francine: a luxury loser, burberry shares plunge. the company warns of lower earnings for a second straight year. manus: the bank of america swings into profit. the ceo brian monahan says jobs will go. francine: fed that fate. data from around the world sends the rate hike to a record low. manus: operation renegotiation. cameron heads to brussels to press his case for change. ♪

francine: welcome to the pulse. i am francine lacqua. medical i am manus cranny. burberry shares plunged 12% at last check in. they revealed the retail sales rose 2%, far short of the original estimates which were a percent. francine: the company says the growth was impacted by the challenging environment for luxury, especially in china. it is about the fed. let's get to mark barton. mark: multiple issues for burberry. first half sales missing estimates. the slowest pace in three years. becoming indicated profits will drop for a second straight year. get in here, have a look at burberry shares. sinking as much as 13%. they are now down 12.5%. that is the most in three years.

its company gets more of that's more than 30% of its revenue from china. japan, very only gets 2% of its sales. u.k., 40% of its european sales. dollar shoppers are heading to the euro zone take advantage of a weaker euro. barberi on track for its worst year since 2008 with shares sinking 23%. 13% lower right now. have a look at what is happening to gold. as expectations for u.s. rate hike get pushed further away, gold is rising. the longest winning streak in eight months. come in close. gold rising for a fifth straight day. when gold sank to a low in august, the odds of a rate hike in october were 55%.

you know what is happening to the odds? when you get a rate hike, gold is less attractive, because gold is not pay interest or dividends. 200 daye above its moving average for the first time in five months. that is a positive trend on the upside for gold. manus likes his golden sovereign on yields. manus, check this out. this is the bloomberg golden developed sovereign bond index. it measures all sovereign bond deals good come in close, sovereign bond deals have sunk to a five month low. , low expectations. interest rate hikes keep getting pushed further away. chart of the day for mr. manus cranny. francine: it is not the chart of the year.

if you're a traitor at the moment. we're getting breaking news out of china, this goes back to mark's point. we have so much low inflation coming in from china. it is hard to see if the pboc has a firm handle. 1000300,000,000,001 -- -- manus: i001 don't know how that comes out, when it comes to money supply. it is rising by 13% in september. francine: let's bring in andrea williams. andrea, great to have you on the program. when you look at the portfolio, i want to talk to you about burberry. it incorporates the fears we

have about china. buy inyou pick what you this type of environment? andrea: china has high exposure to u.k. they seem to be struggling. our exposure is fairly limited. conditions ther other day. a week cognac and spirits were strong. is going to the austerity measures in china. this lack of desire to show the bling are the money. fran -- manus: that is been a recurring thing for the past 15 to 16 months.

andrea: we'll get through that cop. . you'll see an improvement. there are other things going on. the u.s. is still strong. india is strong. china is picking up. it is not a percent gdp growth. -- it is not 8% gdp growth. boon for auch a big lot of companies. we have to adjust to that lower base. let's talk banks. bank of america has reported better-than-expected third-quarter earnings. 4.1.5 they had profit of -- 4.15 billion dollars. eric sat down with the ceo about the impact of a fed rate hike. up,n the u.s. if rates go

we make 4.6 per year for the first move. francine: monahan says the bank will continue to cut costs by setting jobs. downe headcount will cut -- will come down. the question is how the do that? for a while, we had to do that very quickly, because the costs were coming down fast. we have 58,000 people down to talk thousand. we have to build it up and bring it down. fran -- manus: earning season continues with goldman sachs. goldman is expected to reach their earnings at 12:30 p.m. u.k. time. a half hour ahead of citigroup. francine: andrew is still here. thank you so much for sticking around. talk about banks and the

fed possibly hiking interest rates, this should be a positive for a lot of the banks. we are seeing you as banks are .rying to cop down we have some as concern about capital, leverage ratios. andrew: if you look at the result that was announced before about a bill is that is in full swing. the --o be unveiled by jpmorgan,, banks like bank of america. [indiscernible] rates, it could just if the fed hikes rates, it could have an impact. manus: if we look at the banks in terms of the reporting

season, we expect this is going to be tough for the third quarter. , they assume that bank valuations in the u.s. will not see any rate hike until 2017. europe, -- in andrea: jpmorgan is struggling , which areasues they're going to compete in. you have the retail banks. he have that huge range. struggling.spanish there is no real loan growth. also low interest rates. it is difficult. violation that looks attractive. francine: when you look at loans

