jkerry -- kerry sends a warning greater he secretary of state says they prepare a plan to act. the russian president is envy and aware gas from -- gazprom will sign in austrian pipeline deal. marconi -- mark carney on the bank of england's recent tone on interest rates. monsanto's recent talks with syngenta ag or a $40 billion deal is said to be dead.

welcome to "countdown." i am mark barton. it is 6:00 and london. bloomberg reporters ready to deliver the stories that will drive your day. elliott is in tel aviv covering the iraq situation. john kerry calls on the country's leaders to unite. ryan chilcote is in the studio on the current state of play with south street pipeline. manus cranny is here looking ahead to mark carney's grilling in front of lawmakers today. it is the deal this is a lot about u.s. companies trying to avoid taxes. caroline hyde has the autopsy report on the monsanto-syngenta talks. exclusives an mineview with the head of old bank, peter weinzierl.

called to unite against an al qaeda breakaway group to seek after the country's largest oil refinery. this would seem to reinforce very concerns that i rock -- iraq's very survival is at stake. bighe oil refinery is a loss. let's not beat about the bush. this is the largest in the country. there have been reports of shortages of refined products in the kurdish region. the second-biggest city of iraq fell to be insurgents toisil last week. the iraqi army have been defending it against the militants the last two weeks but they were busted out after in

agreement with the militants to let them go. john kerry was trying to paint the picture as he bashed heads in baghdad to bring home the urgency of the situation. >> the very future of iraq depends on choices that will be made in the next days and weeks. the future of iraq depends primarily on the ability of iraq's leaders to come together and take a stand united against isil. not next week or next month, but now. >> kerry said that those u.s. assets, some 300 special forces troops, are on the ground in iraq and that support from the u.s. would be intense and sustained if iraq's leaders come together. if they do not, it is hard to see the u.s. standing idly by. >> we talked yesterday about hedge fund betting on rising oil prices. i see there falling for a third

consecutive day. at first the prices were dipping on the back of reports that iraqi forces have been taken -- retaken some strategic territory near the border of jordan but they were unfounded. investors are being complacent and not taking into account the long-term consequences of this insurgency on oil prices. >> thank you, elliott in tel aviv. president putin will arrive in austria later today. his first trip to europe since the d-day commemoration to normandy. high on the russian's president agenda is talks over the gas pipeline that connects russia to your. ryan chilcote has the details. >> russia supplies the eu with enough gas to heat 80 million homes and it uses three main routes to get it to them. one of those pipelines has a lot of people worried. ukraine owns it, but it is in

dispute over the price it pays for gas. that has left europe short. add to an accident earlier this month, and the reliability of that supply is a concern. what if the accident was not an accident? what if russia wanted the dispute? ukrainian claims it is all a russian lloyd to convince -- ploy to convince the eu it needs another solution. russia is planning a new pop line to your. would goeam project under the black sea. it is much more reliable than countries. so for the eu has opposed it. with supply uncertain, that may be about to change. >> ryan joins us now. what is the current state of play with the south stream pipeline? >> the eu has said they are not opposed to the deal or pipeline as such. what they are opposed to his individual countries cutting

deals with russia that do not respect or follow eu law. specifically, they mean environmental law and competition law. they have issues with both of those. today you have something that the eu is not entirely comfortable. , in austrian company, sitting down with gazprom to agree on a pipeline extending into austria. the austrian say, we rely on russian gas far too must not to have an alternative to a pipeline through ukraine. and the serbians as well. it is not a slight to ukraine. it is the same kind of ,onversations we had in 2011 four or five years ago when the germans agreed to have a pipeline go directly from russia. rdstream, directly

to germany. yet -- russia and ukraine had been to a gas dispute. the german said they understood the argument. it makes sense to have a alternate route because we need the energy but the eu is uncomfortable. >> it is not divided about pipelines. it is divided about imposing sanctions on russia. >> that is right. it is putin's first visit since the d-day visit to normandy. austria is a non-nato country. neutral. later this week on friday, we have the european union heads of state meeting and one of the things they will be looking at is sanctions. the ukrainian president introduced a peace plan earlier in the week. the rebels had said they will observe a cease-fire until then. a lot of people are watching russia's reaction this week and if possible -- it is possible there could be sanctions. a country like austria would argue against it, i am guessing. they say our economic interest from the value that might be expected -- extracted. >> mark carney appears before

parliament cost treasury committee today. it is expected to be a grilling for the governor of the bank of england. his recent speech will be in focus. manus cranny is here with us. give us a sense of how important today is. >> i think it is critically important because we have had ads inflows in terms of what exactly is the monetary policy committee thinking, why did he stand up to tell the market to think differently about interest rates rate is about credibility and forward guidance, clergy of time and and perception of time and of race for the markets, and mitigation -- full guidance is hard at best a more difficult when you have a governor who steps out of the realm from how we normally receive messages from the bank. they give us once ago at less report which is rates will remain throughout 2015. we will breathe a sigh of

relief. two, you have the mansion high-speed. the market is mispricing risk. get ready for potentially higher rates sooner than you thought. and then there is a pricing risk. three very different messages over the. of four weeks. it will be a pretty tough discussion for carney to have. >> what is the most important question? mps on this committee need to ask carney today? >> why does the bank of england believe that the market has mispriced the probability, the possibility of a rate hike in 2014? the monetary policy committee believes that those odds are somewhat -- were somewhere around 15%. goldman sachs, i had a look at kevin daly's notes and they would maintain that the market

was already pricing 50% possibility. >> look forward to it. see you later. a collapsed deal between monsanto and syngenta is the latest sign that u.s. firms are looking to avoid corporate tax by moving headquarters abroad. the takeover of switzerland-based gazprom would have been the latest of big m and a jill. joining -- deals. joining us is caroline high. what was the attraction for monsanto? >> it does seem once again to be shifting its tax location. azprom is a -- syngenta is swiss juggernaut. it is a seed company. there were negotiations in may that monsanto was eyeing up $4 billion. about that is about 17% above where it is valued by the market. they were willing to pay high overall to build a formidable comparator -- competitor.

