>> first, credit suisse. now bnp. more than $5 billion from the french bank to settle its sanctions investigation. >> and an exclusive interview of the bundesbank. >> another bloomberg exclusive. up until losing -- alcatel lucent's chief executive explains why he is betting big on cloud technology. welcome to "the pulse." bloomberg's european headquarters in london, i am

mark barton. >> and i am olivia sterns. also coming up, we meet the founder of a shaving start up that is cutting down the competition. the blackshow you knight's transformer as it takes its first test flight. u.s. regulators are said to be seeking more than $5 billion from bnp paribas to settle investigations into its dealings with sanctioned countries, including sudan and iran. david tweed has the details. is much bigger than anticipated, isn't it? >> only last week, we were reporting that it could be around $3.5 billion. at number has been upped by about $1.5 billion. havemonth, bnp said they 1.1 billion dollars set aside to pay for this potential fine. at the time, they did say that they would probably need more money. the thing is, this is something

that the u.s. attorney in manhattan has been saying, that there is concern that the fines are being meted out for companies that have been violating sanctions, not big enough to reflect what they have been doing. think about it. you violate these sanctions on countries like iran and these are countries which have got sanctions on them because they are supporting terrorism. that is the point of view of the u.s. authorities. they are considering, like credit suisse, whether they will go any further with a guilty plea, a criminal guilty plea that could affect their banking license. >> credit suisse seems to have emerged from its guilty plea this week relatively unscathed. will that be the same for bnp paribas? >> one of the things that the u.s. authorities are thinking of doing is banning bnp from

transacting on behalf of clients shifting money in and out of the united states. that will not cost them much money, but it could be damaging in terms of clients moving away. you move away from your bank, what are the chances that you will come back? that can be very damaging. the interesting thing about all of this is the share price reaction. we are down about two percent. about 1.6 billion euros from the market cap of bnp paribas. finesfference in the reported this week and last week could be reflecting two things. one is exactly what the fines are going to be and the other, penalties. the other interesting thing is bnp is well-capitalized. it has a market cap of 64 billion euros. equity ratio is 12.8%. we are important because talking about another capital rating that is going on in europe at the moment, that of

deutsche bank. the capital rating is about 11.8%. bnp is well-capitalized. it is not considered to be annexed essential problem -- an x essential problem -- existential problem. they do have their tail between her legs. >> it is incredible. these would be the largest nations ever. it is not so much the money you would use -- you would lose, it is that that is a relatively small amount of money. the problem is, it is an essential service. he risk is that you are going to lose customers. >> yesterday's new did not impact credit suisse's shares. today, shares are lower by .5%. >> burberry making news, reporting profit that beat analyst estimates as the company ,nters a new era with a new ceo christopher bailey, also head of creative, at the helm.

caroline hyde is here with more. it looks like a positive set of results. what are the key takeaways? up eight percent, beat. sales up seven percent, beat. sale lower? this company is investing in own makeup, disturbing its own makeup. burberry isway that shying away from its digital focus. also, this is a british company. the british pound is strong against the rest of the the currency. as you bring the currency from abroad, you are getting less pound for your buck. the profitability is maybe what is sending the stock price lower. the fact that it has beaten profit and we are getting a clear focus at the future for christopher bailey, taking away the licenses, control of their

beauty products as well. that is an area of growth that they will be driving on their own. also, in trysting hiring for them, carolyn mccall, head of easyjet. they want to employ her knowledge of global brands, travel, and consumers. she used to be head of guardian media as well. they lose one prominent female and gain another. their brand doing online? >> this is fascinating. this company is going against the grain. the likes of giorgio armani and other key companies in the getry space, they tend to proctor and gamble, l'oreal, brands that are better at making makeup to do it for them. they are going to do it themselves. they will hire 100 executives to spearhead this across the board in really interesting ways. not only are they creating their own dedicated boutique, it is called the burberry beauty box.

>> i actually went in yesterday. nail polish. >> i was too embarrassed to ask. instead of cash registers, there were people walking out just like in the apple store, where you can actually check out -- >> it is all on your ipad. it is all about digital. you can go into the shop and do it. alibaba inzon, china. this is fascinating. instead of getting cheaper, knockdown prices on the internet , they are doing it themselves. we are going to get ahead of you. we are not going to beat you. we are going to join you and we are going to go on amazon ourselves. >> you are saying it does not have the scale of the likes of l'oreal. >> those big players have so much control over distribution and so much power with the department stores. going amazon is one of the only ways to disrupt distribution.

