closer to the ukrainian border. i will break down the geopolitics and what it might mean for you. hans, over to you. >> we will be looking at eon, the german energy giant. their sales are down 13%. their profits are down 20%. expectations were down for 25%. it looks like they beat estimates. we will see what the stock does and we will look at their global strategy as germany moves towards renewables. itkulik the data and you see japanese hopping -- gdp dropping the most since 2011. futures are higher. the dax pushing forward from .6%. toi am going to go back dollar-sterling. i think that is where the action will be. you see here at 1.6824. where we were when mark carney

went to the mansion house and said you guys don't understand risk. get ready for more. i think that is where most of the action is. as for the rising equity markets, i think it comes down to the progression of a convoy. ryan chilcote will take you through that. are we facing a de-escalation in terms of geopolitical risk? i am not saying it is binary. it is darn important. the relationship between europe and russia is one of the ultimate driving forces of confidence in germany, of trade with europe. we batted away the fact that in china, new credit plunges. the weakest in 24 years. he saw the shanghai index managed to hold up. the nikkei managed to hold up even though the gdp contracted. ofmust wait until the end the third quarter unless we

understand there to be more stimulus and the deflator rose for the first time in 19 months. let's see how we go. the quarterly inflation port will be critical. then we go much -- them move on to how much division there will terms of viewin of the slack in the economy. we have the jobless numbers of 9:30. retail sales in the united states later. we have a couple of companies i think we feel like touching in on. biggestne of the security companies in the world. a strong return of growth in north america. eon, stock is flat on the day. we are waiting for the market to open. michael page down 2%. first-half revenue came in but the foreign exchange, the pesky issues for equities in the second quarter. it has held michael page back. not too bad in the u.k..

britain and france underwhelming, to say the least. -- dax is a very into it... is a very individual adjusting bank. >> joining us is francesco gaster really. he is that goldman sachs. francesco, good morning. results ugly this morning. gdp down the most since 2011. do you think shinzo abe our governor corrode up -- kuroda? exceededk the decline expectations from the boj but it enforces the idea that they will be in october and deliver stimulus. what catches them mostly is the market does not believe they inl get inflation back 2011 at eight stable level.

they declined and that is sub-optimal. >> when you look at japan, weak growth to one side. when you look at the u.s., growth next year -- you have written about this extensively -- no one has changed their course. there is a consensus everything will be ok despite everyone revising their course for this year. why? >> we have had 100 basis down 2014 and noon to change in 2015, which is 3% consensus estimate. what is more interesting within that statistic is that the dispersion among economists is thin among that number. everyone is saying the same thing. why is that? it partly has to do with the fed. it must be the case. conversations,

people believe the fed is over weighing its role to get full employment. maybe they are willing to would tolerate more inflation to get the economy full of jobs. that is one thing. i think structurally there is the idea that monetary policy has another angle, which is the financial tied. -- tide. they are taking the edge of the leverage cycle by being more intrusive in the way they regulate the financial system and they have extended the longevity of the cycle. i think that is a talking point in the industry. it isird thing, structural. it has to do with energy prices. you commented on geopolitical events. we have not seen material pickup. >> oil has barely gone anywhere. >> precisely. that is leaving more room to grow for the u.s., to accommodate energy demand without setting off these price

spikes that we had in the past. that may be why people think we are ok. >> do you think we will be ok? do you look at those projections and think there is too much consensus? that is not normal? >> on the volatility of the valuation of stuff, i have no particular insightful comment. i think we are within the cyclical norms. there is a self-sustaining momentum here. i think the risk emanates primary -- primarily on the perception of the fed. inflation has turned and we are seeing buoyant markets. the demand is picking up. there is an idea that the fed will be very tame and that midcycle rates will still be at zero and the market may have to adjust to that and possibly discount a more hawkish fed. a central bank that has not been tame over the last month,

and especially the man at the top, mark carney. maybe the bank of england can tighten, but if you since the economy is not resilient, with a 25 point basis like if it isn't -- basis hike? >> if it isn't, there is trouble. the effective rate for people like you and i is different from 50 basis points. what is interesting to monitor is how spreads apply to the profile of these rates. will they evolve as rates go up? by that time, banks will be in a stronger position and will be willing to lower the mortgages as rates adjust upwards. what is also happening is people are taking fixed-rate mortgaging or locking in the cost of financing and that should be a good idea. >> thank you very much. we will talk to you again. on cannot have francesco

bloomberg without talking about bonds. stay with us. ♪

>> welcome back. this is "on the move" streaming online, fire tv, everything. equity is pushing higher.

