>> brazil gets the boot. it's world cup dream is over as germany crashes it, 7-1, the worst defeat ever for a host nation. another bank, another fight. citigroup could pay the u.s. $7 allegationsederal that it misled investors. and more rockets in israel as the country carries out air raids on gaza. we are live in tel aviv with the latest. good morning. you are watching "the pulse."

we are live from bloomberg european headquarters. we are here in london. i am guy johnson. i am on my own today. we have great guests coming up. sainsbury's fights back. just thinking hands over the reins. we are going to talk about that and a bloomberg exclusive -- one of germany's top gear makers looks to score big. we are live with the ceo of paulaner. so, it is a big story. it is all anybody is talking about. germany flying high. it was a stunning win. it look so easy. 7-1, beating brazil. the same might not be said about the country's airline. lufthansa very much under pressure. could the world cup give it a little boost? hans nichols is standing by.

going tohat they are want to hear about how the airline is doing. for me, the talk is going to be of the world cup. >> the talk is going to be, can they add another route to bring all of these german fans to the world cup? we can talk about long-haul flights and transatlantic flights. the margins are not therefore the gonzo. -- there for lufthansa. they have deployed german wings to protect their underbelly. the problem with german wings, and they mentioned this as a -- at a press conference yesterday, even german wings, which is a low-cost alternative, they cannot compete with ryanair or easyjet read there is some speculation in the german press a may announce a further low-cost airline, something to compete with ryanair and easyjet.

that is their challenge going forward. they have high labor costs here in germany. in some ways, the challenge that some ofa is having are the same challenges the north american carriers had a couple of years ago. they are not very efficient. they need more fuel-efficient fleets. to do that, you need to come up with some cash and capital to make some big investments. nott least they are carrying the debt loads that france is carrying at the moment, which is a big problem. i wonder if they could put on another -- do you put another are going toy, we sell more seats? i mean, this is an unprecedented victory, isn't it? >> you just gassed up whatever a380's you have, put seat restrictions aside. months in advance,

they probably cannot turn it that quickly. look for german companies to capitalize on the feel-good moment. the daxe looking at today. is it going to have as good a day sibley because germans are feeling confident? they are in a good mood. it will be interesting to track that to see whether there is a correlation between sports performance and a company -- and a country's index. we saw that when the netherlands was in the finals two world cups ago. we can wait the next time england is in the final to see if that has an effect on the stock market, but i do not think it is going to happen. >> judging by recent performances, i think it could be a long wait. >> fairpoint. >> we will see what the game looks like tonight. it could be an all-european final. i think that would say a lot about global football. we will be back with you later, talking about beer and all sorts

of stuff with hans nichols. he is always great with statistics when it comes to the world cup. let's change gears a little bit. we are going to talk to an italian now. citigroup may pay as much as $7 billion under allegations that it misled investors about the quality of mortgage bonds previous to 2008 and the financial crisis. that is according to the new york times. let's get the details on what we know and what we do not know. jon ferro is here with us. was just european banks that got big fines? that is one of my big takeaways from this. bnp paribas and commerzbank, we know about the transactions with sanctioned countries. over avoiding taxes. this is a legacy issue. it goes back to 2008.

are taking its very seriously and it does not matter where your bank is domiciled. they are going to go after you hard. what is interesting about this is that we heard so much about the way credit suisse, how investigators worked through this investigation. we heard so much about bnp paribas and the big takeaways houseat if they did not the investigators, the way they investigators saw fit, the fine got bigger and bigger. they offered $4 billion to settle this investigation. whatfine is almost double they are said to have offered. these fines are getting bigger and bigger and bigger the same way they did at credit suisse and bnp paribas. >> is that because the regulators have realized -- the whale story. jpmorgan got a fine. whatever. >> make it bigger. make it bigger. >> it has got to hurt.

>> bnp paribas got a $9 billion fine and it does not hurt so much. the day after, the stock goes up. but you are right in what you are saying. these guys know that the -- that they can inflate some of these fines. >> you wonder whether we are reaching the limits of that. $9 billion is basically a year. >> it is a lot of money. if you are an investor in this sector, this has got to be the biggest headwind to your investment. you have to have such a strong stomach to be in banks right now. we have had such a strong pipeline as these probes continue. i would say maybe it is the beginning of the end now. finallyis legacy issue gets down at the end of the year. a lot of guys in banks hope it does. theonathan ferro covering latest from the banking sector. let's talk about what is happening in the middle east. palestinian rockets have reached

the skies above jerusalem. a possible ground invasion. elliott gotkine is in tel aviv with more. the situation seems to be escalating quickly. protectived the antimissile system is being used heavily this morning. heavily this morning and last night as the sirens sounded. we made our way to our shelter. and here this morning, a couple of hours ago, we heard the sirens as well. two missilesn out over the skies of tel aviv. ,usiness carrying on as normal areas outside of the range of the crudest rockers -- rockets being fired by hamas. when you get closer, there is much more of an impact. something like 160 rockets fired from the gaza strip into israel last night.

