>> russia fight back. we will sell you what it means for them. of america has a $17 billion settlement over its role in the financial crisis. sub-zero. a yield goes negative. this is ahead of another interesting meeting.

good morning. welcome. we are live from the european headquarters in im guy johnson. the business of the on say. the most successful of all time. we see how she became the queen of the concert and it is a little more serious. it is a food fight. russia releases a list of in retaliationis for sanctions imposed. how will it impact businesses? way it will figure this out. ryan chilcote and caroline join us to discuss. let's start with you. >> the headline is that russia is going to ban imports and eight is 43 billion in food every year. you go to russian supermarkets and it seems like form products

are ubiquitous. this is where you have to look at the fine print. yesterday. we thought we got that yesterday. and the russian government holds a meeting that starts and we are expecting a briefing after the meeting where we could get the list of specific products or foodstuffs that could be banned. intendsed that russia to ban all fruit and vegetables from the european union and that would be bad for poland. polands announced and since a lot of fruit and apples. they are trying a push to support apple production. for the netherlands

and they talked about banning agricultural goods. are chickenorts legs and they are called bush legs after the first president because there was always a trade and chicken was the victim. >> you have seen a lot of things with your research. >> yes. i was in russia and that is what they were called. the bush legs are on the chopping block and the food regulator says that what is going to be banned was his personal opinion. and hee not banned yet knew it he was talking about. he said it and they change their mindset yesterday.

one is going to be keeping. a they do not come up with list. they suggested what would not be on the list and i love that. that -- he issue is >> seemingly ubiquitous. >> form products, since the 90's, have been produced in russia. wine is something you cannot produce in russia and there is russian wine. >> unless you call it french grapes. there was a government official the told a russian newspaper that wind would not be on the list. if you want to start a revolution, take the wine. >> let's bring you into this. legs may or may not be

on the menu and wine looks like it will remain on the menu. you go to the russian supermarket and it is western products there. it is too early to talk about it. nevertheless, are they on the list? soldl the goods that are are made in russia and it would make you feel that a ban on imports would not be very much. they say that we have 10,000 the cfoin russia and said he was pleased with how they perform. one that comment. particularly kick cats. who would have thought the ukraine and political turmoil.

-- turmoil? will it go into the next quarter? we will see the impact show. it is a fluid situation and deutsche telekom says this will be a crisis. on the economy in general, they said there was a push on the core. is that 2% of the profit. >> i have to say that the chief executive said that he wanted russia to be one of or the biggest market. put billions into investment and it is a minor

part of profitability. >> this is a minor food producer. the russians have a voracious appetite. exposedit may be more and that is me getting ahead of the curve. we can say which food companies are affected. >> i have learned a lot this morning. we will leave it there. ryan chilcote and caroline hyde. let's move on. would have bank of america with a deal and they are ending the investigation. if the details are finalized, as bethink it could be, it will the largest settlement ever with a single entity and it will top the deal/year and they paid.

you see the numbers thrown the rest will be in consumer relief. you'll be able to go to your mortgage and get a better deal if you are a consumer affected by this. it is going to cement a status and it will be interesting because of the transatlantic story. having level of fines and proportionality out there with united states regulators on the table. out with the come enormous fine and we see nearly 10 billion, despite the fact we have not had any laws broken by europe. take a u.s. bank that may

the wind out of the sails of that story. i expect the french to continue the size of the fines can sit news to escalate -- continues to escalate. the ecb and the bank of england are set to release data. a couple of things come to mind. see a zero rate and the german curve. it may make it easier to not do qe. >> over the last couple of months, he may have been hoping. >> what do they do if they do not reduce? >> it is about a transmission where areand it means

we on that? where are we with that? i think kickbacks and they may be in for a shock with data. not today. certainly. >> my question is asset-backed securities and reducing the product -- the possibility. >> i think that is diminished and the yields and assets. i think the big problem is the policy initiative and talk enough credit supply. recessionee italy and and greece in deflation, is the credit demand going to be there if she gives them the supply? there could be interesting.

>> it is a long time away. the stress test, he is very confident about it. doors, i behind closed imagine there is concern about how quickly the bank collapsed. >> look at the market and it may be not logical that banks are on that ik or, it could be can't get a handle on that yet. the fact that the market is talking about it is a concern. pants i don'tse know how they deal with it. you could see inflation rates

and a huge demand. get an oil spike, it could be viewed. >> whatsoever about different problems. >> stiff-arm problems. the rates, where they are, get data continues to be where it is. >> an interesting story about the bank of england. the have to say, we have a problem here? this is massive for us and the data is getting worse. hike its atred to the wrong point of the cycle when the things are turning negative and difficult? ,ou take consumer spending out are you really confident? andt isn't inflation story

it never really points to robust growth. and, when growth is around 3% and the service , there is apanding rust to normalize and it will be an obsession. how does the bank address that? >> the question is if you are going to cause the recession by rates. >> yes. who wins the argument? >> it strikes me as being important. if you are not getting wage growth, it signals that there is more slack in the economy than you would think. there'llve less slack, be wage growth. you are not getting wage growth. the coala canary in mine with wage growth.