you see the dac is -- dax is up by .7%. that could change through the day. these markets have been trading on headlines and anything comes out of the situation in russia and ukraine -- you know what could happen. convoy closes in on ukraine's eastern border. what happens when the trucks hit the front here? let's get to ryan chilcote who joins us with the latest. how close of the trucks? >> they are getting closer. belgrade is where it gets interesting. the convoy would have as little as 40 kilometers to the russian-ukrainian border. the largest city in the ukrainian area. what will the russians do when they get to belgrade? they do not have to go to the border crossing necessarily on the way to the city.

ukraine themselves have said they don't control the entire border. interesting because the ukrainians have said they will bar the entrance of those convoys. said it wasc that working with russia to provide aid has reservations. >> we would need security guarantees and direct contact with all the parties. this is not settled yet. we need to know precisely what is inside the convoy, the size of the convoy, and the various materials that will be handed over. >> as odd as it may seem, i think it is the movement of the one of the will be bigger forces of the market today. it is something to watch. i suspect i'm not the only one. >> i have seen, co-pictures of this convoy. i have seen trucks with trojan

horses or shot to the top. i have seen tanks with humanitarian tents. jokes aside, this is a serious issue. what are investors saying? >> we are getting different reactions. if you look at investors closest to eastern ukraine, they are pretty concerned. fair to say that perhaps in ukraine itself, they are treating this almost as if it was an invasion. we saw a local currency sold off yesterday. panicntral bank reporting buying of dollars. it is the world' worst-performing emerging-market currency. the central bank said there is no reason for it to be as low as it is. they have $16 billion to defend it but they have tried to defend it three times out of the last -- three days out of the last seven, unsuccessfully. who is propping up ukraine? don't forget the imf and the $17 billion aid program.

the russian market, a lukewarm response. it was down a tad at the open and so was the ruble. we saw the same thing yesterday. global markets saw a bit of a selloff. the usual indicators, like crude for example, pretty much shrugging off this geopolitical situation. >> i am not sure oil is an indicator anymore. it has been snooze for a while. when we talk about russia and the response, we talk about one man, president putin. word is a situation leave him? >> i think this puts putin in an interesting position. it is only fair to assume the russians have good intentions with this humanitarian assistance. we have no proof they have other plans. the russians say that they are headed to the city of lujan's -- luhansk, a city of about half a million people where people have not had running water or

electricity for a wild. the russian seem intended to get that eight there as quickly as possible. that is presumably something that will go down well in the city and in russia itself. concerted part of a international aid effort, even if it is uncomfortable for the west, if this is an area where the russians are able to cooperate with the west, then it could be a de-escalation. the concern is that it is pretext for invasion. that this is a trojan horse, and that obviously would be a market negative. >> great work. francesco is still with us. what we talk about russia, one of the big moves has been risk aversion. german bonds dropped to 1% on the 10 year. we were not even at the height financial crisis but you

got a call that yields would double by 2015. what underpins that? >> we are double at the level we are where we were at the beginning of the year. i hope that is not completely lunatic, i hope. they go up at 2%, the rate of inflation they target. what is happening is two good things. you have this geopolitical tension -- two things. you have this geopolitical tension. the dax is an underperformer and this may be tied to the rally in the bond market. you primarily have the monetary policy. they cut to zero and a negative on the deposit and the voice has been they will not hike until 2060. the whole curve -- 2016. the whole curve has been steamrolled. metaphorically, the two-your rate is the new overnight and so on. at 1%, how you get bonds

which is way below the expected rate of inflation. i think there is still the expectation of qe in the air with inflation being so low that is part of the arsenal. that is also in people's mind. how do you get them to turn? that is the question. foremost, you have to expect inflation to pick up. that is what we do. we think inflation in europe will bounce back around 1.5% by the middle of next year and that will be led by germany, which should overheat by this period. that is a key ingredient. buying is going to start backed securities. by doing so, it will remove bad assets in banks' balance sheets and promote the cycle.

