settlement to the sec as a result.

The second issue and perhaps the larger issue is a liability.

What jpmorgan going to say about what it did?

We understand that they are going to make some admission of mistakes.

They say the oversight of which the unit in which the london whale work -- but they are not going to go further than they already have on the issue in making any kind of admissions of guilt or anything like that.

Who is the london whale?

$6.2 billion of losses with his botched trades.

Is what it cost.

His name is bruno.

We do not have a photo of him.

He left a larger-than-life legacy behind him.

This has turned into a story of whodunit.

Who are they going to go after?

The whale himself is off the hook, at least that is what we are hearing.

He will not be pursued or charged with any wrongdoing.

As for the chief executive of jpmorgan, jamie dimon, he made the comment in the teleconference that this story about the london whale was something more than a tempest in a teapot.

That was in response to our story revealing the trades.

Neither he nor any other senior executives will be pursued.

That is something that reuters is reporting.

What they have said is that they are going to go after some of the lower-level traders around here.

Clearly, they are way down the food chain, if you will.

We will leave it there.

Thank you very much indeed.

Ryan chilcote covering the london whale story and the possible settlement surrounding it.

Britain's biggest retailer is ending independent operations in china.

Tesco will merge its stores with the nations second-biggest hypermarket chain.

It does not actually mean that tesco is exiting china.

But it is a consolidation play.

Yes.

Tesco is investing a couple of hundred million.

That is all we know.

Details are quite sketchy.

You do not invest more money if you are planning to exit the market.

What they are saying is, we cannot go it alone if we want to get any sort of scale.

They are going high up with a bigger player to be part of the bigger story.

Sales at the moment in china are roughly 1.4 billion pounds for tesco.

The combined entity already has 10 billion.

They are already doing quite well.

What does this tell us about the wider strategies tesco is pursuing?

It is all about expansion, expansion.

Now it is about capital discipline.

All about ensuring shareholders that tesco would be far more disciplined in international markets.

They are just concentrating on the whole market and profits.

You have got to get that one right before you can concentrate on fast-growing ventures.

How much are they focusing on the domestic market?

Yesterday, they unveiled the layout for the new store.

It is quite the retail destination.

I was in watford, just outside of london.

It is an extra store that was the traditional , cookie-cutter, hypermarket format before.

Now you have nice coffee shops, a nail bar, you can get your nails done.

There is a giraffe, which is a family restaurant, but not in the traditional sense of a supermarket, where you normally get fried food.

This is like salads and good coffee and you can get a cocktail if you want.

Quick you can go for a couple of hours.

A little bit like ikea.

What they are saying is they want to get more customers in and people to spend more money.

If you keep them there for longer, they will hopefully spend more money.

Thank you so much.

And -- talking of spending money.

Over the next two hours, we are taking you inside graph -- inside graff.

Founded in the 1960s, it has held some of the world's finest and frail us diamonds ever discovered.

-- frailet st diamonds ever discovered.

We are granted rare and exclusive access, including an interview with the ceo.

Why he ditched plans to take graff public.

We will also take you on a tour.

To cap it off, we will sit down with the managing director and discuss what else the ultrarich /their cash on.

---- splash tehir cash on.

You have a large number of money on your finger also.

Probably a couple of hundred million.

Will die million pound tools worn by celebrities and owned by the mega-wealthy.

Graff deals only in the finest diamonds.

Starting from humble beginnings, self-made millionaire lawrence graph -- graff open his first start in -- store in london in 1982. -- 1962. since then, it has made jewelry out of some of the finest and rarest diamonds ever discovered.

Like this.

Flawless, one of the rarest gems on earth.

Among the largest diamonds ever discovered at 493 carats.

Last year, the company hit a setback.

Graff tried and failed to go public.

It received orders for just half of its initial public offering.

Graff has also been a target for thieves.

At one time, it got $120 million worth of jewels stolen.

After more than five decades in business, graff is headed by lawrence's son, and he is regarded as one of the most exclusive jewelers in the world.

It was a tough assignment.

It was really fun.

We did talk a lot about business.

He was showing me around and telling me some of the amazing things.

A lot of the clients arrive in monaco and they are on a yacht.

They want to see the diamonds fast and they pick which of the millions of worth of diamonds in 10 minutes.

I assume you are buying from graff, you know the product will be good so you do not worry about that.

It is about what catches your eye.

What i have always talked about is the incredibly small number of people that they have as clients.

It is measured in the tens and 20s. they have key clients that by serious amounts of diamonds.

It is such a close and small world that i find it stunning.

Quick it is one of the reasons that they probably shelled the ipo.

From my understanding, they are trying to get more clients.

Not many people in the world can buy a diamond of that kind of scale.

Right.

What with all this self-made millionaires and billionaires in china, that may change the way.

Coming up, you will hear more about why graff shelled an ipo last year.

Later, we will show you around graff's stunning diamond exhibition in monaco.

All that and more to come over the next couple of hours.

Welcome back to "the pulse." we are live on bloomberg tv and streaming on bloomberg.com, your tablet, your phone, and now any windows phone.

Our markets focus of the day.

Diamond dealers, the mega- wealthy graff.

The dealer has grown from a single store in london to 40 worldwide.

They have had some bumps along the way, including shelving an ipo last year.

I had an exclusive interview with their chief executive about why he pulled out of taking the company public.

Many people do not realize how vertically-integrated our business is.

Some people know us as a retail company.

But we are vertically- integrated from the ground right through to retail.