>> the problem is that the canary in the coal mine may be wage growth and it is to lay. if you want to keep rates low, you have to be ahead of the curve. you may be behind the curve. >> you may be. you run the risk of over-tightening at a point when -- >> nobody thinks there'll be a hike. slope of it towards normalization and a rate hike. and do a gradual process not think you are going to get that next week. to buildradual process up to that point. >> the data is strong. >> they will be slow and gradual about it. come on themore to central bank story. later, on bloomberg tv, we will bring you mario draghi and his

news conference live and in all. i will find out which type to wear. we will take a look at the impact of the russian import bans. we will get further analysis on it when we come back.

>> welcome back. let's bring the focus to russia. the sanctions today. we want to know how it impacts the food maker. and we areults talking about them. joined from zürich. to talk about this with any degree of accuracy. is there a concern that impacts the bottom line? >> i do not think so. dropped and the russian products are produced in russia and there is not a lot going on. .t is very strong

share.ve strong market we are talking about the food companies in europe being infinite -- affected. >> obviously, the other two. sales and is big. of that, ason 95% well. we have shown good growth. volume.pricing and they have an impact. the other one is you love her russiais 2% of sales in

and produces most of the products. from the point of view of the sanctions we just heard of this morning, this company should not have a negative impact. a meaningfulve impact on the supply chain? they focused and reorganized supplies and the way they do products around the world. we saw some disruption coming through. does it have a ripple effect? >> that could be a case and an inflation environment where that is the case. we look at different products and how strong they are in russia. andcompany increases prices specifically, with nestlé, they

are trying to centralize and something that will not be affected by sanctions. through ae shaped shared distribution cents -- center. they have it and could go into russia. it should not really have an impact. -- theer thing is about other thing is about gannon. non.an i they are sourcing from local anyers and they could have inflationary impact. it depends on how strong it is and the market position is for these products. specifically, i do not see any

impact at all. questionask a specific that relates to the way the company manages cash? what impact will this have on strategies, do you think? >> they highlighted that the priority is to invest in the cap ex.d reduce the focus is on acquisitions and we could see more. they could be confectionary. that is what we expect. we are not see big acquisitions until the companies that are areired because of that integrated.

range oft expects a share been black -- buy back and they show that they are not and are on acquisition on next year. >> we leave it there. excellent. thank you for joining us. >> you are welcome. >> we take a break. back in a couple of minutes.

>> here is 60 seconds. beenis low and the dax has crushed and the reason is to fuld. -- twofold. that is something that mario draghi has to think about today. the euro is lower. that is good. nobody expects the ecb to do anything today. there are major themes for press conferences today. one is data. grease and deflation. bank failures and if there are more to come. the other is russia. it is in the markets and what is karate think about it? what is he going to do about it?

we will talk to the former policymaker. that is next and we are back.

>> welcome back. breaking news out of russia, if stilton, fan of the you have a problem. officialjust got the -- we just got the official list of banned foodstuffs. the russian prime minister releasing this list after he was instructed to come up with a list yesterday by the russian

president. dairy,f, all fish, all cheese in addition to what we were anticipating, fruit and vegetables from the eu and the u.s. that is further reaching than i thought we were anticipating. it extends to countries like australia. let's see if we get any more fine print, there has to be fine print. some of this stuff better foreign products available in russian supermarkets are made in russia. but a lot isn't. steak consumers.

they are sitting pretty in this because they are doing it in the right country. >> there will be a substitution program put in place. it is hard to completely cover this ban. obviously, french wine cannot be made in russia. it is not on the list. >> inflation is already a problem in russia and food price inflation is a big part of that. thatistinct possibility this will only further hasten the food price inflation story. competition,e less

less supply of food, that suggests higher food prices. what would balance that, -- russiaf our shot did have a better-than-expected harvest, that can reduce the inflationary pressure. the russian president is very mindful of the issue of deflation. of all of the economic , i beters he watches inflation is pretty high up there. support is often for russian pensioners. they are in fixed pensions from the russian state. he has an 86% support rating in the polls, but nonetheless, no need to erode that. start --

>> they index tensions to inflation. the government has to spend more money. russiaother headline, will review the trans-iberian air routes. >> the russian president is to speaking on the record talking about the idea of limiting or banning overflight rights. fly over russia to go from western europe to asia. russia, being the world's largest countries, 10 or 11 time zones wide, that is a long ways to have to go around.

