>> will qatar get the boot? to rerun acalls world cup vote amidst allegations overshadowing a major airline meeting in doha. >> preparing for left off, and value a techd startup at $4 billion. >> china manufacturing expands its fastest pace in five months. good morning. welcome. you are watching "the pulse."

i am guy johnson. >> i am olivia sterns. also coming up, breaking away from android. samsung unveils the first new smartphone. >> plus, we check out the world's most luxurious first-class cabins. is facing calls to 2020 two vote for the world cup. allegations have surfaced that qatar won that it following secret payments to qatar officials. qatar says it is fully cooperating with an investigation. that scandal overshadowing another event in the country, the annual meeting of the airline industry's biggest names in doha. we have been speaking with the lat-am airline's. he says the world cup is actually bad for business. >> only we will have traffic in one direction. we will have a lot of flights to

cities, moving people to a game. our middle east editor, elliott gotkine is on the ground. he joins us from the summit. let's start off talking about what everybody is talking about, this world cup story. what are you hearing? not the best of timing as far as qatar is concerned. great timing as far as journalists are concerned. it is when qatar wanted to show the world its best show. they have done that in the past few days with a new $17 billion airport. lo and behold, these allegations suggesting that people representing them bribed fifa officials. qatar is knowingly cooperating with the investigation. it denies vigorously that it did anything like this. unfortunately for qatar, there has been a pattern of negative reports.

everything from the alleged mistreatment of workers on stadiums including a catalog of workers who have lost their lives. there are well-known concerns about the heat as well. the delivery of their superjumbo was also delayed. not the most auspicious start but certainly also not something that anyone is talking about publicly. >> some big headline numbers there. the ceo saying he expects profit to grow by 70% next year. a big increase but obviously that masks underlying issues. what are some of the other takeaways? much celebrating along with the rest of the airline industry, which seems to be losing money more often than it is making money. profit expected to the $18 billion. very reassuring numbers for the industry.

as the boss of the organization that represents the world's largest airline, that doesn't mean the industry is thriving. >> clearly, profitability is on an upward path but it is still very thin. profit margins of 2.5% are nothing to write home about. we certainly have seen consolidation. and developments in the international market assist in this movement. >> what this also allows you to do is get up close with the movers and shakers in the industry. i was chatting very casually with the ceo of lufthansa. he was telling me about his recent one-on-one with president barack obama. i was chatting with the ceo of iag about improvement in spain,

how they have and make amendments yet on their plan for spain but they are looking at doing so. something that willie walsh has never really shied away from. and if thehave means opportunity presents itself, then absolutely. ,> so you have spoken to iag lufthansa, anybody else you have been speaking to? >> some people are more chatty than others. i just chatted with tim clark, the ceo of emirates. bullish as ever. this is an airline that seems to be taking over the world. i asked about a potential -- he said that is an anathema to their model. of course, they have very ambitious plans but he doesn't keep them awake at night because they delivered on their plans and their ambitious targets in the past. they intend to keep on doing so. everyone just kind of milling around. we will be speaking with the

head of air france later as well. qatar hasn't been as chatty. he just held a press conference alongside tony tyler. a lot of questions as well about potential tracking in the wake of the disappearance of the malaysian airliner. we are expecting a report on the proposal on how to improve things about september time. >> we will wrap it up there. elliott gotkine joining us from doha. with less than two weeks ago until the world cup, you can use bloomberg's 2014 tournament predictions. it allows users to create their own bracket divisions. you can find that on our website, bloomberg.com. >> it is the german investor and incubator credited with putting berlin's tech scene on the map.