We are involved in every aspect of the process to sell a piece of jewelry.

You are sourcing and cutting the diamond.

We are designing and manufacturing the jewelry that holds those diamonds.

Of course, our retail network is where we sell all our products.

That means it is much more risky.

They have to trust the brand.

You are taking risk every step of the way.

Somewhat so, yes.

On the other hand, we are in control of our destiny and we know exactly what we are doing all the way through.

We also have the ability to expand, knowing that we can supply ourselves with what we need to carry out that expansion.

Talk to me about the ipo.

Read disappointed when it did not go through?

Of course we were disappointed.

But we had a very bad time in the world and the markets were down.

We have got no immediate plans to go back to the market.

Still something you would consider?

Anything is possible, but no immediate plans.

We are in this uncharted territory.

What worries you for your business?

It is a big worry if the situation in europe does not come to fruition soon, but we believe it will.

Things have been put in place.

Within 18 months or so, europe will start picking up and there will be more employment.

At the end of the day, we have to be realistic about our business within the economy and we are operating at the pinnacle of our industry.

Our clientele are the pinnacle of their success.

They are somewhat insulated to the general worries that we all have.

If you are super wealthy, i guess a bit of a recession here or there does not hurt you very much.

You have the money, but you still go and buy diamonds.

You will hear more from the chief executive later in "the pulse." he will tell you why monaco means so much to him.

We will look around the exhibition and we will sit down with the managing director to discuss what else the world's richest spend their cash on.

We are going to get a krona.

We saw a picture of heidi klum flying in her private jet with a box of cronuts.

As we had to break, the higher you fly, the further you fall.

Veteran riders took turns on this monstrous air raft.

And aussie competitor blew a landing and knocked himself out for the moment.

He wanted to get back on the bike, but the medical team pulled him off the event.

Superman and tail whips earned the judges thumbs-up.

Wow.

That on a bmx.

That is quite insane.

Welcome back to "the pulse," live on bloomberg television and radio, streaming on your tablet and phone and number.com.

We are watching mostly, chinese inflation.

Coming in just below economist forecasts.

Let's talk about the global impact and whether this gives the country's premier room to boost or stimulate the economy.

Julian caro is the chief economist at barclays.

-- c arrow is the chief economist at barclays.

The industrial data looks ok.

I think the numbers were better than we might have thought.

That is quite encouraging.

It suggests that there is a lot of momentum in the chinese economy.

Industrial production was up seven percent year on year.

The momentum is definitely still there.

It looks like china will be able to grow at a bout a seven percent rate.

What we see in the investment data is a lot of things coming through in infrastructure, which was up just below 25% in july.

China presents us with some paradoxes.

How do we grapple with the fact that growth has been so dependent on borrowing and debt?

There was such an imbalance there.

Yet it continues to bring good numbers.

Of course, yesterday's trade numbers were on the encouraging side.

Chinese imports coming out of europe and exports to the u.s. and china, even japan.

They were looking stronger after july.

The data has been looking a lot better.

It seems to be stabilizing.

Is there a danger that we will see much more shockwaves?

I am not sure we will see shockwaves, but we are going to see scope for some disappointment down the road.

If we go back and think about the situation before the crisis , we had a very large expansion in debt.

Now that is true for china.

As well, we had a large extension of real estate investments.

That is also true for china.

Those same characteristics that were very good indicators of the crisis and have been good indicators of crisis in emerging and advanced economies, that is the case in china today.

We have to be quite cautious.

At the same time, china does seem to find ability to generate some better numbers so there is quite a lot of scope for evening on the monetary side.

At the moment, the central bank , the government is trying to squeeze the shadow banking sector.

They want to wean the economy away from debt expansion.

When you break out the cpi number and start to look at the components, you have a food component which is sections of the poor relation -- the population running at a .5 number.

Those are not tolerable from -- for a political point of view.

How do you balance that with the need to stimulate the economy?

Inflation matters a lot to the chinese, but also growth.

It is essential for the system to function in china, that it does continue to generate jobs and a rising standard of living.

The inflation numbers, in aggregate, that is ok.

As you say, inflation is stronger.

In particular, we should see some strength yet to come through from a very important to the chinese household budget in the second half.

That is why the central bank is not showing much desire to ease policy or cut reserve requirements or interest rates.

There is a concern about inflation out there.

On the industrial sector, we have a lot of excess capacity.

Although the ppi rates are negative, it is still fundamentally deflationary you mentioned the global consequences.

China has a huge excess capacity in many different sectors globally.

It is acting as a deflationary force for the global economy.

It is a very interesting set of circumstances that we have.

What you can be sure of is that china is going to really in demand from the investment and consumer side.

It will want to go -- to grow in exports as road slows down in the investment channel.

The million-dollar question is if if we see more volatility.

Thank you very much.

? . . welcome back to "the pulse." live from bloomberg's headquarters in london, i'm francine lacqua.

I'm guy johnson.

Billionaire carlos slim is trying to expand and europe.

-- in europe.

He has made a takeover bid offer for kpn.

America mobile already owns 30% of kpn.

Jpmorgan is said to be near a settlement with u.s. regulators over the london whale trade.

The bank is negotiating final terms over the the deal.

Investigators say the bank misled investors about trades it made.

The london whale 's positions were so big.

Europe's debt crisis was on the agenda at the white house.

Resident obama met with the greek prime minister.

Obama says the u.s. will support greece's attempts to reform the economy.

Let's get back to our big focus and the world's most expensive diamond dealer.