about 160 targets hit by the israeli defense forces from the air and from the sea as well. prime minister netanyahu saying israel will not tolerate rockets being fired into israel. the objective is to stop those rockets from being fired and weaken the infrastructure, the capability that hamas and other militant groups have to fire those rockets into israel. ctive seems to be revenge of ahe palestinian teenager and some of the high-ranking members. >> given the situation we find ourselves in this morning, given that we now have troops on the border, what is the prospect of a cease-fire here? >> well, i suppose there are a couple of reasons why we may not get a cease-fire. first of all, we are still in the early days of what israel is describing as operation protective edge. asngs are not bad -- as bad

they were in 2012 or 2008, 2009, when there was a ground invasion. to broker a cease-fire, both parties have turned to egypt. the problem is that the new president in egypt is not exactly the best of friends with thomas. there,hamed morsi was you had a bedfellow, if you would like, with thomas, someone someones -- with hamas, who hamas would talk to. there has been a big crackdown on the muslim brotherhood, which arm of. an other countries in the region have their hands full with what is going on in syria and iraq. i suppose that leaves the united states, which recently had its fingers burned trying to broker some sort of peace agreement. seems like a long time ago now that israelis and palestinians

were talking to try to reach piece. it is hard to see if and when a cease-fire is going to come about and who would broker such a cease-fire. >> a number of obstacles. thank you very much indeed. what else is on the radar this morning? the u.s. drug company says it has not received support from shareholders for a shire bid. they are looking to buy shire for more than $51 billion. shares fell the most in more than a year this morning after sales growth missed estimates. the company also cut its 2014 revenue forecast. u.k. house prices jumped for the second quarter. 2.3% according to the lloyds banking group. ceol to come, as lufthansa

unveils profits -- plans to get profits off the ground, we are going to take a break. "the pulse" will continue. see you in a moment. ♪

>> good morning. you are watching "the pulse."

new ceo is unveiling his new strategy to revive the airline today. let's get back to hans nichols. you are with someone who thinks the airline is on the wrong track. over to you. >> good morning to you. by the head of an airline consultancy. there is a lot of doom and gloom about the anza. -- about lufthansa. what do they do well? >> reliability, consistency, you get what you pay for. lufthansa, you know what you are getting. they have a very strong network. connectivity from frank for to munich is faster than most airports in the world.

of course, there are also difficulties. structural? oneo understand lufthansa, has to understand term incorporates. longer -- large german companies plan for the long-term. it has an advantage in that it is not hit with every small bump in the road. it things long-term and plans long-term. the downside to planning long-term is if you get it wrong, you get it really wrong. lands on market growth -- many airlines did that. practically every aircraft introduced in the fleet in the last three years has been an upgrade. did is because lufthansa not see the economic crisis coming that we just had. >> the airlines that did not see that are struggling. the airlines that decided to go , they areaircraft

doing better. ,he airlines that moved up these airlines are struggling more because they were adding 20% capacity. >> so what is the solution? buy smaller planes? put inhansa has already orders for good twin body engine aircraft. the problem is, these airplanes do not show up in the next few years. it takes time. the other structural issue they have is labor costs that have not been addressed properly. saidous chief executives the day that management decides to address labor means that management has mismanaged the company. that mosty is

airlines are restructured. whether it is european or north american, they all address labor issues. lufthansa has not done that. they have consistently paid people more money. >> is that middle management or brown workers? >> throughout. >> you think there needs to be a stare down with the unions and potential reckoning with middle management. >> one of the advantages with germany is that the labor force has visibility to all that numbers because they sit at the top. other airlines do not have that advantage. the works council here has the most visibility to the real .umbers there should not need to be a stare down. there should simply be a reality check of everyone sitting there and saying, how does this

airline succeed? lufthansae talk about the airline then lufthansa the group. the group is reporting profits. most of that comes from technik, catering. is core of lufthansa struggling. it has stagnated for over a decade. one has to look back to 9/11, where they had a cash crisis. the ceo's successors have done a great job strengthening balance, but the core of the business has not improved. >> what happens when you look above? are they obsessed with the gulf carriers? lufthansa is preoccupied with the threat of the gulf carriers. first of all, emirates is an

extremely good airline. leads withy large low costs. it also has high density on those aircrafts. lufthansa has higher labor costs. , if you talk about upmarket you take a look at the back of the aircraft come up there is not a lot of. you actually have higher density in emirates aircraft did you would not really call them out on it because they do focus on better service. you do get excellent service, but you also get that on the sa.a -- on lufthan lufthansa's core strength is what i like to call germany inc., german corporate. >> thank you very much. guy, back to you. germany inc. could be the plan

s future.ansa' >> thank you very much, hans nichols joining us from lufthansa, where they are holding a conference later. breaking news coming out of the aviation sector as well. last year at the airshow, emirates lays the world's biggest aircraft order. it was formed boeing 777x's. that is the new version that has a ge engine, very efficient. they did not screw around with it to much. they did not take the big rest -- the big risks they took with the 787. it sold very well. they just placed an order for 150 777x's. it is a massive order for that aircraft. at the same time, when they placed that order at the dubai air show, they also placed an from airbus,a380's

giving a big kick to that program as well. that was a huge win for airbus. the world's biggest aircraft order and today, a big part of that has been confirmed up ahead of the air show kicks off on monday. the big question now is how does emirates actually get their airplanes? because boeing and airbus are going to struggle with the ramp-up. ok. we are going to move on. still to come, sainsbury's fight back. just as justin king hands over the reins. we will talk about that story when we come back. ♪