they could have come together and help build a.j. burnett andspeed up research development. it also has to be about the lower swiss or per tax rate. switzerland generally has a tax rate of 18%. the united states has 35%. it is another sign of this wave -- a trend, these astrazeneca looking at $117 abbvie chasing shyer at the moment. -- shire at the moment. >> it is becoming the theme of 2014 as you said. it is focused primarily on drug companies and medical devices companies but now it has moved into -- >> and wider than that. we could see walgreens, which is the pharmaceutical -- the pharmacy in the united states

pharmacists. because they can shift their tax location and move into the united kingdom or taxes for cheaper. you also got rumors that bp, the u.k. oil giant by speed -- might be eyed up by rivals. tax and version. we have had a spray of them across pharmaceuticals areas. the key is, what if the u.s. changes the rules? this is potentially why the deal did not go through, why syngenta did not like the idea of being valued by monsanto is what congress could roll in 2015 that this tax rate is not possible. you are not allowed to move your tax location abroad and get a cheaper rate. >> thank you. week, the chief executive alan mulally will step down. bloomberg spoke to him about what his relationship with the

carmaker will look like in the future. >> i think i will maintain many of the great relationships i have and i have fallen in love with. it is a great company and it is so important on what it is for the economy, energy independence, security, and sustainability. i will stay close. >> marketing call you if you need to -- mark can call you if you need to? >> he can call me anytime he needs to greater >> mark carney -- needs to. >> mark carney gets an opportunity to explain his comments on the rate hike. ♪

>> welcome back to "countdown." i am mark barton. mark carney is getting ready to testify before parliament today. questions ony face the change of tone on future rate hikes. daniel mccormick joins us to discuss all matters carney. good morning. thank you for joining us. does carney have a communication problem? what is with the flip-flopping? >> i think he does.

there is no doubt i think that when he came in, he put in place a to mitigation framework that has not worked. in that sense, he does have a bit of a typical the every you'll probably face probing questions today. >> why the flip-flopping since the main inflation report? that is the report that the committee will focus on. he essentially entrenched investor expectations for record low interest rates but only a month later, he got up and spoke to mansion house and said borrowing costs could rise earlier. why the flip-flop? >> the rhetoric coming from the bank of england has changed. i think that reflects the fact there is a wide range of views in the mpc of when they should tighten. the reason is a lot of underlying uncertainty about the output gap and outlook for inflation. i think his change of tone

reflects the fact that some of the more hawkish members of the mpc have got in his ear and say we are currently on the path. >> if he has a communication problem, does he have a credibility problem? jesse norman, who is a conservative mp, said this. talking about forward guidance -- all it really counts for is a lot of arm waving until the governor tells us when he thinks rates are going to go up or down. that might be harsh, but forward guidance is essentially dead in the water, isn't it? >> it has certainly taken a hit. no doubt about that. i think that he can point to the fact that when we were in the depth of the crisis, over guidance did provide some benefit. if a lat and -- and allow them to flatten the yield curve just by focusing on what variables they would focus on for monetary policy. it is not terrible. >> they said in july that forward guidance came into play them up later that rates would stay low until the unemployment rate becomes at at -- or below

7%. it was going to have in 2016. in february, they ditched forward guidance. what does that say about their forecast performance? >> the economy is inherently difficult to forecast. there is no doubt the labor market has been way stronger and anyone expected. the mistake they made in the procedural era -- area is to focus on one variable. he got very strong very quickly and caused them to have to change tactics. in principle, forward guidance can have some benefits. i think if he is defending it, he will point to earlier benefits. it is a tricky one for him. >> what does it mean for rates? are you penciling in a rate hike come november, december time this year? >> i think it is a 2015 story. if you look at the latest

minutes from the bank of england, they talk about inflation being absolutely, critically important in how it evolves. there is really no inflation in the u.k. or globally. inflation is up to 1.5%. in the eurozone, we are concerned about deflation. i suspect that inflation will going forward continue to disappoint and expectations will get pushed into early next year. >> is it best to get that rate hike underway? which is a -- what a couple of the members of the mpc have been saying. such as martin we'll. if you get the first one out of the way sooner rather than later, you would not have to do so many when the process gets underway. do you buy into that? >> there is something in that. if you want to go slowly in terms of your rate hike cycle, and you may want to do that because debt level is more elevated, if you want to go more slowly, you should start earlier. if you want to reach the same and point at a given time. there's definitely something in and the bank of england is

to that as a guide. there is no question there has been a shift in rhetoric. >> you're confident despite these errors of communication that when the bank does start raising rates it will be a slow, steady rise? why should we believe that? [laughter] nothing else has come true. why should we believe that? >> it is true. and central bankers are not in the business of destroying an economic recovery or destroying the economy. the reason they will want to go slowly is because of the elevated debt levels. in the u.k., most people are on the short end of the yield curve . they have a variable rate mortgage and as a direct impact on disposable income. there will be an effect on the economy from rate hikes.

they don't want to derail the economy. i think that is believable. >> thanks a lot. -- mccormick.r, apple's pigsty phone ever is set to hit the production line . apple'sash biggest -- biggest phone ever is set to hit the production line next month very ♪

>> welcome back to "countdown." i am mark barton. factories in china are gearing up to produce apple's new top-secret devices, larger versions of the iphone. stephen engle joins us now from beijing. what do we know about these new iphones? >> good morning. bloomberg has learned that apple suppliers in china will begin mass producing next month two new iphones, both with larger screens. that is clearly evident in beijing that that is the demand. so many people on the streets screens,es with larger all the way up to the tablets. apple, evenoutsells shaw me outsells -- xaoimi outsells apple. 'sople familiar with apple

plan say it will have a 7.4 inch display instead of the current four inch screen. another version would have a 5.5 inch screen. both are said to be rounder and thinner than previous models. android gadgets had display sizes of more than five inches or it that is the market -- inches. that is the market apple is targeting. you are younger than i am, but my 47-year-old old eyes cannot look at a four inch screen. i have to do this to just read my iphone. i personally welcome a larger screen. >> i have still got one of the older ones. that is the nicest thing that anyone has ever said to me. much younger than you? thank you, stephen. see you soon. as the on "countdown," refinery falls to islamic extremists, the stake in the region and the impact on the oil