Earlier you heard that graff's global expansion, why it ditched a public offering lester could not many people have a chance to buy multimillion dollar gems, but in a rare exclusive, we are now going to take you inside the world of graff to see it.

Chief executive francois graff showed me around a special jewel exhibition in monaco.

? we are very close to our customers.

It is funny.

I think that customer at the high and considers his doctor.

If they happen to be in polynesia this week, and they need a piece because it is the wife's birthday, we make it happen.

Very often clients will ask us to meet them in extraordinary places.

They will ask us to land on their debt with a helicopter.

It is all very james bond.

Quit frankly for them, it is daily life.

Let me show you this diamond.

This is a next ordinary stone.

This is a very -- an extraordinary stone.

40 carats.

The sparkle from the stone is absolutely beautiful.

If i can just show you how beautiful this is, we do it in all the colors.

How much are they worth?

About $100,000 each.

This is something we just started doing.

How many carats?

About 50 caret.

Men must feel left out.

We do beautiful watches.

I am wearing one of our new ones.

This is a very special movement.

About $300,000, this is a very valuable watch.

It is very limited.

Unique to graff.

Only 20 pieces will ever be made.

There is one stone i would love to take out and show you.

This new diamond.

This is five carats.

This is worth many millions of dollars.

Each character is worth a lot.

This stone, we acquired it back from a client.

They more than doubled their money in about five years.

Do they have names, the diamonds?

Some do.

This one doesn't. we can name it the bloomberg diamond.

There we go.

The yield.

-- deal.

[laughter] ? favorite piece?

All of them.

I asked him what his favorite piece was, and he was like, it is like choosing amongst her children.

Really?

[laughter] i am big.

Italian.

Go big.

If you are going to have a multimillion dollar diamond, go for it.

I would go for a ring.

You?

I would go for the lamborghini.

You will hear more from the chief executive in the second hour of "the pulse." he will tell you why monaco means so much to him and the business.

We will sit down with the managing director of library research to hear what else the superrich low their billions on.

Turning to a battle of the banks, a bloomberg report shows that wall street banks have gained market share in investment banking from european lenders.

This is as the top lenders in the eu grapple with the economy and pressure from regulators to boost capital.

Let's bring in one of the reporters behind the story.

The chief financial correspondent for bloomberg.

Thank you so much for coming in.

What is behind the numbers?

Is it a reflection of the economy?

The u.s. economy being stronger, driving revenue at the u.s. firms, dealmaking booms, stock prices at record highs.

These tend to be higher in the u.s. -- fees tend to be higher in the u.s. we also came across some structurally issues.

-- structural issues.

Some european banks, particularly barclays and deutsche bank, are heavily exposed to the market, holding them back in the second quarter.

Across the board, there is pressure to review the asset base, boost capital, and that is holding back some of the european players.

It is structural issues as well.

Not only about the economy.

I quickly can these banks turnaround?

That will depend to some extent on where the focus among regulators on leverage heads in europe.

You got some regulators principally in britain and switzerland focusing more on leverage.

At the eu level, there isn't as much pressure.

If that were to become more of a focus, and if one or two banks boost their numbers, then you'll see investors putting pressure on everybody else.

We have been speaking to a lot of investors coming in on this program saying, i like european banks because they look cheap.

However, there is still all this regulation concern.

Then you have the bad loan problem in italy.

That's right.

You have bad loans that continue to rise.

The numbers for june in italy were 22% higher than a year earlier.

The bad loans tend to like the economy.

That will take a bit longer to recover.

It is not just an italian problem.

As the ecb comes in to supervise the region's largest banks next year, it is now preparing to conduct an asset quality review.

There are some investors who are concerned that these reviews will reveal that there need to be more provisions.

That in consequence may affect the need for capital.

Thank you for all of that.

Over to you -- let's talk about germany.

The nation's elections are drawing nearer and nearer.

Chancellor merkel's main opponent spoke out yesterday in his first main campaign rally.

He claimed that merkel has been misleading for -- voters on the european debt crisis.

Let's bring in alan crawford from berlin.

Merkel is so far ahead in the polls on a one-on-one basis.

Steinberg has really struggled in the early parts of this campaign.

Is there any sense that his latest message will strike a chord with voters?

Well, the dividing lines are certainly hardening in this campaign.

That was steinberg's first rally in hamburg, his native town.

He is campaigning on the fact that he is telling the truth, even if it is painful.

His campaign to work his card -- tour is called the street talking to her.

Merkel is campaigning on her handling of the debt crisis in europe, she is protecting germany from the worst ravages of the crisis.

The fact that unemployment is nearly two decade low.

St einbrueck says merkel is misleading voters, that germany may have to step in and help more, and that may cost money.

He says that unemployment is the result of her predecessor, schroeder, and the budget balance is misleading because there is a need for investment in infrastructure.

He is calling out merkel on these points.

Merkel has been in the outs.

There are great pictures of her surrounded by rubble.

Nevertheless, she's back in business next week.

How is she going to try and position herself in terms of the key debates that will now have to be run?

Will she respond to this issue that has been raised?

How will she run the campaign over the next week or so?

It is a good question.

Merkel tends not to respond to these charges, that she can set the tone of the debate.

She is going to do this with a series of 56 campaign stops across germany.

She's got about two rallies every day in the run-up to the election.

There are also indications in the past that she was not perhaps the best campaigner, she wasn't the best speaker on a day-to-day level, confronted with an audience.

That seems to be changing slightly.