now, rocket may be nearing and ipo that could value it at $4 billion. here with more is hans nichols. more on the brothers behind the dot clone companies. >> good morning. 4 billion euros is a lot of money. but put this in a context of what some of the san francisco startups are facing. whatsapp for $17 billion. it is the difference in what this company is. this company is an accelerator. it finds good ideas in the states or elsewhere and helps incubate them here in germany and latin america and asia. that is no small task. and say,challenge them you are just a clone, they always have the answer. yes, but. the but part of it is, it is very difficult translating consumer models to different cultures. because they are just doing

copycats, that is why this valuation may be lower than some of the true innovators that have valuations that are off the charts. look at some of the companies that rocket has incubated. an ebay version here in germany. groupon, they sold that back to the founders. their version of uber is called easy taxi. they have one for amazon. eharmony as well. the typical model on this is that they have sold in some cases back to the original company. now they are taking it public and we will see how much demand there is for the 70 75 portfolio companies that rocket has. rocket has a hard time explaining it. is it private equity? is it and incubator? the answer is it is a holding company. >> does that have any implications for the impact this ipo will have on the rest of the tech sector? >> if you think what an ipo

normally does, it brings in a, a great deal of confidence. b, it mints a lot of millionaires. those millionaires talk with their friends and leave the one company and maybe start a new one. in that sense, an ipo from rocket want to do that. most of the money is going to go to these three brothers. it is not necessarily going to go throughout the company. in terms of spawning new ideas, unclear if that will happen as well. it will cross the threshold. people in berlin will finally have a billion-dollar exit. they may feel like they have arrived. >> mr. nichols, thank you very much indeed. our international correspondent joining us from berlin. >> it is an interesting company. it gives them a way to access investors because they are fun.

normally you would only go in as a wealthy individual. if you are buying shares in the incubator, it lets you place your bets in a broader way. >> let's talk about another energy storage. samsung breaking away from android. first unveiled the smart phone that uses zed. the phone comes with a 4.9 inch display. it also includes a fingerprint sensor. >> so it is a bit to get away from android. >> why? >> because android only has a mere 80% of the smartphone market. >> why would you buy one? you can buy a samsung phone with an android operating system which gives you an ecosystem which has huge amounts of apps. why would you buy this one? >> samsung wants you to buy it because they want their own ecosystem. they don't want all the money going to google and android. do whaton't you just

amazon does? amazon's operating system is also android but they tweaked it. it works just for them. it is an interesting one. >> i think they are both trying to get the hybrid going, winning in hardware and software. we all like the kindle but it is still a loss leader. are launching in russia first as well. >> they probably decided that before the ukraine crisis. >> staying in the region, china has reported better than expected manufacturing data. here with more, caroline hyde. >> signs of growth if you look at the official data. we saw manufacturing's strongest in five months, the best so far this year. it eked out 50.8. just in the expansion territory. -- theyeeing that analyzed 3000 companies in china and it looks pretty rosy.

hsbcu look at the acb -- figures, not quite so rosy. nevertheless it is still the strongest in five months for manufacturing. we saw stocks rise. it is having a big effect on minors trading in europe. it seems to be the medium-sized companies doing the best. smaller companies, not yet feeling the credit coming their direction. more companies are still in contraction. this is what the government is trying to do. it is trying to get money going to the smaller businesses. they are promising to cut the reserve or carmen's. -- reserve requirements. they don't want any hard landing. >> we are seeing governments all around the world trying to figure out how to get the stimulus going in small to medium enterprises. a problem not unique to china. so far, these growth targets sending stats up today in asia. behindi is still lagging

those official government target of 7.5 or send growth. >> we are likely still only to get 7.3%. that is what generally the consensus is from economists. will we see more stimulus, in? money quiteling out quickly into railway infrastructure. they haven't actually ramped up their spending. they haven't unveiled some big amount of money, largely because they don't want to have the same problem they did when they unveiled billions of dollars of money in 2008. that started fueling a property bubble. they want to keep property prices relatively low and they don't want to see the bubbles they forced last time. equally, they do need money to go into the system. mini stimulus is what it is called so far. >> caroline hyde, thank you so much for joining us. >> coming up, europe ipo flurry as more companies announced

plans to go public. our investors as hungry as they were? we will talk about that when we come back. ♪

the issue of investment is something we look at all the time. what we did make clear was, you can't make an investment in a business if you don't believe it has a long-term future. >> willie walsh, ceo of iag there.

rose tinted spectacles on our camera? maybe. conference is on an upbeat note right now. willie walsh is making big changes at iberia. rocketonline startup said to be planning an ipo later on this year that values the company at more than $4 billion. bloomberg was the first to report the plans. with so many ipos, how will this one perform? let's ask garrett. the morning. this is an interesting ipo. we haven't seen a big tech ipo in berlin in about a decade. do you think this is the right time to go public? do you think rocket is really worth $4 billion? >> i think in terms of timing, we are in a sweet spot for the european ipo market. there is a lot of talk about the amount of capacity in terms of deals that are coming.