, a lot of these banks are not passing through these low interest rates on to the economy. there is so much regulation and they are burdened by capital raising needs. are you confident that after the u.k. banks are a step ahead the rest of europe? andrew: lloyds is a commercial -- they have been good [indiscernible] notwithstanding the bank of england. been quite they have good in diversifying the source of income. something we served in the continental europe. andrea: italian banks have been very that's switching funds -- switching funds. there were a number of banks

that have managed to do that. manus: we saw the switch -- we saw the swiss raise the leverage ratio. .e are going through so much sche, big-- deut change. to grab have the chance their marketshare? the challenge for the , theybig ones in europe have different challenges. i think deutsche bank is short on capital. it has outstanding litigation issues. christie with the new strategy is. -- c with the new strategy is. i think credit suisse is in the middle with these guys coming on. they have a strategy going to tweak. we need to have that discussion,

where do they feel they can compete. francine: andrea williams thank you so much. medical his a look at what else is on our radar. netflix shares fluctuated wildly in after-hours trading. profit came up short. , belowvice finder expectations of one and a quarter million. international subscribers grew by 2.7 4 million. topping out expectations. the ceo is confident about the future of the industry. is better than linear tv. consumers can watch when they want. the content has gotten better and better. aboutndamental confidence large-scale is because on demand is a better experience.

the entire market is going to move linear to on demand. internet television over the next 10 to 20 years. francine: it was also concerning news. as 4%.ofit fell as much that prompted the ceo to defend his intent to revamp the company. he is positive on china. >> there is some pressure, but it is not a complete tether to what you read in the news. we have supercenters in china. our sam's clubs in china are doing great. set desk now we have set the stage in china by creating a seamless experience for customers. manus: david cameron will try to move his negotiation of britain's membership on the european union on to the next phase today. [no audio]

♪ francine: welcome back to "the

pulse." we're streaming on bloomberg.com, your tablet. andrea, thank you for sticking around. we talk about luxury and the problems with china. we talked about the banks. this boils down to what the fed will do. do you think the fed still has a thise of hiking rates year? if they don't, is it dangerous? there's not much left in the punch bowl for central banks. andrea: i think we were ready for a rate increase a month ago. everyone was kind of relaxed about it. we talked about it for so long now. 25 basis points. we feel the u.s. economy is still pretty robust. creation, the industrial specifics suggests there should be a rate rise.

i'm not suggesting a massive hike. get ahead of the curve. what about the wider markets in china? economy feel the u.s. needs a rate increase to get a rateof the curve -- a increase to get ahead of the curve. probably that is what janet yellen wants to achieve. got brain art. all itching to hold back. if we look into 2015, the possibility of a rate hike in march is dropping. it was 66%. it has dropped to 50%. andrea: we stick to the line that the u.s. economy needs a rate hike to get ahead of the curve. the data is sufficient to support a rate rise. you can say the same for the

u.k. in europe, we feel that rates stay low for a long time. this is not a bad background for equities. rates being low, oil prices consumer, so the u.s. it is great. the european consumer, the -- let's think about the positives. the weaker euro helping companies. it is not great for steel companies, but for companies using steel, it is good. let's see what comes through in the q3 numbers. francine: how do you choose your markets? we're not sure how long the euro can stay week. if you look at the u.k., they have a strong pound. andrea: we look at france with

his regulation and lack of reform and think -- we look at sweden where the economy is strong. we look at germany, you have vw issues. i don't think it is a white issue to german industry. theirill benefit with exports and the weaker euro. the regulatory background is still pretty poor pete were looking at companies where they have deregulated with the market. where there is a cyclical element. we are not that gloomy. manus: andrea williams him ahead of european equities at royal london asset management. francine: can david cameron push forward as he meets european leaders later? we talk about that next. ♪

manus: welcome back. this is "the pulse." live on bloomberg television. david cameron heads to brussels today where he will try to move the negotiations of britain's membership of the european union on to the next phase. our correspondent hans nichols is in london. a very special day. great to have you here. osco i am getting on a train to