Others have made the assessment that she is a better campaigner now.

She has learned.

She's getting better at it.

It will be fascinating to watch.

This is a critical campaign.

Alan crawford joining us from bloomberg news.

Coming up, the biggest threat to opec, the international energy agency names american shale gas as one of the biggest concerns.

We will speak to the head of the oil industry segment at the iaea next.

? welcome back to "the pulse." i am francine lacqua.

I'm guy johnson.

The challenges facing opec remain a key issue.

The biggest threat to the oil cartel, the growing rise of american shale gas.

And the security issues within its own members.

That is according to a new report from the international energy agency.

Let's welcome the editor and head of the oil industry at the iaea.

He joins us from paris.

Thank you for joining us.

The iaea 's estimates for 2014, what surprised you the most in the report you put out today?

What surprised us was the scope of the increase in refinery runs in june and july.

We did expect a big increase in crude demand from refineries, but the increase was more than 3 million barrels a day from made till june good it is unprecedented.

We have never seen such a big increase.

It accounts to some extent for the strength in crude prices, which had a big rally last month.

It has stalled a bit now.

We have seen very high prices.

Part of it is demand-driven, but it may not be sustained because refining margins are starting to weaken on the back of the big rise in product inventories.

We are facing a new turnaround maintenance season starting at the end of this month.

We are in a situation where in the short term there are issues getting in the way of prices coming down, but if you look at the medium-term supply story, you've got shale gas coming on stream.

There is a story that shipments are beginning to plat to awful little bit.

-- plateau off a little bit.

Where are prices going?

Ok, so you are trying to draw me into predicting prices, which is what the eye ea -- what the iaea tries not to do.

There is more supply coming from north america.

More shale gas, more shale oil.

It is a big factor.

It happened this year.

It will continue to happen.

Infrastructure developments are coming into place to allow this new crude to reach the market.

That is a challenge.

Much of the conversation has a been -- has been about what this means for opec.

The concern has been that opec might have to make room for this new supply.

What we have seen lately is that the real problem opec is not so much true growth in north america supply or unconventional supply, but the security issues and turmoil associated with the transitions taking place politically and socially.

We've seen a major decline in opec production the last few months.

You will not be drawn into the price of oil?

[laughter] that's a no.

Talk to me a little bit about the inception.

-- about consumption.

How was consumption going to look like in the emerging markets?

This is where we are concerned most about the slowdown.

What is it going to look like in china?

What was interesting in the last few years, the big story was demand in mature economies or countries was slowing, going into contraction.

Demand from emerging economies, new, industrialized economies like china and others was going through the roof.

We still see this divergence in demand growth patterns, but in the last couple of months, we have seen a slowdown in growth from emerging economies, china in particular, but also from others.

A pick up in the pace -- or rather, slowdown contraction from other countries, like north america.

U.s. demand has been in growth mode for four of the last six months.

We are now expecting a little bit of an increase in demand from north america this year, and then a return to contraction, because there is structural developments, efficiency improvements, new standards for car efficiencies.

That is slowing down.

Then looking forward, we expect demand from emerging companies -- countries will pick up, but it might pick up not so much from the bric countries, but from other countries.

We might see less growth in percentage terms from places like china, but a lot more growth in places like africa.

A certain energy in place when it comes to nigeria, mozambique, etc.. i'm curious to know what assumptions you are making on gdp and whether or not you think that you would be prepared to revise those numbers up.

I'm interested in what assumptions you are making about global growth and where you see that, even in a 10 year time horizon, it does a lot of this stuff needs to be planned a long time in advance.

Sure.

We cannot really forecast the whole economy.

We have our views, and we take our economic forecasting from other forecasters, particularly from the imf.

We have seen the imf recently downgraded its forecast for the next couple of years.

We kind of incorporated those forecasts in our projections.

A little bit of reduction in our forecast in the short term.

But we think that the economy will eventually pick up momentum and growth will recover, accelerate, and therefore, we will see a pickup in the pace of demand growth as well.

If we see some support on the demand side, it is not just the supply-side -- lately, we had an eight dollar, nine dollar increase in wti prices -- some of that was supply-driven.

Disruptions in north america.

Disruptions in opec in a big way.

North sea productions in decline and so on.

Some of it is demand-driven.

Some of it is end-user demand.

One thing is the dramatic increase in refining capacity.

We expect that in the next five years as well.

This is coming in focus because we had this massive increase in refineries in the last couple of months.

Unprecedented in scope.

That doesn't necessarily reflect the underlying end-user demand.

We might have a bit of overhang at the moment, which would in the short-term lead to a bit of easing of fundamentals of demand pressure on the crude side.

Thank you so much.

Coming up , on the back of its second-quarter profit, we are discussing what is next for the danish industrial enzymes producer.

Manus cranny is standing by with that story.

What you can get by breaking a few hundred eggs, how about a change in eu policy?

That is what disgruntled french farmers hope to achieve.

They are protesting european like -- european regulations as weak by throwing 100,000 eggs a day from their trucks.

So far, they have broken 200000 and threatened to keep smashing well into the weekend.

? good morning.

You are watching "the pulse." we are live on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.

Let's not forget the windows phones either.

We are going to focus on the world's biggest maker of enzymes.

Novozymes posted second-quarter profit that topped estimates.

For more, let's bring in manus cranny.

Walk us through the figures.

The headline reads quite well.

You saw 6% uplift in terms of sales.

Household detergents, biofuels for energy, they've got 60% of the market, 16% of the revenue comes from that.