we expect the euro to fall further and that is a bosh -- bcd's bcd policies. >> you have gone to neutral. goldman sachs has been all over the course in 2012. estimates in spain have come down from 6% to 3%. that was a great call. you have gone neutral. is the same -- is it the same --son you felt >> you are only as good as your last call. we have been early birds. i thought the spread and the lever were attractive when we started recommending buying peripherals. what has happened since as we just discussed, bond yields are ludicrously low and we expect them to rise. we don't think the spread over these bond yields is no adequate to protect investors in a total return since.

yields they offer investors, they do not perfect them for capital losses we expect. >> where does this leave us with treasuries? the report was that 100 basis point increase in treasury yields has been associated with a 35-40 basis point in 10 year bond yields. from 1% towe can go 2% on bonds, we will see it substantial move in treasury as well? >> we have look historically at the reaction in germany, and that is the 3-1. it is different because if you compare where level yields are compared to their underpinnings, it is not the u.s. market out of kilter, it is the german market. if you look at deviations from fair value to be a bit more technical, the bond market is very expensive where the u.s. is fair or close to fair.

germany need to have is realigning to that fair value. looker way of saying it -- at the 30 years spread between treasuries in germany on bloomberg. that spread is 130 basis points. we are talking about the long-run differential between these two places. that is a two-standard-deviation event. twoally that is around basis points. we are out of the norm in germany. >> can we compare the two anymore? inflation is so different in the u.s. -- eurozone and u.s. as well? >> it is different but the inflation market does not expect a difference to remain there for a long. of if you look at the long-term forwards, what catches your attention is not that the market is pricing this inflation for a long. of time. we converge back to 2% and the u.s. a bit higher than that. it is in the two bosh.

what is different is the rate differential that the market is surprised or not. that is squarely down to central-bank policy. manage rates to down through this guidance policy and this is making people crave bonds. >> thank you very much. francesco of goldman sachs. up next, taking a hit on currency swings. e.on reports earnings down 20%. we will take a look. ♪

>> welcome back. i am jonathan ferro. let's bring you up to speed with companies "on the move. oh keene digital gets crushed. it plunges as much as -- king digital gets crushed. it plunges as much as 26%. the number of players of candy crushed declines. videoedis introducing advertises. clips embedded into its are effective at engaging users. a trial version will let marketers pay every time someone clicks to watch a video. the largest security firm g4s

rose 4%. the company has much to do to capture the full potential and its block -- 15 of smaller businesses. reported a 20% drop in profit this morning. hans nichols has the story behind the numbers. what happened? >> the market seems to like that 20% drop. the expectation was for a 25% drop and it is up almost 4% in early trading. profit is down. sales also down 13%. when you look at the estimates in their underlying net income -- that is what they determined there dividend off of -- it came in at 1.5 3 billion euros. expectation was for about 1.47. to give you a sense of perspective, last quarter it was in the 1.9 range.

numbers are down. it is largely to do with currency. they have tried to expand beyond currency -- germany into countries like russia and brazil and it is their they have been hit hard by currency downward moves. even though the revenues are up ever so slightly. we basically have a macro story. we have a german company that is looking abroad, looking to have more revenue streams as they retooled the energy system in have clearlyhey been hurt by currency but it is not as bad as the situation in ukraine. we are in a wait and see approach. >> we will get back to you later, hans. awaiting guidance. investors are playing close attention to governor carney pasha attention to any sign of when he will raise rates. we will get the latest from andrew sent in. guess what he thinks?