>> good morning. welcome back. you are watching "the pulse." we are live on bloomberg television, on the radio, streaming live on your tablet, your phone, and bloomberg.com. we have the markets covered. over to you. >> in a couple of words, snapback. that is what you are seeing on european equity markets. gains across mainland europe. .9% down in italy. germany and france on the move higher. these moves higher is not the story of the last few trading days. check the u.s. market out. 17,000, u.s. equities have met gravity. check it out. down .7% on the dow yesterday.

nasdaq had its worst day in two months, down 1.35%. we have hit some big levels. back running into earnings season. elsewhere, we will be talking about fed minutes. will that move euro-dollar? this one grinding higher three straight days. a central bank governor says this one is not too strong. mario draghi might disagree. what can he do to push this one lower? will they rely on the federal reserve to voice their concerns in the federal reserve minutes released this evening? look at the inflation data taking higher and saying maybe we have got to start putting up rates? janet yellen called the inflation data just noise. i think mr. fischer may well agree with her and you could see that come out in the minutes. in the jobs numbers this week, that one could be the one to push this one lower.

that is what mario draghi wants. >> it is interesting to see how the market has priced it in over the last couple of years -- couple of days. next, we will see what is happening in china. ♪

>> reason the top headlines. -- these of the top headlines. aerial assaults. killing 23 palestinians. has to pay for the rocket attacks on israel. with federal prosecutors next week. the near times reports that the deal could involve a $7 billion

fine. the united states and china have kicked off the annual strategic and economic talks. the u.s. treasury secretary and secretary of state are both in beijing. they are facing off over the increased assertiveness in the south china sea. we are joined from beijing. talk to us about the dialogue. there are things that need to be tackled. countries are hoping to play down the disagreements. >> yes. that is right. since last summer, when the met, they declared a relations.f power the relations have deteriorated with a lot of disputes over cyber-hacking and tensions in southeast asia, as china becomes

more assertive there. they are trying to work through some of the mutual suspicions to new way forward to realize a model of power relations. >> so, what do we expect to be achieved? what kind of behind the scenes needs to be achieved? >> behind the scenes, they need strategic a sense of intentions for asia and china is becoming more powerful. it wants a greater role. talked about setting up an asian model of security. the u.s. has been protecting asia since world war ii and they want to know what the endgame is. >> that is a key part of it. cann terms of what we

expect, i do not think there will be many concrete outcomes. most is just getting a strategic sense of the intentions. >> that is john kerry cost to do kerry's to do list. what about jack lew and the ability to generate more growth? to generate a pacific-economic zone. china is not part of it. as anna sees the tpp effort to contain china's rise. in terms of lew, the u.s. hopes that china can open up the markets and become more level. that is the goal of the treaty. what the u.s. wants to see is a more market-based role for the

renminbi. a greater role for the market. they want to see how quickly china will implement reforms. >> we will leave it there. thank you for the time. go to company news. the ceo is stepping down and his exit is not going as gracefully as some hoped. there is a little bit of controversy. of the annual meeting. fear is caroline hyde. let's talk about pay. >> this is a man who might be out for 3 million pounds. that is down on the figure. rivals andoubled the all of the key competitors.

clearly, why does he deserve so much more? does and heat he posted record profits. he is also turning down $1.7 million in severance pay. he is a leader of a grocer to take a bonus. it is the perk and the pensions. that advisory group says this is excessive. is aars at the helm massive turnaround story. and moralen decline was low. he was on board and started to improve the situation. many may want a pat on the back and it is something that is concerned about. >> some could say that we could tescothe situation like when things went from bad to worse.

there is news that king has made and triangulating targets that is a reflection that he is leaving the business and facing challenges. >> you are right. sales deterioration. it is eating into market shares. we know the story. what is so interesting is the way that they are tackling this. it and theyback exited the aisle in 2010. it will come back because of the joint venturer. we managed to speak to the head of the super market and he is excited about it. >> now is a great time to customize and they increasingly want discounts over the last 4-5 years. withink we can get money

our entry into the u.k. market. we are very excited about this opportunity and teamed up with sainsbury's. nobody knows discounts as well as we do. >> westminster is where he is taking part and going to explain the new tactic and the new chief executive or hand over the reins today. where are they going with this? the jury is out. they are saying that this is a strategic masterstroke and it is about hitting discounts where it hurts. take it and start up a new venture. they are flummoxed by and say that it is added to the competition. they say you should make your stores more attractive, rather than starting up a rival. >> it becomes polarized. discount and high-end.

do you gravitate your business to the top vent? trying.have been that could be the tactic. i'll will be explained. >> we look for to hearing about it. caroline hyde. big as thescore national team advances to the national cup final -- world cup final. we will talk about it.