The boss was in your yesterday, talking about enzymes.

Very positive on novozymes.

If it is not in the household, it is in the food that you eat or the car that you drive.

Whether that car is a new car, whether it can cope with more ethanol, that is a key debate.

North america, innovation is driving sales there.

Overall volume growth for this year for the biofuels business is probably going to be flat, but he was bullish on the u.s. let's talk about where this is mrs.

Going.

-- this business is going good we were talking about fuel going forward.

You see changes in the united states, a bigger part of the story.

Some key rulings coming out.

We've had a bit of a change in thinking.

Originally, when the guidelines were set in 2007, it was gas was going to come on in terms of demand.

Let's use more ethanol in the synthetic barrel of gas.

That was set in terms of gallons.

Now, gas is down.

The amount that they blend in terms of ethanol into those gasoline barrels , the big oil are pushing back and saying, look, demand is down, and you are pushing us to use more and more biofuels.

You are really hurting us.

Api did huge banner campaign against this.

What we've got is a real issue , a fight back from big oil, and that is going to -- what we've got is the u.s. saying, you know what?

We will review the overall numbers you are going to have to use.

We will give you a little bit of a stay of execution.

It is a momentary stay, but it is not going away.

It is just getting tougher.

We do not talk enough about enzymes.

We will do it more soon.

Manus cranny, thank you very much indeed.

Thanks so much.

For those listening on bloomberg radio, "the first word" is up next.

For our viewers, "the pulse" is still up.

We will be talking to the chief executive of graff.

We did that interview in monaco.

He was talking about how the product is and who his clients are.

Then we have this, some in the studio.

Guy and i will be trying this read they are the new rage -- this.

They are the new rage.

You can follow us on twitter.

? billionaire carlos slim's takeover bid for kpn sent shares soaring.

A year-long u.s. investigation may be over for jpmorgan.

Sources say the bank is near a settlement over it london whale losses.

Inside graff.

Bloomberg gets unprecedented access to the luxury jeweler in a rare and exclusive interview.

The ceo tells us you will not see a share cell anytime soon.

No immediate plans to go back to the market.

Still something you would consider?

Anything is possible, but no immediate plans.

Good morning.

Good evening to our viewers in europe and asia, and a warm welcome to those waking up in the united states.

This is "the pulse." i am guy johnson.

I'm francine lacqua.

Let's get straight to one of the biggest stories of the day.

We begin with the potential telecom takeover run billionaire harlow's slim.

His mexican telecom company american mobile plans to make a takeover offer for k pn -- kpn.

It is often -- manus cranny has been tracking the story.

Let's get the details.

I've decided to call the story phil or killed.

Carlos slim has decided to go for the kill in regards to kpn, the dutch telecom operator.

He is paying a premium.

20%. take your mind back 12 months ago.

This man bought the stock at eight euros a share.

Is this a roll of the dice?

Is this an opportunity to pick up a huge asset in europe?

He is prepared to pay up.

The question is this -- what is driving the deal?

I woke up mark gorton in new york.

He works for gan.

He said, the concern is this -- kpn tried to do a deal a couple weeks ago to put their mobile assets in germany together with telefonica.

No, no.

That is not being done at the right price.

That could be the driver for carlos slim.

The second issue is, what is the opportunity for america movil?

They have a position in telekom austria.

Take a full position in kpn, and you know what?

Maybe there are some synergies on the block for carlos slim.

100 mobile players in europe.

Five key players in the u.s. so far, he has lost money in kpn.

How does he turn it around?

Do we have on the understanding of what he will do with the company?

Going for control allows him to really dig in, make decisions about what synergies he could have with telekom austria, utilize them, and maybe prevent ironically what could happen -- by going after kpn in totality, it could prevent consolidation, urges the slightly mystifying part about this.

That is what we need in the european market, a bit of consolidation to get average revenue per user up to it looks like it is an opportunity.

This is the conversation i had with mark wharton.

At&t was rumored to be looking at european assets.

In that respect, is it a value proposition?

I will finish with this -- carlos slim is number two in the bloomberg wealth list.

How to change your wealth in the time of 24 hours by 1.7 billion -- $1.7 billion is to make a bid for a company.

It trims your loss to nearly $5.7 billion down on the year.

It still leaves you number two in the world.

Life is tough.

Manus cranny, thank you.

Tesco is among the companies in warren buffett sportfolio.

The biggest are shirt in the uk is making way today after announcing it was ending independent operations in china.

This is the latest in tesco's overseas retreat.

Debbie testing joins us with more on the story.

Tesco, is this a china story, or is this tesco trying to consolidate their overseas assets and focus on the domestic light?

-- domestic played?

It is both.

It is a refocus off its international operations.

They know in china, they cannot build scale.

It would take to long.

It would be too expensive.

Investors are not prepared to fund that.

They are going to be a smaller entity within a larger -- a smaller shareholder within a larger entity that has more scale of immediately.

At the moment, tesco has sales of 1.4 billion pounds in china.

The enlarged entity will have 10 billion.

The growth prospects are actually quite good.

Tesco will have a 20% stake in this entity.

We shall see how that is going to pan out.

As i said, shareholders are no longer willing to put unlimited fund into international business and focus on the domestic business.

Let's head across the pacific and talk about united states.

Fresh and easy has not gone well.

It is trickier than tesco probably thought.

When it announced that it was selling the fresh and easy -- or exiting the u.s. and hoping to sell fresh and easy, they told us at the time that they thought it would take three months.

