>> europe's recovery stutters. the german economy shrinks more than expected as france flatlines. putin's victory lap. the u.s. tightens rules on sanctions. r.w.e. powers down. they swing to a loss on merkel's shift to renewables. we're live with the company's c.f.o. a warm welcome to "the pulse" everybody live from bloomberg's european headquarters in london. i'm anna edwards.

we'll show you some of the most expensive watches in the world and pickpockets in paris. find out how petty crime is causing major problems for the city's tourism industry. before all that, let's get back to our european g.d.p. focus and let's take a moment to look at what's happening in the east of the european union because poland has reported its g.d.p. numbers. quarter-on-quarter was estimated to o come in at .5%. it is come in at 0.6%. a little disappointment. a bit more than analysts had been expecting. because of the geography and history and link between this part of europe and russia and the political climate that we find ourselves in at the moment, that is why we are focused on this little bit this morning. we'll get some insight to what this number means and what the polish economic story looks like

right now. there you can see the impact on zloty. it has been under a little bit of pressure. from poland let's broaden the picture around g.d.p. we had it from germany and france today. germany's growth more than forecast. hans nichols is live from germany and mark is in paris covering the french economy. hans, let's start with you. the german g.d.p. numbers, contraction more than had been expected. what happened then during the second quarter? >> well, exports were down. ip ports were up but exports were down. that is what is driving it. some of this is seasonal. we had a warm first quarter in germany and a lot of

construction movement where construction activity was moved forward in the year. we're starting to see the effects of russian sanctions and what it has done to the business psychology here. tch just speaking with the c.e.o. they have some 3 million container units they load up a year and ship them all over the world and their view here is that things are going to be worse later on in the year and potentially more depressing when get into 2015. the caveat to all of that is that germany will still have basically small amounts of growth. this is not going to be a horrible outlook going forward but it gives you a sense for an economy based on exports 5, 2% of the german economic output is based on exports. there is concern about russia and elsewhere in the globe and if the global economy slows and if the european economy slows, ports like this may be gaining

market share but eventually they are going to rouvent room for growth and that is bad news for the german economy. anna? >> hans, let's talk a little bit about the russian sanctions. you talk about business psychology. the data we got earlier on this week, that came in weaker than had been expect. that is a survey of investment professionals and people that are following this on a day-to-day basis. it is fascinating to see where you are, how this is infiltrating to the perspective, the everyday business community there in germany? >> yeah, it is not just one company, anna. there are some 300 companies that export through this port. it gives you a great indication of the business psychology across the country. the first six months, exports to russia down. russia is not their biggest trading partner but if you toss

that out over the year and say there is going to be 20% to 25% less exports to russia, you'll see another quarter shaved off g.d.p. when there is not enough growth, those are not encouraging number. anna? >> thank you. let's go to france now where the economy unexpectedly failed to grow for a second straight quarter. mark, run us through the numbers then. >> well, basically you know, france has the problem of growth. france has barely grown, well, it will be almost three years now if you include 0.5% as barely grown. the finance industry came out after the second quarter numbers today and cut its annual growth forecast to 0.5% from 1% previously. that means that france won't meet its deficit target this year either, the deficit target being 4% of g.d.p. in 2014 and essentially implying that these sort of holy grail, the 3%

european union deficit target scheduled for france in 2015 won't be reached either. it is a problem of competitiveness and lack of confidence among business leaders. >> cutting growth forecasts, cutting the deficit or saying it won't meet the deficit target, none of that sounds promising politically for president hollande. >> no, i think there is a big problem here for hollande in terms of the economy. he is having trouble keeping his own socialist lawmakers and union onboard. you hear politicians in france regularly calling on the european central bank to do more, to support the european economy. you hear them calling on germany do more to boost domestic demand. from the other side of the rine they are saying get your house in order.