market. ♪

welcome back. i am mark barton. 6:30 in london. let's head over to manus. >> sterling is going to be a focus for the market practitioners today. they will see us trading at 17024. what will mark carney say? will he change the tone of? we see on the day that we are virtually unchanged. when it comes to a changing mood on the currency, take a look at dollar-ran. you are seeing a weakness in dollar, strength in ran. --at the end of a five mark

month strike. the federal reserve on lower rates for longer. when you look at it over three months, you begin to understand where i'm going with this which is a resurgence. it stalls -- does that memento continue? we will see how that carries through in terms of in that range, 1.35. we have it yet so data. expectations are the critical number for the market to look at. 106, a dip ever so slightly from the previous number. there will be a speaker. back to you. >> these are the bloomberg top headlines. david cameron is calling for a vote this week for the european mission president. he set the u.k. wants to see bright, fresh faces put forward at an eu summit in belgium. cameron is risking isolation by

his continued opposition to leading candidate jean-claude juncker. to cease-fire extends friday. the u.s. says russia has sent thousands more troops to ukraine border. let's get back to our top story. the advances made by jihadist rebel group isil in iraq. this video shows air strikes from militant positions near the beiji refinery. despite the superior firepower, authorities have admitted the sunni insurgents have taken control of the refinery. the complex supplies about 1/3 of iraq's fuel. there is petrol rationing in the countries. this chart showing the performance over the last month, fory 3% but trading lower

the third straight day. richard joins us now. ryan is with us on this as well. talk to me about the beiji refinery, why it matters, it has been taken by the insurgents. what is the significance of this? >> the beiji is very intermittent -- very important in terms of iraqi supplies and the neighboring countries, jordan supplies -- depends on it. turkey received some of it. the loss will increased uption. the other thing it does is takes out some of the demand for crude oil in the north. we have seen field in the north that are not under control of their the sunni insurgents shut productione their reduce. >> reduction has not been too greatly affected by skirmishes over the recent weeks. the big question when it comes

to iraq, what is the long-term future on this on iraq's oil growth potential? what is the answer to that? >> in terms of current production losses, it is small from the north. the day production loss and the expectations of growth are in iraq's south. that is a shia majora -- majority area. oft we're seeing is a number international oil companies reduce staff numbers. seen the long-term forecast to the end of the decade being cut. it is the amount of growth and additional oil that iraq can supply the market that if the long-term story. if you take iraq the growth of the the balance forecast, you have a tight market in a couple of your's time. oil can only do so much, especially while the crude export ban is in place. demand is growing and while the world economy is picking up that growth can accelerate.

there are not many countries that can meet that additional demand. >> you think oil is fairly priced at $113 a barrel? we saw a real climb in the prices and then we have seen a bit of a selloff over the last three days. isple seem to be taking what going on in iraq in stride. >> in the very short-term, the next couple of weeks, we are seeing week refinery margins. -- seeing global demand not as strong as it might be, although there are signs of strength in china, but as we get further into the summer, we have the middle east hitting their peak cooling demand season. saudi arabia's domestic demand goes up. no signs of easing in nigeria. you get into a situation where the market is looking tight. crude stocks are low. product stocks are getting drawn down by a little more, and i

think that the price is right now could be sustained and we have quite volatile trading. >> putin visited austria today. they're going to build their -- they're going to sign their austrian portion of the south stream pipeline. willie go ahead? >> -- will it all ahead? >> we think it will. it has been affected by the tensions in ukraine. the eu has a number of important regulatory decisions to give approval to let the pipeline go ahead and they are showing no signs of wanting to sign those off in the short term. get beyond the current tension and i think the pipeline is too important a supply project. europe needs that gass in the the southernas and european countries are committed to it. >> what about ukrainian idea that the russians did not negotiate in good faith on the gas price, that the accident that we saw on that one pipeline in ukraine, some transit gas

moves through, that that was actually a russian ploy to argue actuallyeuropean union needs the south stream project that would go around ukraine because the ukrainians aren't reliable partners? >> i don't like to go to zoo far into conspiracy theory. [laughter] i think if we look at the dispute between ukraine and russia and the gas prices, there is a massive gap in terms of what they think is fair price is , between around $285 and 400 $85, so they have not been able to close that in the negotiation. there is also a dispute over how much ukraine owes for the gas it has already received. politicales plus the and security issues that have been going on in eastern ukraine, so kiev in moscow don't have a lot of bad blood to clear before they can sit down at the table and really get a deal done. europe -- russia once

wants europe to buy an alternative route to supply. south stream is important. having two highlight transit routes but it also does not want to see like an unreliable supplier by cutting off supplies by ukraine by impacting western european markets that way. i think that is a tough balance for them to strike in terms of saying, we are the reliable supplier, but also say we need multiple routes because any one of those routes is not reliable enough. >> thank you for joining us. richard allison, geopolitical analysis. alan mulally is getting ready to hand over the reins soon. in our interview, he talked about how his successor will handle the job. ♪

♪ >> world cup host nation brazil cruised past cameroon and took

the top spot in group a. the win against cameroon came easy. made inthe chances were the match. 4-0 it was. in the lead for the golden boot. it has been a disastrous cup for cameroon. the teen court -- scored one in three matches while seeding nine. for executive alan mulally will o.ep down in -- as ce we spoke to him about how his success and the company will handle the transition. created not only the product strategy, but the manufacturing plant and also the production plant and also the business plan review process. it had wonderful success. it has served everyone well and i think mark is going to

continue those major processes going forward. >> you think mark will do something different from what you did? you came here and it was kind of a revolution and now, the best thing for him to do, and the eyes of the board, would be to continue your administration. does he have his own changes to make? >> well, mark and the entire team, as we talked about, created the process and created the strategy. we are just getting started. we are serving all the markets around the world with his best in class vehicle. we're going to be profitable in europe next year. the u.s. is doing well. we are the fastest growing brand in the asia-pacific so there is lots of opportunity for us to continue this profit. >> you say we are just getting started, even though at the end of the month it is -- >> oh, yes. i did say "we." i have a few more days. >> how many more days? you still have a sizable position in your company. i assume you will be coming