>> does diluting the brand work well with amazon? >> perhaps they are looking more mass market. carolyn mccall from easyjet, who knows the mass-market, you could say, better than luxury. >> they have always been ahead of the game. aboutave been reticent getting on social media and the internet because they felt it diluted the exclusivity. burberry has gone front and foremost into social media. they have 50 million likes on facebook. one of the most followed on twitter. it is about getting in the aspirational purchaser. the younger purchaser who can afford some pounds for a lipstick. it is about locking you in early and getting everyone to like an exclusive brand. >> thank you so much. >> we will have more on burberry a little later on "the pulse." we will be joined by the founder of the luxury rand agency.

that is something to look forward to later. it is time for our bloomberg exclusive. we have been speaking with the chief executive of alcatel lucent. elliott gotkine in tel aviv. the company is setting up a research center just outside. inwe are interested innovating organically. that is what we are doing. but also to screen the potential that we might acquire. i am proud to announce the labs in israel. labs have seven nobel prizes. i hope the next one will come from israel. >> more on that exclusive interview later this hour. wake here is another bloomberg exclusive. markets appeared to be calm. new risk could emerge. that is according to the goodness bank board member.

hans nichols joins us from berlin. it is a great interview to get because it seems as if the bundesbank has been changing its tune ahead of the june ecb meeting. what was that they take away here -- what was the big take away here? >> we think the bundesbank is softening to this idea of doing more. anytime we hear something from a bundesbank member talking about that maybe there is some volatility out there, some concerns, you think it is a potential signal that more using could be around the corner. let's listen to what he had to say and we will try to translate the central bank speak on the backend of it. >> the real estate markets in some european countries are high. the corporate bond valuations seem stretched and high. at the same time, global activity leads to market participants thinking they do not need to hedge. they think low volatility means low risk.

this may all change. we do see risks despite the fact that the markets are calm. >> this idea of warning about risks, warning about unknowns, it could give the market some pause. supervisory ecb role. there will be 130 banks that they will be monitoring and be in charge of at the end of the year. listen to what he had to say about too big to fail. crisis,since the lehman a lot of work has been done conceptually. we have been thinking through things as much as we can. a failure of ae bank if it is too big to fail without making taxpayers pay? we are not quite there yet. >> not quite there yet. that is a clear signal that too big to fail is still with us.

that is one of the reasons, perhaps, white when they look at harmonizing these risk models, he is against that. he does not want to have a herd mentality in the bank. if you have a single mechanism, you could have more herd thinking. regional and national banks should go buy their own metrics and that could provide more stability. in other ecb news, the bank may also decide to hold an interest rate meeting every six instead of four weeks. what is behind that move? >> it will give the bank time to release their minutes. this would mean greater transparency. remember, bank of england has their meetings every four weeks. the u.s. federal reserve is every six weeks. if the ecb goes to a six-week schedule, they can release their ferro can getonny very excited about it. you too, olivia. i am sure you pour through central bank minutes all the time.

>> what do you think tom keene and i do in new york? all the time. risk when weore on speak to an advisor to angela merkel later in the show. >> japan's central bank refraining from boosting stimulus. it has also raised business investment. signs of weathering the sales tax increase of 1997. >> daniel radcliffe has been speaking to charlie rose. even though he made his name in film, the "harry potter" star says he wants to do more with theater. stage is somewhere i get. i get better on stage. it has always been -- it is something i have taken from and i keep coming back to again and again. >> you can watch the full interview later tonight on charlie rose. >> netflix will introduce its

online video service this year in germany, france, and some other european countries. it is the company's biggest expansion in three years. we will be live in berlin with more later in the hour. >> 10 years of talks and still no deal. enoughadimir putin have to the medic muscle to offset the impact of sanctions? we will discuss after the break. ♪

>> russian leader vladimir putin is wrapping up a two-day trip to china. eng sign a string of agreements linking the two economies, but not the one most people were waiting for, the big gas deal. joining us is the senior manager of ihs country risk. only one more day to get the deal signed. is there a risk it will not be signed today? >> there is risk read the do not know yet. this is something that russia and china have been working on for years. we have heard many times that they are very close to a deal. they have worked out quite a number of things already. the only thing that remains to be agreed is the price. but it looks like russia's hand may not be strong enough and china's may not be weak enough for them to reach a compromise. >> putin really wants this right now. he wants to show that he is not so dependent on the west read how big of a deal is this if a deal is not signed?

>> it is not a massive blow. he has been distancing himself from the crisis in ukraine, likely trying to stave off the third phase of sanctions. this would be a great victory for him if he was able to have a deal. you have to keep in mind that it would take quite a long time -- and this is a long-term solution to russia's dependence on exporting gas to europe. >> meanwhile, ukraine owes money due onia for past gas, the first. what is going to happen in the coming days? amicably or solved will he have a gas crisis in europe? >> i think russia made it clear that should it have to cut off ukraine because of ukraine's gas , that would not affect europe. russia has at least made overtures in saying that perhaps through ahip gas

pipeline and european supplies would not be affected. is trying to stave off a third round of sanctions while the europeans and americans appeared to be preparing a third round. how likely is it that we will see a third round of sanctions? if so, will this be the round that has some economic bite? >> that is what one would believe. it looks like the u.s. is gearing up for sanctions that our sector-based, which would hit the russian economy hard. onther europe can follow up similar sanctions is another matter. that is less likely. what russia has been doing is distancing itself from what is going on in ukraine, that the positive elections -- that the presidential elections might be a positive development and thus trying to prevent the sanctions. >> so you think the elections on sunday will pass peacefully?

what are the best case and worst-case scenarios here question mark >> the elections are definitely going to be a challenge for ukraine. what we are hearing from sources on the ground is that the separatist groups are not necessarily going to listen to russia. the regionhave had saying they are going to do everything they can to disrupt the poll. you are likely to see continued chaos in ukraine after the let -- after the election. >> we had an exclusive interview with the prime minister of russia and he refused to guarantee that russia would not annex. how likely do you think it is that they will do that if they do vote to secede? >> they have already voted to se are and they say they preparing a request for russia to send to the annexed region. russia set a precedent in crimea. it will be difficult to say no.