>> the morning after. the night before. we will show you the phenomenal pictures. it was as if there was only one team. in the first half an hour. it was over by halftime. scored five goals in 18 minutes. won threeteam that titles in the 1990's. they were not in the game. it was stunning. there will be questions asked

about the way the brazilians laid their game. argentina and the netherlands. we will see which way that goes. it to be an all-european final. the most goals scored by a team in the world cup. -- they set the record. 16 in four separate world cups. biglly, the loss was a defeat. you heard me. 1920. have a bitterns pill to swallow. brazil is trying to come to grips with the big lost -- loss. german beermpacted sales? let's get to the bottom line.

are --he ceo of pollen pauleaner. to you.ning congratulations. it means a lot to germany and european football that it happened. what does it mean to you and your business? >> thank you. very much. we are very very proud of our team because nobody expected such a part of history. a lot of people celebrated outside and on the street. it was great yesterday and a lot of people stayed at home or inside. during the night, it was a big party in germany and it will continue. >> what are you holding in your hand? >> what i hold? a special promotion activity.

that is an activity in the german market. it is a boot. it is special. item that worked very well. so, one of the activities we was during the soccer world cup. >> pulled it up for me -- hold it up for me. plenty of germans will have it at home. very nice. >> football. >> good. >> it is a nice one. glass.ted a if a beer is empty, you can hear the noise and get a new one. that is an activity outside of germany.

great success. i think it is good from our marketing team. >> that is certainly going to raise the noise levels. terms of beer sales, how do you plan for the final? what events are you putting on? how much beer do you think the germans will consume? >> of course. we expect very good things for the rest of the year. we had an excellent june and we had the strongest june in sales. we have ever had. than 2006,stronger when the world cup was in germany. so far, it is really good for our business and we expect to continue. we work really hard to have all theeer to sell and

events. we celebrate. >> is there a hangover that comes with this? after events, beer sales tend to get. is that what happens? do they stay at an elevated level for the rest of the summer? >> i think it is really officult to put the impact extra sales of beer. it is really important. to the beer coming garden and drinking beer. from the world cup are on top. we have good sales the day that. the game and we see we do not measure it on a daily basis. during the week, we have a stronger impact than before.

>> the final question i have to ask you is where you are going to ask -- watch the game. where are you going to watch the world cup final? wins, it will be unbelievable party in germany. in munich, we are a city of beer and we are the most famous city for beer. party and webig celebrate all of it. we will make sure that we have enough beer to support that. what would be football without beer? in germany, that is key for celebrating. you need a good beer and you will have a great party. >> i imagine it will be a good place to watch the game. thank you for your time. an exclusive interview.

beer. munich. football. what a combo. programnnounced a new for sustainability targets. we took the opportunity to speak to the director and he touched on the growth in the market. >> i am optimistic about africa. we have a portfolio. markets perform and there are challenges. the long-term perspective has as confident about the markets and we think particularly good growth will be in west africa and in places like mozambique and zambia. they have done well for us recently. our optimism is relatively high. in terms of new markets, it is

not as easy. it is much more difficult to find areas to invest further in. perhaps more recent investments over the last 3-4 years has been in nigeria. that is a big market. it has not been, up until this point. >> we have a business coming together. the underlying fundamentals in africa make it huge for growth opportunity. >> our model in africa is in double-digit growth. that is what we are committed to. we have an ambition and it is built on good fundamentals for africa. you have a confluence of good growth of 5%-6%. you have a young population coming into a legal age. we have a stable and proactive

government and a strong position. we believe that is a good formally -- formula for growth. from a perspective, consumers are moving to areas of desirable into formal categories that are good for our business and government. us and sense, it brings develops our supply change -- supply chain. we have a natural developed in -- development in those economies. >> will hear a little bit more a little bit later on. he will talk about sustainability initiatives and we will do that later on. top pullingime, the off of stunts. motorcross competition. taking place in switzerland.

a couple of backflips and my favorite. 20,000 spectators. that is the superman. not that one. you watch the x games. that is pretty extreme. you want to land fees. don't you? you do not want to get these wrong. the tallest waterslide is set to open. it will open in kansas city. thrill seekers will be treated to a drop. it is taller than a statue of liberty. last one was jaw-dropping. that will have a similar effect. coming up, a breakthrough for biofuel. brazil will soon be cashing in on alternative energy. details after the break.

>> good morning. welcome back. you are watching the polls. have lost the world cup. numeral regulation in the united states is shaking up the market and the ethanol exporters could score a big win. the lead energy analysts. good morning. looking for good news this morning.

tell us why this is good news. >> it is consolation. exactly. biofuel producers are looking to export to california and will be pleased by this regulation. the supreme court has decided to do is not interfere with the carbon fuel standards. >> who else is going to win? this sounds like a win for diesel. >> spot on. heavy --producer went an oil producer went heavy 10 years ago and the picture is starting to look rosy. bigink california will be a growth market for them. we see the man's for that

and gettinging close to 600 million gallons. >> that is quite a big increase. , this has to be bad news for somebody. >> it is. ethanol producers. i think california is interesting because we are starting to see a variety of fuel and alternative transport methods coming together. will be gasoline and diesel producers. is natural seeing biofuels doingd fantastically well and advancing . >> nice to see you. >> thanks. for those listening on bloomberg

radio, the first word is next. what have we got for you? we are talking about the vatican bank. that is the big story. we're going to talk about that and a news conference.