back. >> i think i will maintain many of the relationships i have. i have fallen in love with ford. it is a great company and it is so important for what it does to the economy and energy independence and environmental sustainability. >> mark and call you if he needs to? >> i told him, anytime. >> it has been nothing but smooth sailing for the world's biggest cruise company. it seems that analysts are optimistic about carnival. >> this is the company that can sell to alaska, the panama canal. they have 10 brands, more than 100 ships, but it has been a horrendous couple of years, illnesses, fires on board, and in 2000ible capsizing 12 or 32 died off the coast of

italy. there are now signs of a turnabout. deutsche bank saying that carnival cruise lines is recovering. they're getting strength back when it comes back to pricing power. you're seeing an improvement in the european demand and european pricing and a bit of stabilization going on for the command of caribbean prices. morgan stanley saying that hasey suggests that pricing bottom. bookings are looking store -- are looking stronger. we are looking at getting their numbers later today. it is listed in the united states and the u.k. so it comes out later, after we come off air in europe. sales likely to be up for the first half. profit? not going to be great, but it will be positive. fromll see it moving negative in the first quarter to positive in the second quarter. they are expecting profitability to improve for the rest of 2014. it is a company that is slowly

but surely managing to suppress some of the negative facets that are about it and start to look more optimistic. >> how can a boost growth in asia? >> in particular, china. a company that largely does not understand cruising. that is the opportunity according to the chief executive. he has come out from carnival groups saying, never mind the bad press that we had in europe. china does not even know what cruising is. they can take almost a totally blank piece of paper and start to try to build up a brand in china. see it as the main area for growth going forward. they have four new ships made for china next year. world caribbean cruises has said wait for sales in china to jump to double digits. in 2008.e up 1% orders are going up across the

board but what will be interesting for china is trying to suit certain palates. really interesting what they are doing with japan. carnival has carnival princess cruises. sushiave to have a 68 c restaurant and an enormous bathing complex. japanese in particular like bass, but natural -- baths, but natural springs. they have to build more bathing outlets in the particular ship. what will they have to do to entice the chinese buyer as well? they will have to have shorter-sailing trips because the chinese have less holiday than those in the united aids. -- united states. tv shows that have -- never before has a primetime

u.s. drum up been entirely shot in israel until now. "tyrants" makes its debut on fx tonight. elliott has been on set. >> the middle east has had its fair share of dictators. it has a new one now. tells the story of a dictator's second son, barry, who is drawn to the family business away from his suburban life in america. >> she is married to her husband from was 20 years. she thought she knew him and there was one giant piece missing for her. she has never known that life that her husband led before she met him, the way he grew up in the middle east, the way he was the son of a basically to radical leader of a middle eastern country. >> is a lavish production and

allegedly cost $300 million $300 million an episode. >> walking around the set of tyrant, you feel as if you have been transported to the presidential palace of a middle eastern dictator instead of actually being just 10 miles north of tel aviv. >> is not the first time u.s. drama has come to israel. "homeland" field is the root scenes here. -- beruit scenes here. using israel to stand in for the middle east has been controversial. >> is tricky. we are always on the edge but i love that. it goes to a different place where you can reflect about the control.of tyranny and

it is sensitive and it is challenging. depictedors are often as brutal and inhuman and you never get to see their softer side, their vulnerabilities. "tyrant" could change that, doing for dictators what "the sopranos" did for the mafia. >> coming up, chilean fans try to cheer on their team to no avail as holland the feeds the -- the feeds the lat -- defeats the latin american team. ♪

>> welcome back. i am mark barton. caroline is here, ryan is here. had better start with caroline after her day in the sun in wimbledon yesterday. the pain that i have to go through for my job. it was a great day. it was a serious story yesterday on twitter and i retweeted it a bit. it is now front page at "the guardian." ,hese are the three reporters al jazeera english reporters that have been sentenced, 2 for seven years, one for 10 years

for what they say in danger to europe -- egypt's national security group the back thrashes enormous coming from al jazeera community but everyone out there, a sickly thing the price for egypt watch crackdown on dissent. terrifying stuff and your heart goes out to those who are married, related, know these people personally. to al jazeera and journalists worldwide. we hope they are freed and we get diplomatic news from them. >> ryan? talking about diplomacy -- >> in "the times," a host of politicians are waking up to the fact they were recorded in swanky polish restaurants and the contents of what they thought were private conversations are now over the polish press. the photo is the polish prime is -- prime minister and he

heard saying on tapes that the country's orders ship with the u.s. -- partnership with the he. was worthless and likened it to washington to a certain act i will not say every >> -- say here. >> he recently lauded the relationship. >> impose with president obama hownext to the jets and poland and the u.s. have historic ties. what he is saying, if it is indeed him, and i don't think he is denying it is him on these tapes is that we run a risk of really running into trouble with the germans and the russians if we think the americans are going to provide us with real security , suggesting that they have this false sense of security and they need to recognize that the u.s.

really is not there which is an interesting thing to hear. obviously, on friday, we have the eu head of state meeting and on the table is sanctions. the u.s. has pushed for the europeans to do more on sanctions and many european countries, and this would not include poland, are against that idea because they say, what do we care about the americans? it will be our economic skin that we will lose if we get into that game. interesting comments. >> we will follow that. thanks, ryan. i thought we would do the world cup. my favorite subject. equal with wimbledon. orange.k it had to come to that. holland two, chile zero. both teams progressed to the final 16. chile will play brazil. i am making a statement. the worldll win cup. i will say that again. all and will win the world cup and that has nothing to do that

the manager is the next manchester united manager. they will win the world cup. here's my next prediction -- chile will be brazil in the last 16. -- latest on kerry and iraq next. ♪

>> kerry sends a warning. the secretary of state says the u.s. is prepping a strategy to act as militants join the army. >> russia president is in vienna, where they are trying to sign an austrian pipeline deal. >> lawmakers get set to question mark carney about the recent change of tone on interest rates. >> monday santo's talks over a $40 billion take-over are said to be dead.

