a weaker start to the trading day is what we're expecting on this tuesday morning after the stoxx europe 600 was down yesterday. still a lot of profit taking after the fantastic rally we saw last week. oil prices is down. that's putting pressure on these companies. emerging market currencies are down. the stoxx europe 600 is down by 2%. we have a lot of earnings to contend with. in terms of the worst performing

sectors we're seeing basic resources. no surprise. profits were flat for the month of september but the august number, remember, that was that big 8.8% slump but given that we are seeing weakness in oil prices and commodity prices no surprise basic resources is off by a little bit this morning. financials trading to the down side along with insurance. in terms of the best performing sectors autos are up by 0.2%. technology with a modest gain. all eyes on the apple and twitter numbers after the closing bell later on today. here's a quick check of what european markets are doing in just two minutes after the markets have opened. the ftse 100 is just a tad off by 6 points. cac 40 off by 0.2 and the xetra dax with a marginal gain of only 7 pointsor so. this market was flat in yesterday's trading session. you are looking at live pictures of the stock exchange in milan where italian poste is making

its market debut. the ipo is expected to raise more than 3 billion euros for the italian government and is the biggest privatization in the country in a decade. so very important day for the italian market today specifically for italian poste. if that one goes well, that should be a big vote of confidence for the government. now let's get back to earnings. taking a look at those pictures. very jubilant emotions there. very jubilant setting over there in milan. okay. let's get back to earnings because we've got a lot of them this morning. i want to kick things off with bp. we're up by almost 2%. bp posting a 40% slump in underlying replacement cost profit in the third quarter. that did beat analyst estimates. the oil producer also cut it's capital expenditure for the third time this year but they're keeping the dividend in place at 10 cents a share and that will

be a positive for many investors, karen. >> that gain of 1.8% has taken bp toward the top of the ftse this morning in terms of percentage gain. the replacement cost profit $1.23 billion. compare that to same time last year when the number was much higher at 2.38 billion. revenue down from the 94.8 billion we posted a year ago from this company. in terms of where you are seeing the pain, the oil price, $100 this time last year now below $48 today. it tells you the sector changes that are going on and there's a lot of it. capex today to fall from 17 to $19 billion a year through to 2017. it is winding down this year. it was expected to spend $20 billion. those investors are closer to 19 billion this year. divestments and restructuring

charges to 2.9 billion. it's starting to wind down costs and exposures as it starts to shield the business. a lot of messy numbers because of the deepwater horizon oil spill. the total cost of that spill from the gulf of mexico in 2010 will reach $55 billion. that's higher than previous estimates. in terms of how it's placed fairly messy numbers and you looked at this a lot on the sector, the average is for about 14.4. the pe about 17.8. compare that to total, much lower at 12.9. shell maybe a closer comparable, 14.4. so it's much higher than 17.8. a little bit above that at 18.4. >> it's a pretty exciting place at the moment. i know we have spoken about it a lot already with the ceo of hamilton lane and patrick armstrong but i want one more crack at this, if i may.

i'm quite excited when i see just in terms of the wheel turning very slowly or the super tanker being turned around slowly and then i see comments that say over a medium term period, we are going to need trillions of extra investment and yet we've got the oil majors taking off billions, potentially getting to a trillion of investment as well. so i think it looks stunningly interesting for the oil price over a medium term period. >> you can't have it both ways. they're pumping at record levels of production. almost unsustainable and their total cost per barrel is higher than what you're seeing in the u.s. that's the game changer. what you're seeing now and one of the reasons supply is so

high, you've seen the u.s. come online as a huge producer. and they don't have the cost of oil. >> i can disagree with so much there. >> you know what you said about their total cost of barrel. >> their cost of oil is under $5 barrel and we ignore the social costs and infrastructure that goes into that. the u.s. has a pure cost of oil. 50 to 55. that's a huge game changer component to this. the other piece you mentioned the corporates are way underinvested in their infrastructure. they're not speculating on the commodity. they're helping doing the build out of the infrastructure and selling it back to the corporates. >> let me pick up on your point about the shedding of assets here. >> we would see that. the corporates want more cash.