has the world cup dream that is over. for a hosteing ever nation. another bank and in other fine. misledup could pay investors. we are live with the latest. >> good morning.

welcome to those waking up in the united states. i am guy johnson and this is the pulse. we are live in bloomberg -- from bloomberg's headquarters. germanyoing to go to and we are talking about the shocking world cup result last night. germany is flying high after the defeat. the same may not be said of doubt the biggest airline. thes go to germany and join international correspondent. the annual meeting today. we are talking about that. the germansnse of you are talking to and how they are feeling this morning. is there anything else on the agenda today? >> it is hard to talk to someone when they have a smile that they cannot get off. it is difficult to describe the

elation. theyhe quotes are that will not celebrate until they win the entire thing. i do not think there will be any real celebration. last night, i went to bed and did not say up. i kept getting woken up by bottle rockets shooting up into the night. we will not talk about pyrotechnics in the pacific northwest at this particular moment. >> ok. will not talk about pyrotechnics in the pacific northwest and i want to hear about that story. this is unprecedented. i know that they know that the job is not done and that they could be facing very good teams in the final.

unprecedented and we never have seen anything like that. >> yeah. you almost think, what is the autopsy going to be and what are the players going to say. team says it is the worst day of his life. howe will be an autopsy on the team did and we will get a sense from the players on what went down. they will not be trading sequence -- secrets. it is almost like the end of this. everybody blames fingers. we may learn something about this. >> that is good news. they have a battle on their

hands. let's talk about why you are where you are today. reviewe is a strategy and they have to decide what they are going to do above and below. andhave strong competition you have a profit warning. the stock dropped 16%. there is a fair amount of pressure. it is technically a low-cost employment. there is some speculation in the and it was run for

germany. it would be even lower. hard to do it here, with labor cost. we talk to analysts and our guests in the last hour. the labor costs are high and may be prohibitive. yes, celebrating a victory. they have a difficult strategy ahead and we will hear more in an hour. we may talk to the ceo about the strategy going forward. >> we will see what kind of smile he has on his face and talk about pyrotechnics later. i promise you. the international correspondent joining us from the big event today. we will be looking for headlines for that in a bit. jon ferro sat down and had this great line. graphic.e this it is fantastic. the football in the

eurozone crisis. we will come back and talk about it. let's talk about citigroup. citigroup will have to pay u.s. regulators. it is relating to the mortgage security story. >> it is. i do not know how much you can put on that number. it usually takes a while. this is from a person familiar with the matter that it could be as soon as next week. we spent the weekend talking about it and you could by morrison's for $7 billion. you could get it or a huge chunk of change. a huge takeaway this morning was and going after them big time. is a lot of money. >> it is a lot of money. we are getting to that point and

we started off in the last hour. the numbers got bigger and bigger and started to hurt. we are now at the point where we can start seeing the end in sight. >> it is the beginning of the end. we are starting to see some outcomes and some endgames. this is close to an end game. you see the german banks come up and we could be over in that sense. it is a guilty plea. there was concerns about what would happen. what happened to them? we have heard some reports. they were functioning at the bank. >> it is just symbolic. >> that could be a slow burn.

you could see other cases follow. you can use the guilty played. once you use it, you are guilty of the crime. that is the nature of that. >> we have seen some escalation and the banks that got in there were a little bit. >> refines got bigger and bigger. here we are today. there is pressure. whether that is the shape of the fine, it does not matter. print politicians might say something. -- french politicians might say something. you have a sensitive issue in the united states. a financial crisis. it does not get away lightly. some people think it is adequate.

on andill be back later he will bring is that. ok. let's turn our attention to the middle east. and tanks are positioned outside for a possible ground invasion. the defense minister has just said that it will now widen. forget the details. as wellas said that ham, have to pay heavy price for the rocket fire. minister over the last few days. be a ground invasion. given the escalation, more than 1000 palestinians died and there

was a lot of damage. it is not something that either side wants to see repeated. cabinet called up reservists. it means that the defense forces can call on them if they feel they are needed. the missiles are being fired at targets in gaza by defense forces. , in the of hours ago office, we heard sirens. app that goes off every time there is an air raid goes off. high number today. >> the iron dome became famous. is it in use again? are we seeing it being shot down? but very much. in tel aviv, we did not hear it.

we learned that missiles over the skies have been taken out. it is strange to see. it is like watching a game unfolding in the television. there is another bright light. there is a flash of light. throughkets have gotten and there are reports going to the ministry. $3 billion has been caused to property. no casualties. 25 palestinians killed. our middle east editor brings us the latest. come, facing this shareholders -- facing the shareholders the last time.

we will talk about the intense competition ahead of this in just a moment when the polls continues after this break.

>> good morning. welcome back. let's talk about currency market. it is a big event.

repricing risk over the last few days. you are seeing expectation of a sense creeping and. maybe bringing for the dates of a rate hike. it is interesting. we are talking about equity volatility. it is going. because oftly down what is happening with the fed. it is reporting season. they continue to recommend a bullish story. we are trading at 101. the team is saying that they are sticking to the view that the dollar-yen hits 98 before a rally. it is interesting to see how that works. we have a story of dollar weakness. we wait to see what will change perceptions tonight. that is the key event we are watching and watching closely. the market is beginning to read

price a little bit over the last few days. we are heading into these minutes. let's go to economic news and corporate news. before is stepping down he answered -- not before he answers to his shareholders. is one of the top shareholders and the retailer. the equity analyst joins us now to give his take. so, the first thing to say is that he had a great run and turned the business around. i reported on it and it was a disaster. he has done great things. is he leaving at the top? is this a moment that we are seeing? >> i do not think so. inhink that he has invested this and you can see the operating margin. it did not increase as much as it could have if he had used it

as a cash cow. they decided to continue to invest and i think good performers will come back. forre in a difficult time supermarket retailers. at the same time, i do not think the consumer population is going to argue about this. there is a need for a market retailer. ok. any big changes? can i be there as long as he has? strategy. he devised and executed it. do we get any changes? do we need big changes? >> i do not think there will be big changes. to cut that it will try costs expenditures and slow down the expansion into normal

markets and focus on the story. they could become the saints sbury's of the north. but it's what you're telling me is the opposite of what you just told me. we are not getting .5% -- .5 of the population doing that. the kind of strategy we are talking about is for northern customers and we are getting up a markettuation and for the cell. >> not really. -- for the south. >> not really. it is a triumph. it is a low investment. at the moment. if it does not work, they lose 12.5 million. if it does work, maybe it could

be complementary to them. a less see them in affluent part of the north and the less affluent part of the south. the south is not too rich. they can continue to be the quality retailer and they are cutting prices to become a value retailer. it eliminates the core customer base. >> are you going to buy into the stock? what would change your view? what if i continue to see low sales growth for some time. what i am thinking, looking at the data, the market share is thele and that means that valuation strategy is working. >> yes. thank you. thank you very much. the analyst.

, going big on sustainability. you will hear from the executives. ambitious new targets. we will see you in a moment.

>> good morning. welcome back. you are watching the polls. we arestriped street -- streaming on tablets. what have we learned? on 2020 and there are hefty targets. i might add that this is a company that is cutting costs out of the business. they are cutting a carbon footprint. , they are going from grain to glass. 50%. half the target. it is about efficiency and reducing it to keep it to a

minimum. now, there are many other parts of this focus point, as they call it. i got to speak to the managing miller and heab talked about the targets. >> these are important areas and these are commercial realities for us. has of africa and the world water as a big issue. we cannot just take water out of the system without thinking about the water needs of what we operate in. we work much closer. we are reducing our water usage and being more proactive and planning. we have brees. eweries.

if we can reduce carbon footprint, we reduce cost. that is evident. >> more easy to swallow. he says it is beneficial. we know they come from south africa. percent of the business is in south africa. it is impressive how they feel like a corporate citizen. iss is a company that innovating. going to farmers and seeing what they grow naturally to help them produce beer from that. they get them doing it without making home breweries. they have a taste for our call and support the small farmer. it is a nice meeting of minds.

>> you talk about the business. where do you see it going? what are the numbers? >> they are looking for road because this is a company that andseen downturn in europe united states. they want to increase their foothold in the markets and we talked a bit about it. he has roots in germany and he says that latin america and the competitors in brazil will feel the a fax. brazil is now out of the competition. is a company that needs to boost organic earnings by focusing on africa and new emerging markets. helping farmers in africa should help. and have supply chain views all of this is focused on countries and getting demand up.

>> not completely altruistic. thank you very much indeed. making a bid to buy shyer. will it be enough? we will discuss . .

>> welcome back, you are watching "the pulse." i am guy johnson. these are the top headlines. israel has launched its largest offensive in the gaza strip and nearly two years, carrying out an aerial assault, killing three palestinians in the process. an army spokesman says hamas has to pay for the rocket attacks on israel. citigroup i settle a probe into the mortgage-backed wants with federal prosecutors as early as next week. "the new york times" reports the

figure could be $7 billion. united states and china kick off their annual economic talks in china. u.s. treasury secretary jack lew and secretary of state john kerry are both in beijing. both countries are facing off the south china sea. to the markets. >> there's absolutely no reprieve to these equity markets. yesterday, 85 points the biggest one-day drop in four months. in dax had the biggest drop 44 sessions. we are continuing this momentum will stop mario draghi speaks later this evening in london. we don't really know -- the will be out as well. the momentum inequities, people are beginning to question the validity of the rally. is it time to take a little bit of her reprieve?

theme is the insurers. we are paying less to cover our car insurance -- not me. for 10 straight quarters. these are insurance companies in the united kingdom. if you think the national flag carriers are having a problem, these are up. finding it a little heavy on the day. volatility is rising. that is the one message you can take away. the front page has a great article physically saying you might have shorted stock at record lows. in other words, about 2% of the s&p 500 is open and out there in short positions. that drops to 1% in europe. back to you. >> interesting. maybe some of those shorts will start to make sense again. thank you very much, manus cranny.

--ghly 25 minutes to go let's be precise, 28 minutes until tom keene takes the airwaves with "surveillance." let's find out what is on the agenda. >> the beginning of earnings season. the best i know it linking earnings and revenue to the american economy will join us. stephen whiting of citigroup. on friday.gs we will talk about the idea of slashing jobs to keep those earning supported. gaza, ukraine, iraq has been fairly quiet. all of that pushed aside by immigration debates in the united states. i can't begin to convey how america has been captured by the immigration battle involving children,ple -- rather, 52,000 children on the mexican border. phil manley will come to us from

washington as well. thinking the fed is way out of line, but within that, the fomc meetings will come out. i'm not sure how big of a splash it will make. >> tom, looking forward to that show. let's stay safe side at the sun valley conference kicking off today, meaning a couple of things. billionaires and big corporate heels with the big -- corporate deals with the big focus on tech. the guest list is filled with stars of the silicon valley. we check out the five richest tech moguls expected to attend.

>> i'm sure it will be great. the weather is a bit warmer in dallas as well. let's talk about deals and other sectors. let's focus on pharma, and new legal home with our taxes amongst other things. the drugmaker may have to raise its offer for shire. for more on abbvie takeover ambitions, let's bring matt campbell back into the mix. i'm a bit confused as to what is going on. shareholders on board? or maybe not. >> we had a somewhat embarrassing mixup for abbvie, having to retract comments made by rick gonzales about shareholders and committed. this is another one of these horny u.k. takeover law issues

where if you say shareholders, it has a legal implications. abvie had to put out statement saying, we don't have any written commitments from shareholders meaning rick gonzales was really talking about the five years getting. what shareholders really think, we don't know yet, but this number is creeping up. it may go up yet again and that will be the question. >> what are you hearing? what is the best in the game for both sides? where does it end? i'm increasingly thinking it is going in with a deal. >> we're not sing the scorched-earth campaign we had with astrazeneca. this is not a political story. i don't think this is a company impeccably opposed of being bought the way astrazeneca probably was. in all likelihood, people seem to think this does in in a deal. the question is, at what price? 's latestw at abbvie offer, around 51 pounds a share.

some say you could go up more towards 60 and still make financial sense for abbvie. that is what we're going to have to watch. >> how much of this is down to the tax story and down to the nuts and bolts, industrial logic story? >> it is hard to figure these things out. there is a significant tax advantage to being in the u k, also the use of cash advantage rather than just the headline tax rate. it means you can use cash reserves in a way that as an american domiciled company, you cannot. this has to make strategic sense. shire has a great drug pipeline. it is a very strong success in the things it does already produce. there's no question, this does have industrial logic to it but it is partially motivated by tax consideration. >> when you look at where this leads us, does it spur other companies to do more? since the beginning of the year,

we have been talking about tax inversions in the invitations of what cash can and cannot do on both sides of the atlantic. if this deal gets done, to the guys at the banks stood out even more ideas? how many more of these are we going to see? >> ideas are never the problem that investment banks, is whether ceos go for some of the ideas. inversions are the flavor of the month. there were some analysts yesterday that said assuming this goes through, abbvie will immediately become an m&a target itself. it is the circle of life. >> you really have to think about that one. you sign your deal on the dotted line and looking over your shoulder at the same time. >> tracy. >> consolidating, consolidating. matt campbell, our deals

reporter. let's change gears. gears being the operative word. amazing stunts. ask games, your heart out. this is a competition in switzerland. backflip.c i think that one is a superman. impressive stuff. you don't want to be coming down on the wrong side of that motorbike. the world's tallest waterslide is said to open thursday. drop as they speed along the 168 foot slide. that is taller than the statue of liberty and niagara falls. i'm assuming that is the statue of liberty or number falls. anyway, coming up, big changes to the vatican. pope francis looks to shake up

the institution. we will be taking a closer look when we come back. we will see you in a moment. ♪

>> good morning, you are watching "the pulse." francis is on a mission to

clean up the vatican bank will stop you plans to replace the board and executives at the bank as it continues to struggle with the fallout from decades of scandals. the ft reporting the pope has hired the former bbc chairman, governor of hong kong. for more we're joined now by the reverend john walk. good morning to you, professor. the first question that immediately springs to mind is, why has it taken so long to get to grips with this institution? >> well, i think it is an institution with an old story, a long story from the 19th century and through various transformations into the present , vatican bank, which is really institute for religious works. it began its life as institute for religious works to the second world war and has been

used for many different things over the years. it is a very complicated structure and a bit of a rube goldberg operation. the work being done now is a work of verification. reinforcing, making sure there's transparency with regard to structure and function within the bank to make sure it is being managed properly above all. people talked about the scandals in the bank, but a lot of it i think is simply a lack of adequate management or misunderstanding of exactly what is going on on the part of the people who are working at themselves. they're unaware of all that was inside the bank. that is why that the close all these accounts. >> how big a change are we talking about? >> well, it is a major change, a major step in this process of clarification which began with benedict, really. they began under benedict and has continued under francis.