moregument that it is beneficial for russia to maintain a state of uncertainty in eastern ukraine in order to gain leverage over kiev. you byencouraged are discussions that have taken place between the ukrainian government and those other parties, giving them more power, federalist powers question mark is that tangible -- federalist powers? is that tangible? >> right now, we cannot say that that is significant. the separatists are not interested in negotiating with the authorities in kiev. they do not view them as legitimate. they have the tacit support of the population in this. not everyone in eastern ukraine wants necessarily to secede, but they do not like the government in kiev. there is an intractable situation at the moment. even the prospect of federalization may not be

enough. fromere is a big emergence what federalization might mean and decentralization might mean. >> thank you. also still to come, netflix taking on europe. the online video service announcing its biggest expansion since 2011. we will break down reed hastings' ambitious plan. ♪

>> time for today's hotshots. red bull challenged them to port -- to display some of their intense tricks. extreme stunts and breakdancing moves. extreme sports fans are heading to the mountains of northern california to take advantage of the best whitewater conditions. thrillseeking kayakers took on the rapids and got a bumpy ride. i do not know why anyone does this voluntarily. england could win the world cup live on air for you. >> right now, this is the case or go pro. let's see how the markets are trading right now. jonathan ferro has your asset check it -- asset check. >> thank you very much. flat equity markets, taking a dip.

bucking the trend, up by about .1%. a lot of connectivity across the major benchmarks. if you are waiting for news flow, it tight. bank of england minutes in 10 minutes. adderall reserve minutes later today. right now, there is a global debate between federal bankers and the exit. that massive stimulus. fantastic bloomberg interview with that board member over at the bundesbank, concerned about a reach for yields. he talks about the spanish and the italian 10-year dropping below three percent recently. borrowing costs are now back above that in italy. they concerned about the consequences of those low interest rates. a little bit too late perhaps. coming intoher, u.k. retail sales and bank of england minutes. that will drive this one higher or lower. >> up next, razor-sharp. i am not talking about ferro. we are meeting the founder of a

shaving startup that is cutting down the competition. >> and a bloomberg exclusive. more from our special conversation with the ceo of a patel lucent -- of alcatel lucent. you can always follow me on twitter. ♪

>> welcome back. you're watching "the pulse." breaking news, bank of england is saying the argument in favor of an interest rate increase are growing stronger for some officials as the economy recovers and the risk of financial and ballast -- imbalance -- that is interesting. the policy decision was becoming more balanced for some of the

members, but they need to see more evidence of slack reducing before would be time to increase rate.nchmark officials are divided over the spare capacity in the economy. that has become a key measure to keep rates low. there is division. england interest rate was nine zero. many believe there will not be long before a member actually starts to vote for a rate hike. pricing in first quarter of next year. will it come sooner? this will add to that speculation. >> as those comments from mark carney, warning that there is a growing bubble in housing properties. it is impossible to find a reasonable place to stay in london. staying with central banks,

with andre.you more he will take charge of financial supervision at bundesbank. >> if we unify risk models, this behavior, to herd with all of the negative effects. we would also exclude the institute specific measures. those are important for diversity. i am a big believer in canyon -- continuing to use risk models and counter checking them. >> michelle coombe has been speaking to our editor about his plans. joins us.tkine

this is part of the turnaround plan, isn't it. >> very much so. he is trying to bring out the tell loosens back -- alcatel lucent back. labso that is the bell research center. it is one of his top three places to invest in research development in the hope of coming up with the next big thing in technology. another reason for coming here, this is a country that is more startup per person than anywhere else. it is only second to silicon valley. lucentnt to get out to to behave more like a startup. >> we used to be a start up. what i am trying to achieve right now is reignite this innovation spirit within the company.

to be able to do incremental renovation as well as disruptive innovation. difficult to do with our hotel lucent. --.nt to reignite we're going to rant cell -- reinvent the dsl and we are inventing vectoring. vectoring is a way to boost speeds down copper wire. that is the latest one and there are many more other things. >> what is the significant of having bill labs in israel? lucent has a research

center, but this is putting it on the steroids and bringing in the culture and effectiveness bell is associated with labs. everyone from intel to hp to apple and bell labs in particular is an institution. we are talking about the company day, created its the telephone, the laser, the transistor. a huge amount of innovation in this company, which is part of alcatel lucent. he is hoping to remind people oncereignite what was great about the company. i think it is also important to know if you want to know more labs.bekll