they're going to redeploy their assets in other cases. private equity will pick up different pieces of them. it's a hold period. >> what's defunding all the assets though? they're assets that big companies can't seem to extract value at this point so surely the debt me tricks are not as favorable. >> you're not seeing leverage going into this. the corporates want these off their balance sheet because they're not cash flow producing. they can be over a 5 or 7 year time period so they go away. the private equity guys can hold them for some time period and get the pieces in line and once they're cash flow producing they'll sell them back. >> the private equity side is the focus on individual assets selling off from companies is there anything at the corporate level that private equity can be looking at? >> it's a little bit of a mixture. so on the smaller end it's picking up smaller assets. right now i don't think private

equity has the horsepower or financial power to go after and take down a big oil producer. so while we talk about the capital that private equity has available, when you put it in the scheme of the big businesses it's small. >> how big is it at the moment? >> not much of a theme at the moment. last thing we purchased a bit of sab is the only thing we have done. but it was very clear guidance that there was going to be an increased offer before we did that. >> that's working out all right? >> yeah. it's up 10%. it's something that i would expect but unfortunately i don't see the catalyst that's really going to create the mask in consolidation. companies don't want to see big capital outlays at the moment and until you start to see a lot more confidence in everything going on that will probably be the cusp of the next m&a cycle. >> we think it's going to continue strong. i see nothing to change it. debt, cash, all there.

>> what if they do something exciting. it's way bullish. >> it's going to have to be something incredibly exciting to derail this path. >> so not 25 basis points. >> no. >> which brings us back to key points. i'm going to keep it there for one second if i may. you come back if you like. you're very welcome. in terms, though, of this cheap capital remaining, let's move on. >> okay. the company is posted at 23% jump in the third quarter net profit held by favorable exchange rates and strong growth in the u.s. the italian luxury eye wear firm will invest 1 billion euros to build out it's store network in it's biggest market. specifically expanding the lenses crafter and sun glass hut

chains. the strong u.s. continuing to weigh on the company. the european drug maker has reported a 6% drop in sales this quarter on fx problems and on going weakness at its eye care business. profits plunging 42% on an annual basis as it also paid $319 million in a settlement in a u.s. law case. let's have a quick look at axa. all of these stocks trading to the down side this morning. axa by 0.8%. they reported a 9% jump in revenue in the first nine months of the year. the company citing boosts from a weaker europe. growth in emerging markets and tariff hikes. axa biggest division life insurance also saw a 1% growth in the same period and last but not least basf is the big one we're watching this morning. they're off by 4.3%. weakness in emerging markets such as china and brazil weighed on the world's largest

chemical's firm. the german company lowered it's full year earnings guidance after sales came in below analyst expectations. they warned that the economic environment for 2015 has been a lot more challenging than previously expected and that exchange rate volatility would also pose a risk. should we really be surprised about these numbers given that a month ago they warned that things were going to be difficult. >> 4.6% lower given what they said. miss on the profits and the revenues and the outlook is grim as well. the stock is trading at a discount 14 times before today as opposed to the broader sector 17 times. but -- >> given all challenges though it's every excuse in the book. it's got the oil sector problems and currency in there as well. if you look at how the share prices traded it's similar to the rest of the chemical sector.