It is taking longer than the three months.

A number of potential interested parties are stalling.

It now could be that the whole business has to be broken up, and analysts have said this morning that it might lead to further write-downs.

I do not think investors are overly unhappy that tesco is taking a different approach to the china business.

We will watch this space.

Winky so much, gabby.

-- thank you so much, gabi.

Inside graff, when the mega- wealthy go shopping for diamonds, they turned to the london-based company.

It holds some of the world's finest and will -- and rarest diamonds.

We had a rare interview with the chief executive.

You will hear from him throughout the hour.

We will take you on a special exhibition through a show in monaco, an exhibition where everything was for sale.

We sit dow n -- more of my rare interview with ceo in monaco.

I asked him what made the place so special to him and his business.

Monaco is very special.

For us, it is very special because it was the first place where we opened a store outside of the uk.

It is very dear to us.

We hold an extraordinary exhibition every summer for the last 16 years) monica.

Talk to me -- 16 years in monaco.

Talk to me about expansion.

I know you are opening shops in china.

Is that where you're demand will be?

Clearly southeast asia has been growing tremendously.

We have cemented our foothold in that area, particularly in china and hong kong.

But we are opening now this coming month in the beginning of august in beijing a new store, and shanghai, a new store, and in seoul, korea, new store.

We have other plans also.

It is not only a ship.

We are quite that -- it is not only asia.

We are quite advanced with plants in europe and -- in europe.

Despite the crisis?

One has to be forward-looking in business.

We see europe coming back quite strongly in the next 18 months.

Are you worried about overexpansion?

We are not worried about overexpansion because we are a very cautious company.

We have expanded step-by-step over very many years.

We are operating within our means, and we aim to continue to do so.

You grew up while this company was being formed.

Is there a moment that you remember thinking, when did you think, this is a family business that i want to be a part of?

Actually from a very early age.

At that time when i was a little boy, my father was just getting going in the retail business.

His first door was opened in the early 1970s. -- his first store was opened in the early 1970s. at that time, there was the oil boom.

There was an influx of this new wealth into europe.

They wanted to see the best things.

He was the purveyor of the greatest diamonds.

I was privy to many incredible stories.

He used to come back home at night, maybe with what was left, and i used to love to play with it and look at it.

I was captured very early, and my imagination was really taken to go forward and be in this business.

You will hear more from our exclusive rare interview with the ceo of graff later.

We will show you around the special exhibition and monaco where everything is for sale.

Millions on display.

We will sit down with the managing director of legendary research.

Let's talk about what else is on our radar.

Jpmorgan is said to be negotiating terms with u.s. relators over botched riveted at last year.

-- watched to riveted that's last year.

-- botched derivative trades last year.

The biggest loss ever.

President obama says the u.s. will support greece's economic reforms.

He made the comments after meeting with the greek prime minister at the white house yesterday.

The meeting comes ahead of the german elections or angela merkel has vowed not ease pressure on greece.

China's factory output rose more than forecast in july.

Meanwhile consumer prices remained subdued.

Less than the government's 2013 targets.

Still to come, in light of our inside look at the high-end jeweler, we will break down how the world's wealthiest spend their money.

We will be joined by a researcher who spends -- who specializes in high net worth individuals.

? welcome to "the pulse." live from bloomberg's headquarters in london, i am francine lacqua.

I'm guy johnson.

Interesting trends.

We have seen the australian reserve bank downgrading expectations for growth moving forward, but what has been driving the aussie over the past couple of days has been the better than expected industrial production data out of china.

That has led the momentum that you can see to the upside.

The are trading around .90. the aussie has been gaining.

Let's talk about euro-dollar.

From a technical point of view, we are getting close to interesting levels in terms of resistance.

The moving average being looked at grade you got weak data coming out of france today.

Talking of weak data out of france, did you catch the handle -- the interview with fisher from the federal reserve?

His biggest concern of any economy in europe, not greece, not portugal -- yes, it is france.

That is the one he is most worried about.

The french data causing a little bit of a blip.

The fed is keeping a careful eye on the french.

Not the only ones.

Let's move onto banking.

Jpmorgan is said to be nearing the end of its so-called london whale investigation.

Sources say the bank is negotiating the final terms of the deal with the sec.

Let's bring in christopher wheeler to discuss, a banking analyst at media bangka -- med iobanca.

They are not win after the big guys.

Does that make a difference to jpmorgan?

The ceo could be scot-free.

What i am hearing is they are going after the company rather than individuals.

It will be very much civil proceedings coming out against procedures that surrounded the losses.

This is most the sec and the financial conduct a 40. it will be a slap on the wrist -- financial conduct a 40. -- authority.

It will be a slap on the wrist and most of the leadership has been shifted around since the london whale trade.

The only person would be jamie dimon himself.

I think the bank itself will avoid that if they come to a settlement.

A tempest in a teacup.

Is it more than a slap on the wrist?

Anything more we can read into this?

The case is often made that banks largely get away with these things.

While this is certainly a little bit more than we have had of late in terms of banks, it still represents a very little.

I set in your studios the davis blew up.

I was with the milliken fund manager who said, i had 3 billion at the time, and jamie will move on from this.

I point was, yes, he can, but at the same time, it is a lot of money.

That is the thing that has been dogging him.

6 billion.

Just to say that jpmorgan is big enough -- a tap on the wrist?

He has apologized many times for this.