>> thank you, elliott gotkine. rodent cakes. i guess that is to get rid of rodents. rodent repellent? >> something. from telecom to technology, netflix is advancing in europe. they will add their services to six other countries. hans nichols has more. news.s great it is a big injustice that not everyone in europe should be able to watch house of cards. where else is netflix expanding? >> they are allowing it to be legal. they are decriminalizing mark

barton's behavior. you cannot do that unless you have a complicated workaround. this is exciting news. for all of the content that is on netflix, they have not a -- been able to have reising or a payment model that works for most of europe. they're going to be coming into germany or france, austria, switzerland, luxembourg, belgium, and should be able to offer content there. said isd hastings has that 70 to 80% of his revenue will come from outside the u.s.. when you look at their current breakdown, 48 million subscribers. they must see an opportunity for phenomenal growth outside of the states. they have to figure out the pricing and the payments. netflix is going to be coming to the continent. >> it is extraordinary growth

for netflix. it is amazing they have more subscribers than hbo. hbo is teaming up with amazon. is it going to be "game of thrones" versus " house of cards"? eventually, maybe you could have the more current shows compete each -- compete with each other. then, it is the showdown between amazon and netflix. have both. there is note you regulation against having both netflix and amazon. >> hans nichols. >> i have discovered something amazing. one of thes like

actresses on "orange is the new black." i believe she is a transgender character, so i do not love the comparison. everybody in the u.s. already knows this. it is a terrific show. not as good as "house of cards." "the good wife." >> i am so glad. cheaper razor blades online. the startup is just bought a german factory to help its cause. david tweed caught up with the co-fan -- cofounder. >> in the small town in the former east germany, new

york-based startup is making waves. >> i am the cofounder and co-ceo of harry's. it is a grooming brand. we sell our own shaving products. there are a couple of companies that have controlled the industry for a long time. they charge prices that are discontented from the cost of manufacture. -- disconnected from the cost of manufacture. when we started harry's, we searched all over the world to try to find the best manufacturer and it turns out the best manufacturer in the world is here in germany. we are able to, owning the factory, deliver product efficiently. we also sell directly to them. todoing that, we are able

deliver an exceptional value. you walk through the factory and you have an appreciation for how hard it is to manufacture labor -- razor blades and how skilled the workers are here. the folks here have been doing this for a long time. they are truly craftsman. that is the special sauce in the factory. the people and the process and the know-how that enables them to create high-quality blades. clean-shaven.tty straight blade or -- >> i am triple blade, electric razor. thanbably wet shaved less five times in my life. i always cut myself. you get a rash. away from that, taylor schilling. that is her name. look her up on the internet.

there is an uncanny resemblance. and you were born four days apart. linehave gotten to cut the at airport security because they thought i was the star of "orange is the new black here to -- orange is the new black." as we head to the break, some music news. led zeppelin is getting sued over "stairway to heaven." zeppelinclaiming led plagiarized one of the most well-known rifts in history. ♪

>> burberry reported results today. the luxury brand is taking control of its beauty business. is that the right move? let's ask the founder of the luxury brand agency. they are bringing all of these cosmetics back in house. something their competitors do not do. is it the right move to do it in-house? ?s it a risk

theou can -- it can be killer -- for luxury brands. this is how burberry sees it. it makes sense to do that in house and develop it as a core part of the business. >> are the margins better on cosmetics and fragrance then they are on handbags and dresses? >> they are. all that is a core business. you get customers who are very loyal. people do not switch cosmetic brands easily. if you have locked in a customer, you have got them for life. --t can be

>> you buy lipstick for 30 pounds and maybe a year later, you think of buying a 4000 pound handbag. i don't see -- people who buy cosmetics tend to continue to buy cosmetics. there is a myth that you start with a cheap product and you graduate to something more expensive. from my experience, it does not happen. you are probably not on track. >> all this stuff about trying to get people in low and sell high, it does not happen. it is just brand strength to justify to themselves that it is ok. >> the margins are fatter, but isn't there a risk that you're diluting the brand? this surgery -- this survey came out today.

of the brands that do really well. that almostmpanies never put themselves on sale. the reason they're doing better is because they were raising their prices. isn't there a risk that if you're going to the mass market, if you put out all of the sunglasses, cosmetics, perfumes out there, you will dilute the equity? >> there is a risk that your brand becomes perceived as the cosmetics brand or as a sunglass brand. as long as your product has great integrity and great quality, in line with the other products of your brand, it is ok. if you look at chanel, they're doing that well. cosmetics,y selling but we still think of it as high-end. >> you see it as a small part of the business. sold 144 million

pounds of beauty products. it is small compared to the global marketplace. it wants to be in the top 10. it needs a five fold rise in sales. will top 10 soon? >> i think it will be in the top 10. houston, i do not know. it could be in five years or 10 years. poundld be a multibillion line for burberry. >> one thing that is fascinating as they are going to start selling on amazon. is that the right move us to -- is thathat risk the right move? you go to amazon because you want a deal and you think things are going to be on sale. they are trying to sell their goods at full price. >> this is still perceived as the place to go for a deal.

they are trying to reach all of these hundreds of millions of consumers. i think we will have to see. at the same time, buying a bottle of perfume is not necessarily a super committing purchase. that may work. >> thank you. up, theg environmentally friendly investment that is socially responsible. ♪

socially clean way to invest. is set tobond market double. joining us now for more on green exposure is michael wilkins. thank you. why is the green bond marking market increasing so dramatically? >> socially responsible investors has grown considerably. there are $4 trillion worth of assets under control. they're looking for new assets. that is what is striving to

grow, the court writ -- the corporate green bond market. the future -- the skies the limit. >> it is a very small part of the overall bond market. we have to keep december portion. given the growth since last year, the total green bond market last year was about $10 billion. that included the issuance by banks. this year alone, we have seen $11 billion just by corporate, mainly utilities. that kind of growth is incredible. that is why we are forecasting 20 billion dollars just from corporate this year. >> is the structure of the bonds different? are the ratings higher? >> at the moment, most corporate structured the same as a normal corporate bond. the future, we see a change in