more fuel costs for the airlines. that is why we so all the western airlines slump rapidly. this is more of a suggestion. that may be on the cards. it is interesting, they are going after the food band today. not fully recouping losses made as a result of the concerns. >> inflation is a problem with the russians introduce food imports. starts not good if they introducing bans on overflight rights. the mining giant is maintaining its forecast, second quarter sales rose.

we started by asking him about the price of gold. 1300 is a good number. by thenside is driven industry continuing to supply gold at a loss. it is my pet subject. we are not disciplined as an industry. we are not in good shape. sure supply will tighten up as the industry struggles to make a profit. drivers, thosehe that chasess investors into gold. 1300 is a good price for the time being. >> did you ever fancy a big

merger? for bignot a big one organizations. i like to run companies that make profit. >> the industry has gone a bit crazy in the last 10 years. you are number enough for in the world. did you ever think, i want to be a number one? >> we do not have any debt as the company and we make a big difference to where we invest. find one moreo big deposit or acquire one. >> you are in west africa. --have you got prevention things in place right now? are you worried about the

spread? >> everyone is. the big thing is education and discipline. we have done all of the standard things. is, a lot of migration in that part of the world. it is about education and teaching people to be very careful and no longer shake hands and wash her hands and be aware. ceo of rentthe andgold. let's focus on what is happening with the boe. england could be creeping towards a first rate hike. charles goodhart is a

professor of economics. if you were one of the nine, how nowe -- would you be there to raise your hand and say now is the moment? x i would not be there now, but we are getting closer. there are a number of reasons we are not there now. wages continue to surprise on the downside and we need to tory about what is happening productivity. the eurozone is beginning to look a bit worse again. raise rates, we could imbalance the economy. in the middle of the geopolitical problems with ukraine and russia, one would not want to raise rates in the middle of that. >> time to observe and i just. -- digest. let's talk about wages.

doesn't signal the fact that there may be more slack? has a goodus explanation. despite the fact the labor markets have shown remarkable buoyancy. we do not quite know where we are. i will have to confess a degree of uncertainty and endurance. -- ignorance. common a bit throughout the whole world. it is partly due to globalization. a very large proportion of services overseas and people know the threat is credible. >> do you think members share

your lack of clarity on the subject? >> i have great sympathy for those who have to put forward a forecast. forecasting is impossible. we do not know what the future is going to bring. one of the great difficulties of being an economist, people think you're world is to forecast. about some of the other issues. how a way of forecasting the impact will be felt. the ecb has a very different problem. how did the two central banks interact in their thinking? >> the ecb is much harder because people from very different backgrounds, most of generalle share a

commonality of you about how the economy's work and the way the policy ought to be done. that is not the same in the ecb. they are much more like herding cats. the political problems in the ecb are a great deal more difficult. mario draghi has done masterfully in very different -- difficult circumstances. this one is fairly easy for them. >> how do you think the bank of england's will be viewing the deliberations the ecb is facing at the moment? geographically and economically linked. even johnson admitted that.

let's think about whether or not they would want to tighten into an environment where the ecb and the eurozone are having significant economic problems. >> that is one of the major counter arguments. looking weaker than it did a few months ago. with the italian figures and some of the german figures on the french figures, all showing signs of greater weakness. forecasts are getting revised down a bit. unless there is some reversal of that, the ecb will have to do something within a couple of months. but what? given the different viewpoints, it it is much harder. ecb. much harder on the

>> how will russia figure into all of this? it is hard to extrapolate the impact they might have. the relationship is changing. how is that going to impact? a negative. one must argue against raising rates because even if things don't get any worse, this will feed through into lower eurozone growth and even though -- and even lower u.k. growth. that is a negative. difficult formore the ecb to take into account .hat is transitory

with luck, it will get reversed. if it gets a lot worse, you have to think of much more serious measures than they would be prepared to do at the moment. >> we will leave it there. member. we will bring you mario draghi's news conference. we're back in a couple of minutes. ♪ you mario

>> welcome back. europe's biggest phone company reported results today. it shifted network investments. story front and center for dt. the results are interesting, they tell us something about the business. what we really want to know is how will reorganize. that is the big question that hangs over it. opera iswo-year soap showing no signs of being concluded anytime soon. we saw softbank plot of a plan to buy t-mobile.