head to brussels. hans: i am getting on a train to head to brussels. ride with cameron, that is my advice. manus: what will be delivered over the next couple of days you hans: it is been shortened to one day. this is going to start in the afternoon. you technically are correct, manus. i think the important thing to look at is what comes out publicly from jean-claude juncker after. he has been quite critical. he says cameron has not been involved in the negotiation. it takes two to tango. i think it is important. chancellor merkel gave mr. cameron a little coverage. she says they are confident they

can reach some sort of agreement. cameron-merkel dynamic. see if they can anchor some type of change. francine: this is tricky. if you are the european union, you say you don't want the u.k. to leave. we need to renegotiate. they also need to stick to what they call the red tape. if greek -- if europe is going to have roles, they have to stick with him. manus: there has been a overtory recall in germany diesel cheating. they are going to order a recall. hans: bill reported his earlier on anonymous sourcing.

the idea that these vehicles were never going to be recalled is not that based in reality. the fact that the german ministry is amending it puts a little more pressure on volkswagen. they have a technical software fix. 2.8 million vehicles on the road . francine: 8 million vehicles have been cheating software. -- have the cheating software. you don't know how much it costs. you take it back, do you price them? hans: they think there is a software fix in some jurisdictions. you're going to have some sort of reengineering. that is going to be more expensive. francine: hans, think you so much. -- thank you so much.

[indiscernible] up next, we talk nike. ♪

anna: welcome back to "the pulse," live from london. manus: let's get you some of our top headlines. shares plunge this morning, down more than 12% after the luxury goods maker revealed that the first half of underlying retail sales rose just 2%, short of estimates of a percent. it was impacted by increasingly challenging environments for luxury, particularly among chinese customers.

francine: netflix shares fell in after-hours trading after subscriber growth missed estimates. the service signed up 880,000 new u.s. users, below expectations. however, international subscribers rose by 2.7 million. david cameron will try to move the conversation with its membership of the european union to its next phase. the prime minister is heading to brussels for a second round of beating with the european president jean-claude juncker and martin scholz, followed by a full summit of eu leaders, also scheduled to be raised. francine: we are getting breaking news on u.k. banks. they are being told how they should be running their business. these are rules linked to expending. -- two big spending. they have higher capital

requirements under these bank of england rules on the separation of retail operations from riskier investment banking unit, the so-called vicars rule. the regulation authority estimates that so-called ring fencing could mean an additional capital requirement to between 2.2 billion pounds and 3.3 billion pounds by 2019, which is when the rules kick in. these rules, as i said, the is aidingvicars rule, to ensure if that crucial financial services such as retail deposits and payments will be protected of riskier units if they incur losses and have to be shut down. essentially, let's not have a repeat of the 2008 financial crisis. the capital burden is due to the protected unit being measured on a standalone basis for its capital needs.

transactionsany between the ring fence unit and the other parts of the institution will be classed as third-party deals, meeting capital will have to be held against them. banks face further capital means, so says the pra. mark barton on the latest news in terms of capital requirements for the u.k. banks. world may behe worried about china, but nike isn't. is sports giant says it expecting huge growth from asia and anticipates revenue of $50 billion by 2020. the company has been running high this year with the share price around 30%. the ceo says china presents huge opportunities. >> we are not seeing it. in china, our brand is incredibly strong. the market is good for us in terms of participation. is a mobile he connected

community digitally, so that is good for our digital platform, which is doing quite well. our reset over the last couple years and china has proven to be fruitful in terms of setting the foundation for future growth for us and china. ,onsumers want premium brands authentic brands, and they are voting every day and nike is doing quite well. we expect that the pipeline of innovation we have coming into the work that we have done to get the operational foundation set for years to, puts us in a great position in china. haveine: burberry shares plunged in london trading after the company reported a sales miss this morning. slowly growth in china has been identified as a contribute in factor. caroline has a bit of a dive into these numbers. caroline: what a different picture than that painted by nike -- the optimism versus a company admitting that they are too heavily exposed to china and

that is why it was hit so hard. 700 million pounds worth of market capitalization wiped out of burberry's market cap this morning, all because of underlying retail sales. themarket wanted four times underlying retail percent. when you dig into the numbers in the second quarter, it is down 4%. the market expected to grow. for your profit is now being downgraded to where analysts see it. they have been downgrading for burberry and burberry admits that is where we are seeing it. that we will see a second year of pretax profit falling. it is all because of the economic volatility, they are saying, weighing on consumer sentiment. notably it is waiting in china -- why is there such a concern? because of their exposure to asia-pacific.