the evolution of this market. that is the next age. at the moment, it is general corporate credit worthiness. gdf recently sold the largest ever green bond. are the sizes of the sales going to get larger? >> we are seeing the big jumbo bonds coming into play. it is rated in the a plus range. they have hit the sweet spot range. they also seem to be pricing tighter. whale -- well on the

secondary market. >> there is a growing appetite for investments. that is one of the things we are talking about with the settlement at credit suisse. business be able to do with these companies? these mandate coming from ? bond was 60% of the bought by social responsible investors. a clear mandate to only invest in environmental social and government related assets. the other 40% is coming from mainstream investors. we do not necessarily have an sri mandate. there's a potential for much bigger growth. the potential for growth is much larger. >> thank you for joining us.

for those listening on bloomberg radio, bloomberg, "the first word" is next. we have kristin schmidt. ♪

bnp.rst credit suisse, now the u.s. sees more than $5 million from the banks to settle an investigation. >> an interview with bundesbank. lucent's chief executive explains why he is betting big on cloud technology. >> good morning to our viewers in europe. good evening to those in asia. a welcome to those waking up in the united dates. >> this is "the pulse."

this hour, half truck, have helicopter. we will show you the black night transformer as it takes its first test flight. christoph speak with schmidt about economic recovery. -- dealing with sanctions, including sue john boehner ron. david tweed -- including sudan and iran. david tweed has the details. >> this is a fine that does not seem to stop growing. this $5 billion might not even be the final number. number not get the final until all of the penalties are handed down. it should happen next month. the thing about it is, it was

only last month that we were reporting that the fine would be about $3.5 billion. that is considerably more than bnp thought it was going to be. they put aside only $1.1 billion. the reason the attorney has decided to go hard on this is because there's a perception fines for sanction violators have not been tough enough when you consider what they are doing. are supporting terrorism. that is why the finest of severe. whether it is severe enough does not seem to be reflected in the share price. it is only down around 2%. about $2 billion in terms of market capitalization. that is only the difference estimate andweek's the latest report of $5 billion. emergeit suisse seems to

unscathed. -- thatre allegations was a settlement over tax evasion. this is about doing business with countries that the u.s. says supports terrorism. >will this do damage to the way they do business in the u.s.? they want to go further than they have gone with credit suisse. one of the proposals they are looking at is to ban bnp from andg currency transactions to bringing money in and out of america on behalf of their clients. i will not cost much money, but there is a risk that they could lose clients over this. if you have to go to another bank to perform a basic service, why would you go back to another bank afterwards? they could lose clients over

this. the other point to make about this is -- $5 billion -- it is a huge amount of money. it represents about six percent of bnp's market capitalization. this is not an existential problem for them. it is almost like the cost of business. it does not look like they will lose their banking license. we will see. it is next month that we get the final penalties. >> if they are banned from money --ientd' m the -- isks to real estate markets in some european countries are high. corporate bond valuations seem stretched and high.

at the same time, volatility leads to market participants thinking they do not need to --. activity means low risk. this may change. we see risks, despite the fact the market is calm. >> you will hear more from that interview later. we will be live with christoph schmidt. he is the chair of the council of economic advisers for angela merkel. you will not want to miss that. >> another bloomberg exclusive. alcatel ceo has been speaking to our middle east editor about his plans to bring bell labs to israel. is this part of his turnaround plan? he is trying to do is to reinvent alcatel in a way.

innovativenessf going on in the company. they have a lot of amazing inventions under their belt. bell labs is integral to that. research lab,of a they already have an r&d facility there. it is one of his top three investment areas around the world. what he is trying to do is take alcatel lucent back to its roots , back to what made the company same time,at the tapping the startup culture that proliferates here in israel. we used to be a startup. when you look at the history of alcatel lucent. i am trying to reignite this

spirit within the company. everyone has to innovate. do incremental and disruptive innovation. that is difficult in big companies such as alcatel lucent. i want to see it as an thatative fabric, meaning it will reignite things. we are have been the ones to inventedl and now we vectoring, that we are running in israel right now. bell labs back in the day, telephone.he >> thank you, elliott.

he is our middle east editor. >> advances in europe. netflix will add its services to six countries. more on reedhas hastings' ambitious lands. >> they will come to germany, france, belgium, luxembourg. 16 come at -- six new countries. a bit of the legality, trying to so youflix through a vpn can watch things like "house of cards." here is the issue. netflix wants to have growth outside the u.s. market. reed hastings is talking about 70% to 80% revenue coming from outside of the states. when you look at their subscriber model, they have some

48 million subscribers. they see great potential growth outside of the states to deliver content on a subscription base. it is in the u.k. and throughout most of northern europe. aboutne can start talking "house of cards" in their native language. teamo and amazon are ing up. will it be a case of "game of thrones" versus house of cards? the older hits, "sex and the city," the wire." having more immediate thrones," "game of

you could have competition. let you guys have "orange is the new black." who do you think you look like, hans? all of my responses could get me fired. i have already admitted to trying to break the law with netflix. let's cut to black. be assessedseems to with "game of thrones," "house of cards," i am preferable to "breaking bad." so much of the magic is in kevin spacey's delivery, but i would be curious to get hans'

thoughts on that. burberry is reporting profits that beat analyst estimates as they enter a new era with a new ceo. for apple. caroline hyde has all of the details. aboutre is cautiousness profitability going forward because the british pound associate on. it is up again. minutes on the data. that hurts the u.k. companies that export a lot, that have a lot of sales. bring it back home, less money to your bottom line. nevertheless, it sounds strong other than that. half it is up 8%. sales are up 17%.