the good news for deutsche telekom, t-mobile is doing pretty well. it is adding subscribers. this is not a fire sale situation. grilli, they want to get out of theyss soon as they can -- want to get out of the u.s. as soon as they can. know is iliad do and france. it is seen as a bit of a longshot. they are there and they do have a bid on the table. then there are the domestic players. .e have had dish they've expressed an interest in t-mobile in the past. then there are the other domestic player's. comcast. even google has been talked about as a buyer. maybe they want to make a bigger

bet on mobile. there is a long list. >> come back to comcast. not something that is common in the united states. it has been shown to work. could the model be you replicated stateside? in the u.s., it it barely exists at all. comcast is a behemoth in every way, but it has no mobile offering. long-term, we think we will go to quadruple play offering. >> matt campbell on the latest from dt. $5.3 million, the average ticket sales generated by jay-z and

beyond see -- beyoncé. it has grossed over $100 million this summer. we will look at the business behind this record-breaking duo. ♪

-z and beyoncé tour comes to an end later in san francisco. it is expected to generate over $100 million in ticket sales. emily chang checks out this power couple. >> beyoncé and jay-z may be the most powerful couple in music. from their first collaboration in 2002, their secret wedding in 2008, to the release of ,eyoncé's self-titled album they cap people guessing on every move. albums, and20 solo sold-out global tours. they had become the king and queen of hip-hop.

the success has commanded high-priced endorsements. just jay-z has valid and millions -- dialed in millions. media, 84rule social million facebook fans. ♪ problems, but 99 selling tickets is not one. it has grossed over $100 million this summer. averaging roughly $5.3 million a night. it is the second most successful tour of all time. their appeal may be forever young.

>> for some hot shots to some hot shots, former jet ski world champion pulled off some pretty along themersaults south african coastline. nice. ever wonder how they land some of their tricks? they practice. this is how they practice. you want to get those ones right before you have to land them on something hard like concrete. fun.looks like a lot of viewers, it is a second hour of "the pulse."

t-mobile, words this business go next? it is a big day for central banks. ♪

back.sia bites the u.s. and canada, amongst others, the sanction showdown escalates. we will tell you what it means for the world's biggest food companies. bank of america bashed. its7 billion settlement for role in the financial crisis. the german two-year yield goes negative for the first time in years. head of the ecb rate decision later today -- ahead of the ecb rate decision later today.

good morning to our viewers in europe. a warm welcome to those waking up in the united states. i'm guy johnson. this is "the pulse." a busy morning. let's get to our top story. vladimir putin has retaliated against the sanctions imposed on russia. this country has banned major food imports from the eu. more than we anticipated. >> yes. it goes further than what many people anticipated. dairy, etc., anticipating vegetables and fruit. people will wondering about very. -- dairy. banned. already been

beef, it is not a huge beef importer, but that is significant. fish is an interesting one. a couple of omissions. not banning any imported baby food and making no mention of wine. overflights. they are talking about overflight bans. is kind of like the united states and the european union. the russians are announcing what they are banning today and saying, by the way, here is what is next. these are the so-called overflight rights. if you're going to go from europe to asia or the other way around, you want to go over

said. . -- siberia. if you're going to have to go around, that is going to cost you fuel. this got leaked a couple of days ago. we saw all airline share prices react to that. >> a couple of negatives that could happen as a result of this. the inflation story could be quite significant. the central bank has indicated its concerned about this. how big of a break will this be? >> inflation is one of the things he is concerned about. it is higher than he would like it to be. his strongest base of support is amongst elderly people who are on fixed pensions. when food prices go up, there was a question about whether they can afford food. them to be darn sure they can afford food.

they thought about this for a long while. economists will tell you if you , it meansthe source less competition and higher prices. the counterweight would be that it was a good harvest this year, not just in russia, but also the european union. this is interesting. that might take away a little bit of the inflationary pressure. -- itmean lower pressure might mean lower prices in the eu for fruits and vegetables. >> drawing a line between this reaction and the troops on the ukrainian border. he needs to have wins at home but our political and this would be one of them from a propaganda point of view. the question is if russia

responds as it now has by banning food imports, does that preclude russia directly intervening with its own troops in the east of ukraine? i think the answer that those two probabilities are not mutually exclusive. i think the russians felt they had to respond to sanctions already introduced by the u.s. and the eu. the decision to go into eastern say thatthe russians is groundless, would be predicated on something entirely different. the pro-russian separatists in donetsk look like they are truly now under siege. they have said that if they do not get russian support in the

form of russian troops than that maybe the end of them in the next couple weeks. that will dictate the russian president's decision. >> we will leave it there. let's turn our attention to the other big stories. bank of america is said to be nearing a deal with the united states to pay $17 billion to end its investigation. if the deal is finalized, it could be the largest settlement ever for the department of justice with a single entity. it is interesting that this will not all be in the force -- form of cash. $9 billion will be in cash. cash.not all going to be the impact on the bottom line won't be all at once.