context is important and we are nowhere near the levels we were at in 2006, 2007. the timing is definitely a good one. you can bring a differentiated equity starry to the market and you will find a good audience. >> why should i go through the hassle of listing my business when i can sell it to corporate's? >> it is a question of options. we only have to go back to the second half of 2012 when the european ipo market reopened that you brought the ipo option back onto the table. it is a case-by-case decision. we are in a good -- >> is it 50-50 or is it ipo slightly edging out? ipo is slightly edging out. partly because the market is functioning again. we weren't in that position two or three years ago. picked flurry of deals

up last year. what are your thoughts on the quietly of ipos that are coming out right now? have they declined? are the valuations still opportunities? >> i see this phase as a restocking phase in the market. the quality if you look at individual companies, i think is still in the very highest end of the market. these are getting existing investors new opportunities for differentiated growth stories which are difficult to find in the secondary market. we are not yet at the point where quality is deteriorating. >> what do you think the second half of the year is going to look like? >> we will have a pause in summer. we have 20 plus ipos live at the moment. if the secondary market continues to perform as it does and you have attractive valuations, i would see the market continuing to the what i would define as normal and functioning. >> we were speaking earlier

about how the market in london seems to be a little bit offed. -- soft. saga priced at the lower end of the range. the ipo market in continental europe seems to be holding up really well. >> to your point, i think if you look at continental europe, ipos are up something like 17%. that has been a good story for the investor base. in the u.k. it has been a more mixed story. in the u.k. we have seen a very focused issuance calendar in the retail sector. the secondary market has had a tougher time since february. a lot of the mid-cap stocks have had a tougher time. that is why you have seen this dislocation and performance. >> where is the demand coming for these ipos? while stocks are near record highs, volume is low. are these retail investors going in? >> it is very much an institutional story.

the european and u.k. macro recovery story has been key. i think it is very much institutional with international investors being very supportive. >> private equity obviously a big part of all this. 'sw far through the list of x they need to do are the gps right now? how far through our the funds? >> they are a big driver in the volumes we are seeing. we are probably 40%, 50% of the way through. they want to recycle. they haven't had a market to exit for three or four years. that is really a new factor. we are about halfway through but there is still further to go. does that -- >> does the flurry signal top the markets? >> perhaps. the ecb action is going to be critical for the next phase of the market. if you look at underlying indices, we are still at highs.

>> thanks so much, gareth mccartney. ok, time for today's pulse number. $70 million. >> it is the amount that "frozen" brought in. your favorite disney movie. no, excuse me. the new hit, "maleficent." a live-action twist on the animated classic, sleeping beauty. men" to winast "x- the box office crown. >> i gave that to you because you are a massive disney fan. >> are you going to take your kids to this one? >> i think they are a bit young. we are going to take a break. see you in a moment. ♪

>> welcome back to "the pulse." let's see how the markets are trading. caroline hyde has your asset check. >> $64 trillion. that is the value of global stocks. it hit a record last month. in june, we are still sticking in the green. we had manufacturing data coming out. germany posted a gain. spain posted a gain. the euro zone general posts again. france doesn't. it is really about china today, manufacturing the strongest in five months. copper is trading up 0.75%. have a look at fx. euro just gaining a little.

it is off by 0.2% but bouncing off its lows. down to 1.3607. much focus on the ecb. one everyone is betting for an unleash of stimulus. will he also reduce the refinancing rate as well? will there be money going to stimulate lending from the banks to smaller businesses? euro also get the aussie dollar down. newhouse bills surprisingly fall down 5.6% in building approval for the month of april. also we are seeing house prices fall in australia. off by 0.6%. let's look at stocks again. we are generally in the green. i want to look at the stoxx 600. this is your outperform her, minors. back to you. >> thank you very much indeed. you have had regional data from germany not looking good. coming up, marchionne's magic.

the italian exec has spent years steering fiat toward success. what is in store next? that is next on "the pulse." ♪