I think why they are going to settle -- they are not going to settle from what we are hearing -- there are all the settlements we have had on mortgages and money laundering, there have and nobody -- there haven't been anybody admitting they're wrong.

What is that going to change?

Ok, procedures were incorrect.

They are going to say to the sec and the financial conduct authority.

He is saying, i will do it one more time.

With a bit of luck, let me absorb this.

Let's not put it behind us.

I'm afraid it is one of those legends, just like big trading lawsuit -- losses.

It will always be just in the background for journalists to pick up on occasionally.

Let's go to the other side of the balance sheet.

Jpmorgan is doing pretty well as a business.

U.s. banks are generally doing pretty well.

They are taking share from the european banks.

We have a story on this today.

Momentum behind this is going to change once europe recovers, or is this going to be a long-term thing once again?

U.s. banks dominant?

It is interesting.

Deutsche bank's ceo said that perhaps the european banks would come back in the second half with levels of activity.

I think what we are seeing -- we wrote a note on this after they put out results a few weeks ago saying, i think they have recalibrated their models quickly, and also they dealt with capital more quickly and leverage grid u.s. banks were always far less leveraged than their european counterparts.

What we saw during this last set of results is everything revolving around the leverage ratio, because that is the latest issue in town after the capital ratios.

Deutsche bank in particular, and barclays.

In terms of what the italian banks are doing, bad loan provisions increased 22%. but as guy was saying, more market participants are looking at france.

How concerned are you?

French banks just put up decent numbers.

From our perspective, to be fair, let's be honest -- french retailers have done quite well.

A bit of a mixed picture.

In terms of some international operations, we have seen some resolution or improvement.

The broader economy clearly, it would make people worried about the french retail.

If mario draghi was to go for a big ltro, what impact would that have on valuations of european banks?

Craggy -- crikey.

If you want, it would be measured.

More liquidity coming back into the markets.

I would have to assume that we would see some losses in the bond markets recover.

The problem would be, what is this telling us about the state of european banks?

How healthy are they?

It is intriguing talking today with my colleagues about how much pressure is being put on uk banks, swiss banks, u.s. banks, and some broader-based banks, we have some interesting capital anomalies, particularly in peripheral europe.

You feel that we have almost turned the corner overall?

If mario draghi was to say, an ltro, it would come back come and we have all these questions about banks, are they healthy?

They are not in too bad a shape?

There has been so much done about liquidity and capital ratios.

There is much more to be seen in results.

There are certainly getting there.

There's no doubt that the balance sheets are considerably stronger.

Of course, there are always things that stand out that still need more attention.

That is what mr.

Draghi will focus on as they take on the role as being the lead regulator.

Christopher, thank you so much.

Still to come on "the pulse ," silvio berlusconi's legal troubles are adding up the stupid the former italian prime minister has added more to his personal fortune in 2013 then warren buffett.

We will take more -- take a closer look at the cash behind the man.

Modesty was always a strong part.

We got unprecedented access to the luxury jeweler graff.

You will hear more from our exquisite interview with the ceo.

See what he says about what he does as a day job.

We are very close to our customers here.

I think a customer considers his jeweler as important as his doctor.

? welcome back to "the pulse." we are live on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.

Let's talk about today's number.

118.08. that is the number of carrots in graff's sunrise diamond.

Is that the low one?

It is the largest yellow diamond in the world.

It took more than one year to complete.

I think it is this big.

You are getting?

-- kidding?

The size of an eyeball.

Double that, it is probably this big.

That is pretty incredible.

I'm lost for words.

The fact that it takes a year to cut that is pretty incredible.

We had a chat about, once you have the rough diamond, it is very difficult to cut it.

What he was saying is nature decides.

They analyze it.

Then you have to cut it so you get the maximum from that particular cut.

Anyway, moving away from all the glitter, let's talk about what the company news is.

Some bad news for apple as they continue to struggle for smart phone sales in china.

It has fallen behind.

One researcher says xiaomi is in sixth place.

Apple is now in seventh place.

The information was from a six-year bribery probe.

The defense company was fined 500,000 pounds for accounting irregularities in 2010. a chinese bid for american meat producer smithfield foods may face a tougher challenger.

A shareholder is proposing a new bidding group to derail the $4.7 billion takeover bid.

Star board says smithfield could obtain a much higher price if it was broken up.

Coming up, we will get back to our exclusive look behind the scenes at our high end -- at the high-end jeweler graff.

It is all very james bond.

Very cool.

Talking about the superrich, here is a sneak peak at "elys ium." it is about a luxury space habitat where the wealthy relocate while the rest of us are left to live on the overpopulated slum that earth has become.

That doesn't sound very nice.

A reminder, you can follow us on twitter.

@guyjohnsontv.

@flacqua.

? welcome back to "the pulse." buy from bloomberg's headquarters in london, i'm francine lacqua.

I am guy johnson.

Billionaire carlos slim is trying to expand in europe his american mobile business.

It is made of $4.2 billion takeover offer for the dutch telecom firm kpn.

He already owns 30% of kpn.

Jpmorgan is said to be near a settlement with u.s. regulators over its london whale trade.

The bank is negotiating final terms of the deal over bad bets that led to losses of more than $6 billion.

Investigators say the bank misled investors about trades made by the london whale.

The man challenging angela merkel has led his first election rally.

Mr.

steinbrueck kicked off by criticizing the german chancellor by -- for misleading voters.

He is gaining ground in the polls, but merkel is still in the lead.

Let's take a look at how european markets are trading.