we want to see them boost growth. the problem with france is it has a long record of failing to meet deficit targets. since the european sovereign debt crisis they have already been granted two delays in reducing its deficit to 3% of g.d.p.. it asked for it again in april. it was rejected. with the numbers out today, it means essentially that france won't be able to meet that target again next year and, you know, it is a very difficult position for -- it puts policy makers in berlin and bruss unless a very difficult position -- brussels in a very difficult position because these are fiscal rules that france helped write and it needs to show that it can comply from time to time. >> thanks. mark deen, bloomberg news. reporter there in poirs. >> a convoy of almost 300 ssian trucks caring --

carrying humanitarian aid. good morning, ryan. give us the details on the convoy. >> it is headed for you cranian border. it should be there in a few hours. as we have seen, there are surprises along the bay. the russians took a tactical pit stop last night. no one anticipated that. the ukrainians are now saying they will accept this aid under two conditions. one that they be allowed to nspect the trucks and that the red cross distribute the aid opposed to the russians in those trucks with the aid. in any case, we have yet to hear from the russians. this is a bit of an improvement. just yesterday, the ukrainians were saying they could take their 30 tons of salt and shove

it. and we herd the prime minister say they had better send those trucks empty and pack their fighters into them and take them home. >> president putin is in crimea. he is set to speak there today. what do we expect? >> he is going to address the russian parliament, talk about sanctions and send a message to the west, one of defiance. think about it. he is going to talk about aid for crimea. let's just imagine he said -- i wouldn't be surprise standard he is there inalitya, the place where stalin -- yalta, this is the place where stalin and roosevelt met. they are sending the convoy to the east. separatists want to be part of russia. he is helping those people in the eastern ukraine who are

suffering as a result of the ukrainian army's block aid. he is helping crimea after having annexed the territory. this is mainly about the message that he is sending out. >> all at the time when the u.s. is focused on sanctions giving us revisions to the sanctions they previously put in place. are things going to get a bit tougher? >> yeah. this most recent change comes to the so-called 50% rule. the rule was if an individual or entity is sanctioned, if they own more than 50% in something it too is sanctioned. there is an insurance exeand at one point last year, three months ago we thought they might be sanctioned because its majority stake holder appeared be a bank whose biggest shareholder is a guy named yuri. one of the shareholders close to

the russian president. they took it to just beneath 50% just before the sanctions were introduced. it looks like the treasure i have trying to close treasury is trying to close those loopholes. they said if any own more than a 50% stake in the company that entity is sanctioned. it looks like they are back in doghouse. there might be other sort of examples. it is just a little example of how the u.s. is broad tng sanctions by tightening the screws. >> and how the devil is in the details with this. thank you very much. ryan chilcote with the latest on ukraine. we have breaking news. germany's 10-year bond yield has dropped. we'll get more details on what is going on here. perhaps surprising for some to see this on a day when we got the german g.d.p. number coming in below estimates.

a contraction of .2%. we'll ask whether he thinks investors are receiving something more dove niche stance from the e.c.b. we will leave that one there. and tell you what else is on our radar this morning. a surge in clean energy power generation. r.w.e. is germany's biggest producer of electricity. we'll be live with the c.f.o. later on "the pulse." according to people familiar with the matter, the companies arest are in talks to buy the centuryry-old unit that g.e. recently decided to sell. they could make an estimated $2 billion in the sale. we'll have more on this. and a top presidential kd in brazil has been killed in brazil.

he died when the plane went down in bad weather. investors are trying to assess what his death means for october's presidential elections. coming up on the program, recovery halts in the euro area. we'll continue our conversation on the vulnerability of the region to the crisis in ukraine. stay with "the pulse." 13 minutes past 9:00 here in london. ♪