that full number won't be factored into the balance sheet. it may have some impact on transatlantic relations. france supported the issue of proportionality of u.s. regulatory fines on global bank. -- banks. the fact that we have such a significant find to the u.s. bank may be taking the air out of that argument. the french are still licking their wings. from banks to central banks. the ecb and bank of england are set to release rate decisions later today. jonathan ferro joins us with more. mario draghi first of all. the myriad of problems this man faces. >> i know.

issues.e load of data, issues with banks, and russia. i don't even know how he goes about russia. >> do you have to? is it necessary for monetary policy to be looser in this kind of environment? suspicion has got to be yes. >> yes if you think it is going to be deflationary. the price pressures will be there. affecting thely german economy. you would have thought, we are not exporting as much. greater deflation is probably a good thing. you need prices to fall in that country.

they did not need a financial crisis for that to happen. they have been in an economic situation for the last 10-15 years. germany slowing down is a concern, surely. >> germany has not had the inflationary push that some would argue europe needs. nevertheless, you start to slow germany down and it is going to have an effect on demand throughout the rest of the continent to read -- continent. >> they have got to sit and wait. credit demand is going to be the big issue at the back half of this year. is that demand even going to be there? >> the banking sector -- >> this is why we needs trust tests, to restore the credibility, is what he will say.

inwardly, he has to be pretty concerned about how quickly one of portugal's biggest banks collapsed. there is always an interesting twitter battle about his ties. how much time will he be spending in frankfurt worrying about this stuff? it may be anecdotal. it may be something you could look at. the bank of england has a completely different problem. mark carney is a very relaxed man. >> i kind of think the bank of england is injured -- interesting today. are, draghi's problems though, enormous. look at at it and you the numbers coming out today. you have more companies talking about this having a meaningful impact on the german economy.

it might go down the road were some of these companies start to use this as an excuse for weakness. >> i think it is meaningful at this point. the fact that they will be opening half the number of stores in russia probably tells you something about that there is a company that is being directly affected by russians. stay tuned. john will be breaking the rate decisions later on. he will be walking you through the ecb press conference. live and in full. no deal forl or deutsche bank -- deal or no deal , two bids to none in a week. ♪

>> welcome back. the hour. past you are watching "the pulse." let's talk about deutsche telekom. europe's largest phone company said they have gained customers in germany and the united states. sprint ended talks to buy t-mobile in the u.s.. what is next? let's find out. matt campbell is here.

did t-mobile really have a chance that it was going to be sold to sprint? >> yes, it would have been a significant change. encounteredhave political resistance, possibly because it is softbank the control sprint. sprint.controls it non-american consolidators are less welcome than in market american consolidators. i think they are at an impasse because t-mobile rejected the bid. the options have gone to zero in a moment. we will see with deutsche telekom tries to do. move towardassive fewer cable operators, fewer mobile operators. we are seeing some very, very

big deals to achieve significant scale in the u.s. market. >> are the options zero? >> i don't think they are zero am and necessarily. softbank was going to be a nonstarter. mobilerom four to three operators in the u.s. was not acceptable at this point. this was always a bold deal. there was always a significant chance it was not going to get through the approvals process. there are others. -- illiodeally odd from france. the options are not zero. the underlying business at t-mobile u.s. is not doing too badly. that is a relative bright spot for deutsche telekom at the moment. >> a more fundamental question.

why not go in with somebody else? generate scale? find a way of making it work? what is wrong with the business? >> they spent an enormous amount of time trying to make it work and trying to build the scale that they believe is important in their own market in germany. we have just seen the approval of telefonica's acquisition and will move that market from four to three. we are seeing the same kinds of transactions in very big markets. they would obviously be of the , which is that you need to have a massive redrawing of the sector mapping in europe to achieve massive levels of consolidation in europe. i don't know where the door to telecom follows that logic. telekomer deutsche follows that logic. >> how does this fit into the

overall story? it does not have the footprint that vodafone has in the emerging market. how does it position itself? what would you do if you were running door to telecom right now -- deutsche telekom right now? >> i think they are pursuing all the right moves. if they cannot get rid of t-mobile, which is a very extended affair, they do not have any other options themselves. we have to get through that phase. you also have to get through the regulatory phase. we have seen vivendi not achieving receipts from their sale at the end of the regulatory process this year, which limits the options vivendi has in the here and now, perhaps not after. liquidity and the access to liquidity is a very key feature

of this. you saw how quickly fox was able to raise a certain sum of money. but not an infinite sum of money. there is not an infinite game out there. kind of bubble mentality in which people are fighting to do existential deals. bankersdo you think the are going to be saying? saying that there is a big break in the system. nevertheless, if they were looking at the landscape and thinking of m&a and how they're going to reposition the business and what is next, what will the bankers be telling them? >> they will recommend whatever brings in the most fees, which is why they exist. mean all probably renewed effort to sell t-mobile,

likely to one of the cable players in the u.s. and to find a way to put that money to work in europe. partly through network investments, which will be more important as we move to 5g. and then perhaps m&a. europe has something like 200 distinct mobile operators and the u.s. has four or one day three. this consolidation is going to come at some point in europe. it is just a question of who does it. future where a european telecoms coalesce or five big companies, of which deutsche telekom is planning to be one. >> we're going to see the same kind of consolidation and cable. we have seen liberty global make acquisitions. we could see liberty global expand its content interests.

we have certainly seen the rise of large-scale production discovery.ought by very big moves by american players into europe and , sense that european players that a certain amount is also vital in europe to have the scale in northern european markets, which are very attractive economically and where the regulators, although tight, actually except the issues of competition -- accept the issues of competition. there is really definitely a big series of transactional and global moves afoot. >> we're going to leave it there. thank you very much indeed. we will take a very short break. we will see you in a couple of minutes. ♪

>> good morning, everybody. welcome back. you are watching "the pulse." data frombstantial the central banks here in europe. let's talk about the eurozone, the ecb. this morning, we have euro-dollar trading at 1.3 374. it is not down as much as the ecb would like it to be. we have a number of interesting developments.

we have the front-end of the german curve moving negative. 10's have moved toward more than the front-end of the curve. that is something the ecb will be paying attention to. the russians are going to impose a ban on european food. is that ultimately deflationary? well that food find a home in europe which will push down prices across the eurozone in terms of food prices, which is already been fairly significant? that is something to watch out as well. we will look at the impact the sanctions are going to have. the sanctions will have a deflationary effect in countries like germany and then the sanctions coming out of moscow may have an impact on other parts of the euro zone economy. french cheese could be meaningful in terms of the story, with two aggregated altogether. mario draghi certainly will be thinking about all of that.

let's look at the company news we are looking out as well -- at as well. cutting profitability forecasts for 2014. sales decline was due to golf equipment. -- gulf equipment. -- golf equipment. finally, commerce bank posted second-quarter prospects -- profits more than doubled after the bank shared unwanted assets. the bank is expanding everything from consumers to companies. right, we are going to take a break. then we will get to the central bank story.

we're watching the bank of england and the ecb. both banking you decisions and mario draghi's news conference. follow me on twitter. when we come back, we will be talking about the impact that the fighting in gaza is having on the israeli economy. we will see you in a moment. ♪

>> good morning. welcome back to "the pulse." we are here in london. i'm guy johnson. let's talk about what is happening in israel. the truce with gaza is nearing its final day. our next guest says israel's market is strong enough to deal with the geopolitical tensions. at pwc us is the partner israel. thanks for your patience. let's talk a little bit about

the israeli economy. everybody tells me it is able to cope with these types of conflicts. my sense is that this time is different. different for a number of reasons. first one is that we saw ben-gurion shut down for a little bit. that it's a sign we have not seen before. is your sense that this time is different or the same as previous conflicts? i think this conflict is much bigger to the israeli economy than in the past. the ben-gurion airport was shut for a few days. eventually, it did not harm significantly the israeli company. we know how to cope with such situations. all, israeliall in companies, israeli economy, and and israelioreign investors, understand that every few years there are such events.

we say, business as usual. >> ok. what about the tourism ministry? said it was not business as usual. they said it has been dramatically affected. >> israeli tourism has been affected, yes. this has been for sure period of time. contraryributes to the is that internal tourism and the internalins used tourism for external tourism. the true effect will be measured in a month or so when the cease-fire is done and we will see if foreign tourism will come back to israel. the internal replication of tourism in israel actually was not working, they said they

needed significant help from the government. what kind of help do you think the government needs to put in place after this fighting to stabilize key parts of the economy? >> it depends. where it relates to israeli high-tech companies, i think that businesses are flourishing. have been three successful ipos in the u.s.. one of them was the biggest israeli ipo ever. when you talk about tourism, i guess the government will have to give reduction of taxes or pr efforts outside of israel to attract tourism outside of israel back to israel. gurion.lked about the -- ben gurion. has andering whether that longer-term shadow effect on the

economy. i'm also curious to get your take on what is happening on the northern border. syria is a problem. arabia now got saudi having to provide further military assistance to lebanon, also on the northern border, vis-à-vis isis. what is the sense among israeli businesses about the larger situation in the region? are they concerned, not just about gaza, but what is happening elsewhere in the region as well? i think that when you talk to israeli companies, these risks are factored into their business. if you look at the dollar exchange rate and the euro they are not, significantly influenced. they are not followed all during the gaza operation. -- volatile during the gaza operation.