you can look at the way that the geographic mix has been working against burberry. asia-pacific underlying sales down 6%. sales falling.s yet further pain coming -- they say it has amplified the overall consensus -- 30% of their sales come from china. on the flip side some other areas are doing very well. japan and the yen are very weak. the same for south korea -- a lot of japanese and chinese tourists. but there are only 10% of sales coming there. they don't have any scale in 16se particular countries concessions opened in japan and

a flagship in tokyo. opening and south korea, the first of the year. basically, they got hit hard -- francine: we saw a 20% slump, francine, in chinese sales in the overall from the previous year. caroline: now we are seeing their third quarter seeing some relief. 5.7% increase in sales, much better than expected. this is being health as the chief executive happily admits that the d stocking isn't happening anymore is a relief. but also they have taken action online. think of the alliances that can be struck with the likes of alibaba, the presence in terms of online sales, getting into

not just the maid lane cities but also getting into the region. that is the area they can start to ramp up. far more of their other products, for example. but there are some alarm bells still ringing when it comes to unilever. at the moment, share prices are still up, and they are trying to talk the market into some sort of reality check. they continue to see soft, global markets. the cfo saying that uncertainty is rising in china and there is much volatility in russia as well. the company is still so exposed that they managed to outperform it. francine: caroline, thank you so much. caroline hyde with the latest. very different companies. manus: completely. here to talk more about china and emerging markets in the changing trends the slowdown has affected, the head of strategy at brand union. great to have you with us.

we look at burberry as though it was the shining star in terms of what it was doing, in terms of emerging markets and the china story. speedbump reality. the presence in china is a bit of a drag. from a brand perspective, what is the issue? >> i think if you work in branding, it is quite nice not to hear about burberry. been the case study of emerging markets for so long into to be honest it has done so many things right. it has innovated hugely when it comes to digital, it has really understood the chinese has understoodt how to dial up those qualities. ways, therein many is a market and an environment that they haven't been able to control. the fact that the government in china has been inducing so many anticorruption lives has meant that the entire luxury market as a whole has gone down. it used to be that burberry was bought by many government

officials as a gift. francine: do you have any concerns about burberry? thee are no concerns that trenchcoats or whatever they are selling are a little bit less exciting than they were 3, 4 years ago? laura: i would say so. i think burberry has done everything they can to innovate and show they are moving on and the iconic trenchcoat is still a bestseller. when you look at how much appetite there is for the trenchcoat, it is still something people want. i think it has become incredibly expensive. respondedberry has saying that they are quite dexterous in terms of pricing, but if we look at this marketplace it is getting more and more competitive. this comes down to delivery and experience -- that would be the

key message that burberry would take him. we know or they are in terms of buying online -- what will they need? laura: they need to learn more about chinese consumers. a third of chinese consumers say that it's experience in the luxury brand -- they value the experience more than the product. they need to think about how they can do more to induce incredible experience with chinese customers in their own market. for many the ultimate experiences to go to london and by a trench here. it doesn't feel so great in the shanghai office store. they need to think more about the retail experience in china to encourage those chinese consumers to stay there and spend on burberry in their own market. francine: let's talk about unilever -- they have staples in certain emerging economies and this is considered a bit of their luxury. a branded shampoo or soap. laura: what unilever has

understood, particularly in china is that the rising middle true luxuryn't afford but the everyday luxury is something to aspire to. they know how to position products as something to aspire toward, particularly in the personal care category that target women. they are good at showing what value those brands give you beyond just being a soap and i think that is what they do really well. where -- thes advertising budget, the marketing budget, is critically important, and they tend to get that very much on the geographic basis. laura: yeah. unilever has increased by 10% in india to really up awareness in that particular market -- when you look at rural parts of india the market is in a new

generation of consumers that have divided up every day items -- they do spend a lot there and doing more with lower-cost sections and social media, investing in that. word-of-mouth is particularly important in china, particularly in women with rural -- with women in rural areas of india. francine: think you so much. laura tan. manus: what's up next? theher energy company, biggest oil producer, said to its breakeven plan at $50 per barrel. how aggressive is the call? we talk about that, next. ♪