>> welcome back to "the pulse." it is g.d.p. day in europe. germany's economy contracted more than expected while france flatline and we have learned that the polish economy slowed from its fastest growth pace in two years in its second quarter. joining us now to paint the picture of what's happening in the eastern part of the e.u., the director of emerging markets at roubini global economics. we spelled out the details around poland. 0.6%. a little bit better than the estimate but still a decline from the first quarter. paint a picture of what is going on in eastern europe. we got news from the czech rub and hungary also. >> growth is slowing down but we see a resilience. hahn gary showed a strong growth performance -- hungary showed a

strong growth performance. i think the real question mark is as this region emergingstout ecession and slower growth and deleveraging, what will the growth look like? we would expect some deceleration in the region. germany is the largest trading partner in all of the countries in the region. as their exports slow down, that will dampen growth. >> some of those eastern european countries export into that german manufacturing engine or empire, don't they? what happens in germany is important for what happens in these eastern european countries and also on top of that, the sanctions story and what is going on in russia. which is it is dictating where these countries are going at the moment? >> these countries are caught between the e.c.b. that is providing liquidity and the dynamics from russia and a euro-zone that is struggling to

grow, including germany. poland is an interesting example. they export into the manufacturing sector and feed german domestic demand. where po slant concerned one of the questions -- poland is concerned, one of the questions going forward, where they stand in deflation. our view is that it is going to be short-lived in poland and that prices will return to positive growth later in the year, but this is still an environment like all of europe where there are really not price pressures wand the e.c.b. likely to do more policy support this will provide some cushion for local central banks and to -- for local assets. >> of course policy makers will be mindful of fighting deflation and they might have to be support with their currency and the threat for any cap tool flight that could be -- capital flight.

>> the place i would watch for that is hungary in particular. they exposed their financial channels to russia in particular but also it still has a high level of foreign currency debt. we have seen it come under pressure. we expect it to be stronger going forward. actually the polish central bank is getting weaker over the last few weeks which perhaps does a bit of easing work for it. i think there is also a broader picture outside of europe and russia. which is about the chinese growth story. china is an important trading partner of germany in particular. our view is we're seeing china add more content domesticically and import less. we see chinese growth slowing down over the next year. so this all adds up to a somewhat more challenging growth environment. the good thing is in eastern europe, we have seen balance

sheet repair. we have seen deleveraging and they look less vubble vulnerable. >> what do we watch for on sanctions and eastern europe for the rest of the year then? the russians have taken action on food and talked about the possibility of taking action on the automotive industry and shipping industry. automoat i sounds like something -- automotive sounds like something that could hurt the eastern part of europe. >> they would hurt not only germany but also eastern europe. the czech republic and hungary are tied into the german automobile export chain and as i mentioned, hungary is in large part about new production added in the automotive sector. that is where to watch. we could also see luxury good being targeted. why luxury good? that would fit a russian government goal to reduce

reliance on luxury good imports. we don't think automotives will probably be the first step but we would imagine the deeper sanction could come in coming months particularly given the news we're seeing on the ground from russian ukraine. >> still to come on program, a restroomp rolls-royce. -- revave to rolls-royce. you'll hear from the car maker's c.e.o. later on "the pulse." ♪

>> welcome back to "the pulse" live on bloomberg television and radio and streaming on your tablets, phone and bloomberg.com. let's check on the markets. manus cranny has more. german 10-year yields dropping below 1%. >> we have it in splendid tech any color. what does that actually mean? what does a buned yield below 1% mean? -- bund yield mean? does it mean that q.e. is on the way? does it mean that we should be more concerned about risk in the markets perhaps than we already are. i know we're flirting with 1% at the moment. certainly it is quite a dramatic statement.

stagnation in france, contraction in germany. triple dip recession in italy. they say don't worry. a couple of little things helping us along the bay. more sanction also come along the the near term. the domestic demand is holding up in germany and that is something to be grateful for in terms of through those g.d.p. numbers. the rest of the equity market, london is looking to eke out gain, a big dividend gain. of course it is loflation. the new phrase i picked up if the i.m.f. that is what the i.m.f. are worried about. that's actually what is going to drive the next big move.

underwhelming. if you take over 1,000 watts of production out of the way, it is already knocking into your numbers. think what more that can do. rolux, will they go after g.e.'s assets? essentially london, a popping of the boyle as it were in terms of the momentum of prices of property here in london. is knocking it off. they don't want to go any lower. it is the low of the market. u.b.s. said the hedge funds are 20% short into this market. i'll leave through it.