>> welcome back to "on the move ." i am jonathan ferro greater than 30 minutes into the trading day and this is what everything looks like. gains across the rest of europe. watchingondon, we are the inflation speed. carney speaks at 10:30. risk still and rules. we are watching an aid convoy. ryan chilcote. >> it is about resource companies today. roast that is up 1%.

the entire stock market is up today. e.on is also up despite the fact that profits are down. sales are down. third-biggest mining company in the world, we learned that zinc and iron have declined by 1.3%. we will be watching that convoy on its way to ukraine. >> these are top headlines. china pasha level of credit plunges since the global crisis. it puts pressure on economic growth targets. japan pasha economy contracted the most since the record earthquake three years ago. 6.8% last quarter but

that was smaller than 7% forecasted by economist. it fell after a sales tax increase in april was implemented to help curb a world largestrgest -- world's debt word and. hundreds of trucks from russia are near the ukraine border. ukraine says the convoy could be carrying weapons. truckssaid the trash -- are carrying of food, medicine, and water. another top story we are watching is the bank of england's quarterly earning report. everyone listens closely to mark carney's words and we will look for when the bank of england starts putting a brace. joining us now is former bank of england policymaker andrew sentance. you walk into the bank of england and get from all this data at you. 2008 low.nt at a

wage growth at a 2000 night -- 2009 the. we should put rates on hold, shouldn't we? >> we have put rates on hold until now and we are in the most consistent and strong. of growth we have seen since almost a decade. the circumstances which are in the other members of the multi-policy committee put into this level in 2009 have gone away. they are not -- everything is not flashing red. wage growth is subdued. we had higher inflation than coming out of the expected crisis. mbche nbc waits -- waits, they should be taking advantage of the flak that inflation is well controlled at the moment. >> if you are on the mpc and the growth,re saying, wage

wage growth, we have not got any. surely that is evidence of lots of slack? >> i think we have taken up a lot of slack in the economy. if you look at surveys, their average response on the issue are the highest they have had in the history of their survey. market,ook at the labor unemployment has come down from 8.5% to around 6.5%. if it keeps going at that rate, in 18 months time we will have close to the lowest level of unemployment since the 1970's. to mpc is paid anticipate conditions. it is important they anticipate because we are starting at such a low level of interest rates. if they don't anticipate, they will have to push rates up more sharply than the what would be ideal. >> are you worried we are dealing with a legacy from 2008 4 we have a substantial amount u.k.eople in the

that people are on a floating mortgage and they will not be able to be able to absorb a 50 basis point hike? >> people have had five or six years to adjust their finances. up economy is not just made of borrowers. it is made up of savers. savers have put up with low rates for that time. if we run the economy based on a small subset of the population who have not adjusted, we will be stuck in monetary policy not on the basis of the whole economy but on a small part. that is not with the mpc should be doing. >> give me some insight. you're sitting there across two days. how does one dissent? is it awkward when you have to go out there and put your hand up, and say, i disagree? >> i did not find that difficult to vote in a different direction to other members of the mpc. it probably helps if there is a group of members feeling the same way. you don't find that out until everyone has voted. in my first meeting on the mpc,

i was in a minority. most of the time i was in the majority. think the way that members should approach their task is looking in the data in the u.k. economy and forming their own independent judgment. if the judgment is that we should start raising interest rates, i would hope that those members will vote in that direction. what you have is a lot of turnover on the committee and some people coming in not estimate with the u.k. economy, coming from overseas. -- they wantrhaps to play themselves in and get the hang of the committee before they start making strong judgments. >> do you think that means that first ascent that is probably push off further down the road? there has been so much talk about martin wales being the first guy to put his hand up and say, it is time. what are your thoughts? >> i did not get into individuals, but there are some