israeli companies are factoring in the risks associated with doing business in israel. currently, the situation is that we are focusing on the business and evolving it. not on what can go wrong. >> ido heller, thank you very much indeed for your time. let's go from tel aviv to new york. "surveillance" takes the airwaves shortly. tom keene. >> good morning. we are going to be looking at the interest rates of germany. ecb.onto the can you imagine what the mario draghi press conference will be like today? with the negative two-year yield in germany. we are going to talk retail in america. back to school. in the united states, back to school is almost like a rite of passage. you do it in august and a little bit into september. it is a huge part of american

retail. getill talk about that and ideas on the strength of back to school in the united states. robert kaplan will join us from harvard business school. i will talk to him about language, about the idea of the importance of many languages to corporations around the world. we have a lot in store wrapped around the newsday. what, my kids are not ready to go back to school yet. they don't want to think about it. we're are not ready for it yet over here. >> when do you go back to school in london? >> beginning of september. >> ok. after what we call labor day is when we go back to school, unless they go back earlier -- in the west. i don't know why that is. colorado and california, they go back to school in august. >> why would you do that when the weather is so nice? >> it is time for philosophical

questions. >> these are the questions that need answering. plus the language stuff. thank you very much, tom. let me run you briefly through the top headlines. russia has banned food imports from the u.s. and the eu and retaliation to sanctions imposed. has put foodn import and sin place for one year. place for one year. if the deal is finalized with bank of america, it could be the department of justice's biggest deal with a single entity. it is not all cash. for someld be relief of those involved, in terms of consumers. banks are expected to keep interest rates.

the bank of england could be split over the next rate increase. let's talk about all of this. let's start off with the ecb. mario draghi has a lot to think about at the moment. is slowing down, russia is imposing sanctions, we are imposing sanctions on russia. does he need to do something? think the thread throughout all of you have mentioned is that there are downside risks to the ecb that will increase the pressure on him to reissue markets if things do go wrong in any of these fronts. i don't think there is a need to act right now. the negative interest rates, the interest rate cuts. the window where the ecb can wait and i think it is a good

idea to keep some powder dry if things do turn worse. plenty of things. my thing is how many times russia gets mentioned in the press conference. we will be counting. how does he factor russia in? it is still developing. >> i think the key is confidence. of course you have got the exports, of course you now have to look at each individual sanction of the eu and the russians and what effect they can have on the economy and whether there is a need for the ecb to respond to it. the russian counter sanctions, it is all about food. that could have some import and european exports.

-- impact on european exports. the real factor is and remains confidence. we are seeing a serious impact on confidence in germany. germany is the one country where you could think they could cope with it. the weak ones like spain, portugal, italy -- there are signs that even italy is affected by this already. russia will say that it has also to of impact. down the road, would you be raising your hand today to say this time for a rate hike? >> not today. the same risk to the ecb applies to the u.k. russia affects europe.

that is the downside to the u.k. economy as well. you have the independence referendum. you would not want to be prematurely raising rates at this stage. should receive fairly quickly. we have a big boom in the housing market. >> i thought macro prudential was meant to do with that? >> it was. we have the mortgage market review. i really don't see much of an impact. ultimately, i think you will have to raise and they will have to raise interest rates. i just don't think the timing is right. i would wait. forhat is the spread like the bank of england and the ecb in terms of rates? of a ratea 60% chance hike in november and quarterly rate hikes after that. for the ecb, we don't expect a rate hike until 2016.

it is an interesting question. sterling is going to rise, at least on these monetary policy issues. it must be rising, it will be rising. the u.k. is running a current account deficit. up.ling is going to go the rebalancing of the u.k. economy -- that is not good news for that. that will be under a bit of pressure. i don't think that the alternative, trying to force down sterling by keeping monetary policy loser for longer, is a good idea. i think that would be a much bigger risk. i think sterling is likely to be stronger against the euro. >> thank you very much indeed. chris has just laid out an awful lot of issues. how are the markets thinking about the issues? how is jonathan ferro thinking about the issues? >> thinking very hard, guy johnson. more weak data.

imports of food products from the likes of the eu, the u.s., and norway, among others. marine harvest is getting crushed today. down by over 10%. this will have an isolated impact on particular companies. this particular set of sanctions. it is driving stocks lower, as you would expect. the big thing today is mario draghi and the ecb. mario draghi has to think about russia and weakening data. i'm not talking about an italian recession and greek deflation. i'm talking about the core of europe. german data getting weaker and weaker. the failure of the portuguese concerned about

how quickly one of the biggest banks virtually collapsed in a matter of months? >> i will think about it. jonathan ferro, thank you very much indeed. the food fight. russia biting back. find out what it means. for world food companies and european companies in general. we will see you in a minute. ♪

\ >> welcome back.