>> good morning. welcome back. you're watching "the pulse." i am guy johnson. >> i am olivia sterns. here are the bloomberg top headlines. china says it will press ahead with territorial claims that it caused friction with japan and other neighbors on the south china sea. a chinese military leader rebuffed criticism at an international security meeting over the weekend. last week vietnam said china sank one of its fishing boats off of vietnam's coast. >> thailand's junta deployed circles -- soldiers.

saidilitary leader has that a nationwide curfew will remain in place until order is restored. he also said it may take at least a year to return thailand to civilian rule. carlllionaire investor icon says he has no knowledge of investigations into possible insider trading. the new york times and wall street journal reported that icahn was the subject of a federal probe. d the reporting inflammatory. an impact on the pound. since then, the pound has come back a little bit. we have seen mortgage approval data coming through as well. that was a little softer than anticipated. we have also seen some fairly disappointing data coming out of

the eurozone, particularly in germany. this is regional data on the cpi ahead of tomorrow's national release. that has been the impact on the euro. most other regions have had negative numbers. that is going to put further pressure on the ecb. >> let's turn to one of our top stories. sergio marchionne has marked his 10th year at the helm of the italian carmaker. after returning the automaker to profit, marchionne is again at a turning point. for more on his reign, let's bring in ryan chilcote. we know they call him the canadian. how did this all begin? >> 10 years ago, he comes in, june 4 2004. rto has just passed away. they were the owners, he was the

chairman. he was very active but in the two years while he was still in the seat, the company lost $8 billion. he comes in wearing a suit, black tie, look somber and says, i am going to try to save the company. that he does. not only in the last 10 years have they acquired chrysler, but he has made fiat profitable. he has tripled revenue and he has tripled their share price. various skepticism about his next plan which basically calls for them to produce 7 million cars a year, 60% more than they do now, and make about five times more money than they are now because they are going to focus on the higher-margin cars. little problem, debt and they have got a lot of it. >> everyone looks at him very successful as being the turnaround guy. very good at deals, but can he sell cars? the fiat has done very well. there is a car that he brought back in 2007. his new plan to make alfa in

italy and sell them to americans and make jeeps and sell them to europeans, it is going to take a lot of money. 55 billion euros is what fiat expects to spend between now and 2018 which would put that to $11 million over the next couple of years, which he says will come down to $1 billion once they start selling all of those cars. theysts heard the pitch on sixth of may and five of them walked out of the room and change their recommendation from buy to sell. >> stock tank ever since. >> ok, show us your car selling magic. >> he is mr. fix-it. is he now selling the type of cars we think are going to resonate with customers? >> he has had some success with the maserati but he hasn't had that success with alfa yet. he is going to redo the whole line. think there is a big

question mark. there is another car they are going to slim down to just one model. that is a very low margin car. it does ok in southern europe. so we will have to see. >> can't wait to see. will we see suburban moms driving alfa romeo suv's? >> i definitely see you in an alfa. >> breaking news coming through the last couple of minutes. we now have in spain one of the leading newspapers reporting that the king is said to abdicate. this is being reported that mr. mariano rajoy is saying this. he is the prime minister of the country. this is a royalty that has been hit i scandal and scandal and scandal. from elephant hunting to his daughter being involved in a series of court cases, this is the latest we have on this

story. that willreport have huge implications for spanish royalty and the constitution. >> the big names in the airline industry are in qatar for the annual meeting of iata. elliott gotkine caught up with an iag ceo, willie walsh. >> is your investment something we look at all the time. what we did make clear was you can't make an investment in a business if you don't believe it has a long-term future. we are now convinced that iberia as the basis to justify significant investment. we have not made any commitment at this point. we have options on various different aircraft types and we are evaluating those. >> now spain is back on track. would you be looking for more acquisitions in europe? >> we are always open to an

opportunity but we are not actively pursuing anything at this stage. we have still got work to do to complete the turnaround at iberia. i am pleased with the progress we are making but at this point, we are satisfied with the size and structure of iag. we are ready if the right opportunity presents itself. we are ready and capable of making a move. pink so he is obviously happy about life. he talked about the fact that he still has work to do in spain. that has been really tough. >> of course. getously the play was to those fast-growing south american economies to fuel the growth of iberia. >> maybe not growing as fast as he would have hoped. fewopefully he is selling a tickets for people going to the world cup. >> let's listen to the guy we spoke too early on who ran a brazilian airline saying this is not having much impact. >> he said he thinks the world