both beat analyst expectations. it looks like christopher bailey is following her lead. they are expanding their beauty, expanding in japan, ring back their licenses, gain control in japan. that will hit the bottom line. withey did the same thing their overall retail business. they brought back their franchise in china because they felt that is where they can have control of the brand. >> you heard our interview. we have exploded the myth that you get in cheap, sell high. experts said it is a complete myth. when youhyde, it is sell a lipstick for 15 pounds, in the hopes that they will aspire to something greater. >> in the earnings statement, it the, already by having nt, they said --

>> they are not known for their scent. it has attracted sales in the british clothing line. it has rocked people in. -- it has brought people in. >> they will start selling through amazon. >> again, going digital. they have had deals with google, apple, now, amazon to sell their lipsticks online. >> an interesting trade between price and prestige. social media is where burberry is front and foremost. it is about getting social media involved, getting the youth involved. >> did you go to the shop?

>> i was too embarrassed. it was awkward. can you do my nails on your computer? >it was like the apple store in the sense that they do not have registers. they have mobile tablets to check you out. that is new. resurfacing the microsoft surface. they are unveiling a larger screen tablet that is thinner and faster. will this third time be the charm? that is the question. ♪

.> today is a major milestone it starts with dreaming the impossible of can we design and build a device that takes the best of the tablet and the laptop. nadella,s satya speaking at the launch event for the surface pro 3. it has a 12 inch screen. is 800 dollars. is it too large and too expensive? that is the question. joining us for more on the tablet wars, we wanted to bring in lawrence lundy. thank you for coming on.

until now, it seems like microsoft forays into the tablet market have been a flop. will the pro three change the game? >> this is a laptop replacement. it is along the continuum of a pc/laptop device. the way we laptop in sent it. there talking about the -- with i7, we are expecting about $200. that is a macbook competitor, not the ipad competitor. you can do photoshop, all of office products. that is a different type of model them we expect with tablets. >> everyone was expecting them to unveil a smaller tablet.

they going after the macbook air. >> we were expecting to launch a competitor, it has been said that they did not feel there is differentiation. their doubling down. it is a relatively small market compared to a tablet could be. we are not talking about huge aree when enterprise pcs around 175 million globally. it is smaller than what we anticipate. >> 1.3% market share. they are so far behind apple and google. it is important here, the actual business strategy going forward is the device and services. the service part is important.

satya nadella did a good job releasing office to the ipad. windows and office can no longer be bundled together. i agree with that 100%. successful,t to be they need to abandon windows as a strategy and push all of their services across all devices. they are doing now. -- doing that. >> which hardware maker do you think is winning the tablet wars? >> there is no winner takes all. of course, it is apple. the types of consumers that are using it. apple is the only company delivering i post-pc vision. they're so much that can be done and there's so much more innovation around the tablet

form factor. that arely seeing apps smart phone apps that are scaled that arektop apps scaled down. we will see this for some ios and it will trickle down with android. >> let's talk about streaming. netflix. this is a fascinating market. is there a place for a lot of players in this market? the content providers, amazon, -- netflix, hbo -- who is going to win? the internet has prevented boundaries, so we can have global winners. plans,, with expansion intentionally ahead of anyone else here. microsoft and yahoo!, they want to get into the

business. >> yahoo! is spending premium on business. hardware on its own will not be enough. software will not be enough. the real value is going to be the service. this is content, original programming. this can be the battleground of the future. netflix is ahead, but i would not be surprised to see amazon really investing. are, officially, a "game of firms." -- thrones." one dollar 6898. 6898. how long can you keep rates at record lows?

there is a division on the amount of slack that is left for some policymakers. that monetary policy decision is becoming more balanced. the first rate hike could be around the corner. how much weight can you put on these minutes when we know the mpc is about to change? new members coming on, old members leaving. ♪

>> it is time for new energy. a green ship of the future. a push to make the ocean freight industry more sustainable. >> we think it is a win-win. we can reduce co2 emissions. it is showing the way for the rest of the industry. bunkerg so, we caught consumption. we get more competitive. the newest vessel, we are taking delivery of now, essentially, it uses 50% less fuel per container than what we used to a couple of years ago. there's a lot to be done. we still think it is very exciting. nils andersen. >> we will be discussing

economic recovery. schmidt -- christoph schmidt will be joining us in his first interview of the day. ♪