the president who is leaving was appointed by benedict. and it was under his direction from a for instance, that over 2000 accounts were closed and the vatican bank. they say most of those were dormant. they were accounts that were just hanging around. i think only 300 some accounts were accounts that were inappropriate. in other words, people had an account at the bank when they should not have been able to have an account. it is a major step because it is a step of gratification about the function. they're going to separate the vatican bank's functions into two separate situations. one will be asset management and the other will be financial services and funding for religious groups, which is really what it was designed to do in the first place. -- the word you think guy that will be announced at the top of the arch ahead of the institution, john baptiste, he

potentially could be a guy that will take this institution further forward. but what does he have to do? to beanges are going announced. that is kind of in the river near. what is next? >> well, i think the work, assuming john baptiste is the one that will be the head of the bank in the future, his work should be simpler because that side of the bank will go back to its original function of funding , say, missionaries and parts of the world for the church is persecuted and they can't have bank accounts in local banks, etc. that was the original purpose of the institution. and that is what it is going back to. the more complicated side of the bank and the one that got into trouble in the past was the asset management investments. that has been separated out, but it is not clear who is going to be in charge of that yet.

maybe we are going to find out today. that is a huge question answers so far. >> looking forward to that press conference to find out a little bit more. more broadly, let's talk about the changes the new pope is bringing to the institution. he talked about transparency. you talked about the need for the catholic church to get back to basics. how much of a message is what we're going to see today about what is going to happen within the rest of the organization? what is going to happen within the wider catholic church? this is a good example, maybe, of the changes that are going to be talked about. >> i think you're exactly right. the reform of the vatican bank xvi, but inbenedict many ways, seems to fit well with pope francis. in other words, the bank is

getting back to taking care of the truly needy as opposed to being an investment joy for vatican bankers. that is very much in line with what the pope has been saying about the economy and the dangers of greed and vatican careerism and all the things the pope has talked about in some ways has criticized or exemplified in the problems within the vatican bank. i think what he is doing in reforming the bank and making it clear that its true function, original function, is a funding exactlyhurch in need is what the church as a whole needs to hear from the pope. we will leave it there. thank you for your time. wauk in rome. we're going to have news at the top of the hour on that, so stay tuned. company news, shares under pressure from forecasting a mckinley fourth quarter, sodexo.

accompanies company is the 18th largest employer worldwide -- the company is the 18th largest employer worldwide. alcoa reported better than estimates. shifting its focus to manufacturing. aerospace components. barclays is said to be planning a celibates natural resources unit. britain's third-largest bank to sell the private equity unit. this is the latest bank to divest private equity holdings as regulars push lenders to increase their capital. up, we will recapture moves up the win over brazil and look forward to tonight's world cup match. argentina taking on the netherlands. i am the pope will be cheering for argentina. the match was another big win for twitter.

580,000 tweets. that is per minute. for football.ph the match was the most tweeted about sports game ever on twitter with more than 35 million posts. you caneminder, continue the conversation with me on twitter. we will take a break and be back in a minute. ♪

>> welcome back, you are watching "the pulse." wi.'s talk about the ki i think we have taken out a year high this morning going from strength to strength. trend line and operation over the last couple of years. once again, we are pushing ever higher. the meantime, let's talk about what we have been talking about all morning, and that is football. 7-1. that was the germany victory over the host brazil last night. tonight is argentina versus the netherlands. the netherlands hot and cold a little bit this tournament. let's figure out what we all think. hans nichols is back. the lufthansaom

event today. , have theysmiles started to fade yet h,ans? >> no, they will not fade until the finals and then they may stay on for a long time. here's how we're going to tie together the lufthansa story and the world cup story. there is a 10: 25 daily flight that leaves from frankfurt, goes to rio. we're going to see if they will more capacity a plane. that could be an indication of just what the german world cup victory or in the finals could mean for the german economy. we will find out a lot more details on serious matters here from lufthansa, but for now, it is a day of celebration and preparation in germany. >> i can imagine. john, you had a great tweet earlier. --it does to this gentleman

it goes to this gentleman -- that is the tweet of the day. it is brilliant. on the score itself, and my surprised? it, butocked watching it has to be the worst resulting in decades. it just goes to show how much silver was carrying that back forward. i'm looking at the game tonight. we talked about the vatican and the pope watching that one as well. it, david louise, trade of the year, goes to chelsea football club, 50 million pounds. they got rid of him. that may be looking at the purchase -- >> the trade of the year could be the united manager if he

comes through and does well. you never know. for "the pulse." everyone will be watching the game and we will talk about it again tomorrow morning. "surveillance" is live with tom keene, next. ♪

>> washington confronts an immigration crisis. the president budgets $4 billion for 52,000 children. there are two americans, as one

prospers, the other's struggles. ernest to media moguls will read hemingway on their gulfstream's to sun valley, idaho. this is "bloomberg surveillance." wednesday, july 9, i am tom keene with adam johnson and stephanie ruhle today. she hasn't been up this early since her kids got her up this early four days ago. she beaten to death, hopefully, she won't be tested at. let's get started with the morning brief. picture as weixed often do when we look at economic data run the world. in the u.k., housing prices rose 2.3%. in china, producer prices fell by about 1.1%. >> the u.k. thing is a big deal. said the bank of england governor effectively said about two weeks ago that he was sur