>> grounded. suspend flights to israel in the wake of a rocket attack close to tel aviv's main airport. inaccurate and unreliable. that is what a report from the new york fed said about deutsche bank's u.s. operations. installing on sanctions. the eu delays tougher sections against moscow. we will assess the risk to russia's energy giants. ♪ >> good morning, everybody. you are watching "the pulse."

we are live from bloomberg's european headquarters. i am guy johnson. let's get to our top stories. it limits are sending out pressure on hamas to extend a cease-fire that has -- in a conflict that has killed nearly 600 people. israel's president spoke today about the cancellations. this is what he had to say. >> it is not to stop the flights, but to stop the rockets that are endangering the flights. , speaking earlier. let's go to elliott gotkine. the faa putting a ban in place. it is a 24-hour ban. let's talk about that and put it in the context of what we are seeing in this wider conflict. ban from the federal aviation administration,

almost like an automatic ban after a rocket hit a house about -- mile north of the airport now, there are airlines flying in and out. british airways is flying. el al international carrier is still flying. is proposing that other airports step into the breach to replace flights that want to fly to tel aviv. it is not just the damage in terms of the number of people that cannot come to israel right now, but there is the perception when people start seeing airlines being canceled because of rocket fire, that makes them think twice about coming. netanyahu has asked the u.s. to reconsider that ban. it is perez has said that a gift for the terrorists. the u.s. administration will not overrule the faa.

>> mike bloomberg is actually flying in. we are in a situation where this is going to affect business. we were talking to an investor yesterday and he said business is carrying on as normal. given that this is one of the first times we have seen this anden, el al still flying shares are doing well, that this is going to have a more meaningful impact on the investor community in israel. >> the first time it has happened since the first gulf war. there are concerns that it is terrorism, --t impact tourism, which accounts for two thirds of national income. some workers have been called to go to battle. some parents have to stay at home to regard for the children because the summer camps which usually run are closed because they do not have bomb shelters.

so there is an impact. israel has been through this many times before, many worst situations. think you speak to most people in this country and they will tell you that israel has dealt with this before and it knows how to get through these things and it will carry on in terms of economic growth. though, anda sense i am looking at the business community point of view here, i think it is a critical link to the rest of the world. this is the first time since the first gulf war back in the early 1990's that this has happened. is that a psychological game changer? in the past, the country has dealt with the situation because it has maintained access to the rest of the world. do you think this changes the situation? >> it could potentially complicate matters in terms of a cease-fire because thomas has victories, soor

to his feet, a large number of casualties, the kidnapping of a soldier. i stopping a large number of international flights coming to countom israel, that does on their part as something of a victory. it may make them think israel is feeling the pinch now. we can dig our heels in and stick to our position rather than trying to negotiate and be a bit more flexible. >> thank you very much indeed. elliott gotkine joining us from israel. of thealk about some company news that we have been tracking this morning. deutsche shares under pressure this morning. the new york fed has reportedly faulted the bank for inaccurate and unreliable financial reports. hans nichols joins us now from berlin. not atsm directed here what is happening in germany, but the u.s. operations.

>> this is really focused on the u.s. operations. think of this as a bad report card that you got before christmas and it get -- and it became public in july. the question everyone is asking is is the underlying behavior still there or hasn't been rectified? deutsche bank has done quite a bit to rectify some of its problems. when mark legal settlements. they have tried to work closely with regulators. yet this letter came out. it is likely that it came from the new york fed's office. it is unlikely that deutsche bank would actually release its own letter because you have seen their shares get absolutely hammered. it happened yesterday when the wall street journal initially reported this. shares dropped almost 3%. that was matched this morning at the open in frankfurt. here is what the letter said. it is blistering when you listen to the tone. "the size and breadth of errors wrongly suggest that the firm's entire u.s. regulatory reporting structures requires wide-ranging, remedial action."

that ir i was told needed remedial action, i note that meant something needed to be changed. lex i do not know what you are talking about. never happened to me. honest. the interesting thing here is that what this tells me is the story surrounding the banks, the litigation stories surrounding the banks, is not going away. the relationship with the regulators is not being fixed. the story that has really dampened down shares for the last few years is not changing. is that the right read here? you could not make some of this stuff up. lex on the litigation, they have made strides to settle some of these. they do not know how big the hole is going to be if there is a fine on the currency manipulation. that is the big question on litigation. have someys, you sympathy for european banks that are in the states because they have so many different regulators to deal with. in this case, they have run

afoul of the new york fed. the new york fed is displeased with their u.s. operations. sentnuary, this letter is in december. in january, the bank announces a bunch of changes. one billion more euros for compliance. better computer and training systems. the question is, was the january announcement enough? does the regulator want to see more? if it wants to see more, does it want to see earnings and numbers and figures restated? if that is the case, this could be even worse for deutsche bank. >> thank you very much indeed. hans nichols will be back a little bit later. let's turn our attention now to technology. .pple posted growth in profits bottom line doing well with the iphone once again the jewel of the crown. elsewhere in the tech landscape, investors seem optimistic about microsoft as well. nowful that its new ceo is

making some of the necessary cost cuts to reorganize and reorientated this business. let's talk about both companies. airline hide joins us to talk through these giants. let's start off with apple. --caroline hide joins us hyde joins us to talk through these giants. >> some interesting products. i've had doing not very well in western europe. in india. 50% increase in china. not enough to offset the western european decline, but making inroads into emerging markets. tim cook said he was surprised at the uptick in china helping the iphone broker a deal with china mobile. but the iphone is the standout product. them tech giants. $37 billion in sales. that is more than jordan, bahrain brings in in a year in

terms of economic output. this is a juggernaut. and it continues to do well. shares up 18% so far this year. many were invested that tim cook would turn this around and that iphones would fly off the shelf the -- off the shelf. -- >>second and della, satya nadella, let's talk about things -- talk about him. he changes things and move the business forward. investors feel that he has a long way to go to fully satisfy them. >> it is a huge company. 18,000 jobs going, 12,000 in nokia. the company,ty of it is not much. clearly, this is a huge the money that became too large. they are having to shrink it down and reorientate it.

that is why the shares rose after hours. even though profit missed analyst estimates, fell some 7%, but they show that the cloud business dominates in terms of sales. well, the products that businesses are getting so that you and i do not have to be good -- do not have to be glued to our computer at work anymore. you can access are working homeents while we sit at via the cloud. that is the way that businesses are reorientated. of course, they wound down windows xp. an awful lot of businesses are having to reinvest for the pc's that are in the office. intel shows that the pc market is dropping a little bit. , his focus on cutting costs, promising to do that more , and focusing on doubling down on the cloud computing.

>> thank you very much indeed. what else is on our radar this wednesday morning? daimler has posted an increase in profits as deliveries for the mercedes-benz s-class doubled the the chief executive is trying to position mercedes to retake the lead from bmw and audi. more on this story from hans nichols a little bit later. bank of england releases its minutes later this hour. investors are looking for any signs at the central bank is ready to raise interest rates. the u.s. and the u.k. have you seen accelerated job growth, which could mean a race spiked by 2015. owner mark carney also speaks later today in glasgow. and the downing of flight mh17 a planeaine has brought tracking app into the limelight. they have seen a 50 fold traffic

increase as more people study mobile flight paths. coming up, we are going to put the spotlight on sanctions. as russia braces for more penalties, we will size up the impact on the country's energy giants. ♪

>> welcome back. good morning. you are watching "the pulse." expand theagreed to list of russian individuals who will face penalties. for now, leaders have stopped short of more forceful sanctions that would hit sectors fully, including the energy industry. we are joined by charles roberts to discuss all of this. is thergy sector elephant in the room because of the fact that russia has a huge relationship with the european union and is very cautious about this. we have seen companies being affected. ft is being affected, but gazprom is not yet. do you see a situation in which this relationship becomes more strained and what are the implications? >> the longer the conflict goes on, the risk is that more companies get taken into these sanctions, which the u.s. began last week by saying you cannot

issue new debt. that will restrict rosneft's ability to borrow and grow. >> does that include gazprom? this is what nobody is talking about at the moment. yes prompt has a monopoly on exporting russian gas into western europe. that may change soon, but nevertheless, it is the company that holds the keys to this energy relationship. >> the sanctions are directing people closer to putin. gazprom, europe needs the energy. there are alternatives. n, if sanctions get used later ash eased later this year, you could see russia supply gas to europe. energy to europe becomes an alternative.

maybe not in germany, but more of the hydroelectric, wind power. today, europe has not got an easy option. it looks like that would be a last resort. >> do you think that there is a way in which the sanctions will be applied? rosner, the fact that they are not able to issue debt, becoming harder and harder for the financial story to be seen as positive in russia. it would not be hard for the americans to make it significantly harder be do you think that is the reason we are going to go down there for? if you cannot directly target these companies, you indirectly target them. putin'san growth hurt popularity. the difficulty for the sanctions effort is that it is working, to some extent, on the companies. of there conscious sanctions that are happening and

are concerned. at the lower level, the average russian is very pleased with putin. the unemployment rate is near record lows. good wages growth. >> sounds like a great economy. >> domestic demand is actually quite bullish. some sectors have not been touched by sanctions. the retail sector, for example, the i.t. sector. these companies are actually doing pretty well in this environment. june isst data for telling us we might be too conservative at 1.5% growth for this year. >> if you get those kind of numbers, that is going to spur some sort of enthusiasm for changing that. the moment could be seen as a negative because it poses a potential risk. >> it is relative to consensus. we are looking for around .5%. it is very similar to brazil or

africa. the advantage is that russian equities are very cheap relative to south africa. their economy may well put in a similar performance this year. >> how do you see the story developing? i am talking from a corporate point of view here. i read stories every morning that the oligarchs are getting frustrated with the policies being applied by putin. the companies are seen as being at risk. why are they nervous? looking at the kind of story you are painting for me. why are they nervous? >> because they cannot be sure where we are going to go on the horizon. governmentukrainian capturing new accounts yesterday. there were fights in donetsk. so i can imagine a scenario where the ukraine is back under the control of kiev.

in which case, tensions should ease. each week that passes by is another week when the americans seem to add another level. right now, i am hearing eft arees like rosn struggling to attract financing even in european markets, which have been open to them. -- yield, not expensive. now some people are saying they're nervous about lending to these companies in any way. both have a lot of financing on board. they have a big cash pile, some $20 billion. they do not need foreign financing for a while. for now, european and u.s. sanctions are so limited. the bank and then lend money to rosneft. seenis a russia that has

so many crises, the collapse of the soviet union, the collapse of 1998 -- >> do you know which one this is? 1998, clearly an opportunity. >> but many people lost out. entrepreneurial guys did well. 1998 seemed to be a game over moment for russia and it was not. the economy is 10 times larger than it was then. 2008, another and the rebound was decent. is something of the western media overstating concerns. the oligarchs have been through much worse than this. >> we will leave it there. charles robinson joining us. we are back in a couple of minutes. ♪

>> time for a quick update on the market. it is a spirited attempt by the equity markets. volatility not as high as we have seen yesterday. a little bit of a drop in volatility. equities just bouncing ever so slightly. the conversation that we have just had here talking about the oligarchs in russia having gone through a much worse time than this.

remains to be seen what europe actually does. looking at the currency, the ruble just beginning -- this is dollar falling and ruble rising. the beginning of a little bit of a turnaround. a couple of different factors that play in terms of the ruble trade. russiantand that companies are getting ready to pay over the next 10 days. what that has done, you might see the trajectory of the ruble begin to change. you have a bit of a move on dollar-ruble. equities, overall, are coming under a little bit of a reprieve since the start of the trading day. you are waiting for the confidence data to come out from the whole of europe. undoubtedly, there is only one story. it is the minutes from the bank of england. will this be mark carney's continued tenor of unanimity? there seems to be a general consensus that we will get through this month with no level

of dissent. carney speaking a little bit later in glasgow. so stay tuned for that with the minutes with guy johnson, up next. ♪

>> good morning. welcome back. we are live from european headquarters in london. the minutes from the rate decision. no change. nobody put their hand up to say they need a rate cut. thatank of england says some members say that the risk of a rates rise has been a

prelude to the hands going up. there are votes that people expect are coming in the near future. touch -- ds yet a ipped a touch. some analysis now. joining us is the chief u.k. economist. pretty much as much as predicted. what do you make of the statement? changeslooking at vote and not words at the moment. we have inconsistent messages in recent much -- months and we are not focusing on that. >> do you think they are the words of the most likely candidate to put his hand up? in february, he thought that the rate increase should come in

the first quarter of next year and he has put his cards on the table already. >> where are yours? >> they were in q1. i am looking forward to q4. the risk is later than that. >> yeah. ok. >> the problem is before the treasury committee and he was dovish on wage inflation. the numbers will get weaker. >> what number should we be looking at to decide? the eta is very strong. we saw some earlier this week. it points to a recovery that is broadening in the industrial sector. we are seeing investing taking place. this is good news. data is the outlier. what should we be looking at?

>> it was distorted on the downside because the pay increases to take increases of the tax cut last year. they could go negative. we need to watch out for that. that will catch a few headlines. we should look at labor cost and the inflation. datant up in the latest because of full where. sayeed to see what they about the inflation trend. >> how much slack is there in the economy? get youris the gap to arms around? what is your sense of the level of slack in the economy? is ahead?as if it

>> the upper gap is strong. forecast, they simply the gdp is 4%. it is not taking she gets. if potential growth is lower scenario thatany you could see? >> i think it will. it is more of a gut feeling. we will not see a change in productivity. even if we get modest inflation up, wee inflation going

will see higher inflation pressure. it has a significant impact on it. have all it take to significant impact pennsylvania economy down from the rate we could be tracking at? can i believe him? >> let's see what the bank says. would have materially increased rates. there will be an impact that will be gradual. it is incredibly low. >> yes. compared to where we have been.

>> it is not the issue with these levels. >> we have rate hikes and changes. there is a ratio on what is happening. >> it depends on the data. he is right. if the inflation numbers only move up gently, it will be gradual. it is building at less than 25 basis points. >> where is it in the cycle? >> maybe 4%. price has three and a bit gain at the moment. >> that is right. is that a new normal

and a risk-free rate is lower. that is possible. the more compelling analysis is the margin with the bankrate and lending rate. it is higher than the crisis and you will have higher lending rates. >> the transmission mechanism is going to work more aggressively. you get a rate hike and a transmits a care. >> i would not put it that way. the lending rates are higher than you expect and the policy rate is only 2.5%. that margin remains wide. >> yes. >> right. nice to see you. joining us. >> carney speaks and talks about the conference. that is where we caught up with the minister. he is the leader of the scottish

national party and anna edwards asked about his plan for an independent scotland. .> we are keeping the pound it is our currency. we published the working group commission. it is in the best interest to keep the sterling. the working group is looking at a range of other options that are viable. we are keeping the pound. when plan ave plans is the best proposition. >> they say that is not going to there are no fudges ordeals over the currency. same people who .re labor and liberal mps

they are liberal unionists who say the same things to each other. the government minister said that there will be a deal on sterling and this is just a campaign cap it. darling askedhat them to do. the people of scotland know that we will keep the sterling because it is in the best interest of the united kingdom. our position is that we are happy to take a share of the liabilities and debts built up. we are equally entitled to a share of assets. i have a position on the share of liabilities. it depends on having shares of assets. the bank of england holds one third of sterling and we have enjoyed building it up over

several hundred years. it is as much his current see as his. >> -- currency. usthat was alex speaking to in the lead up to the referendum on this. we'll bring you the views of other major parties. now, more than gaming. be a medical game changer? we'd take a look inside the new frontières full top it is medical. it is time for a look at cool pictures. -- new frontier. it is medical. it is time for a look at cool pictures. bikerying stunts from the in the competition. you have to slow these inks down

. we leave you with pictures.

the hour.tes past you are watching the polls. let's talk about cars. they are trading higher. they beat expectations. hans nichols joins us. >> yes. that is right.

this is the big sid dan. consumers are doing the numbers here on what the prophet is. it is 2.4 6 billion euros. $3 billion.h of a remarkable number. this is steve. it widened. it profit margin when up and is under 10%. it is not the standard by any means. it is the goal. it is steady as she goes. are and at where they the race to be number one and 100,000 behind

bmw. onlineller one comes later in the year and we may get a photo finish. >> i am english. a saloon car. sedan.unds better than the margin looks good. it shows steady progress. right? he has a plan and he is exit to being an. surprises andget there are concerns that something else is going on. these are steady numbers. analysts say these are showing progress. car.d the smart it is a small car and how excited they are about that.

vehiclean entry-level and you can move on to your saloon. >> a saloon. me think of american cowboys in 1970. it is a great word. thank you very much. rights. microsoft has reported results and it is dragging down the profit line. all day, we have been taking a look at the giant and how the company is trying to get more use out of it. gaming,e world of video a motion sensing camera was a game-high thing changer. the levels of interactions earning an award the productse when

was sold without the camera. microsoft is still investing research. down andt the camera you use it. in and you canf bring the scan to live. >> while. look at the detail. allowed an application. >> you can do it. >> stepping into your living room. we know it works. it does scanning. microsoft thinks it has found something that is more critical. >> they are doing minimally invasive surgery and are opening the images.

we are investigating the use of systems to allow them to navigate to those images more effectively. ae result of all of that is decision-making process that is quicker and more effective than surgery. >> no doubt, it could be good for microsoft and expose new markets. . while game he can feel like life and death -- gaming can feel like life and death, it exposes it to a new market. .> check it out online the company says they are not in position to do this.

it is energy assets. they reported a boost in out what in the fourth quarter. they increased fiscal production this year after expanding. posting the first quarterly profit and they have been cutting costs. there have been exiting. are smart phone manufacturers. next, we look at what significant power source for the market. the bankve with governor and we will ask you about deflation in europe in a couple of minutes.

>> welcome back. you are watching the polls. this guy is a billionaire. of hair care products and he was homeless. what did he learn on his journey to the top. let us find out. >> i was homeless in my early bys and we had to survive

going around and collecting soda from vacant lots. , i had a fewd this hundred dollars in my pocket. i had $700 that went a long way. so, what does it take to succeed. is tost advice i can give be prepared for a lot of rejection. rejection,ready for people say i do not want it. if you are prepared for it, it will not let you down. learn from your failures. i had a lot of failures along the way and i learned from those things. it got better. you talk about success and success is having the highest quality. something good.

if you make it worse or not as good, you are not as successful. this is a booming success. we do not skip on cost. that is what keeps it perfect. successful people do all the things that successful people do not want to do. if you do work saturday or sunday, just do it. i have two credit cards. and, this one. i do not have any money in my wallet. say that theto secret to making things worse is love and happiness. the world will become a better place. i promise you. >> cannot argue with that. let's talk about the energy

news. what is driving the uptake? energyook at new finance. we are joined now. thank you for taking the time to be with us. i read the notes this morning and one line stuck out to me. forecastingwith the is like the uptake of the internet in 1995. we know what it has done to the world. are we looking at a similar story? >> probably. possibly not. that is forecasting. worth putting solar on your house if you are somewhere sunny and without any subsidy. powerful into be the next years or so. we do not know how powerful.

we are making assumptions on how that could all work. >> the assumptions are pretty incredible. the essential case is that this that stripped out subsidies and it is going to make economic sense. that is the story here. it is going to make economic sense. not that it is going to. it does. it has been a rocky few years. a lot news has been about how manufacturers have prices that are too low. thatactually happened is it got so cheap that there are significant parts of the world where people are building these things and they save money. >> where to leave it there.

thanks. if you are listening, another hour the polls.

>> grounded. suspended after an attack. john kerry arrives in the country. inaccurate and unreliable. that is what a report said about u.s. operations. sanctions. delaying them against moscow. the risk to russian energy giant. >> good morning to our viewers in europe and asia.

a warm welcome to those waking up in the united states. this is the polls. i want to take you to our top story. john kerry has just arrived and urged a cease-fire. that comes as global airline suspend flights because of rocket fire. the president spoke about the cancellation and this is what he had to say. dangerreal answer to the is not to stop the flight or the rocket. they endanger the flight. let's get more on this story. elliott joins us from israel. there is the -- very little impact. you shut that down and that

changes. what are they saying? what is the first time that it has happened since the war. there was a first , it brokeis conflict out with the air raid siren and what happened yesterday was about one mile away. u.s.ave flights from the and many european airlines. they are flying. theythey propose is that -- i have been there. tiny airport and not particularly nice. it cannot handle a fraction of the traffic that they need. it is the kind of thing that also,ill feel and

israelis feel more isolated than normal. >> that may change the dynamic and we are losing your line a little bit. you are breaking up a little bit. this is a difficult story here and we have to go back, as well. a journalist is traveling with the secretary of state. i want to turn our attention. the shares are under pressure today. said thatrk fed has the bank had an accurate financial reports. we are joined now from berlin. this is the target of the u.s. operations. her and weeaded by do not know how far back it goes.

we noted the letter was issued and we are finding out about it now. address working to these problems. chargeticism and the from the new york federal reserve is pretty strong stuff. that there is weak technology. you mentioned the shares being under pressure. they are down almost 3%. here is the actual quote from the regulator. listen to the town. that thely suggests entire regulatory report structure requires wide-ranging and remedial action. it is a strong word. only made public now in july and may suggest that they have not done enough to clean up the behavior. >> that was then.

this is now. what is happening? it was a wild ago. >> so, as there've been remedial action? >> there has been action. they would dispute the action as remedial. they have a new program on technology and a presentation to shareholders saying that they are going to do this. they are trying to make some peace of the litigation front. , they haveon matters tried to work and have some sort of settlement. restating ofthe the financial figures. are the numbers so bad that they want to restate the numbers? that is something they have to call for. they have not yet. we will see what sort of response they have and whether they can keep the fed app they.

the fed says they are taking this for media lacks in. >> thank you. our international correspondent. growth and profits. the top line and the bottom line. , optimistic about microsoft. making some of the necessary cost cuts to reorient the business. what do we need to know about both companies? caroline hyde is here to tell us. the numbers include china and they are great. >> they are great. anything in europe. we're seeing that. still, the consumers are getting their hand on the iphone.

35 million. that is phenomenal. they are doing very well. armor ischange in the the ipad. it is not enough to upset the growth in the united states. there is still a lot of growth and profits. they have the reason to be the biggest company. there is optimism and people have felt that the updated iphone would sell well. we have an unveiling of new we think we are going to get a bigger iphone. there are extra inches that make

the difference. wearables toing keep driving the growth. so far, this is a company that is doing well and the executive was a mage's that -- amazed at how they did. what they need to carry on delivering more. >> promising more. that is less than the entire workforce. there are more cost cuts and the areas are doing well.

the shooting area for businesses allow them to access the sheets and from the internet. mobile and cloud our first. he is scaling back some hardware and missing 12,000 of those. also is turning around and he is trying to show the investors that he is serious. profits fell more than expected. >> i get the impression that what he is saying is that he will do better.

>> that is one that investors are hearing about in the moment. >> being brutal and not being afraid. they used to have windows. they are having to upgrade and businesses are having to invest again. he is promising big things for the clouds and just to stop talking management speak and speak to the investors on the business. the revenues speak to it. the european business correspondent. what else is going on? risksfficials are taking

and that growth becomes more entrenched as the rates are at a record low. i think i am getting ahead of myself here. those are the minutes released here two weeks ago. they have been tracking into the limelight. they have a traffic increase. only draws geeks and professionals. it is an increase in second-quarter profit. executive retakes the

we will have more on that story from hans nichols later on. we have a live picture from italy. they are taking the cruise late -- the cruise liner. they struck a reef act in 2012. they are starting to move it now. au can imagine that it is massive job. we are taking a break and will be back in a couple of minutes.

>> welcome back. you are watching. we have minutes from the bank of england monetary policy committee. it happened. we on not how the members voted. -- we all find out how the members voted. have ae hikes will not negative impact on the growth. prelude tot is a what is happening. --eresting lead the figure has a drop-off. you can see that on the screen here.

it and that ist the market reaction you are looking at. let's turn to the big story. they have agreed to expand and, for now, the foreign ministers have stopped short of force. it is and intimidating the energy industry. they could see a little bit if he this time around. let's talk about that. is the energy story the elephant in the room? >> we have talked about various theynies out of russia and have gas. is it a step too far at this stage?

>> it was included in the last round of sanctions and not the gas producer. and it isy off getting gas imports. margins see some of the . conceivey hard to direct sanctions to block those imports. >> you look below the surface and it is not. and this is a major pipeline. we have the story this morning.

it is being examined carefully. behind the scenes, do you think the pressure is been applied? >> i don't think we have everything rosy and feeling an indication. the energy is moving slowly and that could be a way off. the have moved quickly. the pipelines my face competition and other companies might be allowed to stop exiting the market. there are plans in europe. can gas?hat we

it is no longer the case. how is that not a dynamic? there is a future supply. that is still somewhere. the gas is being affected at the margin and they have your up. europe does not seem ready to start threatening back. >> we are not going to see headlines. everything becomes more difficult. what does that have? >> the projects move more slowly. we have overall tension in the

u.s.. -- u.s. do we see a prolonged dispute? will we go into a new winter and it incrementally has more effect on plans and strategy? >> will be the impact on the partners? many of the projects have take european and u.s. partners. there are examples of u.s. and european ones. what is the impact on them? >> certainly, prior to the tragedy, we did not see any interaction with the companies backing a way. there was a firm commitment and it would take a real escalation from here. we would have to be looking at sanctions affecting energy. the energy resources are. difficultare probably

and there may be quiet negotiations. we do not get any announcements until there is clarity on the crisis. is this going to be one that carries on? >> we are going to leave that there. come, we stay on the standoff story and there is a bloomberg exclusive with the central bank governor. -- see you in a couple of minutes.

>> good morning. welcome back. you are watching me tech giant. we are attracting data and providing insights. ago that not too long i was sitting in a university and learning about statistics. is gpst thing i know devices. >> you may think that you know the software maker. at the research lab, microsoft still seems to be doing things differently. he is one of the thinkers.

tiny gps tracking devices. beall of the information can put together to help empower the world and scientific oddities. -- commodities. >> it helps them understand the impact of climate change. thatere is no company should be placing its decisions within this context. to date, they have not been able to get their hands on inflation very easily and what we are getting is not reliable. >> the data could pinpoint air pollution. microsoft has been criticized for losing the initiative. it is fighting to correct that.

than $9.5nvest more billion. they are channeling some of that budget. what thedoing cambridge lab director calls research. >> doing something because it is interesting and because it is a challenge in computer science. of things that have not been investigated. reinforces thanks. >> for microsoft, this is about creativity and big ideas. we have writing on the walls. >> the race is on to invent software or hardware. hardware.sales is the researchers think they're onto something.

airline hide. bloomberg. >> right. moving on. we have an exclusive and we are live with the governor of the national bank to talk -- about inflation.

morning, everybody. you are watching "the pulse," here in london. i am guy johnson. these are the top headlines. the eu threatening to restrict russian access to capital markets and defense technologies. to blacklisted russian business people and companies for the first time yesterday. with a wide and say actions -- with a wide an -- with a d sanction list set to

be released tomorrow. >> the impact on the banking community will not be less on the russian business. johns. secretary of state kerry is in israel to press for a cease-fire. this after u.s. regulators suspendairlines to flights to israel as palestinians sent rockets near ben-gurion. lufthansa and other airlines flights.ended the transport minister said the airport is safe and the suspension gives a price to terrorists. the bank of england has said there is following risk from rate hike, voting to keep the benchmark rate at a record low of 0.5%. that is according to the minutes released an hour ago. a relate -- they relate to the

central bank meeting that took place two weeks ago. let's talk about how european markets are reacting. as karen a? equity markets have a rebound, volatility is dropping. the foreign exchange story tells a more robust story. equities are rising, a reprieve. money going into the yen. still discussion about what is going to happen with russia in regards to the size, scale, and impact of sanctions. what shape will they be, what impact will they have? you mention bank of england minutes. looking atling, the possibility of an early hike, what impact might that have? just come an little lower, 1.7035. day two of where the rebel is beginning to rise again. ruble two of where the

is beginning to rise again. you have dividend payments, tax payments, push and pull issues in the dollar/ruble. companies driving momentum. 15 companies reporting earnings in europe. it is all about outsourcing for the u.k. company. this is one of the biggest outsources, they government and education contracts, i.t. software, the whole backdrop to government agencies. 97% of their revenue is based in the u.k. a nice set of numbers. the u.k. is the powerhouse behind that. paris, airbus, up .8%. socgen up 1.5%. >> we have around 27 minutes until "surveillance."

tom keene at the helm. we have earnings, apple out last night. any number of technology companies today, including facebook. the geopolitics of the moment. will join us, he works with ian bremmer at the eurasia group. we will get into the debate of sanctions. i was taken by an important "ft" article on the inner circle of vladimir putin. also joining us, sir wrought set douglasat seddy of lane about ed linkage of markets from these geopolitical events. what to do given where valuations are. >> looking forward to it, surveillance is coming up .hortly increasef which could

the threat of deflation within the eu. let's get a perspective, miroslav singer is the governor of the central bank of czechoslovakia -- of the czech republic. wow, my history. talk about how big a threat this is right now. is this the one thing you are worried about? worried about lack of demand causing deflationary sentiment that is more pronounced. we just observed low inflation andurope generally deflation in some eu countries. that's about it. the threat is here. that is obvious. >> is the situation with russia making it worse? >> is this something that could tip us from disinflation to

deflation? >> russia is two-sided. for some countries, it is about .nergy coming from russia >> they could be inflationary. the other hand, european financial systems have a stake in russia that is not insignificant. that may, together with loss of export orders, be deflationary. it is much easier to say that that will be detrimental for growth. let's talk about the policy response that you generated. you cut rates to incredibly low levels. you talked about the currency

and the levels you want to see it out. 27 is a member you have talked about. it is not generating -- is it generating enough of a response for you at the moment jacob do you think you're going to have to go further? are you going to have to weaken the currency further? what options are out there? >> we set a floor half a year ago. judging the effects, we think beneficial were very . we would see a period of deflation without doing it. we have very low inflationary numbers, that is more or less do sufi prices -- that is more or less due to food prices. due to the fact that they import price pressures from the

eurozone than we expected. floor --nge rate >> you do not have -- >> we don't have interest. we are zero bound. we don't think it would be beneficial for us with our liquid financial system to go to negative territory because banks did not need cash so they do not move it. go,ing that as soon as we they simply do not have to deposit. >> as a transmission mechanism -- not work for us. so we will do exchange rate. we do not think at this juncture that we are -- that it would be

beneficial to change the floor. what we are now doing, we are closest terminal stage of policy. set a policy that will help until the beginning of next year. at our latest meeting, we said that the policy will be with us. until at least the second quarter of next year. more certainty by extending the policy. >> if the situation does not improve, you roll that for. >> that is what can happen. >> but your senses the 27 number is the right number. not have 27. we will leave it about 27. essentially between 27 and 30. blinded as toow

risk. you say 27 you get something different. this situation, the pro-litigation -- this situation, the prolongation and moving further to the future, we think it is the proper response. >> you are not a euro zone member country. that is a very clear story right now. it is going to become harder and harder for non-eurozone countries within the eu to make their voices heard? hear andtory we london, concerns about banking and what that is likely to mean moving forward. >> i am not worried. i think a banking union is needed for the eurozone. some a substitute for features of the federal state that should enable the financial system. >> good for them, what about you? >> good for us.

>> good for london? >> i am not london. for us, the prosperity of the eurozone is a plus. of the euro and these currencies is very beneficial for our economy. why should i worry about it? system our own financial that is independent and quite robust, stable, and liquid. why should we worry? it is a good thing that the eurozone is doing something to put itself in better shape. stabilize your economy. finally, you talked about policy options available and the impact they could have. nevertheless, you talked about a negative rate. how difficult is it setting policy at the moment, given that we are watching what the ecb could do next. how hard is your job if we see

developers coming out of frankfurt. this mario draghi were to do more to try to stimulate the economy, which could have a negative effect on the euro -- how much more difficult with your life be jacob >> it would be beneficial. we are fixing the exchange rate. monetary policy in the eurozone -- >> you might find it hard? >> that is our monetary policy. talking about? easing monetary policy in the eurozone and increasing the demand in the eurozone. floor -- not the exchange rate itself. that would mean more demand for our exports. i don't think we are in a zero-sum game. we have a lack of demand. who does increases demand not only for their own

production but for inputs. >> is this a currency were? happens currency war when you have too lax monetary policy and get out of competitiveness. this is not a situation we are in. we have problems of low wage growth and low demand. any of monetary policy helps. >> miroslav singer, governor of the czech national bank. a fascinating insight. coming up, sticking to sterling. talking of currency story. our interview with alex salmon, coming up after the break. ♪