>> what's happening now is the sales and earnings front is going to decrease. it blames the oil prices and also hasn't worked out so well for the numbers. the economic environment isn't going to deliver the numbers it had hoped earlier in the year. so you can see where those numbers start to hit. sales down 5% in the basic chemicals division. now this is the area that produces petra chemicals. if you take a look at the currency impact this is in the agriculture solutions business. crop solutions. the depreciation of the brazilian real. we all know that story. so in terms of the pain, it's well and truly been flagged up to markets and if you look at the way it trades now you still have to ask the question if there's a gap it can make up at 14.2 times on pe.

dividend, 3.9%. loftier than it's peers at 2.4%. >> yeah. so do companies like basf struggle -- where are you shopping? >> much smaller. where we see the price inefficiency is the microcap private businesses. the big side, one relatively healthy and doing well and two, very, very competitive. it has to be a much smaller off the radar opportunity. >> are valuations much more attractive here than in the united states. >> about on par right now. we're not seeing -- not on the private side we're not seeing a lot because the leverage is much less available than what you see in the states. >> tell me about it. do you think the source of funding for european companies is a major reason you wouldn't buy some of them? >> that has been a surprising issue. we kept waiting for the lending environment to get more and more open here and it's slow, slow, slow. rates are good.

it's just the opportunity to actually borrow is just much more muted than you see in the rest of parts of the world. >> they have to rely on banks and the banks have been with drawing liquidity. five times the market access and alternative forms of capital than they have. >> that's the difference. i mean, in the states you've seen a lot of new lenders and new types of entities coming into the game and you haven't seen that same flow coming in here. >> doesn't that create a potential where you can borrow in the united states and buy european companies though on the microcap level? >> that's one of the issue we're having a hard time doing. transporting money ease lay cross borders. the u.s. lenders want their dollars to stay home. they don't want to take the currency risk on top of it. >> it's a hard one to hedge though, isn't it? we've seen a lot of u.s. dollar trades because the dollar hasn't elevated that much. >> and hedging becomes very

difficult and expensive because you have an unknown duration. you don't know if you're going to hold that company for two years, five years of eight years to trying to put an efficient hedge on that is pricey. >> investors are all u.s. dollar based. they're much more private equity based than in europe. is that why there's more dollar buyers than european? >> that's true. about 60 to 70% of the money is u.s. dollar denominated investors and europe has 20 some odd percent and the balance comes from outside. >> but even if leverage is more readily available in the u.s. we haven't seen the same sort of leverage buyout activity that we've seen before the crisis. why is it not coming back? we saw a huge emc deal but that's not classified as a leverage buyout deal. why sit not happening? >> price. it's no more complicated than that. one of the few times i'll use this word, private equity is showing discipline. we never say that about them but they are today. they're restrained. >> okay.

we are going to get back to the markets. we've got a big ipo happening today. that is in italy. it has delivered shares rising more than 1% in their market debut. a price of 6.78 up by 0.4%. claudia joins us from the stock exchange. why is this so significant for italy? >> well it is a very well-known brand here so there has been a lot of focus on them. they have 13 points of sales. employ 142,000 people here in italy and they have diversified in the last years and gone past just servicing mail and parcels. what they also do is of course work in the financial sector as well as insurance. so that's a business that's been growing and that the ceo expects to continue to grow. in 2014 the company came in with 28.5 billion euros in revenues. that's a decline from 2013 and

212 million in profits. what's important is to see what they will do going forward. the strategy. but it's been very important here also from a political front because the government has been moving on wanting to go forward with privatizations. this is a big one. it's the first of its size in 16 years here in italy. it's going to be the largest ipo in europe so certainly a lot of focus and the fact that they did go forward even with the market turbulence and ended up slightly below what they were expecting in terms of valuation. they wanted 9 billion. they got 8.8. 32% went on the market this morning. 30% of that was dedicated to retail investors. 70 to the institutional investors and it's a good deal for the retail investors. they'll get one free share for every 20. they have promised to pay out of 80%. we'll see. we'll see how he expects to keep that up. there's a dividend yield of 5% here and it's turning into one

of the top 14 in terms of market cap on the italian stock market. so it's certainly a very important entry on this market. again, because of the fact that it's such a well-known brand. there was a lot of focus here. they did a lot of advertising of this to the public so there has been -- it's been long awaited. so we will speak, though, to the ceo in just a little bit to get his view on what happened here today. just behind me standing up on the stage were the ten representatives of the ten banks that were arranging pretty much everyone was included from jp morgan to goldman sachs, morgan stanley, all the large banks to here, right now, everyone is present and on a fashion note, though, just to put out there t chairman was dawning a bag made out of the canvas that carries the post historically here in italy with a red white and green flag. so that was quite interesting to see that there's also maybe market out there for some

accessories. we'll have more for you in a little bit. >> not having lvmh and the rest of the swainky bags. i'm going to do this story. i think it's delicious. have a look at it. 4 million barrels of crude bought by the chinese state trader, 4 million barrels of crude has been stranded in very large container carriers off the eastern port for nearly two months due to a lack of storage. a lack of storage. i wish cutmore was here. he would be telling me about all of this real demand coming from china and i was trying to point to him about the strategic reserve being filled up.

do you remember that one? yeah. look i could be judge and jury on this one. >> he's probably awake now tuning in. >> is he awake yet? >> probably. >> he's probably just hunkering down from the storm. he's in the west indies isn't he? >> yeah. >> lovely time with the rain. >> china said it's storing about 90 million bar rels of crude oil. what's the size of the u.s. one? 480 million barrels at the moment. i think it was 476 was it? 479.6. let's move on. tech. you want to talk about tech. >> i do. a bunch of earnings coming out state side this week and technology for you, is it worth buying into the sector or are you hitting the exit just yet? >> we're hoping to hit the exit.

if you look at the unicorns they have basically been funded by private equities so they're sitting in our portfolios having been invested in in a much earlier stage investment. there's unrealized gain that needs to get converted to cash. >> so give us examples of where cash is trapped in some of these corporates. >> you pick the list. uber would be a big one. so 50 plus billion dollar private market valuation. virtually every dollar of that company so far has been seeded by private equity investors. >> isn't there nervousness that once you do make the step toward the public market valuations are going to come crashing down because it's not sustainable what we're seeing in the private markets. everyone talks about that bubble. so is it that the companies are not willing to make the exit? they're just delaying it forever? >> this is the question. you really need an exit of enormous scale and size to have that happen and that i think requires an ipo window that's very, very open.

one or two can get through but you look at how many billion plus businesses are sitting there on the books privately waiting to line-up and it's a lot more than one or two. >> is there a tried and tested myth with the exit from tech? you know, a time line about when they start to innovate, execute and then there's a lot of disruption in the industry. they hold too long that technology is suddenly last season's story. >> it's that plus it's the how many windows do you have? where else is that going to exit other than the ipo channel? it's relatively unlikely given the magnitude of the business so now you have yourself down a narrow path. >> a unicorn is a start up which is, venture capital, got over a billion of potential market value. >> current market value. although private market value. >> this is fascinating because these companies typically don't

make any money and what percent of them won't ever make any money? >> well, this is a bit of a different shift from what we saw in the last tech bubble. one of the reasons why -- >> you have to say it like that. >> we have to say this is different. this part is different which is the reason why they're taking so long to exit. in the prior tech bubble they would have all been sold and all ipo and people would have been moving on at this point. what's happening now which is they're waiting for real profitability. i think they're trying to build these differently. the pro and the con is its costing long tore get these to scale. you have to stay in a longer time. we're talking about a larger duration and huge amount of cash to make the businesses viable. >> they're having to take on longer term risk on these before selling them to the ipo market. >> note the irony.

>> it's delicious. >> is it the right move for a tech company anyway? >> i'm not sure it's the best. i'm not sure what the other option is. >> they need the funding? >> they need the funding and the exit. >> what do you think about tech valuations? >> one is the old fashion tech so we own microsoft, google, apple -- >> you had a lovely week. did you capture all of those gains? >> yeah. worked out very well. apple reporting today. they're trading at market-like multiples with potential for growth. those are boring almost but good valuations with some growth. >> when you see the price to book is over 12 times which do you care most about or neither? >> earnings matter more than book value but the s&p as a whole is almost at 1.8 times book value. that has me more concerned about

apple than apple at four times. we're short the u.s. market as a whole. we're trying to buy companies that have the potential to outgrow the markets. >> that's where it was in 2000 almost. >> they're not taking them private. you'll see the science of when they think the public market is cheap when they start buying public businesses and taking them private. >> michael dell did that and it's working out fine for him. emc wasn't it, the data storage company. that's working out well for him. does he come back to the markets? in some way, shape or form. >> in some way he has to. you going to go on? we have all kinds of stuff as well. >> well, in germany, shares are down some 30%. this is a german engineering firm.

it's a smaller one but issued a profit warning saying it plans to review all of it's current sites in europe and asia on the back of delayed orders in china and company saying it expects 2015 revenues to slump by 30%. so big move for that industrial company. man or deutsche bank. what are we doing guys? all right. let's do vivendi instead. but the news is the following, down by 0.4%. saying it's considering purchasing more shares in french video game makers. the media group not ruling out making a takeover bid for the companies within the next six months. this after they bought additional shares in both companies last week bring it's holdings in each to just over 10%. and down this morning by .5%. and the canada pension plan investment board and private

equity firm bc partners has agreed to buy a 30% stake in cablevision along side altice. the acquisition is expected to close in the second half of 2016. >> excellent work. thank you. let's ask patrick and eric how they're playing china as well. you think people are way too excited or exacerbated or concerned about china. >> i thought they were. i think when i was on the show about a month agatha was all the worries of the world. >> absolutely. >> it's a hard landing and if some number versus come out and they put in some monetary stimulus i don't think people are panicking about china. it's slowing. but it isn't the hard landing. >> we're going to wait and see now. waiting for the services sector to improve and as i was just showing there was real issues. that's what really started all of this earnings season. i better ask you what you're doing in terms of companies that

have a more china sen trifocus . >> we see growth coming in at the 5 to 6% level. that's probably plenty and we see a shift to the consumer oriented businesses. so this is becoming more of a nike market as opposed to a caterpillar market. >> but a nike market valuation is way bigger. it's already there or is there an opportunity? >> we're not going to play nike. we'll play ten level bess low that. >> what's nike. >> you never heard of it. >> thank you for bp. >> after the shock break stay tuned. we're back in two.

profits drop by less than had been feared by the market. tech really is in the post for poste italiane after it trades above it's issue price for the debut in the market delivering good news for the prime minister and his reform agenda. the swiss pharma apologiant see plunge. strong dollar and weakness in his eye care business weighing on earnings.

it's a case of bad chemistry between basf. >> european markets have been open for half an hour. the stoxx europe 600 index is down by .6%. as well today a little bit of profit taking and specifically last week that's running out of steam driven by mr. draghi last week. really expecting them to hike rates as early as tomorrow but also we're getting the boj decision later on this week. i want to show you the sectors one by one this morning and we're seeing chemicals down by 1.3%. no surprise we'll get to basf in

a second. many of the commodity prices are lower this morning. along with oil prices inventories. so that is a continued overhang for the sector. real estate, autos and media among the relative outperformers but no sectors in the green today. let's show you quickly the individual stock which is are making big moves today. the semi-conductor in germany off by another 7.75%. this morning we got a couple of price target cuts. so this stock really continues to fall. the basf share price is off by 4.8%. why? it cut it's outlook for 2015 on the back of weakness in china and brazil and on the other side of the board, recooping losses. we're up by 4% this morning .

>> what have you got for us? >> if it's a 15-year-old hacking into the business. >> do we know it's a 15-year-old hacking into the business or is this an opportunity to try to -- there's a super cyber security team on this one as well. >> it sounded so much more serious. >> pretty serious. >> do you know if it's a teenager? >> it's a different connotation from a super superior hacking group versus a 15-year-old playing at home. >> it's even more worrying that it's a kid that's gotten in there. >> so you'd be selling the stock

today? >> you can go to vodafone but you don't want to be taken down by a 15-year-old kid. >> you mean hacking phone companies? >> i wouldn't put it past the hedge funds. >> that's the angle. >> bp has posted a 40% blump in replacement cost profits in the third quarter beating analyst

expectations for a 60% drop. the oil producer cut it's capex for the third time this year. now expects to spend $19 billion on investments but the company is keeping it in place. that's important for you. it's keeping it in place saying the strategy underpins our strong priority of sustaining our shareholder distributions over the long-term. the more porn factor is the details on the underlying cash cycle and what they're doing to bring cash into balance. that supports the dividend story. >> $60 barrel is the figure they quote. >> that's correct. >> which means we're still under water. it's a modest improvement

compared to what some are saying but you think $60 is realistic? >> well, my personal opinion is that 60 will not even be sufficient to balance the market by 2017 in the intervening period we have some fairly significant pressures coming from the iranian bar rerels com back into the market. >> had stock has come up from 322. what do you think of the valuation? >> well, i think the dividend yield is attractive but when we look at the other me tricks the entire sector is trading at very elevated levels. the market is telling us that the oil price needs to get back to 70 before you can support the valuations here. >> so if you have one major in the industry that decides to cut it is it all bets off for the

rest of the players? >> it depends on who it is. and wouldn't result in anyone else moving forward. i don't think it effects necessarily the stocks. >> let me ask you about the refining margin because this is being flagged up by the analysts, you getting a bit of a downstream, upstream. do you think you saw any of that today. >> a quarter of the downstream result was very strong. they did beat on the upstream as well but the earnings were about three times the upstream earnings. the issue is that refining margins in the atlantic basin, both the u.s. and europe have been cut in half over the course of the last seven weeks. so that support from downstream isn't going to be there in 4 q.

>> i had a discussion before that and i argued this is based on what i have been reading from analyst notes is that bp moved away some of its shackles because it settled that liability and may be on the look out for acquisitions. steve said no this is not the case. this is not the priority for that business. what do you think? >> they have come out saying defending the dividend was a good thing. that's not saying they wouldn't have the financial capacity to move forward with it but i don't expect to see any type of major acquisition over the next 12 months. >> you mention the refining margins are going to fall. what's driving the lower margins? >> the issue is refined product demand growth is decelerating right now.

>> in the u.s. it was up 7% in july. it's still fairly robust but the problem is we don't really have that big demand driver that we had over the course of the early part of this year. it's really slowing down. >> i love comparing them. you do too i'm sure. bp has just bought itself the mother of all acquisitions potenti potentially how do you look at them as a pair? bp performed better than shell as of late. >> we prefer shell here. bp has been active in managing their cost structure. they're far down the road. shell is in the early stage of managing their cost structure so we see a lot more low hanging fruit there. they are both yielding about the same amount. we see a lot more room for expansion in the cash flow. >> that doesn't seem to be

shared by those trading the stocks today. shell has come off 1.2 or 1.3% gain. this result from bp i would have thought could have energized the sector but it's not having the impact. why is that? >> the oil price is down and that's going to be really an overwhelming factor for the oil stocks probably through the end of the year. bp is benefitting today because they reported something very specific. we'll see if it follows through to the end of the day. >> just going down the curve a little bit more what about some of these oil services company? what about the engineers of this world as well? they have seen real volatility more so than the iocs and it would be interesting to play there, jason. >> so i don't cover those stocks. their volatility is because their revenues are driven by the capital spending of the integrated companies. my colleague does have a preference. >> i want to ask you one more question then. the oil sector in relative