>> welcome back to "the pulse." the top headlines. authorities are seeking more to settlellion investigations into bnp's dealings with sanction countries. on transferring money and an out of the u.s. might also be part of the settlement. >> the economy is showing signs of weathering the impact of

sales tax increase since 1997. >> arguments in favor of a rate hike or growing. that has the pound rising for a fit a against the dollar. we also want to get you breaking news. cnbc have signed a deal. it has been in the works for nearly a decade. it makes a big statement. russia relies on selling its gas to some european economies. europe is very dependent on russia as well. we do not know the price. we know the overall value, but not the actual price. in ukraine, crisis many were saying that was strengthening china's hand in

bargaining for price. for more context, let's bring in ryan chilcote. what are you hearing about the deal? do we have ryan? >> we have lost the line. we will come back to ryan as soon as we get him. for the moment, let's have a quick peek on what is happening on european markets. >> mixed. by a 10thhe ftse down of one percent. struggling for a significant decisive direction across the benchmark, the federal reserve minutes a little bit later. futures in the u.s. a little bit higher. that is one to watch. talking about the sterling better u.k. retail sales.

elsewhere, the dollar yen. it is lower. the yen is higher by a couple of tenths of 1%. the bank of japan does nothing. the bets on extra stimulus, will they hit the 2% inflation target? the yen is stronger. the dollar is weaker. >> in 25 minutes, it is surveillance with tom keene. he joins us with a preview. we are focused on this breaking news. they have signed this deal for a gas supply pipeline worth $400 billion. what are you going to be looking at today? >> we will focus on that and folded into the sunday election in ukraine. to thislly look forward critical election. this is after that new news. fry as talk with timothy

we look through russia and the calculus. script.ip up the front and center after credit suisse yesterday. es.will focus on those fin we will look at chris of gabelli. we have to talk housing. so many interesting things going on. the questions are, what will happen to the ongoing business if they are prevented from transferring client money in and out of the u.s.. it is a tiny bit of money, but it is an essential service area >> i would agree with that. there is a lot of backpedaling.

you see the differential between the wall street journal emphasizing mr. dugan almost lost his job and the afc going the other way and suggesting that he was in pretty good shape through the entire process. you look at bnp, which is been quiet. there's a question about whether an americanain business if they cannot make those flows. "surveillance" with tom keene in 20 minutes. low volatility has led some investors to not hedge their bets. hans nichols joins us from berlin. good morning. >> good morning. andreessen is going to be one of the more powerful regulators when the ecb starts taking a more supervisory role.

we thought we would sit down. my colleagues got his general take on what is happening in the market. markets arete pretty high. corporate bond valuations seem stretched and high. at the same time, it leads to market participants inking they lowot need to hedge because volatility means low risk. do see risks, despite the fact that the markets are calm. he is on the bundesbank. he will be on the supervisory role as well. there is a notion of too big to fail. he did not think that european regulators had solved that issue. >> ever since the lehman brothers crisis, we have been

thinking the thing through as much as we can. exclude a failure of a bank if it is really too big to fail without making taxpayers pay? we are not quite there. one final thought, he is concerned about herd mentality. he likes different regulatory regimes to keep a little more variety. everyone ends up making the exact same mistake. >> we are joined by christoph schmidt. it seems in the past few weeks, the bundesbank has been changing and singling -- signaling

support. what do you think that would achieve? >> it is a balancing act. it is necessary in a monetary .nion and keeping inflation in act has been achieved delicate fashion. i think it is wise not to be too forthcoming in the rate cuts. >> how concerned are you about deflation? >> not as much as some other observers. we need the rebalancing in the euro area. we have gone through a recession. andre out of the recession

if there are enough reform efforts undertaken by the government, we will come out of this. >> there has been criticism that the ecb has been too slow to act and they waited too long to cut rates. what do you say to that? >> they were always quite consistent with its own ratesetting rules in the past. it has followed the same consistent behavior. is aboutanking consistency. the ecb has shown that. >> we will come back to you in a second. joins us. we had the news of the big gas deal signed between russia and china in shanghai. talk about timing. be smiling.in must >> he was hoping to sign this deal yesterday. it was all but buttoned up and

then we got this delay. it is coming just ahead of the forum. what we do not know yet is the price. we know that it is the 30 year supply deal for 30 billion cubic meters a year. that is an awful lot. whatis about a fifth of russian now supplies europe. there are all of these conversations, they're talking about the versa flying away from russian supply. they get about a third of the gas from russia. the russians are concerned about this. this would help them deal with the threat of western europe diversifying itself away from russian supplies, if there is a way to diversify away. perspective, it is only about a fifth of the gas that is currently going to western europe. >> it is interesting. this deal has been a decade in the making. it is going to help food and --

putin save face. what is your sense of how long it will actually take for the gas from asia to come online? they say russia does lose some of the markets and they cannot just switch a desolate base which in turn on the taps in china. quick they have to build a massive pipeline. that is not readily available. we're waiting to find out who is going to pay for the pipeline. are the chinese providing loans for this deal? it would take years before this gas would flow from russia into western europe. it would also take years for western europe to diversify a way for russian gas. i was talking to the russian

prime minister and he was saying gll of this talk about l and coming to replace our gas, as far as i understand, it would cost 40% more. that is inething russia's interest, depending on the price that the chinese know that russia really needs us. it opens the second market and allows them to diversify away from western europe. alienated,oking isolated from western europe and the west in general. it is also another huge market. the chinese really need clean gas. that is what the russians can provide. >> what is next in the russia-chinese relationship? it has been volatile over the

decades, but they're coming closer. they seem to be closer on the united nations's security council. they have used that to their benefit. what do we think this deal heralds in this new relationship between the two countries? >> it is ambitious. the russians are hoping to move bilateral trade from somewhere under 100 million to around 200 billion to around 200 billion. they did not just do this gas deal. they signed a whole bunch of other deals while they were there. we will have to see. the devil is in the details. both sides have been skeptical. russia, theref are only about 6 million people in the far east of the country, which is, size wise, bigger than all of western europe. over the border, there are hundreds of millions of people in china. the russians have been concerned

that they could lose the territory if they get china to much access to their market and allow them into the country too much. it is worth watching that space. the russians have wanted to do this, but they're very anxious about getting too close to the chinese. >> we will speak to you later this hour. thank you for bringing us details of the news we have waited for, some more than 10 years. back in two minutes. stay with us. ♪