manus: welcome back to "the pulse," live from london. spain's biggest oil producer has set its breakeven price at $50 per barrel. what does that mean for the company's bottom line? our madrid bureau chief is standing by. charles, good day. surprises here? this is someone laying out a very clear call. charles: that's right. this is repsol telling us how

they think things look for the next five years. the context is that they bought they asset in canada and did that just before world prices plunged. telling theol market what to expect over the next five years, 2016-2020. what is the big elements here is the breakeven prediction for oil at $50 per barrel. that will allow them to pay debt, generate cash, and keep money for dividends. francine: charles, is it an aggressive scenario for oil prices? charles: well, it is a scenario that stretches out for the next -- until 2020, $50 per barrel. bearing in mind where they have come from, the kind of levels that oil was that when they made previous acquisitions.

--tells you something about take this conservative outlook for the next few years and give the markets of guidance about what they can expect for the company's plans. about investments? anything more there? charles: well, they have given this guidance 6.2 billion euros. the question i suppose would be where my that come from. example, fore, for the non-enp asset they have substantial assets in latin and stuff they could sell in spain. time will tell. manus: charles, thank you very much. largest banksuk's may need additional capital of up to 3.3 billion pounds, according to an estimate from the bank of england's credential

regulation authority. they come as a result of the .oe's ring fencing plans let's speak to our u.k. baking reporter, stephen morris. what does this regulation actually mean. : it means that the banks have to completely separate. they are reselling units from any banking operations, and obviously there will be lots of costs associated with this, even just providing the infrastructure, but also funding the re-fence -- the retail industry. hence the increased costs. manus: we have seen a little bit of relief for some of the banks. this is good news, isn't it? in the overall scheme of the capital threat. 2.2 billion pounds until 2019 is not a huge number. i think people were expecting it

to be a lot higher and pra would have come out with a lot more announcements. right after the news came that we saw barclays and hsbc shut up. so clearly this is a better response than people thought. overall, 2.3 billion so this is basically the uk's answer to the vicar rule. banks that could have lost more -- stephen: they are the ones with the big investment banks compared to rbs, which is retrenching heavily. barclays and hsbc are one of the most effective places. manus: stephen, thank you very much. let's get you up to speed with some of our top headlines. francine: inspectors wrap up their investigation around the nuclear -- they may see the lifting of sanctions and diplomats say it

should happen in three months of the next year after the iaea i ran has curtailed its current nuclear program. manus: australia's employment numbers have defied expectations, companies unexpectedly jump in september, a sign that the record low interest rates may yet lift the economy to a sustainable footing. 5000 jobs were lost in the mining industry after a gain of almost 10,000. francine: london's make you will not take place in 2015, after talk about pay and conditions, the unions broke off without agreement. it had been scheduled to begin last night and was postponed. they got talent tv format hits mongolia. does it make the cut? that is coming up next. francine: i want to be a judge. ♪

talent tvthey got to format is a staple for producers around the world. only a handful of countries have been able to resist it. manus: it now includes mongolia. but the juggernaut has proved unstoppable. tv mongolia reports. ♪ disappointment,

the approval, the better ejection. for the talented and the not so talented, it is a chance to realize a dream. for viewers, it is a tried and tested format for entertainment. for mongol tv it is a potential money spinner with that one third of the population tuning in for the launch. there are plans to charge more than $7,000 for a 32nd ad during the finale. that is more than 25 times the usual cost. >> this challenge is most expensive mongolia has ever done. we haven't expected that return was going to be anything less , howevere years because of its success in the first season, we can see that already we will probably be able to have investment return in the

second season. >> each contestant hopes to deliver that's showstopping performance and road to faded fortune. but mongolian artists are yet to achieve the same level of international success display by western counterparts. >> nothing really happened on the international market. for this industry, they didn't know what to do. -- it is a new thing to them. >> in an age where on-demand content streaming is challenging traditional television, mobile tv will succeed not because of viewing habits that because people want to escape from the gathering economic gloom. >> having something positive on their has given a lot of people

hope. but there famously harsh winter is fast approaching and entertainment is all the more appealing. that certainly won't do any harm to the viewing figures. ♪

>> burberry shares plunge as retail sales miss estimates in the company warms of lower earnings or a second straight year. bank of america swims into profits but guide monahan says jobs will go. the economic data around the world brings the odds of a rate hike to a record low. good morning from our european headquarters. i'm francine lacqua with tom keene in london. tom: