warns sanctions will bring the russian economy to a standstill. this as a ceo tells us exclusively that he stopped doing business with clients in that country. hold the phone. iliad interrupts sprint's plans for a t-mobile bid with a rival offer. investors punishing the french firm. shares are down hard this morning. the global stock selloff continues. european equities keep falling head of what is expected to be a strong u.s. jobs report.

good morning, everybody. you are watching "the pulse." we are in london. iming guy johnson. we are goingg ciao to tell you why italy's leading car manufacturer is leaving mama. and talking of cars. pimp my mclaren. the are talking to the company working on the interiors of the world's fastest cars. check it out later. that's get to our top story. socgen posted a profit increase for the second quarter. with sanctions looming over russia's economy, will that start to threaten the bottom line of france's second-biggest bank? caroline connan is in france. she has got the story. she has been talking to the deputy ceo. >> guy, if you look at the earnings of societe generale,

they were pretty good numbers. they beat estimates. for the risky loans declined by about 24%. the net income was at the highest level since mid-2010. of course, we have to look at russia. russia is one of their big strategic markets for societe generale. it is the second-largest market by client for consumer banking for societe generale, just after france. ceo whathe deputy would be the impact of sanctions and what was the total exposure of societe generale to russia. geopoliticalt asues, we have probably

macroeconomic impact on the russian economic issue. our new expectation is a flat situation in russian economy for 2014. on thell have an impact credit origination, and globally speaking probably also on risk. actual impact of russian sanctions on societe generale? >> total exposure of societe generale represents 3% of our total balance sheet. capital, the group exposure in terms of capital and funding to our russian subsidiary represents 5 billion euros. >> you own almost 100% of respect. in theo participated deal.left -- rosneft what kind of impact will you see now that these companies are

blacklisted? >> the corporate counterpart you mentioned was bridged loans worth 25 banks from all over the world. we were one of those 25 banks. this operation probably could have been very good. >> more generally, do you think the russian situation will have a bigger economic impact on eastern europe where you are very present? if the impact will go to zero growth in russia, we don't think the question is how long the tension will last. very difficult to say. is in the interest of all the stakeholders, we don't expect this tension will last very long. globally speaking, the impact on the world economy will not be so

significant. >> the deputy ceo of societe generale also told me they currently have nearly 14 billion euros of outstanding loans in russia. in fact, there loans are increasing in russia in the second quarter by more than 5%. as you remember, guy, goldman sachs said that societe generale remains one of the most vulnerable european banks exposed to russia. >> we will keep an eye on it. ok, caroline connan, thank you very much indeed. we are not done yet. the boss of another french business has been weighing in on the situation in russia. the ceo of the texas tells us he is looking carefully at the impact of western sanctions on russian entities. obviously will reduce our

business we do with russian customers. we have to take that into account. then, the impact on the russian economy will depend on how long the sanctions last. for the time being, it is hard to say. if it does left, it will have some impact on the banks themselves and the global russian economy and potentially on the clients. what measures him he has already put in place for a violation of u.s. sanctions. everybody influence -- in france very aware of what happened with bnp and that record fine. >> we have been working very hard on that. i think today we have put in place a process and control system that are in line with what is expected. not the samesly size as bnp paribas, but we think we have the appropriate

system. >> that was the ceo of natixis speaking with us on an exclusive interview earlier. a lot of action in france today. let's continue the conversation on what is happening with the french economy. we are turning to the transatlantic tussle to control t-mobile. offer for an cash controlling stake in t-mobile u.s. what is going on here? everybody thought sprint was going to get this. caroline hyde has more details. the stock is down pretty hard. like a burst into song. luckily i won't because i am a terrible singer. i would sing "my way" because the founder of iliad owns the rights to "my way." he is doing it his way. companyion to buy a three times your size on the other side of the atlantic.

that is the bid they are putting in. $33 a share when we understand sprint is offering $40 a share. what is in it for t-mobile u.s. and its owner? it could be regulatory. this is what is so interesting. the reason we are seeing such a stock reaction in iliad and its , we understand that maybe because there are so many regulatory hurdles for sprint, because it would take four players in the u.s. down to just three, it would take them a year at least to weave its way around this regulations. maybe this makes the iliad deal that much more enticing to t-mobile. how much does deutsche telekom want rid of its u.s. arm? would it be willing to take $15 billion in cash?

also, it is not the only thing iliad is offering. they say, savings, we will have $10 billion of savings. we will share them. therefore the rest of the stake that it won't buy in t-mobile u.s., about 45%, would be valued much more. >> you are pretty good at this. he knows how to go after aggressively competitors and you see that. real disruption. it is interesting that the merger boys are taking it seriously. >> they might well follow through. what is also interesting is how similar the two mavericks are. they are not too dissembler. offering noas been contract plans in the u.s.. he has been taunting his rivals on twitter.

he has been turning up uninvited to at&t parties. contracts half the price of his competitors. >> what does this mean for sprint? they obviously are having to offer the regulatory spread. what does it mean for what they do? >> it looks like they have to speed up their offer. we understand it is not just regulatory hurdles. there is also the deal structure which is not appetizing to deutsche telecom. maybe they will have to offer a bit more, make the deal structure more appetizing, and start dealing with the regulators. they thought they had a year to deal with this. not so if iliad is going to disrupt your deal. >> the french are on the move. arrow line, thank you very much indeed. up next, socgen sounding the

alarm on russia. when we come back. ♪

>> our new expectation is zero growth they're big it a flat situation in russian economy. since we have an impact on the credit origination and probably

also on the cost of risk. of socgenuty ceo speaking to us today about the impact of the russian standoff. socgen is the latest european firm to post second-quarter results. the earnings season has been overshadowed by litigation costs , sanctions, the list just goes on and on. let's talk to christopher wheeler, a banking analyst. you say in your notes that you have been brave to run an investment bank. the litigation story is followed by the sanction story. it just goes on and on. brave doesn't even do it. to point oute has that most of these banks are going through changes. restructuring within their broader in business or investment bank. they are doing good work in many cases. just when you think you are out of the melee, you are hit by another issue. it is difficult for investors to

make assessments of what they should be owning. they are being hit by things which are difficult to build into your calculations. >> how will russia affect business done in the city of london? risk our bidders must be watching this one very carefully. the onest want to be responsible for another massive fine. willerybody will say it have only a small impact. is peoplee reality will have to be conservative and that inevitably will mean less business will be done. more business will be turned away. you have to err on the side of, let's not do it. you don't want to add to the litigation wars. >> the litigation story is industry. do you think we have got to the point where the banks are almost throwing every single risk they can imagine at investors to get over this problem that you just

indicated, that investors can't get their arms around the story? maybe the banks are going the other way. you have to counter the number of comments on litigation. they are blasting investors with all the potential risks. at this point, we face a risk on this, this, this, this. got 87 mentions of litigation in their report. with credit suisse it was 63. it would have been five or 10 before the crisis. you are right. they are trying to draw our attention to it as much as possible. having gone through all the meetings this week, management don't want to dwell on how much that is going to cost them. it will have a material impact on results going forward. >> i am presuming until they are close to a settlement, they -- they don't know so they

can provision. >> unfortunately, it gets quite complex in terms of the point in time. if you remember, credit suisse the 2.8 first against billion fine it took a couple months ago back in 2011. nothing happened for a long period of time until they got closer to the point where they knew what the number was going to be. i am afraid you can have litigation buffers but it is quite difficult. putting't like provisions aside for something which may or may not occur. fixed income, where are we? get a pickup in volatility , that could really pay off. barclays is retreating. this is a big part of a lot of big banks.

read the tea leaves for me. >> is it structure role, that is the big question. jamie dimon is convinced it is cyclical. it is going to be somewhere between the two. we saw a pickup compared to what we expected because we saw a good june. the reason june was good wasn't just the pickup of activity. june last year was awful. we had bernanke making comments on tapering. the good news we have is we are going to have very good comparisons. last year, most of the activity was very low indeed. you are right. that july wasment awful. one of them, it was barclays actually, the cfo said july has been the worst month of the year. it is the summer, but nevertheless we did see that pickup in june.

>> a taste of what we have got to come toward the back end of this year. plenty of question marks hanging over this. >> i don't feel that is the case. i feel much more confident. we have done a lot of work on the stress test. quite frankly the banks have been running around with capital raising's. the italian banks, look at some of the work done by the u.k. banks. in most cases, it is fine. unfortunately, we still have a number of cases where the risk has not been fully quantified. >> all this does is highlight the lack of visibility. you don't know which bank is going to have the problems. >> i think we all know the regulators were not as diligent as they might have been precrisis. that has changed markedly. it is difficult for them to sweep up what is left over from this biggest hangover from the biggest party we have had in years. >> mr. wheeler, thank you very

much indeed. let's get you some other company news now. don scott has been represented by denmark for misstating risky retail loans. the lender couldn't prove consumer debt assets deserve a lower risk rating than other loans. been ordered to raise assets by $485 million. accelormittal has posted estimates that missed analyst estimates. the steelmaker had to lower its outlook as the price of iron ore continues to decline. the company is trying to reduce borrowing after its credit rating was cut by moody's, s&p and fitch. trailedsales growth analyst estimates in the second quarter. for cited sluggish demand maybelline makeup and other consumer products in the united states. l'oreal expects growth to remain solid in western europe. we like to look good.

still to come, how to customize your car. a new company helping personalize your sports car. some amazing requests made of how to pimp out a bentley for instance. ♪

>> welcome back. you are watching "the pulse." we are live on bloomberg tv. let's get on the markets now. market action this morning in stocks. let's go to our markets editor, manus cranny. >> these equities, the beginning of a new month. we are down for the third month as we stand at the moment. we are at three-month lows. volumes higher than an average daily volume. theimpact from russia and ukraine in terms of this propensity and its growth impact , deutsche bank wealth management is saying it could be 1/10 to 4/10. come over here and have a look. is perhapsese story one of the most pervasive stories in europe. down over 3%. what is driving the psi? espiritus, banco

santo. the question you have to ask is whether going to public market is going to be safe. the entire board has been replaced. there are major issues still within the spirit so sent out. santo.ito will the portuguese have to review that situation? nobody is talking about having to turn to the bailout fund at this point. when you want to impact -- understand the impact of russia, look further than adidas. this is day two. this is when the scribes come out and downgrade the stock. you have jpmorgan putting their view on the stock. you have a whole host of companies moving on the ideas story. commerzbank down 0.3%.

so you are definitely seeing a big lag in these equity markets. russia, argentina and during the fault. these markets are not managing corral they on better than expected numbers coming from china. really got ang has facade of something that has a much bigger move at play. the market focus will continue to go to the u.s. u.s. equity futures were higher and they are still turning around. now down zero .3%. unemployment numbers are going to be the key focus. 230,000 is the number. back to you. >> portugal is now down over 10% since the 28th. still to come, fiat says ciao.

why they are leaving home after 115 years. also coming up, beats not bombs. we catch up with bill gross who is blazing his own trail in the music industry. ♪

>> good morning, everybody. welcome back. you are watching "the pulse." i am guy johnson and these are the bloomberg top headlines. hamas has broken a gaza cease-fire. this according to an israeli official. the news out in the last few minutes. thanighting has left more 1400 palestinians and 60 israelis dead since it escalated in early july. china's manufacturing expanding in july at the fastest pace in more than two years.

pmi rose to 51.7. the reading may show that government stimulus policy is helping to boost the chinese economy. and the iconic italian carmaker, fiat is leaving home. the family and investors meet in turin today to seal the merger with chrysler. it will see the company moved to the united kingdom and list in new york. let's get the details of this. ryan chilcote joins us now. is it a done deal? >> it is not. two thirds of the shareholders have to vote in favor of the merger. some of the proxy advisers have said this isn't a good idea because all it does is give the agnelli family even more power, more of a stake, more control over the merged companies. incentive plan to reward investors who have stuck with the yacht, their stake goes up.

john elkin effectively has more control. but even if it doesn't go through, it is not the end of the world. it is just an issue of how much it will cost for them tomorrow. of there making a lot fact that this is 115 years. fiat finally leaving home. the reality of that is not quite set. >> they still have factories in italy. it is just the story of a regional carmaker going global. it is a good story. , heting in 1899, giovanni heard about horseless carriages. he was already the mayor of a city in northern italy. he coughed up $400, got his stake. produced twohey dozen cars, had 35 workers. he ran the company through the end of world war ii. was really the man

that made it into italy's largest manufacturer. they controlled 5% of gdp. he became italy's richest man until he handed it over to john elkin. he was born in new york, met up with marchionne in geneva in 2004 and they hatched this plan to go global, which they finally did. first marchionne was trying to get gm. that never pan out for him. chrysler comes up for sale. sort of up for bailout. >> he rescued it. >> you could look at it that way. as a result, fiat got chrysler for a 10th of what daimler paid. a bit of a song. now they are going to be a truly multinational company. not just here in the u.k., but i findn slough which novel. interesting to see the italians walk around in slough. for everybody who doesn't know, that is just outside london.

in addition to that, it is going to be incorporated in nevada lens -- in the netherlands. they will list in new york. marchionne has a master plan to make it even bigger. if they don't merge with somebody else in the meantime. >> slough and the big apple. quite a combo. ok, thank you very much indeed. ryan will be back later. italy bute leaving other auto companies are opening up. one new business that personalizes the interiors of luxury cars has just set up shop and is getting some interesting requests. tom gibson went to find out what is going on. >> it is a problem not many encounter. >> a customer came to us and said, my interior of my aston martin, i want to have it in my ferrari. how do you do that? >> this is what ares offers,

taking high-end cars and giving them a bespoke makeover. >> he paid to redesign everything new and try to fit it into the ferrari. that is a huge task. >> a huge and expensive task. averaging 600,000 euros, this luxury service can rework a supercar from head to toe. interesting companies like ares is high. the asian market in particular is investing more and more in customization. china alone is estimated the customization industry could be worth 17 billion euros by next year. back in 2009, it was worth just 4 billion. big money means big competition. lamborghini and ferrari already offer customization options. half of lamborghini customers pay an extra 15% on top of the original cost. to customize a ferrari generally

cost between 20% and 30%. when it comes to a complete overhaul, sometimes you need a third-party. offer all of them the same opportunity. say i have a mclaren. it is too boring. i would like to have my own design. i would like to change the interior. differentiator from any other customization company. >> for the most cash ready motorhead, even a supercar can be super mod it. >> my mclaren is boring as well. ok, let's move on. let's turn to the transatlantic tussle for control of t-mobile u.s. iliad shares down over its bid for the u.s. carrier. said to have been shrugged off by deutsche telecom. had offered $15 billion in

cash for a controlling stake. our european telecoms analyst joins us now. good morning to you. does this deal makes sense? the stock is down hard as it is. it would seem to indicate that the merger arbitrage boys think there is some possibility of this happening. >> probably. yet it is clear that we are onll waiting on more details synergies that they are discussing. everybody was expecting iliad not to go to a new country like the u.s. market. however on paper, it is a deal that could make some sense. onobile is trading multiples. u.s. mobile prices are relatively expensive. iliad is offering prices which are two to three times lower in the french market. they are looking at pricing up.

has acquired 15% market share in two years in france. >> what do you think the regulatory opportunity is here? clearly this is significantly below where sprint is pitching the offer at. sprint is going to have problems. sprint is going to take the number of operators from four to three. iliad isn't going to do that. >> you are right. t-mobile is doing great in the market. even if there is a regulatory hurdle of sprint making this acquisition of t-mobile, they will just wait for one or two years when potentially there is a new u.s. administration in place and more room or m&a action. we quite rate this offer from iliad as relatively low

probability of going through. >> do you think the deal would make sense for iliad at a higher price? do you think they can compete on price with sprint? would it make sense to close it at $40? >> i don't think so. basically have a rights issue, plus add 9 billion euros of debt and bring the ratio to levels like five times, which is very high in the sector which is on average two times. i wouldn't expect iliad to enter a bidding war. let's bear in mind that it is another reason for sprint to make a bid on t-mobile. thanks to the fact that they have huge synergies emerging on t-mobile. avoid a newentially price war in the u.s. market if

iliad is looking to do the same as they did in france. of plan be some sort here for iliad? as you say, everybody was expecting them to come salivate the french market. -- to consolidate the french market. being machiavelli in, what do you think is going through his mind right now? >> there could be a conspiracy theory regarding iliad's intention in france. iliad was in talks with other french telecom operators. bouyguesto buy telecom. clearly, iliad sending a message to the operators today that, look, you didn't agree on my terms for the acquisition of bouygues telecom. i am moving on to something else. you could argue that it is putting a bit more pressure on orange and bouygues to

reconsider what iliad's terms were. >> i think he is probably a smart guy. he probably is playing a number of chess games at one time. thank you very much indeed. watch this story. i want to bring you back to one of our breaking stories over the last few minutes. israeli officials say hamas has broken the cease-fire in gaza. it was only three hours old. let's get straight to elliott gotkine for the latest. >> yes, a rather depressing and shaky start to the cease-fire. it began some three hours 45 minutes ago. there was a siren that sounded in israel. it was after that that there were plumes of smoke coming out from within the gaza strip. hamas saying that it was had broken the cease-fire and

that is what precipitated its retaliation. there are other reports swirling around, none of which are confirmed. there are a number of injuries and possibly death as a result of that attack. we will bring you up-to-date as soon as we get more information. clearly this is not what the u.s. or the u.n. would have wanted to have seen or indeed most of the world leaders. there was hopes that this humanitarian cease-fire would stick. provide asthereby secretary of state john kerry put it, opportunity for negotiations to take place in cairo. we have seen previous humanitarian cease-fires fall apart. i am sorry to say that although this one is not officially over, it certainly is not looking that great when both sides seem to be fighting once again. >> i think that is a fair point to make.

thank you very much indeed, elliott gotkine. we will make sure that as soon as we get the news, you get the news. we are going to take a break. our next guest breaks down the risk of global market sanctions against putin. stay tuned for that on "the pulse." ♪

>> welcome back. you are watching "the pulse." we are live from bloomberg's

london headquarters. that's talk about the situation in russia. it has been a rough week for emerging-market stocks. unrest between russia and ukraine continues to escalate. we have got sanctions which could potentially trigger a further impact on the global economy. the head ofow is emerging market research at commerzbank. good morning to you. there is a lot going on. there is a number of stories we need to talk about. this week, major european companies have been lining up to tell us about their concerns about what the situation in russia will mean for their businesses. how serious do you think it is going to get for them? >> the main issue is how many exports go to russia. thebaltic countries are most exposed. germany is probably the least exposed. effect is thecal most important thing. that will have a kickback affect

on consumers in europe as well as russia. you have seen the comments all many made. they are starting to feel the pain. >> everybody from adidas to siemens. the list keeps getting bigger and bigger. let's focus on russia. let's not call it a wall just yet. isn we look at how this going to ripple out through the economy, credit is going to become more expensive. for thenology required energy industry is going to become harder to obtain. how long will it take for them to be fully felt within the economy? what is the drop-down affect? >> the russian economy itself is already feeling the repercussions. we started to see growth being scaled down. russian officials already recognize this. the one thing they do have is central-bank reserves and a solid fiscal backdrop. those preserves can be used if they need to to pay external

debt payments. for the local economy which is highly dependent on household consumption, those are the most important factors. there we see consumer confidence being hit in russia. central banks already raised rates once as part of this. >> that is a very important and interesting point. the lack of global policy or political coordination in the world at the moment means that central banks have to react. you have seen the central bank in israel cutting rates multiple times to reduce the effect of the war that they are having on the economy itself. you have seen the central bank in russia having to hike rates to protect the currency. you saw the central bank in turkey having to hike rates. what we are relying on is central banks having to make up for the deficiencies in global policy that the moment. >> critically, global politics is lacking. the global ability to get round

a table and talk the situation in ukraine out is really stark at the moment. there doesn't seem to be any obvious progress being made here. all theserries on, positions become more entrenched. >> absolutely. inther you speak to somebody russia or the european union or the united states, nobody can understand why all the different sides can sit at one table and negotiate this through. the private sector has already voiced its concerns many times. we do not understand why this can't happen. if that would start to happen, we could start to see a de-escalation. otherwise we continue to see more escalation and more sanctions being imposed. forhich is the greater risk emerging-market portfolios right now? geopolitics or the fed? >> both of them. up until two weeks ago, the biggest concern was u.s. treasury yields.

if you look at the two-year treasury yields, they have jumped in the last two weeks already. there has been a reaction there. thatis the first big risk you have for local currencies in emerging markets. you have seen the local yields in europe as well. you have seen it in other countries. the second thing is obviously the sanctions and the psychological effect it has on investors in emerging markets. do notfolio investors have the certainty that they can hold these bonds in the future, you will start to see repositioning taking place. we already see this in the last going to with flows turkey and south africa. >> and that would only accelerate. >> it would accelerate unless we get a calling on the political front. it is not just about ukraine. it is about the middle east, venezuela. all these things would be able to be resolved. we would start to get some

coherence in global policy. the eu and the united states and russia getting together at the table. >> it is interesting that you talk about the flows going towards turkey and south africa. two countries with big karen icon problems. we are not worried about anymore . >> if you see u.s. treasury turn up very quickly, you will see south african rand and turkish lira being hit first. >> it will be an interesting few weeks. very nice to see you, thank you for your time. we are going to take a break. coming up, tesla. the electric carmaker achieves estimates as it rolls out deliveries in china. it has big plans in china as well. we will talk about that when we come back. ♪

>> welcome back. you are watching "the pulse." we are live on bloomberg tv. energy, topew headlines, tesla has posted second-quarter sales of model s electric said anze that matched analyst estimates. this as the company begins delivering to china. tesla said it would deliver more

than 35,000 cars this year. patagonia has developed a sustainable wetsuit material derived from natural desert-based drugs. an eco-friendly rubber alternative to the mark conventional petroleum based surf gear. patagonia hopes to expand the use of the rubber into other products such as shoes and yoga mats. -- the second your guest largest u.s. solar manufacturer expanding production by more than 50% from its current levels. the company hopes to increase output capacity to around 700 megawatts of solar power a year. the u.s. secretary of state, john kerry, visited india this week. climate change discussions were high on the agenda. both sides pledged to cooperate on clean fuel and energy efforts. they fell short of reaching a

breakthrough on the phaseout of hydrofluorocarbons. bloomberglistening on radio, the first word is up next. for our viewers it is a second hour of "the pulse." fiat is saying ciao. we are going to talk to george eliot. what this means for the italian car giant. and the stock selloff continues. a senior economist is going to be joining us. does the stock selloff indicate that the market is pricing in a strong payroll number? and we are getting breaking news out of gaza and israel. you are looking at live pictures. a moment ago, you could see in the hayes, smoke clouds indicating the possibilities of a cease-fire which is an very old at all have been broken. we are going to go back to israel for the latest on that story. we are going to take a break.

we will see you in a moment. ♪

>> flatlining. stockton war and sanctions will bring the russian economy to a standstill as the ceo tells us he is pretty much stopped doing business with clients in that country. boat.he interrupting sprints plans for a to mobile bid with the $15 billion rival bid of his own. shares sharply down today. a cease-fire over. israeli officials have broken the truce. this just hours after it began. going to tel aviv to get the latest.

good morning to our viewers in europe. good evening to those in asia and those waking up in the united states. i am guy johnson. this is "the pulse." we are live from bloomberg world headquarters in london. i want to take you to tel aviv. the truth is over. only three hours old, the truce. the latest now for what we know and don't know and elliott -- from elliott plotkin. around three point five hours there have been rocket launchers fired into israel or towards israel after about two hours into the truce. smokesere were looms of in the gaza skyline in the south of the gaza strip. there are various reports out

there, none of which we can independently confirmed yet. what seems to have happened according to the reports is the israeli army came under attack from militant emerging from a tunnel, and that is why there was a subsequent response. the health ministry in gaza has reportedly said there are at least four deaths and some 20 wounded. palestinians have been emerging had to go to play -- hesitantly to take in the damage, to maybe grab possessions or even to recover bodies from rubble and buildings that have been destroyed. it is too early to say the cease-fire is officially over. if it is not over, then it is certainly very wobbly and appears to be crumbling. what are the implications for the peace talks do you think?

interesting to see what happens now, if we return to all-out war, is seems hard to see that these parties will speak with each other in good people on both sides are being killed. as i say, until such time as we hear it from the israeli government saying the cease-fire not be, we will premature in saying the talks are not going to happen. obviously what has happened so far this morning does not bode well. obviously what has happened is not what the u.n. and secretary of state john kerry would have wanted to have seen. are maneuvers in the background trying to get both sides to go back to the cease-fire that was agreed to all powers -- parties and meant to last 72 hours. as we see on so many occasions

thomas just because there is pressure internationally and just because a cease-fire has been agreed to, does not mean it will be adhered to. for now, a very fragile situation and could all be over but we have not got official word on that just yet. gotkine joining us from tel aviv. more information if we get it, we will get it to you. top company story. stockton posted an increase for the second quarter. stockgen posted an increase for the second order. it has a significant footprint in russia. my colleague is in paris with the story. speaking with the bank. what did i have to say? >> -- what did it have to say? >> russia is a strategic market. they have been growing their

prussia in russia since the fall of the soviet union. the exposure represents about three percent of the total balance here. of course looking at earnings this morning. actually pretty good numbers. decline in their own provisions for risky loans. of course i had to ask about what russian sanctions mean for the future and whether the exposure will come down. >> the current uncertainties and would havel issues probably an impact on the russian economies. expectation is flat. this will have an impact on credit origination, and probably

speaking, on the risk. >> what is the impact of russian sanctions? what is total exposure? >> total exposure in russia represents three percent of our balance sheet. capital, the group exposure in terms of capital and spending to a russian subsidiary represents 5 billion euros. ask you own almost 100% of the bank. own about 100% of the bank. the deal.ssipated in what impacts will you see now that these companies are blacklisted? >> their earnings you mentioned, it was the ridge loans. banks from other parts of the world were participating and where one of those were correct.

another of the current conditions, you are right. generally do you think the russian situational will have a bigger impact in europe? >> this is a situation and impact and russia. the question is how long the tension will last. very difficult to say. it is difficult for all the stakeholders of attention. we do not expect it will last very long. >> he also told me they currently have 14 billion euros of outstanding loans in russia. itthe second quarter

increased by five percent. this will have an impact on credit origination. >> thank you very much indeed. joining us on what socgen is saying. also joining in for the exclusive conversation and russia. looking carefully at the impact of russian sanctions into entities. ofo said he has activity russian clients on hold. >> obviously we will reduce our business. then the impact on the russian depend on how long the sanctions last. for the time being very hard to sit. obviously if it does last it will have some impact on the banks itself in the global russian economy and potentially

the clients. we askn all of this, what measures are being put in place to prevent violation of u.s. sanctions. french things pretty nervous about this, particularly given what happened with bnp. working hard on this for six years. in ank today we put process and control system that are in line with what is expected. not the samesly size as bnp paribas, but we hand we have the upper statistic. speakinges -- the ceo to us earlier. let's stay with france. a transatlantic tussle for control of t-mobile u.s. has broken out. iliad has stepped in.

caroline hyde has been tracking the action. the most on record. people feel it would be willing to take up significant amounts of debt to finance the deal, a $15 billion cash offer. less than what is already on the table by u.s. rival, sprint. offering about $40 per share. this deal would be 33 dollars per share. lex why? >> because he take -- feels he can bypass regulatory concerns. price a little bit of a price war with sprint. because it would no longer mean for players become free. t-mobile, thenes you only have three players. sprint aing to take year to get it through.

maybe deutsche telekom, the owner who does not want to be in the u.s. anymore would take less money to get the deal done. the whole personalities involved are fantastic. with a sex started chat business. so this is a man that knows how make old moves. he is a character. he also own the rights of the frank sinatra classic. he is currently allowing iliad to put in an offer to put in a company three times the size of it. they dwarfed it in terms of market capitalization. it disrupted france so much. he came in offering half-price on tracks compared to other competitors.

now looking to get on that t-mobile space. it has been a disruptor in the u.s.. offering no contract plans. he managed to hijack certain at&t events. it is interesting the personalities. t-mobile has come out to say this is serious, not competitive. , if we is saying look make any savings, we will share it with you. the other half that i don't own and we will be left with about $40 per share. i think there will be a little bit a price war. not only in france but t-mobile u.s.. pet theory,y little i think he is doing it to take

attention away. bid, thatthat discussion onto firmer footing. everyone thought he would consider an -- continue to consolidate and france. unfinished business in france. to john leger was speaking bloomberg earlier before this came out, the chief executive of t-mobile u.s. saying we need capital, we need to invest. he wants the deal to go his way as well. >> peer speculation. indeed. you very much >> very confusing. i/o is wished i was pronounced caroline. -- i always wished.

latest us with the coming out of the french market. flat. hours, jobs stay in america. predicting slow labor gains in the next month. ♪

>> welcome back. let's talk about what is happening in the currency

market. trajectory.m i think the chart tells you what is going on. strength coming through. the perception we will start to get more strong data coming through. the data generally good coming out of the u.s. economy but good enough to get the fed moving? another thing i want to draw your attention to, take a look at the right-hand side of the chart. we're seeing it in volatility as well. just beginning to pick up. maybe things are starting to happen a little bit. a lot to get through over the next week or so. investors looking for clues out of the non-form payrolls number. this 230 is the number. short who joins us now,

senior economist at west bank. why the caution? >> to coast the u.s. economy grew at a less than one percent annualized rate earlier this year. and they have virtually produced no extra growth. what are those people doing? i think employers will be inclined to look at what they have rather than adding more people of the same pace they have been in the second half of this year. we would say the risks around the number could be to the downside. if not in july, certainly the next couple of months. >> the wider story, which takes into account everything the overall labor market, indicating a lot of slack still in the economy. this seems to be what janet yellen is concerned about. talking about wages and the first line talked about underutilization of labor. even though the fed statement

was a little bit more upbeat, they emphasized underutilization of labor. tende like you and me we to not get them back. that will lay down on consumption. this will have implications for consumption. durable stronger like we saw in the second quarter. we see services strong in the first quarter at the expense of durables and non-durables. to get rod consumer growth, which you need to see to have a self-sustaining recovery, you need more people at the upper jobs, earningting decent incomes. that is just not happening. >> breakeven trending up. a gradual trend of.

>> there is so much slack in the economy. >> do you think we're missing price inflation? >> i think there has been too much optimism priced into the market. optimism about the ongoing likelihood of decent growth, similar pace growth we saw in the second quarter continuing in the second half of the year. risk outoptimism about there in the wild, wicked world. the optimism i think is going to start to crack, given the outcomes we are expecting to see the.

>> the european pmi is revised down. the inflation number out of the euro zone. >> 40% of the eurozone is either on the cusp of or living in deflation now. portugal, greece. that is a third of the countries . that has the ecb quaking. iswhat you are not getting reflation in the core. that is what you would normally do. >> you want those guys to be able to adjust. not to adjust by deflation. it is not the route they have chosen but being forced upon them because there is low inflation in the core. draghi wants to do is print money to lend to the banks, and then he will buy the

loans back off the banks. then banks can lend the same money. he will buy the loans back by printing more money. it will be quantitative easing effectively for the ecb. the first fede rate hike? >> the second half of next year. the market will be comfortable with that for a while. we think there may be policy errors. interest rates will get to a point where it really does become too difficult for the economy summit which still has a lot of loans that have not fully healed. we are concerned there will be another deep down growth. >> you think the cycle will be short and have a very low terminal rate? >> yes. they will be cutting rates ready aggressively after that. correction from the balances that led to the

correction crisis has not been think.through we >> thank you very much indeed. we're going to take a break. back in a couple of minutes. ♪

>> welcome back. you are watching "the pulse." .nd we are at bloomberg.com getting to company news. british airways has ordered 16

wide-body jets including the airbus model for the iberia business. that is after a turnaround after the spanish group was did earnings by 55% in the second quarter. earnings that missed analyst estimates. the world's biggest steel maker had to lower the outlook of the price of iron ore continues to decline. trying to reduce borrowing after the credit rating was cut to below investment grade by moody's, s&p, and fitch. sales growth trails estimates. siding slower demand for the maybelline makeup. expects growth remains solid in western europe, which is interesting. we're going to take a break. up next, not bonds. we will stick up -- catch-up with bill gross who is blazing his own trail in the music industry. apparently he does not even know what a bond is. you can follow me on twitter.

@guyjohnsontv. we will see you in a moment. ♪

>> welcome back. you are watching "the pulse. " from european headquarters in london. chinese manufacturing expanded in july at the fastest pace of more than two years. pmi rose to 1.71. the government stimulus is helping to boost the economy. the world health organization and several west african nations will pump $100 million into an

intensified effort into the a bowl of virus outbreak. people,illed 100 79 mostly in guinea where it was first reported. has reported to have broken a gaza cease-fire according to an israeli official. the fighting has left more than 1400 palestinians in almost 16 israelis dead since it's escalated in early july. we will be back in tel aviv shortly for the latest. find out what is going on in the markets. over to you. >> european equities are down three percent. most of the damage done over the past few days. volumes of 42% of normal day trading range over the past 30 days. volume behind the moves. manufacturing and the u.k., the slowest in the year. the policyive committee perhaps some of the ammunition they need to hope act

on rates. looking at the lowest manufacturing numbers in italy and almost eight months. the chinese said the official data at a two-year high. the official data this thing estimates. down for the fourth consecutive day in a row. we are breaking the overall 100 days moving average. going to show you that over here in terms of what is going on. giving a slightly better reflection. it is shifting lower. again, these are the kinds of things, manufacturing data and movement are the kinds of things that will give a little bit of good news to the market polisario -- solitary committee. the dollar is the strongest currency out there this morning.

stronger against the euro, the yen. where will it break to on dollar-yen? that is the critical thing. is the see that this dollar rising. yen falling. is one wayak point 03. a couple of big stock stories that are driving it. let me show you u.s. equity futures. you are done happened percent. the question is, do you buy the movementyou have this in the united states of america. i am not going to give you buy or sell recommendation, i will give you data. the average that has lasted 1.5 days in 2014, the shortest since 2009. could it be we're looking at a much bigger potential move? s&p futures down happened percent.

you have not had a retracement of more than 10% in 33 months. back to you. >> what does tom keene make of that? let's find out. 25 minute to go until he takes the airwaves. joining us with a preview. >> are much going on. jobs stay in america. he will follow the store your followng link -- we will the store your following. also, a significant defeat for the house leadership. the evening and washington. a defeat against their own conservative republican on immigration and thousands of children at the southern border with mexico. a jumble of israel in gaza. jobs stay. joining us is alan krueger of princeton university. for fester kruger joins us each and every job stay. bill gross and jim glassman would join us on radio.

michael spence will join us with arguably the essay on the summer. he joins us from new york university. michael spence on new digital economies. mr. mcafee at m.i.t.. a wonderful set of guests. busy morning. >> a very busy morning. what are people saying about the price market action over the past 24 hours? >> we're down three percent as you know. i just did the math on the correction. marketrection and bear is 14 thousand 100. nowhere near that. certainly more volatile with the vix near 17 than anything with seen in months. >> certainly is. looking forward to the show. later on in the show. tom mentioning he has bill gross

joining him later on. pretty well known name in the bond world. his son knows very little about bonds. i find that the little bit hard to believe. he does know a lot about beats. he is making tech and media investments tied to the music industry. jon erlichman with him. >> 25 euros and the gross loves the drums. crazy one.s the he is the son of a legendary bond investor, bill gross. >> i cannot tell you what a bond is to be honest. i am like it is a coupon. i will not even get into it. >> he shows us around his music

studio in hollywood. >> he has seen at one time and said this is intense. >> he says all of his children are pursuing artistic paths. >> my brother is a photographer. honestly i am doing what i am doing. he always supported doing what we wanted to do. >> that is not to say he does not have his own business ambitions. >> i put rusher on myself to succeed and do well. >> the on his rock band, he is a producer and songwriter connecting with nellie hooper. he has worked with stars enterprises. in theusic as it is stock or bond world, you have to be ahead of the curve. >> he is investing in businesses that could shed light on where the music industry is headed.

like i have invested in 10-12 different things on the tech side. advisement on the investments but not to steer him towards a career in investing. every singleme to opener and supported the whole music thing for so long and never really pushed bonds or stocks. >> is he musically inclined to? >> he always said if it was up to him he would take this career over his career any day. huge beatles fan. withd how are you focusing 19 books around you and jamming out to the rolling stones? that is what he does. he loves music so much. it is definitely there. i think he is happy he was able to pass that down. >> interesting stuff. pretty strong connection. you to the ecb quickly. interesting stuff coming out of

the central bank. seeking clarification on russian bank units and where they stand with the sanctions. seeking clarity on bcb, access to financing. the ecb clearly has concerns about details and the devil is always in the detail. and access to finance. bringing you that later. getting numbers from chrysler. bringing you that in a moment. today. of an era after more than a century, fiat leaving italy. find out where they are up routing headquarters. also, the company is merging and will release exact details of what we are learning. the july numbers for chrysler, little bit of a mess. more in a moment. ♪

>> welcome back. you are watching "the poulse." headline numbers from chrysler. the market looking for something around 22%. a few years back him if you had said chrysler would be oferating july sales number 28%, you would be happy. but you need to be really happy with is the fact that jeep has

had one of the best quarters ever. sales rising. is a 41% increase. this is music to the years of sergio marchionne, the boss of the business. after 100 and two years, fiat think how to the italian home. to the italian home. it will list on the new york stock exchange after the merger of chrysler. about all of this. an automotive analyst for international strategy and investment joins us now. fantastic numbers of chrysler. >> i agree. at chrysler we look there have been tremendous sales growth in north america. and thes for management reason we are cautious on the stock is while you are seeing tremendous growth, not seeing

operating leverage in the business. this was very well demonstrated in the second quarter when north ofrica saw revenue growth around seven percent, but at the same time the margin contracted by about 90 basis points. >> what the sergio have to do to get that part working? >> i think that issue to a certain extent is in north america they need to spend money to invest in product. you have an increase in. it is a market expansion. at the same time, a tremendous amount of legacy product. so while it is the new vehicle such as the cherokee training -- gaining traction they have to increase incentive. this is holding back pricing. ?> what does that mean for fiat they clearly need investment as well. the fact that they are coming

together and moving headquarters. invest in alfa romeo. that is a lot of money. >> it is. i think when you look at the 7.5 to eightng point 5 billion euros. in quarter one spent 2.2 billion so seems to be behind plan. part of the reason they are proceeding with the merger and looking to do the u.s. listing is of course because they believe it will give them greater liquidity and access to capital markets. fiat looks to do that's going forward i think the approval can assist with that. >> what do they need to do, what does the market need to get right? sales numbers being generated out of the united states are really solid. are talking about what is

happening with alpha. what are the key metrics? >> i think the key parts of the business plan are clearly improving the north american business. margin. doing a 7.5% clearly a huge opportunity to improve the business. also getting back on track. profitable in quarter two. historically that has been a big earnings driver. but i think one of the problems opportunity is huge, as is the opportunity for performance and luxury brands. are seeing the margin contracting. the second half of last year during 13-14% margin. first half of this year they look just like any other premium

carmaker doing a margin around eight percent. bmw and deadline with mercedes. feels like the momentum and the policy driver for the business is actually backs off sequentially. >> thank you very much indeed. joining us from international policy. fiat may be using -- leaving italy but others are opening up. getting pretty interesting requests. >> it is a problem not many encounter. >> a recent customer came to us and said my interior of the austin marten is so beautiful i wanted in my for robbery. how do you do that? you takes where

high-end cars and give them to the maker. >> you take them and designed everything new. you design it to work together. that is a huge task. >> huge and expensive ham averaging 600,000 euros, this service can rework the supercar from head to toe. interesting companies is behind the asian market. the asian market investing more and -- more and more into customization. china estimated the industry could be worth 17 billion euros by next year. back in 2009, worth just 4 billion. big men he means big competition. lamborghini and ferrari are ready offer customization options. customers paying on average an extra 15% on top of the original cost. to customize of farah rate generally between 20% and 30%.

when it comes to a complete overhaul, sometimes you need a third hearty solution. lex we would like to offer them all of the same opportunity. we would like to offer them all of the same opportunity. i have them a clarion -- mclaren but it is so boring. it is the main differentiator from any other costume as they should company filed there. supern a supercar can be modified. forecast bright. we are going to take a break. some call it the world's most important economic indicator. jobs stay in the united states. i think we are looking for a number of 230%. gaza the cease-fire in teams to be over. the truce.roken just hours after the cease-fire

began. going back to tel aviv to get the latest on the story. we will see you in a moment. ♪ \ >> good morning.

welcome back. talking about what has happening with the british pound under pressure as we get readings that showed the growth rate has slowed to the lowest level in a year. talk about that as the weeks progress and more data comes in.

the data at the moment they be to little bit of a slowdown coming through. with theappening pound. i wanted to show you the next shot as well. shelling use like volatility. it is picking up. pay attention to that one. we have been getting interesting stuff from the ecb. also watching what is happening in gaza very carefully. jon ferro. let's start with you. the ecb had a few questions about the russian sanctions. >> yes, about whether the banks can continue coming to them for the regular market operations. we will have a new round. financinge toxic operations later this year.

will they have any operations -- access to the operations and the biggest upset comes later this year. we have an answer on that. >> eu is now saying units of the bank may access ecb funds. europets operating in will still be able to get access to the ecb. >> the gut reaction to this is what kind of sanction is that? >> i suspect they will monitor very carefully. the eu is saying it does not believe this will be used to break sanctions. so there is details that need to come out on this. it will be allowed for access, but i suspect only for the loans in western europe as opposed to using the money to finance russian operations. what happens as politicians

make a decision about sanctions. >> makes life fun. a look at the end of the day you have the big significant under utilization of the labor market and labor resources that has come out of the labors are -- labor reserve. headline numbers important that things like participation rates touch more important. the preferred reading of inflation. that is a big 1, 2. >> you have to really go beyond the headlines on the numbers. getting a very different picture. the participation story really fascinating. thank you. bring us up to speed with the latest. we have a cease fire. we do not know whether the cease-fire is still in place. >> it does not look that way.

probably put the cease-fire that it was written onto in the bonfire. took about 3.5 hours. israel retaliating. theth ministry officials in gaza strip reporting a number of casualties and injured. a lot of reports flying around right now. we do not have the israeli government coming out to say it is definitively over but seems as though the evidence with suggest that it is. before any parties have sent delegations to cairo for more substantial talks on permanent cease-fire. that certainly does not bode well for whenever the time for when they may negotiate a more permanent truce. >> we will continue to watch this very carefully. i know you will report on it throughout the morning. that is it for "the pulse." here on bloomberg

television. tom keene and his team up next. elliott will keep you up to speed with what you need to know. you can follow me on twitter. have a great weekend, everyone. ♪

>> republicans were of no -- rebel against their leadership. the last hope for legislation to fund our border crisis.

are there two americans decided by our digital divide? speed,ot the schwinn 10 we look at bicycles. this is "bloomberg surveillance." we are live from new york. it is friday, august 1. i am tom keene. it joining me, scarlet fu and adam johnson. >> a lot happening. stocks selling off. europe and china down about 1%. this is in spite of better manufacturing data we got out of china. president kirchner denies her country defaulted. today is jobs day. a lot to talk about. at 8:30.ent is out at 945, u.s. pmi.