>> thank you very much. still to come, pickpockets in paris. we look at how petty crime is causing problems for the country's tourism industry. stay with "the pulse." ♪

>> welcome back to "the pulse" live from bloomberg's european headquarters in london. i'm anna edwards. r.w.e. has turned to a loss in the second quarter. r.w. sembings cutting capital spending and selling assets to reduce costs. they are germany's biggest producer of little bit. we'll be speaking live to the c.f.o. later on during "the pulse." ukraine has opened the door to compromise over humanitarian aid east of the country. they said they are ready to

accept a russian shipment of aid. ukraine said it will inspect the aid first and that it will be delivered by the international red cross. the u.s. and e.u. are warning russia not to use the aid as a pretext for an invasion. germany missed g.d.p. forecasts for the second quarter. they abandoned their 2014 deficit target. it contracted more than expected. the aggregate reading for the euro-zone is out at 10:00 london ime. as if by magic, just to add to the picture of what is going on in european g.d.p. now, what is going on in the european growth story. just getting numbers out from portugal. 0.6 preponderate. that is just a little bit above -- 0.6%. just a little bit above the estimate.

at least against estimates, a slightly more positive picture being painted by that part of the european periphery. that could be very relevant to our conversation next with bloomberg economist david powell. he has been pouring over the details of this at the moment. go through with us. what is the drive -- what is driving the weak thans we have seen in the big economies. >> we have the same forces out playing behind weaknesses in both countries meaning it was a contraction in germany due to subtraction from net exports and also a slowness from housing construction. essentially the same factors behind the number in france although france is a bit deeper problem or a structural problem with that weakness being more spread than just the housing. > actually the german number q

1 g.d.p. possibly overstated slightly because of construction in that quarter. q 2 maybe down playing g.d.p. a little bit maybe because of construction lost in the first quarter. is the construction an investment story in germany? is that an area of concern or is this just a statistical issue over a couple of quarters? >> germany had a stellar first quarter. 0.7%. they have to look at the contraction in that context. france is a different story. stagnated in the first and second quarter. >> how do we expect all of this to develop into the second half of the year? i'm thinking about the sanctions environment, i guess. we don't know -- we can't know how that will develop. how do things look from here? >> unfortunately things don't look so good for europe. we have already had the business investment survey pointing to stagnation at the start of the

third quarter for france. if we look at the survey for germany indicating weakness at the end of the year and the more forward survey showed a huge plunge. the growth numbers are looking pretty bad. >> for a while, it seemed that the core of europe was motoring along and the periphery was where the weak story was in the euro-zone crisis. things are turned around now haven't they? we're talking about weakness in the powerhouse of europe. but we're getting better than expected numbers from portugal and spain. we're seeing some positive signs from other parts of the the euro-zone periphery. not italy. portugal having come in better than expected and we have the same thing with the spanish q 2 numbers that reported a bit earlier in the month.

essentially yeah, there are some bright spots in europe. it is not all doom and gloom. >> the questions about where the euro-zone economy goes, what does that mean for the e.c.b.? >> i wouldn't overplay the german weakness in the sense that it comes after a very strong first quarter but we are seeing a slowdown throughout the continent. it is really not concentrated in any one area. spread to germany. the pressure will be on at the e.c.b. to ease pressure again. the doves will be given the upper hand and certainly more strength by these numbers. >> thank you. david powell. 9:35 in london. staying with the g.d.p. scene. tourism represents about 7% of france's g.d.p. paris is the is the number one destination for chinese travelers abroad but as petty crime increases, there is a concern that chinese vitors will be scared away. >> another day at the eiffel

tour with -- tower with tourists snapping away. >> no problem. no euros. >> these are far more sinister. the petition is a diversion and while you help, they are helping themselves to your wallet. they target those they see as the most vulnerable. chinese who carry a lot of cash. >> we just run away. chinese one million ourist advice ited a year. -- visited a year.