cup is not going to have a positive impact. once again, strength in that trend. >> case in point. >> what makes you think i flew here business? >> i didn't say anything. i just lead you down the road. one of the last things -- i completely disagree with this intro. one of the last things on your mind when jetting from london to new york is your seed. i would say the most important thing. >> i particularly like when they make the bed. some airlines make the bed such as virgin atlantic. some airlines that won't be named don't make the bed. >> that is an important point. if you are running an airline. if you are on the overnight and you get some shut eye before that meeting, probably quite important. anyway, those seats don't invent themselves. thousands of hours go into creating one of those seats. essence of making

olivia comfortable. i guess and it takes up the studiothe secretive where the seats are dreamt up. >> a team of designers pour over 3-d models and intricate plans. they are working on the next generation of airline seating and top-secret. >> can't show you that. >> james park set up jpa design 20 years ago when we were flying in the equivalent of dentist chairs. his firm helped change that, designing seats that fully recline with luxurious materials. maker challenge is to something that is aesthetically pleasing, that is functional, and that satisfies all these requirements. it is quite demanding. >> 40,000 feet above sea level in below freezing temperatures,

this is a hostile environment for luxury. seats can't just feel nice. they have to be safe. >> safety is king. tested,are rigorously made to endure a process called de-lethalization. >> if you were to experience the testing limits these seats are tested two, it would be quite unpleasant. >> the finished product is unbelievably expensive. a single economy class seat costs the airline as much as a small car. a first-class seat, try your house. >> we have worked on a number of products which have been award-winning and which have gone on to sell great numbers. they are nonetheless expensive. >> something worth thinking about next time you spill a drink. i guess bennett, bloomberg.

>> that is the first thing i have ever heard that has ever made me think that the fares for first-class might actually be justified. half $1 million for one seat. >> they are pretty expensive. both the seats and the fares. the question is, do you want to go first-class or business-class? >> who travels first-class anymore? where is that customer? --y are just making digs its digging business-class bigger. >> back to our breaking news. it has been speculated about, now it has been confirmed. spain's king is going to abdicate. this according to the country's prime minister. we have more on this story later. there is going to be an extraordinary cap netmeeting tomorrow. there is a lot of protocol that needs to be gone through. the 46-year-old will now become king on the back of this. more details when we come back. >> also coming up, crunch time.

the clock is ticking for ukraine and russia to resolve their dispute over gas prices. we have the latest on those negotiations. ♪

>> welcome back to "the pulse." russia has given ukraine an extra week to pay for this month's gas supplies or risk a shut down. both countries resume talks in brussels today. the negotiations open a week of

international engagement over ukraine. for more we are joined by otilia dhand. thank you so much. big week for negotiations. gass talks continue but meanwhile we are looking forward to these awkward photo ops we expect to see for the gathering of the d-day reunion when we see putin bop into obama. they are expected to have dinner with the french president. do you think we are going to see any progress in terms of a gas deal? >> it might not be close this week due to the complexity of the talks and also due to the busy schedule that these countries will have in forthcoming days. we still have three problems on the table. the outstanding debt, the pricing and the question of advance payment. what we got last week was a partial payment. of the first three months 2004.

that is something that is probably going to be on the table. then we are looking towards negotiations on the price itself. not, thatey agree or is probably not going to come this week. that is going to come later on. the price will eventually likely 400ettled at around 370 to per thousand cubic meters. that isfast do we get still the main question. >> so a gas deal will be likely here? no crisis? >> ukrainians themselves are already counting on the possible distraction. that is why the process might meet some bumps along the road. it is not going to be a disaster if we see a temporary cut in supplies. it would be much more complicated if the cuts -- >> let's get into game theory

here. how does this fit in to the overall story that we are talking about? the u.s. officials are saying more about sanctions. we have this meeting coming up later this week. putin, the master of positioning, how does he use this as part of the wider story? gas pricing in itself and the demands on the debt have been used as a political leverage over ukraine. as we see these talks unfolding, there will be further talks about, how does europe, u.s., russia see their individual interest in ukraine and how does the ukrainian government itself see it. gas will also be used as a leverage in getting what russia wants in ukraine. perhaps more powers to the regions.