members who have been there quite a while. i think we will find a little bit more out in the inflation report press conference today. the minutes that come out next week may be more revealing. in the past when the bank has been close to changing policy, there has always been a minority of people pushing in that direction. we have not seen that yet. if that minority does start to merge, it will be a clue that the interest rates may not be far away. >> communication has changed immensely. -- since you were at the mpc. 12 months ago, mark carney was saying that unemployment will until 2016 and7% therefore rates were not writing. forward 12 months, radically different economy and outlook. what have you made of the communication over the last 12 months? >> what i think they have tried to communication but i think what they have relearned is that when the economy is changing,

monetary policy needs to adjust. last summer, perhaps it was not apparent that the economy would grow strong and the unemployment with fall so fast. i think it is right that the monetary policy reassessment. facts said that when the change, sir, i change my mind. what do you do? the great thing about monetary policy is that it is a flexible tool. it is important for the mpc to give a broad, forward-looking picture about the way they are thinking about policy but they should not boxed themselves in. perhaps last summer they did that to a degree. >> given the geopolitical risk and slow down you see in the eurozone right now, particularly with this in german data that has come out, if you are sitting at the bank of england, which you be concerned about putting up rates in that environment? >> there is always some reason for insurgency in the global economy and those periods of those -- those times of

uncertainty go up and down. we are starting from an extremely low-level interest rate. if we use every reason to delay, we will get to a point where they need to rise more sharply. if the mpc wants to have a gradual rate rise, they need to prepare to take the evidence and say there will be some uncertainty. we need to start this process soon. >> when marcon he sits there today, he turns around and says sits therek carney today, he turns around and says rates need to rise, does that mean it needs to go in the next three months? >> i expect they will make their move before the end of the year. that is a big change from where we were last summer. it shows that monetary policy has adapted. i would prefer to sit the mpc getting on with it sooner rather than later. now,ing from where we are they should be making the first move before the end of the year. , thank yousentance very much for joining us.

we look at business is being affected by geopolitical strife. ♪

>> welcome back. i am jonathan ferro. this is "on the move." : we will talk about china. we had two disappointing readings. ew credit and industrial output is low.

loan -- tom, loan growth collapse. what is up with that? >> very disappointing loan growth in july. the weakest number since october, 2008. a pretty thin, auspicious comparison. bank is normally tight-lipped but they rushed out fallte explaining the in lending in terms of seasonal affects. there is an element of truth. we normally sees slower loan growth in july following more rapid growth in june. the concern is that there is something more to it and this reflects weakness in the banks as they process non-performing loans and equally worrying, weakness in china's corporate sector as they struggle to deal with a burden of debt and

uncertainty about outlook for the economy. >> we also had disappointing days on -- data on factory output. what does that data say about the chinese recovery? >> we came into the third quarter with a lot of optimism. there was a strong rebound in second-quarter gdp growth. we had positive pmi data but today's numbers are on doing a lot of optimism. we saw broad-based deceleration, slowdown in industrial output, slowdown in retail sales, fixed-asset investment. loan growthis with collapsing, that the recovery in the economy risks being over almost as soon as it began. this, you have a government that has a growth target. it is over 7%. still they have that target. they want to create growth and it does not matter what growth looks like. what will we see is a policy

response? >> the message from china's government, especially from china's central bank up to now has been that growth is on track and they are content with targeted micro-measures to support areas of the economy which need it. we have a note from the central economist that argued that if unemployment is low, we do not need to do much to stimulate the economy. i think the data will change that dynamic. i think it will bring more extreme moves, potentially cuts to interest rates on the agenda. >> we will keep an eye on that. thank you for joining us this morning. israel's iron dome defense has protected most of the residents during the border. the businesses in southern israel are still feeling the heat.