>> it happens nearly every day. and we need to react quickly. >> the problem became so acute that the louvre went on strike to get more security. now you can find a mobile police station just across the street. >> we tried to put in place intelligent security by targeting the most visited laces. the french police launched a new tourist plan last year with a ainian police officers and routine. >> let's turn to one of our top corporate stories this morning.

g.e. may have found a buyer for its home appliances unit. they have been looking to sell that particular arm of the business for sometime. joining us now is math you campbell. good morning to you. why is g.e. trying to sell its appliance unit? it is actually quite a small part of their business, isn't it? >> good morning. this is indeed a relatively small part of g.e. which is an enormous company. it is quite iconic. for most consumers, they interact with these consumers through dishwashers and things like that. there is tons of competition from asia and elsewhere. g.e. and its chief executive jeffrey immelt are trying to focus on things like maintenance for rail network where is the real money is for g.e.. >> your reporting has unearthed electrolux could be

interested and also quirky. tell me about quirky. >> quirky is a very quirky company that is a startup that gets input from an online community of fans on what products to develop and it basically works on them and tries to bring them to market. their folk us is connected -- focus is connected device. stoves that are plugged into wifi. > if you your oven to be plugged into your toaster, you should tell quirky. >> they are also in the running for this and urks the possibilities of them buying such a large appliance business. >> iconic business for g.e. but not big. where are we with g.e. in general? this is not the first time we have talked to you about g.e. this year. >> indeed. g.e. has to finish independent

athe or start integrating -- int greating what they have bought a lot of. sthazz going to take -- that is spin off their france unit. g.e. was almost brought down by the financial crisis. it had gotten into all sorts of risky activities. a little bit under the radar. not what most people think of g.e. being a financial services company. jeff immelt has been trying to de-emphasize consumer good and build up in the heavy industry stuff. >> let's move from consumer products to pharmaceuticals. there is a deal we want to talk about. a biotech business could be bought up by any number of european drug companies. what is the attraction? >> they have turned into the bell of the ball at the moment.

they have one drug like many companies, it is a one-drug company for a debilitating lung disease that has no treatment currently. it has been designated a blockbuster by the f.d.a. in the which means it gets expedited review. this is right in the sweet spot for a lot of pharmaceutical companies. there are not a lot of breakthrough companies out interest -- out there and this is one and that makes them attractive. >> germany shrinks more than expected. how can they get back on their feet? hans nichols is live. hans? > we have just -- coming up in about two minutes to discuss that. we'll be talking about this old industrial area that transformed itself into an old logistical

area. we're here taking the pulse of the economy on exports. we'll have a great interview for you coming up. ♪

>> welcome back to "the pulse" live from bloomberg's london headquarters. europe's recovery is stuttering. france is flatlining and germany's economy shank more than forecast during the second second quarter. hans nichols is standing by

joined by a guest. hans? >> anna, thank you very much. the oined by the head of chamber of commerce. you have over 60,000 companies. tell me what they are telling you about the state of the economy. >> at the moment they are still quite pleased about it but they are a little bit worried. you can see that from the figures we have at the moment. they are worried about the international crisis we have and they have impact on the economic situation as well. >> have we seen the worst of the impact of the sanctions or the r-the third and fourth quarter going to be worse? >> actually we hope that the third and the fourth quarter are going to be better, but what we don't know is how the political situation in the east develops and so we really have to see how it comes. >> this is part of a country that was so crucial to industrializeation, but now it is more into logistics.