>> hello, and welcome to "countdown." eye mark barton, and i am anna edwards. let's tell you what is coming up. don't miss "on the move." we are continue our conversations around the meeting between president putin and the austrian leaders. in light of that we will be talking to meinl bank c.e.o. peter weinzierl will join us to talk about austria's relationship with russia and the type of business they bring to the austrian economy. >> secretary of state john kerry called on iraqi leaders to unite against an al qaeda breakaway group, only to see it capture the country's rogerest oil refinery. elliott is following the story. this latest loss would seem to reinforce kerry's concern that iraq's very survival is at stake. >> it would, mark.

another humiliating loss for the iraqi army. they managed to beat off the insurgents in the last couple of weeks, but finally the militants won through last , the nd in an agreement iraqi soldiers were bus thed out, marking eat humiliating retreat. it is the biggest refinery in iraqi, and there have been records of shortages in the occurredic region. it is symbolic and paints another part of this picture that kerry was trying to show to iraqi leaders as he was bashing heads together in baghdad yesterday to say look, this is really an urgent situation. you really need to sort this out. >> the very future of iraq depends on choices that will be made in the next days and weeks , and the future of iraq

depends primarily on the ability of iraq's leaders to come together and take a stand united against ice i will -- isil. not next week or next month, but now. >> and kerry said the u.s. assets, the 300 special forces are already in place in iraq, and he says that u.s. support will be intense and sustained if iraq's leadership comes together. >> elliott, you talked yesterday about hedge funds betting on rising oil prices, but they are down a bit today. >> yes. latest data shows exports from iraq from the southern terminals, where about 80% of iraq's oil comes from have not only been unaffected, they are at or approaching record levels. they are warning against complacency in the oil market and saying prices could rise in the long-term, particularly if there are sustained terrorist

attacks on oil majors. >> thanks, elliott. he is in tel aviv. >> mark carney appears before parliament as committee later today. it is expected to be a grilling of the former governor of the bank of england. man us is here to give us a sense of how important today is. >> i think it is incredibly important from a whole range of aspects from. -- from the communication of the head of the bank of england. we have had a couple of different tones to the clarett. i think the credibility of what forward gite ands is is coming under the spectrum of the markets. there have been a range of voices on the n.p.c. time to get slightly more hawkish. has the tone changed? one moment we are given a

statement that rates are going to remain pretty much unchanged until the second quarter of 2015. then we get a contractive message, and then we get the minutes, which in themselves which would be seen in themselves as completely hawkish. e has to given some clarett. you can't keep flip-flopping. >> i am interested to hear what he thinks forward guidance really is about, how set in stone it is. what is the important question that needs to be answered in this? >> did you set out to change the absolute expectations are where interest rates are in the united kingdom? why did you make that speech? what was the motivation behind that? did the want to move the entire expectation range we have in the markets place? or place clarify, governor, whether at the manages speech, it really was, as you went on to say, it is about the risk

premium that the market was attaching to interest rates. this is the crux of the point. the money policy committee and the economy said the markets were only presuming that rates could move -- only a probability of about 15%. goldman sachs on kevin daily's night, they said the market was already assuming the possibility was up to 50%. there is a divorce -- >> where they were started and where they want it to end. that is where he would put it if you were on the treasury select committee, where would you put it? >> if i were on that committee -- alas i haven't had that call yet. >> i have a call-back. he says still thinks the rates will go up next year. inflation we know has fallen to 1.5%. >> danny alexander came into our headquarters, and he is

part of the treasury team in new york yesterday saying you don't want to throw the baby out with the bath water. the problem is here in london, but not in the rest of the country. be careful. it is a very fine tight rope that he has to walk. ou can be pretty sure today is important. >> it is what he says more than anything. >> two quick charges. have a look at dollar-sterling of over the past month you begin to understand how important carney's words and messages are. he spoke and sterling moved. it is a much more important chart. we have reflected on a number of times. the manages house speech reflected on where markets were to go. it was a knee-jerk reaction, but was that reaction correct? today is the moment for clarett. >> one rake hike at least by at

least. >> agreed. the difference is, is that what you meant to do, or was it all just to recalibrate our view. >> i have read a lot of critical things about forward guidance. i wonder why the u.k. would be. there is no answer. you can't run this scenario. but i wonder where the u.k. economy would be? just putting it out there. >> he said he kept rate expectations low in those months from august through the end of the year. >> can i say one thing? we all have memories of elephants. i want to take you back to the weekend that the r.b.s. almost went under. banks were about to go down. guidance and rhetoric saved the system. >> says manus. >> he has woken me up. >> the japanese prime minister released details of the third stage in his harbaugh

bob-nomics package. andy joins. what can we expect today? >> good afternoon from tokyo. today we are pretty much at the 18th month mark since they came to power. as you know, he put through the military and fiscal l.s.u.. -- and stimulus. with the sailts tax kicking in and consumption falling. what we are looking at today is the latest phase of his so-called growth strategy. much of the detail we have already reported. we are expecting a corporate tax cut next year, leading to a rate falling under 30% over the next few years. has always been proposals

for de-regulation of health care, of agriculture, the world's largest pension fund, talks of changing that portfolio there. a lot of this is known, but we are still waiting to see the final reports. who knows, there may be some surprises. >> how does this fit into the economic picture? he first two arrows were implemented quickly. e have had to wait a long time . how does the third arrow fit into the economic picture? >> that is the thing. speaking to economists here in tokyo, they are saying the money policy has done its job. the fiscal policy -- they are wielding the world's biggest debt burden. they can't keep pumping out

fiscal stimulus packages. to really get the economy moving as the population graying in a rapidly society, the country needs reforms. one thing that people are saying here that seems to be lacking is a reform of the labor market. we are kind of stuck in this seniority, five-decade-old system of lifetime employment. there are still a lot of challenges yet. this is one stepping stone in his whole plan. maybe there will be more to come. we will have to watch this space. but today i wouldn't expect too much. let's see what surprises there are and what else he puts in place in the coming months. >> thanks, andy. andy sharp, bloomberg news