>> we are back with christoph schmidt. thank you for sticking around. you say the crisis is not over yet area the economy is improving. talk to me about the of thecture, what pieces architecture need to be implemented and put them laced? to understand that there are two areas of action that need to be made compatible with one another. hand over the sovereignty to a centralized agency to a finance minister. >> we are not going to fiscal union? >> i do not think it is there to have a fiscal union that has

-- going for that, to be aligned at the same level. on the other hand, we have to see that we have joint monetary policy. we need joint regulation and joint supervision so combining fiscal sovereignty with a real banking union, that will be the issue for the future. it is very helpful because we have this review in front of us. if that is conducted strictly and problems are identified and theed by restructuring resolution of affective banks, then we become -- we have a bridge into a solid future and a stable union. if the identification and resolution is not done strictly, we are in trouble again. >> what countries so far? europe is not performing at the

same pace. which economies would you give good marks for the internal reforms they have made and which ones do you think have a lot of progress to go? >> the program countries have made tremendous progress. they have reformed labor markets. maybe not to the extent that is necessary to have a self-sufficient growth going on, but the other countries, not being on adjustment programs may have problems. france and italy come to mind, where you need to reform labor s.rket it would only be carried if all the member states are growing. >> what are the prospects for those reforms? you think there is the political appetite to change the pension age in countries like france or italy? >> that is the dilemma.

integrity ofthe the area will be preserved. it has alleviated a lot of the pressure, but it has taken away the pressure for reform. in a moment, germany would have to push for more reform, which leads by example. that makes the german policy problematic. we are introducing a lot of actions that go backwards. >> is real qe palatable within germany? in theing of bonds primary market? would it be allowed by german politicians? germanave seen constitutional court is critical of the omt and the tying of the monetary measure with fiscal conditionality. a very delicate issue from the german perspective. we would like to have the two areas separated.

it would be in the ideal setup of having fiscal sovereigns and financial market regulation. >> one of the biggest things holding back growth in europe is unemployment. staggering rates in countries. what do you think can be done to bring down unemployment in the eurozone? theou have to get rid of duality of the labor market. you have a strong segment of protective workers and a small theent where you have vulnerable workers, the unskilled ones, which are bearing them with the burden of adjustment. the other issue is to have finance flow towards new investments, new companies. for that, you need to clean up the banking sector. >> thank you for sticking around and talking to us.

christoph schmidt. we are back in two minutes. ♪

>> for a look at what we are watching for the rest of the day, we are joined by why and show. -- we areadjourned

joined by ryan chilcote. gazprom would provide about a fifth of the amount of gas it is currently supplying to western europe to china in a 30 year deal. we thought the deal was going to be signed yesterday, but it got signed just now, about half an hour ago. a bit of a face saver for the russian president. the issues onming price. it will be interesting to find out what the price was. we have not heard with the price was. the prime minister of russia said he thought it was going to be comparable to the price the western -- that western europe is now paying. he will be a big issue because a lot of people have said the chinese know the russians are anxious to diversify in case western europe follows through on his threat to diversify away from russian supply.

this is a huge market in china. they can have a bottomless appetite for russian gas. >> timing is everything. this has been in the making for 10 years. we have the ukrainian elections on sunday. what message does this send out? >> if you do not want to do business with us in western europe, we have alternatives, we have options. it is really up to you. the companies in western europe and the united states will be speaking with the government and many of them will be encouraging their governments not to slap additional sanctions on russia, but germany and the united states, the european union have warned that if that election that is set to take place this sunday, the presidential election is derosa disrupted, that will be the trigger for more sanctions against russia. >> thank you. ryan, in st. petersburg.

>> so interesting to see him clinch the deal. face-saving and for ukraine and the upcoming elections. keep it here. "surveillance" with tom keene is next. ♪ . .

>> this is "bloomberg surveillance." >> credit suisse is yesterday's news. this week, bnp paribas france could face a more than $5 billion fine. can they do business in america?

win big.s the tea party falters in primary elections. as ukraines agenda appears to vote. good morning, everyone. this is "bloomberg surveillance." we're live from our world headquarters in new york. it is wednesday, may 20 first. i'm tom keene. with me as always is scarlet fu and adam johnson. we have breaking news just out. you saw it on london tv with our ryan chilcote reporting on the gift from china deal, a large 30-year transaction. ryan had that's the other day in their important interview, and we will talk to ryan we hope in the coming hour. we have much more on this gas deal in china. you mentioned, adam, we could not get a trade deal done it with japan. >> correct. and by the way, he did not even go to china, yet mr. putin goes to china and comes home with a $400 billion -- >> they have been working on this for years. >> yes