tell us about that transformation. >> that's right. about five decades ago, we have been an industrial dominated region with steel and coal mining and now we are logistics. over 40,000 people work in that sector. this is a very impressive change. a good experience. the port is very important for the regional economy but also for german economy. having the possibility to bring the raw materials in for the german economy and bringing and delivering the end product to all over the world. >> you see those raw materials in. we can't see it behind you but there is a coal island here where coal is brought in for making steel. the largest steel plant is in the region. is germany still producing enough? 22%? going to stay at 21%, >> we're discussing that. the chamber of commerce says we

should concentrate on production. this is one of the strengths of the german economy. we have a discussion with the politics and society because this is a special kind of production and too many people think services could help better. we are convinced industry is quite a strong factor for the german economy. >> an industry-based, not a service-based economy. >> yes. the success of the german economy at the moment in comparison to other nations. >> give me a sense of how -- you said there is concern here. try to quantify that for me. there is a great deal of enthusiasm say in 2013. what is it like now? >> we had the euphoria last year and the first quarter of this year and now there is uncertainty about the future. there is the international situation, but there is also the decisions the national government in berlin took concerning also the enterprises. this is the right to have -- get

a pension at the age of 63 for the people instead of 65. >> you want to see them work until 65? >> yeah. we have the situation where people need specialists in the companies and we have 100,000 people wanting their pension at age 63. this is a loss for the companies. >> what concerns you more? lowering the pension age or political tensions in the ukraine? >> in the long range, i think political decisions might be worse. we have to be careful in ber lib about that -- berlin about that. we have a good and stable situation at the moment but that might change. >> the numbers were not great. we thank you for your time. anna, i will send it back to you. i heard a great deal of optimism about the past and some questions and concerns about how that is going to affect the economy going forward and as our guest said, the euphoria may be over. anna? >> hans, thank you very much. hans reporting there from

germany. hans nichols on location. in corporate news, it is something old and something new for rolls-royce motor cars. their combining the traditional design with new technology. matt miller spoke with the company's c.e.o.. >> rolls-royce is all about strive for perfection. one of our founding fathers -- for that reason, we are always searching for the latest technology to make sure our cars are living up to the unbelievable high expectations of our commerce. we updated the ghost and made it a series ii. it has many features to assure that customers are buying the best car in the world. >> much like the cell phone industry where every few years i have to have the best and the newest. i feel like a lot of times that is the case in the car industry as well. how do you build a rolls-royce so that the ghost ii doesn't

make me feel like i need to sell my ghost 1sh? how do you build it to elongate the life cycle because i'm assuming most rolls owners want to have that car in their possession for decades rather than years. >> you are right. we are highly interested in excellent resell values and that is particular what our clients are looking in and you don't want to see your car being outdated after a couple of years. that is the reason we're following a different strategy. we're making sure our cars are technology-wise up to date but we would never change just for the sake of pure changing the design of our cars because we think our cars are timeless masterpieces. >> i have to ask you about s.u.v.'s because it is a craze that you know, has gone too far for some car makers. i feel like it is unforgivable

for porsche to make an s.u.v. rolls-royce has historical roots here. you made a shooting brake in the 193020's and 1930's. are you planning on coming out with an s.u.v.? >> we haven't confirmed any plans yet but we're working on it. it is an interesting segment for us and we're talking about it. i get the feedback from our clients. why aren't you bringing such a car to the market? i can tell you we are making progress. there is no final decision yet because for me it is very important at the end of the day that it needs to be a true rolls-royce that lives up to all the expectations our clients do have with our brand. >> that was the c.e.o. of rolls-royce motor cars speaking to matt miller earlier. up next, casino crisis. atlantic city feels the heat as three more casinos prepare to close their doors. how will the gaming city live up

to more competition after the break? ♪

>> welcome back. over the next few weeks, three more casinos will close their trish atlantic city regan spoke to the heads of

m.g.m. and caesars about the crisis. >> what is your take? >> i am concerned. he is the c.e.o. of m.g.m. >> we want to make the city come back. >> do you worry at all that there is a lot of saturation in that market? >> i do. we have to be very targeted and remember lessons learned in the recession not repeat them. not grab every market because it happens bing to be there and not be a glutton for development. >> their rival has an appetite for rebuilding. even the c.e.o. has built casinos in pennsylvania and maryland. >> atlantic city, that is the poster child for why it has been tough because there has been so much regional expansion. >> you're part of that. you have casinos everywhere. >> we do but it is a complicated problem. it puts pressure on an incumbent state.