federalization. depends on how the violence in eastern ukraine will develop. the way we normally see the gas price is a sort of expression of political alignment of the given country. the crisisation of will probably be the most important. >> thank you, otilia dhand. >> let's move from ukraine back to spain. breaking news. king juan carlos will abdicate the spanish throne, this according to the prime minister. bloomberg news reporter -- joins us now from madrid. this had been widely speculated. i had seen a number of websites talking about this. now the reality has come through. how big a surprise is this? say for the spanish people it is not a surprise but a shock. the king has been on the throne since 1975.

he is the only head of state that many spaniards have known. he has led the country from dictatorship through almost four decades of democracy. having him no longer there is going to be a big change for many people. that said, his health has been deteriorating quite noticeably, particularly over the last 18 months or so. surprised that he decided to call time. i think what this shows is the that theconfidence spanish establishment has in their handling of the situation, particularly with the decline of the rich premium. they feel they are now in a position to manage this transition. what theo me about recent scandals have done to accelerate this. we have seen elephant hunting,

we have seen his daughter in court. to what extent will this clear some of that away? >> i think that is the big question. the king's reputation has been tarnished over the last two or three years. prior to that he was seen as a national hero. now he leaves with question marks over him. there are question marks over the financial affairs of his family. philippe a, the prince who is going to be taking over, as not being drawn into any of those scandals. i think the palace has been very careful about protecting felipe. d thee a now has to lea family and deal with those ongoing scandals. his sister is likely to be in court facing tax evasion charges. >> we will wrap it up there. thanks for the update. we are going to take a break. back in a couple of minutes. ♪

>> in today's new energy, apple is expected to launch its new smartphones software at the upcoming build conference. the future of the so-called internet of things is larger than just our thermostats and refrigerators. it is becoming increasingly important to also future-proof our cities' infrastructure. joining me to discuss is the ceo of atkins. thank you.

atkins, a leading engineering company here in britain. let's start with this concept. what do you mean by smart cities? how the cities is about living environment is going to be shaped in the future. think about how it all fits together. it is not only about energy efficiency. wasteall about water, management, the transport system of the city has to come together to enable a kind of living environment where people like to live and work in the future and to design that, to have a holistic approach to that urbanization trend. >> the numbers you sent over are staggering. urban populations of south asia and sub-saharan africa set to double in the next 20 years. that is more than half the population on the globe. what are the key things that cities need to do to the able to take a holistic approach to support this development in a

green way? >> that is the important approach. the city approaches it from a general sense of looking at the infrastructure. just think about london. a victorianto infrastructure. clearly, cities in china or africa now have the opportunity to really think afresh about how architecture should look in the future to future-proof a city for future urbanization. -- think about that in 2050 we will have 75% of the world population living in urban centers of the sort we are used to here in london. it is about thinking through not only the transport and architecture, but also how is the social environment going to be shaped? that is what we mean by a holistic approach. >> what about the so-called internet of things? when you tell me that my

thermostat is going to be speaking to my garage door, that suggests that everything that was once mechanical is going to be wired up and perhaps you could be draining a lot of batteries. do you think the internet of things is going to drive energy efficiency? >> absolutely. what applies to the large infrastructure of cities applies to your home environment as well. naste recently acquired for $3.2 billion. to thewhat applies larger environment applies to you as well. it is not only about energy efficiency. it is looking at the whole environment at home and how you can be more efficient in using it. >> our thanks. guy, let's get over to you. >> let me talk to you about what is coming up. for those listening on bloomberg radio, the first word is up next. for our viewers, it is a second hour of "the pulse." spain, the economy back on track.

now is the time that king carlos decides he is going to abdicate and leave the throne to his son. what will that mean? out bothmadrid to find the economic implications and the royal implications. see you in a moment. ♪

a thief faces calls to rerun a world cup vote. corruption allegations are overshadowing a major meeting at qatar. hourig story over the last , spain's king juan carlos is abdicating the throne. we will be live from madrid.