valuation -- i hate relative valuation but we'll go for it anyway, how does it look compared to the broader market now. >> the sector is trading at elevated levels and i do think that with the potential for an overpriced oil hang between now and the end of the year it's a space we would be cautious putting our money to work. >> always a pleasure speaking to you. thank you very much for your time, sir. what do you think of sectors at the moment. >> we think european banks are still cheap. >> raising money. >> they're just below tangible value. we think you're going to end up with a steeper yield curve. >> we have negative interest rates. >> you have negative interest rates but the pressures will come. 2016 you'll start to see interest margin start to rise. >> it's coming it had a good run

and it's trading where it started the year. if you were going to be investing in banking stock would you enroll specific. >> mostly the sector we're underweight in the german banks. the end valuations. they're all similar multiples. some of the german banks are at risk. >> but the strategy is so different. you have deleveraging taking place in the german banks. when you have such a diverse strategy it seems unusual to hold the sector. >> just because it's valuation call, i don't want to miss out if they're doing it right about the deleveraging. i want to have some exposure there. i prefer the capital situations. >> sounds like you don't trust

the banks. >> what i like about them is the multiples you buy them on. >> is there a reason why you're picking those assets? >> do you trust the tangible book value? >> i think the tangible book values are not that far off. >> they're not still just left holding these? >> well, you have that but then the aggregate, they're cheap. they're a play on the european recovery and inflation and you can't have recovery in the euro zone without a healthy financial sector. >> lovely: share versus reversed. early gains rose as much as 1% in the market debut. and she has a very special guest. >> yes. we are here after the listing of poste italiane. they began listing at 675. they are trading now and i have with me the ceo who is going to

tell us a little bit about what is going on here with the idea that maybe investor confidence has come back. >> this is what we notice in the road show. there has been great interest toward our story but as part of i would say the frame work of a country that is growing again. >> this is the largest ipo for europe again. so a very important move in that sense. 3.3 billion euros that the treasury will be using to pay down debt but there's the question about what they're doing in terms of business. can you tell us about how it's set up? because it's quite different how you're going about this ipo than for example royal mail did by splitting up the group. >> >> it is a profitable sector

today which can rely on a customer base and has significant potential for a perspective for earning growth. that is then articulating in the various businesses we operate and what we observed is that they have appreciated the clarity of our vision and the prospect that we have shared with them in terms of growth and value creation. >> what is the part you were going to work on the most? that represents 15% of the business although the brand here in italy is probably one of the most penetrated brands. so well very known for that. are you going to work on that part or is that something that's going to stay and continue to represent a small part of your business. >> of the 28.8 billion revenues of last year, it's less than 15%

is post and parcels. 18.8 billion is insurance that's growing double digit and about 5.4 is transaction banking where we don't have any lending activity in the credit risk. so we have put forward the company which has limited capital requirement. a fee based visibility structure. very interesting growth potential in insurance and asset management and some turn around challeng challenges. however we see growth all the time. >> thank you for being with us. the ceo of poste italiane. back to you in london. >> i must apologize to viewers. there was a slight gremlin on the line. but the sound was not up to what we normally like. >> very good questions. >> good ipo. >> absolutely. >> still coming up on the show, we cut to the core of apples earnings. the stock dipped ahead of the latest results. we check out the key numbers you

need to watch out for. we'll be back in two.

>> take a look at the share price. off by 2.3%. they were hurt by a u.s. settlement on rebates or claims that they pay rebates to specialty pharmacies. that settlement is worth $390 million. that took a little bit of a chunk out of the bottom line. apart from that sales missed expectations. third quarter profits were down 42% and one of the main reasons why sales were down is because the strong dollar is hurting the top line and novartis saying in a statement this morning that if current exchange rates are going to be at the level ws we saw at the beginning of october the hit to the top line will be to the tune of 10%.