that is a problem we have to solve. >> a former marketing professor argues regional casinos are necessary. >> a lot of hopefuls are hopefully loyal to the brand. >> you have been treated well in cleveland. now you want to go to las vegas. you could purchase online from my competitor or call your host and get exactly what you want the right check-in experience, the right room typhoon. that is the proposition we want to deliver. >> and we'll continue our coverage from atlantic city all today. trish regan will be live from there with some more big enter views. , our second tening hour of "the pulse" is coming up. r.w.e. swinging to a loss. the c.f.o. of that business will be talking to pufments around 11:00 london time.

euro-zone g.d.p. and inflation data. we had the components from france and germany and other parts of the euro-zone already. we'll get that overall number for the european fuller picture at the top of this hour. ♪

>> europe's recover stutters. the germany economy shrinks more than expected. eurozone gp data breaking new. putin's victory lap, russia's president addresses lawmakers in crimea as the u.s. tightens rules on sanctions. and the electricity giant swings to a loss on merkel's shift to renewables. we're live with the company's c.f.o. >> good morning to our viewers in europe. good evening to those in asia. welcome to those just waking up in the united states.

this is "the pulse" live from bloomberg's european headquarters in lone done. let's start with breaking news. european g.d.p., eurozone g.d.p., eurozone inflation numbers all coming through for you now. we have got a bit of a disappointment on the overall eurozone number in terms of the g.d.p. story. the quarter onquarter number has come in flat, unchanged compared to the previous quarter. that was against an estimate of .1% growth. coming in weaker than expected, i suppose after we got the german and french number disappointed. many will already start to think the overall number was going to disappointment. if we're look at c.p.i., things coming in exactly as expected and exactly as they were the previous month, so the numbers for c.p.i. you need to be aware , that was entirely as expected. the month-on-month figure not quite so simple in terms of the expectations and where we were

last time, but at least the simple story is inflation year-on-year for the month of july hasn't moved against where it was the previous month, so .4%, the very low level of inflation compared to where they're supposed to target it. let's bring in some other voices on this. our team of correspondents is here to dig into the flurry of g.d.p. data and other data we've had out this morning. man us cranny joins us in the studio. hans nichols is live from germany. and bloomberg news reporter martin is in paris. manus, let's start with you then. in terms of the g.d.p. number that we've seen here, a little bit of a disappointment then in that g.d.p. number for the overall eurozone, but given those disappointments on france and germany earlier this morning, perhaps that was to be expected. >> yeah, i don't think any phenomenal shock that they were that. going behind the numbers, i think the bigger issue is germany, 56% of their business is just in exports.

looking at the note that you shared with me this morning, we talked about it earlier, domestic demand holding up, g-1 overstated, q-2 possibly overstated, no doubt geo politics. you've got to say this adds more pressure on the bundus bank not to capitulate -- i'm not saying they aren't listening, but certainly they're going to have to have much more of a conversation on the european central bank about what form of q.e., when we're going to get it, what type of q.e. we're going to get. you got to say, you're virtually flatlining. the spread of how much you pay in the north of europe has come down, still flatlining to the next, what needs to lap. government bonds are below 1% for the first time. the reason i go from data to

that is because i turned around to mark barton and said what does rates below 1% tell you, and he said well, it tells you three things. one, the inflation, expectations, they must be pretty darn low. there you go. >> yeah, .4%, no change. >> two, if you get q.e., what typically has happened to bonds? they've gone. dying. is it an indication? >> the market may be assuming we're going to get something more dovish from the e.c.b. coming through. that could be the exception. >> i talked enough. i let the other voices n. >> yes, let's bring in other voices. thank you very much, manus. let's go out to hans, who's in germany. germany, of course, one of the powerhouses, the powerhouse of the european, certainly the eurozone growth story over recent years, hans. a little bit of a wobble in the numbers today, and as manus would have said, that's a technical term. as manus was telling us, reminding us that yield dipping below 1%, fairly significant developments, hans.