>> good morning, you're watching "the pulse," live from london from bloomberg's tv headquarters. some news from the car sector, sergio marchionne of fiat and chrysler is giving a speech in turin. saying interesting things about russia, "we have colled -- "we have cooled down a bit on russia." he is still waiting to see what the medium to long-term story is. in the short term, fiat and chrysler cooling it on the russia story.

he says he does not see any cooperation with renault for now. stay with the car story. shares in daimler trading higher company beat estimates. hans nichols is here to break the numbers down for us. what was behind this? >> let me jump in on those sergio marchionne comments, that is in direct contrast to what the ceo of daimler-chrysler told us. he said the important thing about russia is to keep gaining market share. he said mercedes was quite strong. differentnd fiat have footprints in russia. most of the line from german , the lineas, henkel

is generally a wait and see approach. the fact that a major auto company is saying let's take a step back and put on the brakes is somewhat significant. don't you agree? is significant. the car industry has big exposure in russia. marchionne maybe is a little bit more cavalier with the way he approaches press statements. is saying it, some of the german guys are thinking it. a very good point. this could be on the back of all these major ceos that have data export economies but marchionne is the only one articulating it. i don't know if it is genius or iscreet. s class' sales of the more than double. still in third place behind bmw and audi. when you look at their operating margins, 7.4% as their revenue,

profit over marvin new -- profit of a revenue uop. -- profit over revenue up. s class is popular. >> i remember asking marchionne a question at the geneva motor show. it was just gaining traction. he was in wait and see mode, i don't think he thought it was going to turn into a development for his business. clearly we are starting to see some evolution of that. our guy that follows sergio marchionne around's take on it. thank you, hans nichols joining us from berlin. scotland's first minister defending his plan for an independent scotland to keep the pound.

andpoke to anna edwards said the pound longs just as .uch to scotland >> blogs just as much to us. in the best interest of scotland and the u.k. range of other options, but we are keeping the pound. b, c, we talk about plan d, and e when plan a is the best? we are keeping sterling. >> although parties in westminster have said they will not vote in favor of keeping the pound. but's over the currency. >> these are the same people, mps.and labour and liberal

same thing tohe each other. according to "the guardian," u.k. government ministers said of course there will be a deal on sterling. this is a campaign tactic. we're just doing what alistair darling asked us to do. the scottish affairs committee -- people in scotland know we will keep the sterling because it is in the best interest of scotland and the best interest of the rest of the u.k. our position as we are very happy to take a share of the liability, the debt that has been built up by people like alistair darling and the chancellor of the exchequer. we are entitled equally to assets. share ofs on having a the assets. among these assets is the bank of england and sterling. the bank of england holds one third of u.k. gilt.

does not belong to george osborne. it is as much our currency as his, we are keeping the pound. >> scottish national party leader alex salmond speaking to us. we will be bringing you the views of other major parties. we will take a break, back in a couple minutes. ♪

>> welcome back. john kerry has arrived in israel

to press a cease-fire with hamas and israel. joining me on the phone from jerusalem is bloomberg news reporter traveling with secretary kerry. the faa has stopped u.s. carriers from flying into ben-gurion and this is isolating israel. has the secretary of state talked about this? the secretary of state has not actually adjust the issue of the faa. it applies only to commercial flights. it does not technically a flag typically applied to officials in jerusalem that the issue that has led to flights being stopped due to rocket fire from gaza. he arrived about two hours ago --

>> what are we expecting him to bring? what is he agreeing to the table in jerusalem? what are we expecting to hear in tel aviv? waterway going to learn today in terms of progressing this story towards a cease-fire? >> he'll be meeting with benjamin netanyahu, as well as bachmann abbas. he is currently meeting with ban ki-moon, who has been in the region this week. with the various players about what the way forward would be. he said there has been a small step forward in cairo. he will be spending the day today in israel and the west bank to push the ball a little before. that is but we will be expecting today. joining us from bloomberg news from israel. that wraps up the program, keep it here on bloomberg television. "surveillance" is next.

we carry on the geopolitical conversation about what is happening and that middle east and ukraine vis-à-vis russia. if you want to follow me on twitter, @guyjohnsontv is where you will find me. i will see you tomorrow. ♪

>> this is bloomberg "surveillance." and erika secretary of state travels from egypt to israel and -- america'se-fire

secretary of state travels from egypt to israel in search of a cease-fire. flights stopped to israel. how to conduct business in china. live from our world headquarters in new york. wednesday, july 20 third. joining me, scarlet fu and adam johnson. let's get to our morning brief. we start in england. the bank of england has kept rates at .5%, a record low, as the governors are no longer saying a rate increase would hurt the economy. >> is this a surprise? rates fact that they held steady, no. what is different is that they to signaling a willingness effectively increase rates down the road, which was what mark carney told us at the last meeting. that caught people off guard. he has other -- >> other people off