reporter live in tokyo. >> president putin will arrive in austria later today, the first trip since the d-day commemorations. high on the agenda will be talks over the gas appliance that connect russia to europe. here is our report. >> russia supplies the e.u. with enough gas to heat about 80 million homes. one of those appliance has a lot of people worried. ukraine owns it but is in dispute with russian over the price it pays for gas. twice before that has left europe short. add to that an accident earlier this month than a the reliability of that supply is a concern. but what if the accident wasn't an accident. what if russia wanted the dispute? ukrainians claim russian wants another solution. the new project would travel

nder the back sea to bulgaria, serbia and beyond. so far the e.u. has opposed it. but with supply again uncertain, that may be about to change. >> and ryan joins us now. what is the current state of play then on the south stream pipeline? >> the european union is not opposed to the south stream pipeline as such. what they say is the pipeline needs to abide by the e.u. laws, and not just the laws of the countries that want to have it. there is a law on the books where the operator of a pipeline can't be the same person that owns the pipeline because they want to encourage competition and have highways for transportation of energy and have multiple sources. would be the

owner and provider of the gas. they have yet to provide a waiver of that rule. they are not as such against this, but at the same time what they also believe is they need to diversify their sources of supply, but they want to diversify away from russia to places like the caspian fuel. >> another pipeline coming from the same place. >> the austrians see it differently. they get a third of their gas from russia. they are going to sit down during putin's visit, and they are going to agree on the austrian section of that pipeline. not because they want to spotlight ukraine in any way, but they say we need this other route. it is a very divisive issue right now in the european union. >> thank you, ryan. >> 7:14 here in london. this is "countdown" on bloomberg television. lots more to come on the show here today, including, mark carney, who will face lawmakers

today. his change of tone last week has led many to call him a flip-flopper on forward guidance. ♪

>> welcome back to "countdown." >> mark carney is getting ready to testy before parliament today. he will answer questions about his change of tone on rate

hawkeyes. we are joined by jay bryson. do you think mark carney will stand accused of flip-flopping, or will he have to defend an eve lution in forward guidance? how would you characterize it? >> i wouldn't necessarily call him a flip-flopper, but there are questions about what he means. when they came out last week, we scratched our heads and said hold on, there is very little inflation in the economy, no wage inflation? what do you mean that we are not pricing in rate hawkeyes properly? it will be interesting to see if he clarifies that. >> is his credibility at risk or not? >> programs a little bit here, yes. we will -- perhaps a little bit here, yes. we will have to see how he handles this whole issue. if he gets to a point where markets are confused by what he means, then his credibility is at risk. >> if he wanted to move a

chance up to 40% or even higher. >> maybe that is what is underlying all this, correctly pricing the markets, putting two-way risks in markets. they can get ahead of themselves and you can start to get bubbles. perhaps that is what he meant to see with that. we are looking for a clarification. >> are you going rate hike this year or next year? >> we are still saying next year. we look at the underlying fundamentals of the economy, and it is improving. with inflation at 1.5%, they don't need to raise rates this year. >> it is feasible to raise rates with inflation below 2%? >> it is possible. it is sort of a preemptive tightening. in a world in which growth is still somewhat sluggish, i question whether you need to be

doing preemptive tightening or not. maybe that is what he is doing here. >> let's talk about europe and a lack of inflaugs. 0.5% was the last print. and we got some p.m.i. manufacturing data out, the french number coming in low. where do you see the e.c.b. moving, and when do you see the e.c.b. making their next move? >> rate headaches, forget it. we are years away from that, if not more. we are a long way from a rate hike there. i think the big question is q.e. i think you are looking at the fall. you have to get past the asset quality review of the banks. eventually you will see some q.e. there. i don't see inflation coming up at all. there is the potential of a mild can he flation -- deflation.

we have had some big changes there in terms of policy just a few weeks ago. >> jay, on the subject of rate hawkeyes and the communication of rate hawkeyes, at what point does the federal reserve start o alert the market that an impending rate hike is on the card? >> i think we are talking fall here. what they want to do is we have to get through the whole tapering exercise. that will be done by this fall. then the chairman will come up and give a speech saying get ready, it is coming. or expectation is the first rate headache in the united states is the middle part of next year, but she will telegraph that later this year. the way we have it in our forecast, the u.k. goes first, but only marginally first. >> jay, thank you. chief global economist at wells fargo. >> this is bloomberg television

broadcasting live from europe. that soon can be the united states of europe. the italian prime minister hopes so. find out more after the break. ♪

>> welcome back to "countdown." i am anna edwards. >> mime mark barton. >> one week from now greece will hand over the reins of the e.u. presidency to italy. in just under one hour, he will

brief the country as chair. we are joined by the bureau chief, dan from mill and. >> he has talked about that before. i am not sure that will be the focus of his speeches that he will be making in both branches of parliament today. i think it is more likely he will be emphasizing reducing unemployment in europe, promoting growth and boosting investment, these are themes he talked about with mr. olank. they will come up in the summit in europe. these are issues he himself has been using in his first few months as prime minister of italy. ese are issues that are also kind of -- that he is trying to promote, at the same time he wants more flexibility in interprets the budget discipline in europe.

i think he was encouraged yesterday with the remarks by angela merkel's spokesman when he talked about giving more flexibility around the rules. >> should we interpret that as italy calling for a move away from some of the austerity, or would that put it too starkly? >> well, certainly italy and rienzo has talked about putting less focus on discipline and more on reducing unemployment. at the same time they are not calling for relaxing budget discipline, not meeting the terms of the stability pact. but they want more flexibility in interprets those measures, -- in interpreting those measures, longer term in reaching the debt and budget goals. >> dan, thank you for joining us. >> 7:26 here in london.

it is part -- or it is a defunct deal that could be part of a trend. u.s. companies avoiding taxes by basing their headquarters overseas. full autopsy next. ♪

>> welcome back. f.x. et to manus for an check. >> i thought we would check out the south african rand. it is strengthening. these are some of the biggest unions in south africa, the platinum business agree to new terms. no hard landing. so goes the thinking. and the federal reserve, lower rates. a nice dip lower there in terms of the rand.