they want to bring it back to profitability but according to barclays they had another really bad quarter in part because of competition. let's talk about the positives, though. they have this enlarged portfolio that they bought from jsk and newly launched drugs provide a little bit of a lift for novartis. karen. >> thanks carolyn. it has a lot to prove but will the expectations for apple this quarter prove to be too high. this period last year am reported the most profitable quarter of any u.s. company on revenue. analysts are forecasting revenues of over $51 billion. that's the top end of the tech giant's own estimates. so up 21.3% versus first time last year but they'll be keeping a keen eye on the break down of

device sales. iphones still account for more than 60% of the companies revenue. due to the timing of the 6s launch comparisons to last year are skewed. so keep that in mind. but even some of the most bullish analysts raised concerns that am may be lining up for the first year on year drop in iphone sales. elsewhere ipad and mac sales steadied after steep declines. >> the apple watch though, the company will not disclose sales figures for the device but tim cook says sales have exceeded expectations and the firm feels great about how it did in the quarter. >> a lot of questions about what to do with the stock. there's been options that the company could fall below 110. the trading price for this year, 4.1% so far. it looks stronger on the curve. so this company traded higher

and lower in the past as well. what do hedge funds do with this right now? >> long u.s. large cap tech so am fits in there. it's a company cheap on earnings. earnings coming out today. no one is expecting much. no one is expecting any growth. people are worried about significant declines. you're paying 12 times multiple for a dominant consumer brand with 50% growth margins on phones. even with no growth that's an incredible valuation. >> what about the iphone sales? people look at it and say this is a company that surprised us all by continuing to sell us more smartphones. if this starts to fade a little bit and there's no massive device in the background to step in and compensate for iphones are we looking at a problem for apple? >> the old apple which was a tremendous growth company. now it's a value story. it's a company that's not growing that much. it's grower faster than the broadest economy.

just replacing the iphones is a huge amount of cash flow. so $50 billion in iphone sales say huge story. it's going to match that. >> if that's the case shouldn't the dividend be higher. 1.8% versus 2.7 in the sector. even low versus other sectors as well. surely it needs to be higher for sectors. >> they have an abundance of cash or dividend. it's moving that money into america as bait of a difficulty and they're creating ways to do that by issuing dollar debt by keeping their money in companies without having any tax funds. >> it's one of your biggest positions. in the past the catalyst for apple has always been a big launch or it's been the announcement of capital returns. now that is pretty much set in stone over the next one or two years so we know exactly what is coming from apple on that front in terms of share buy backs, et cetera. what is the catalyst going to be? >> you don't need a catalyst

when you're so cheap i think. when you're chasing growth you need something to be there. you need them to be beating and if we continually beating estimates. right now apple is priced for disappointment and any good news and any positive guidance they give today is potential catalyst. the bar is so low right now anything they say about good news coming up you'll see the stock rally on that. >> it's an interesting flash from the russian finance minister. danger reserve fund which was valued according to my estimates on the first of september, some in the region of 70 billion u.s. dollars. the finance minister sees danger. the reserve fund will be entirely exhausted in 2016. already the deputy finance minister previously said 2017, 2018 it could be gone. and now the finance minister that we interviewed on this channel a few times said could be gone. this after a huge draw down. it was the last estimate i had for the withdrawal of funds.

$6 billion in september. the russian finances remain under a lot of pressure. they have a deficit. they're fighting in ukraine or there abouts and syria as well. >> tax increases? >> of course because we saw the ceo of vtb talking about the need for the central bank to cut rates aggressively to improve the economy as well. but all kinds of problems there for the russian balance of payments. patrick armstrong, thank you for joining us. our guest host tomorrow, the founder of carn macro advisors. from all of us have a very good day.

welcome to worldwide exchange. >> here are your headlines from around the world. >> european stocks are in the red today. u.s. futures are pointing down as a mixed earnings picture keeps investors on their toes. >> defying the oil downturn. bp shares jump in london after the oil major beats estimates and unveils another raft of cost cuts. >> novartis in the news. the swiss pharma giant sees net income plunge due to a legal