you are watching "the pulse." russia has banned food imports from europe, the u.s., australia, and norway. what does this mean? caroline hyde is here to tell us. nestlé probably won't be the country in the fire line. plenty of other countries will be. bigertainly not as potential he because no baby food ban. nestlé sells 90% of its goods in russia and it makes them in russia. it is not actually importing those. it is not taking them from outside russia into there. whether or not sanctions will stretch to companies operating in russia. think moment, i don't this is going to have as much an effect on this late. -- nestle.

fluid.ntry is they are saying that the numbers are strong. they have had good growth in previous quarters in russia and growth in ukraine. they said ukraine is very resilient. whether or not we have to wait until the next order to summon the concerns about geopolitical risk and get into the purchasing of ukrainians in their hometowns kitkats are flying off the shelf. russia is the second biggest market for ice cream. they have a boutique where you can of mushroom soup with ice cream. a pretty disgusting combination. [laughter] is not feeling any of the bad wins in russia.

they have got to be looking at russia. it is a minimal footprint in terms of sales. less than 2% is what analysts were saying. it remains fluid, but they are not entrenching so far. >> could the dairy ban be a problem? they like their chocolate. >> precisely. a slightly superior taste. iteris say the to the americans? -- dare i say that to the americans? a lot of these companies that sell big in russia have pushed manufacturing into russia, so you offset negative currency issues in negative russia. >> it is interesting they put cheese on the list. champagne only comes from a certain part of france. ine brands.

-- bans. >> maybe the smaller markets will be affected less. irelander countries, come on the back of these bands. we will see with the real ramifications are. >> they give very much indeed. we will be back with a little bit more after this break. see you in a couple of minutes. ♪

>> welcome back. you are watching "the pulse." i want to show you euro-dollar. it keeps wanting to pop higher. session lows and we are beginning to work our way back up. we are waiting for the ecb press conference. here.an ferro is ryan chilcote is also here. two stories. the food story. the banks. both have an inflationary link. >> they do. we were talking whether this could be inflationary, whether further down the line we could get energy spikes. when you increase the available supply in europe, that could have a deflationary impact and push down food prices. another headache for mario draghi to have. >> it could improve consumer spending.

they could spend more elsewhere. this could be good for other parts of the economy, which need the spending from the consumer. >> intentionally. but i think the amount of problems mario draghi has to deal with today, i don't think there are many bright spots. >> there are just an awful lot of moving spar -- parts. they are banning for out of five food groups. [laughter] with the exception of chicken having been left out of the meat section. if the food cannot go to russia, where does it go? deflationary pressure here. another question we have not looked at, what if you produce your food in russia? these big food companies, where did they make their food? if they make it in russia now, as caroline was talking about. what if they make it mostly in russia, but they rely on a

couple of ingredients out of russia? we talk about finished products. is stillthe stuff imported and that could become located. it's more complicated. without the food coming income award of the russians get it? they are not discussing with ecuador having charter flights to pony up the difference in beef and chicken. >> pony could be the poor choice of words. [laughter] >> i think you have to look at this in percentage terms. this is 10%. this is a big deal in percentage terms. thatis an area in europe is really, really politically sensitive. it is very sensitive. i think they probably realize to that. it is not just the economic impact. it is, let's hit them where they know it is going to hurt. >> the french have not pulled

the plug on sales of the warships. but brie is out in russia. >> this is a geopolitically charged climate. we had the nato secretary general in ukraine to lend his support to the ukrainians. i'm sure that will be helpful. newsflash. this is about nato and ukraine. here we go. anyway. what is the ukraine military do? what do the 20,000 russian troops to? >> the fact that he has come down hard on the sanction side, doesn't mean there's less inclination to put troops over the border? >> i think those are mutually exclusive ideas. i think the russians felt like they had to retaliate to the sanctions. whether they sent troops into ukraine, which they said they will not, depends on what happens in the east of ukraine and nothing else. >> we will leave it there.

thank you very much indeed. a reminder to stay tuned. jonathan ferro will be back later on. we will be following the central-bank decision. we will bring you the ecb press conference with mario draghi live and in full. "surveillance" is next. ♪

>> this is bloomberg "surveillance." >> the german two-year moves to a negative yield. deflation in the air. bank of america's yturn.

han.ress moyni back to school. good morning, this is bloomberg "surveillance," live from new york. thursday, august 7, i am tom keene. joining me is scarlet fu and brendan greeley. adam johnson is on assignment. our morning brief, negative yields. >> that is not the overnight development. the development was data that contributed to that -- german thantrial output grew less expected. australia, the jobless rate jumped to a 12 year high at 6.4 %. surpassing the u.s. level. >> maybe even china, that links into china. >> it is a resource story. >>