now, there will be undoubtedly one focus for most f.x. practitioners, and it is this. 1.7024. what did mark carney mean in his speech. you just discussed it, saying they still don't see a rate hike until 2015. did mark carney intend to change the views or the risk premium associated with rising rates in the u.k.? what did he mean by the manages speech, and what is forward guidance or should we no longer pay any attention. the euro dollar virtually unchanged. we wait for the confidence data coming out in germany today. it is the expectations market looks ought there. a sleep dip from 1.06.2. >> these are the bloomberg top linzie. david cameron is calling for a vote this week for the european

commission president. he says the u.k. wants to see bright fresh faces put forward at an e.u. summit in belgium. cameron is risking isolation by his continued opposition. the former luxembourg prime minister is speaking in berlin for the first time since the election. rebels in ukraine have called for a cease-fire that matches the truce announced by the government. the cease-fire extend to friday. the u.s. says russia has sent thousands more troops to the ukraine border. and japan's prime minister, they plan to shoot his third arrow today. he is holding a news conference later to formally unveil the details of the third part of he autonomica package. he is due to speak at 10:30 currently time. >> later this morning, mark carney will appear before the

treasurely select committee where he will face questions on the quarterly report. carney said u.k. rates could rise sooner than expected. thank you very much for coming in. does mark carney have a reputation here that the whole subject of forward guidance is in the dark? >> forward guidance is tricky because you commit yourself to a certain course of action, and then the circumstances might change. i think that is what happened right here. what we have been observing as well, which has been lying behind our own outlook action back to stable from the negative outlook we had on the u.k.'s ratings, was that the recovery was actually more broad-based than what we had previously anticipated. that changes the circumstances, and that changed our view on how we look at the u.k. economy and what is happening in

carney's mind as well. >> why do the government's critics expect him to have more insight into the u.k. economy than they do? is that fair or unfair? a lot of people have been caught off guard with how quickly the u.k. economy has recovered. >> no one has a crystal ball, but he has a very strong body of research behind him, and that is the bank of england's in-house expertise. >> where it lies is when you do force guidance. to do this in a meaningful way without falling into a trap of saying something you may later

regret. this is an untested strategy of central banking. we are seeing some of the challenges early on and he in particular. >> you released some research which essentially says that capital markets overshot, but they have reconverged towards your fundamental credit assessment, so essentially you are defending yourselves against the view that racing action modified your reaction. it was quite a defensive piece. are you defending yourself still four or five years after the crisis? >> well, a couple of points. after the crisis, it presupposes the crisis is over. that is the subject of another conversation. what we are doing, you call it defending, but what we are trying to do is put out the facts. because there is a lot of discussion on the role of rating agencies, sovereign

agencies in particular. repeatedly we have heard if the rating agencies hadn't downgraded so aggressively, it may have evolved in a different way. if you look at how the ratings and markets have behaved, you will see that the ratings actually have been fairly moderate in their down grades. for example if you look at the periphery, the market was in early 2009 or mid 2009 really, was rating the periphery over-all like an a-plus. and then within a year to b-plus. that is almost 10 notches of downgrade. if you look at our rating, the eurozone as a whole was downgraded by 2 1/2 notches on average. that is not massive. it is difficult to say that this tail wagnered the dog. >> when will ratings move to precrisis levels for the

periphery? how long is it going to take? >> that will happen when the fundamentals were equally strong as they were before the crisis. this looks like a very long distance away. if you look, for example, at the over of all leverage you still have in the economies, if you include public and private debt, it is still at all-time highs, still very, very high. while this goes on, we think that the de-leveraging process in the public and private sector will continue and be a drag on growth. you have the stocks, and the government is higher. you have potential growth, and because you have long-term unemployment, skills are decaying, you have investment, underspending and the rest of it. i think it is going to take a really long while until we have the fundamentals that we had before, and in some cases maybe never. >> we were having a conversation earlier about ren

stanford i, italy's prime minister, and their leadership role in europe. what would your reaction be if we saw a push toward looser rules and maybe a move away from some of the austerity measures? >> well, we are already seeing a change in tack in fiscal policy. this year and next year, it is the government's plans, the fiscal headwinds will be much less chilly than they have been. i think that is a normal process. that is all fine as long as this isn't sort of overshadow the recognition that what europe needs is more growth. you don't yen rate it by less austerity, you generate by making the economy more flexible and agile. the problem is not the budget. the budget is not in such bad shape actually. it is really the disappointing growth rate, the below par

after the crisis, during the crisis, before the crisis, pick a period. that is what holding things back. >> the european commission president, when that change happens, does that change any of the dynamics you have been talking about or not? > well, i think the most potential implication might be what is happening in the u.k. is a consequence. our own assessment on the u.k. is that the u.k. stays in the e.u. and this is a strength. if they were to decide to leave, this would really change the game. regarding europe as a whole, it would operate pretty much the same as it has. >> if they decided to leave, how would it change the game? >> the referendum is 2017. first of all, the conservatives need to be re-elected, and so

there are a lot of ifs on the way. but we would certainly take note that the close integration that the u.k. has with the eurozone not only -- or the e.u., not only in trade, but in services and financial interaction, that may look very different. the f.d.i. that the u.k. attracts, being outside the e.u. may look very different. if you have a low investment ratio already as the u.k. has, sister-in-law funding is probably not good for the economy. >> thank you. >> 7:40 here in london. monsanto al between syngenta is s -- look that moves are occurs. aaron, good to see you. -- does it want zpwin

syngenta about text? >> no one admit it is just because of tax there. is strategic rationale for the two companies to combine. you are talking about taking the largest seed company in onsanto to and the largest company in syngenta. tax inversions aren't that straight forward. the u.s. politicians are looking at closing that loophole, and there would be a lot of anti-trust issues. >> is it going to come back, when do talks take place, and when could it come back? >> talks took place a few weeks ago. they were very inform alin the lps, et cetera. they were talking with vizcainoors as well. those collapsed about three, four or five weeks ago. whether it will come back is the million dollar convection.

a lot of bankers and journalists are hoping it would come back. our sources say we shouldn't rule it out because we have seen a lot of big deals in the past that were discussed, fell apart and did return. >> we have discussed about companies taking money ban to the u.s. or trying to put their tax residency in europe so they pay lower tax. the u.s. government isn't blind to this. they are trying to close this hoop hole. > i think pfizer-astra stole the cake. that got a lot of attention. they talked about how they were going to close the loophole, but talking about it and doing it are two different things. it would take up to 18 months to close it. the window will be open for a while and that is why we are seeing those discussions.