Manus cranny is that the touch screen with more.

Equity markets in europe have become rather unsure.

When you go into a vacuum, the u.s. not giving you did it the markets become hesitant.

The fed governor fisher saying, we are getting ready to taper.

The chinese data, lower inflation.

Could that china is -- the chinese go for many stimulus?

-- mini stimulus?

When it comes to the fill or kill, carlos slim is going for the full phil.

He wants the company.

He wants this mobile operator.

What does that do to the recent deal that these guys -- 16% higher, 2.33. these guys did a deal or were said to do a deal with telefonica.

Carlos slim says, i will review that deal.

Telefonica comes lower.

What will happen to telecoms?

We spoke about it at 10:00. this industry group needs consolidation.

This is spoiling that.

U.s. futures, when you go into a vacuum on a friday, what do you do?

Do you sit on your hands, or do you say, a much -- i'm not that sure?

The overall trend this week , the discussion this week, yes, it has been about tapering, but couple of big themes which purvey the market.

It is this -- what do you do for risk?

What is your view on risk?

What is your view on the world?

Is europe stabilizing?

Is china stabilizing?

The dollar is down.

Money coming out of dollar.

That is an indication that the tapering debate is losing out to the fundamentals in the economy.

It looks as if interest rates are being trumped by the economy.

Money coming out of the dollar suggests we are going into a pro-risk environment.

Have a look at the yen.

96.6. that is where she trades.

Money coming out of the dollar.

Progressively going into equities.

I will leave you with this -- shock and awe, the aussies downgrades growth.

Inflation for these guys is under control.

I will pick it up.

Manus, thank you very much.

Trying to figure out what is happening this friday.

Let's continue our focus on the ultra-wealthy.

Interestingly enough, silvio berlusconi is one of the biggest gainers on the bloomberg billionaires index.

He has added one one $5 billion to his fortune -- 1.5 billion dollars to his fortune.

Let's bring in gerald goldman in milan to discuss this.

The man has a bit of an issue with the courts at the moment, but he doesn't have an issue with the bottom line.

That's right.

His companies have done quite well.

One of them, mediaset, shares have more than doubled this year as the company cuts costs.

There has been some speculation that mediaset might bring in big partners.

There has been some speculation that berlusconi would sell a stake in the holdings.

The shares have done quite well based on speculation and normal business factors, aside from berlusconi's legal problem.

I imagine he has had enough to distract and this year.

Let's talk a little bit about his claims to business acumen.

He says he is italy's leading entrepreneur.

He certainly is italy's most flamboyant entrepreneur and the one with the most name recognition.

There are a couple of other individuals who may be have more of a claim to that, notably the founder of exotica, they own the ray-ban brand and oakley.

O'er the family company that makes the net tell us spread -- the nutella spread.

Berlusconi is certainly the best-known entrepreneur here.

He has certainly made a name for himself and i think we could go with that as a certainty.

We will leave it there.

Thank you very much indeed.

A reminder , we will keep looking at the ultra-wealthy.

It is a bit of the theme running through the show.

Inside graff , inside the diamond story.

On that note, francine lacqua, over to you.

I am on the cronut craze.

It burst into the scene in new york three months ago.

It is not taking a ship by storm.

The original croissant doughnut snack has been trademarked in the u.s. the race is on to create a hybrid in asia.

Meet the cronut, half doughnut, half croissant.

Made famous in new york, and now available everywhere.

Here in asia, the race to reengineer these hybrid pastries is on.

Knockoffs have popped up in tokyo, the philippines, south korea, and hong kong.

Each shop has its own twist.

A japanese bakery features crispy chocolate, green tea, and strawberry flavors.

At the mandarin oriental in hong kong, it is all about the way they make it.

When i started with this, i was doing deep-fried croissants.

Then we were trying to bring something with deep-fried croissants -- it did not come out.

I was inspired by new york and america, the croissant doughnut.

It was something interesting.

We came out with this croissant doughnut.

The mandarin orient -- the mandarin oriental calls it the croissant donut.

Dunkin' donuts and south korea calls at the new york pie doughnut.

In the philippines, it is known as the doughnut croissant.

One company is not shying away from using the term cronut.

A hong kong bakery has applied for the term.

Swiss back started selling their cronuts last month for $3.86 apiece.

The mandarin oriental makes 50 croissant donut each day, 25 of each flavor.

A sellout within minutes.

The question is, are these pastries a fad or the next artist staple?

One thing is for sure, they are awfully delicious.

-- or the next breakfast staple?

One thing is for sure, they are awfully delicious.

This gives us confidence to go forward with it.

I have a bit of a supplies.

The cronut craze , it is also made in london.

Earlier we sent our producer austin brown to go down to the bakery in east london where he cooked up a few cronuts for us.

He brought them back just for me.

A lot of people do not know what the doughnut is.

Or what a cornut is.

-- cronut is.

It is a little bit of a donut and a little bit of a cronut.

I tried one piece.

It is a bit like a danish grid -- like a danish.

Tom keene joins us from new york.

Tom, you love cronuts.

I liked him a lot and you've got to fly over here.

We will go on 3rd avenue at 4:00 a.m. to a place called dunkin' donuts.

It has been around for 60 years.

1728 in boston, and invented boston creme doughnuts.

They will put to shame any fancy pants cronut.

The mandarin and hong kong, they have to try a simple boston creme dunkin donuts i think it costs $.35. -- dunkin' donuts.

I t

This text has been automatically generated. It may not be 100% accurate.

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