around 3200 rockets are fired out of the gaza strip over the last five weeks. with residents of southern israel than the intended target. the iron dome defense is the may protect most people, but the impact of the area itself is damaging for local business. >> it is not easy. you,an see -- if it hits it kills you. >> he lives a 10-second rocket flight from the gaza strip. it is the area where his employer was founded. he just returned to the company plant where his colleagues have been struggling to fulfill the daily quilt photo. >> instead -- quota. >> instead of doing 100 mattresses, we do 50 or 60. you do not work as quickly. six times a day you run to the bomb shelter. oneo one wants to fail, but

consequence of the conflict is that orders are falling. the company's sales dropped 30% compared to last to live. they are looking to spend $2 billion -- $2 million to renovate this but when it comes to investing israel, there are not -- are unusual factors that you need to consider. there is the uncertainty. >> people are struggling with cash flow, with payments, with tax payments. the impact is severe. >> nadav runs a plastics manufacturing firm or the cell. industry has played a historically important role in communities and despite the , national politics play a role in the decision. >> it is a combination of trying to be competitive on one end, but the other end is the long-term view of the way israel should do business. >> for safety issues, he has cut

shifts, while the costs have risen. >> we are paying extra salaries to the employees, providing a risk premium. >> there are some things money cannot buy for those who live and work in this part of israel. that includes peace of mind. >> my wife, for the first time did ask me, what are we doing here? why can't we move? it is hard. >> what did you say to her? >> you don't run away from your home every time he gets -- it gets hit hard. we give it another go. great work. "the pulse" is coming up. anna edwards joins us now. think of england -- a bank of bank of england installation report. >> what will they say about

their growth expectations? what will they say about spare capacity? the ukraine tension, how will that play in? will anything do anything to change the interest rate? they seem to be looking through the wage weakness and say the mpc needs to get ahead at some of that data. we will see if members of the current mpc echo those sentiments. we will talk to german companies in particular, merck, the ukraine tension. there will be something a little bit lighter in the show. i think you have it coming up later in your program. a new fastest car on the block. 290 miles per hour. what does it matter? what do you do with a car that fast? to test it, they needed to find an airfield -- a nasa airfield. that is an immense of state you

need to test that. you would not be caught bragging about brands and that kind of lashing fashion, would you? >> never. >> feet on the ground. anna edwards,, -- thank you very much. said first-half profits are down 20% after disposals reduce the size of the business. sales are down 13% from a year ago. e.on is expanding abroad and plans to reduce spending to cut costs. losses from -- also increase. it is asia-pacific's biggest airline passenger numbers. have you got a need for speed? yout of the car built -- tour to go to hundred 90 miles per hour.

♪

>> welcome back to "on the move ." is 8:53. the carmaker hennessy has announced an upcoming model which will be the fastest production model ever made with a top speed of nearly 300 miles per hour. sam rover is skeptical. here is his take.

>> i am trying to figure this out. hennessey, maker of ludicrously their modelnnounced which should -- f5 have a top speed of 290 miles per hour. who is buying this car? there has always been an arms for faster cars, and it will be faster than its predecessor which only went 270 miles per hour, but this is veyron.han the bugatti who in the universe needs a car that can go this fast? i am not talking about speed limits. these cars are faster than the cars in formula one and those are driven by professionals. with crazy speed comes even more craziness. eighthe bugatti about

been a ton of data has elected. at top speed, it has a gas mileage of two miles per gallon. that tank will be empty in eight minutes. it's not like you can reach these speeds on i-95. to get these miles for our, hennessy had to roa landing strip from nasa. it was the only place long enough. all of this is lunacy. itt makes a -- crazier is that it is theoretical lunacy. do you think anyone who buys this will take it to the limit? this is bragging rights, pure as simple. these people are as rich as rockefeller. what do these people have to prove? >> don't need one. can't afford one. here is something i am

interested in, a picture of the markets. stocks up across the board. dax is up 28%. by .64%.in spain is up everyone is watching an aid convoy. humanitarian aid from russia to ukraine. there are concerns there are military devices on the train. russia said it is just food and water. here in the u.k. in the city of london, we will be watching mark carney's quarterly inflation report live and in full at 10:30 london time. i will be in that news conference. unemployment dropping. which is going nowhere. what is your view on the economy? the only man's whose matters is mark carney's. in the meantime, you want to target markets, finding on

twitter. ♪

>> standoff at the border and go border.end of the a surge on better-than-expected earnings. welcome. we are