>> thank you, aaron. stay with us on "countdown." we are 18 minutes away from the start of the tuesday equity session. ♪

>> welcome back to "countdown." >> 7:45. let's talk about the big themes today. manus is here.

>> today is about people and data. the data will be the efo index. we are looking for a slight moderation in terms of expectationings. what are the germans thinking on a forward base? dip, d.w. took a bit of a and e.f.o. is expected to show that. the people part of the market is john kerry, his unexpected trip to iraq. i know that brent oil is dipping. >> down for a third day. >> we misinterpreting the elevation of risk within iraq or not? as the case may be. it seems to move on a daily basis. keep an eye out on that. >> the days of lack of volatility within the oil market seem to be behind us? >> certainly in the oil market. a lot of trade -- >> the other markets, maybe not, but in the oil market. >> there is a piece on bloomberg first word that talks

about volatility. when q.e. one, volatility went way up. and then the change between the q.e. one and q.e. today. every time you had q.e., volatility dropped like a stone. you have one, two and three. the trajectory of volatility is like that. it is like a 45-degree angle. that is possibly going to set to turn. you have the iraq situation. you've got the s&p 500 just coming off the boil. these equity markets are off record highs. and then you have mark carney and his views, his clarett around what -- his clarity around what forward guidance is. that is going to be the key focus for markets. >> what happened between the inflation report and the manages house speech. what data changed? was there one bit of data, one

conversation or meeting that changed things? >> you have a number of guests through this morning. i read through the note from kevin daily at goldman sachs. as they said there is something of a divorce going on here between what goldman sachs has modeled, what the markets thought the risk of a rate hike was in 2014. they were pricing in a 50% possibility. the minutes from the bank of england suggested that we were mispricing risk, that the markets were mispricing the risk of a rate hike, and that the markets has only attributed a 15% possibility of a rate hike. so there is an anomaly in terms of what the market was pricing and what the m.p.c. believed the market was pricing, clicking away there. a nervous tick. >> twitchy.

>> that is relevant. >> manus is feeling twitchy. >> twitchy is the word our next guest is using to explain equity markets lately. he will explain his reasons for caution in the market after the break. ♪

>> welcome back to "countdown." i am mark barton, and ianetta anna edwards. time is 7:51. back in april, michael suggested that the markets were

showing an ultimately unsustainable combination of risk on and growth off. still so unsustainable. michael is here. >> such a good intro, i didn't know what to add. >> this is true. you have seen credits continue to squeeze lower. you have seen volatility drop to multi--year lowe's across a range of asset classes. yet you are seen economic growth forecasts scaled back in the u.s. you are seeing earnings forecasts scaled back in europe. so the forward multiples are actually looking quite challenging. however, i would think over the short term you have a number of technical factors that are weighing in favor of further appreciation of the markets. you have two-year highs, flows continue to be positive, and you've still got banks singing the tune.

my concern is that unless you have a growth reaffirmation later in the autumn, you have the kit list for an autumn melt-up. >> i haven't heard that one in a while. carney, if you were to ask him one question. if you were sitting in that room in parliament, what would you ask him? one question only that would split him open with its laser sharp focus? >> i would say why don't you stop talking as one of the questions. how did he get it so wrong last august? from my perspective -- and i wrote on this at the time. to hitch phase one as he called it forward guidance to a number, the unemployment rate, which they already didn't understand, was absolute folly. i think we have seen a succession of rear guard actions ever since culminating

in the manages bomb. >> do we foregive that folly if it was in part thanks to that folly that the u.k. economy recovered? >> there is an element that thanks to forward guidance, the economy is doing so well. therefore it's seeming failure is actually a sign of success. that is sort of orwellian with the undertone. the economic forecasts from the start weren't deemed credible. they under estimated growth. their forecasts then were an outlier. so they were hitching it to the wrong star whichever way you look at it. >> do we believe him from now on when he says that rates will gradually rise? if we are doubting their veracity in forecasting and doubting his credibility now, if one is, do we even believe

the rates will ride steadily once they do rise? >> it is a busted flash. i would have been better informed by listening to the people in the park shout at pigeons. i personally don't think so, but as mark carney will probably point out at some point this morning, my opinion, or perhaps the opinion of people in the financial community doesn't necessarily matter. it is the man on the street or the users that matter. you can fool some of the people all of the time, but hopefully i am not one of them. >> one phrase that worried me in your notes, you talk about how it is 2007 all over again. you are not feeling very positive about things? >> i just think that markets don't really have much of a memory. when people talk about the current conditions in financial markets as the great moderation, i start to get brickles in the back of the neck. >> i am sure others do too.

thank you for joining us. michael joining us from b.b.c. brokers. >> i am going to say goodbye, you are doing "on the move asia" today. >> i am doing "on the move." it is 7:55. we will have the start of european equity trading after a short break. ♪ .

>> welcome to "on the move." i am anna edwards. moments away from the start of equity trading. details from governor mark carney after the bank of england. he faces a grilling on a forward guidance. let's start with you. >> you are right. all eyes and ears. it comes down to the credibility of forward guidance. and communication. for mark the three c's carney. sterling will be watching. back to you.

>> over to me, in fact. john kerry in iraq. this time in the northern town. meeting with kurdish leaders and pushing the best way to deflate the islamic insurgents is by forming a more inclusive government. just last night, they managed to capture the largest oil refinery. more on that in a bit. over to caroline. deal.0 billion agricultural giant appetite and the ongoing hunger for companies. a more onback with that. >> thank you very much. equity markets are just opening. let's check in with the manus cranny who is at the touchscreen. >> these as woody marcus r