>> anna, it's a technical wobble, to use your phrase. it's also a psychological wobble. the question that exporters are asking ourselves, we are here at the port of duisburg, the biggest in all of europe, some three million containers are getting loaded every year. they have 16% growth. it's a growth story here, but the question is, will the export story slow down if these sanctions on russia continue to bite? remember, a lot of the sanctions on russia didn't come in the second quarter. so if you think the sanctions on russia are really hurting exports, the next quarter, at least for germany, could be even worse, and then there's the psychological aspect. how is germany going to try to return to growth? they had .7% revised for the first quarter. how will they do that when all of their neighbors, if not all, most of their neighbors are at flat-line growth, if not negative growth? you see negative growth in italy, flat in france.

these are questions exporters are asking themselves, and frankly, their answers aren't entirely optimistic, as we just spoke with one guest here. he said the enthusiasm, the euphoria of the german economy is clearly starting to wane. anna? >> hans, thank you very much. let's go to france then, to paris. the economy unexpectedly failed to grow for a second straight quarter there. joining us now from paris is bloomberg news reporter mark dean. take us through the numbers, because the numbers in paris have left the government to move on some of its estimates. >> the important thing to understand is the french problems today are actually hidden a little bit by the wider eurozone numbers, and in particular germany. as hans was just saying, you know, exports in germany are the issue. russia obviously, but also flat, you know, lack of demand in the rest of the eurozone and slowdown in china. that's what germany's problems are. but nonetheless, it allows the french finance minister to go

on the radio this morning and say, yes, our numbers are disappointing, we had no growth, but look, germany shrank, italy is in recession. it's not just us. it's a superficial analysis, because france's problems are home grown. france is, you know, it's not a economy of exports, it's a question of lack of confidence, lack of investment, and the germans would say, lack of structural reform. so the lack of growth also means fewer tax receipts, it's translation, al and the finance minister went on the radio this morning and said we're not going to make the target of 4% of g.d.p. this year. france has already had delays in its target, but he's saying it's not realistic, and france isn't going to make its target of 1% growth. he expects growth to be about half that, .5% in 2014. >> so when -- where does this

leave president hollywood hollywood? are they talking about giving existing reforms more time to work, or are they talking about bringing in new reforms? hat are we going to hear next? >> what we heard is this is a french and european problem, we need to do more to boost demand. it's a constant refrain from france. manus mentioned the e.c.b. that wasn't discussed by the finance minister this morning, but it's certainly in the back of some people's minds. but, you know, the question really is, what can be done in address their problems? it will probably be at least next week before we hear any new sort of reforms being announced, but, you know, the expectations are high, and i think economists agree a lot needs to be done. >> mark, thank you very much for joining us. bloomberg news reporter mark deen talking to us from paris. still to come on the program --

angela merkel's renewable push dampens power prices, and r.w.e.'s profits. we're live with the c.f.o. with germany's utility giant later on "the pulse." ♪

>> welcome back to "the pulse" live from bloomberg's european headquarters in london. let's check in on what's

happening on the currency markets, shall we? there's been a lot to talk about today. we've had plenty of g.d.p. data, growth data for everybody in the markets to digest. we had the french and german number both coming in below estimates. the overall number for the eurozone coming in below estimates. we had the c.p.i. number, inflation number for the eurozone come in in line with where it was expected to be at .4%, but still, that is way below where the e.c.b. would like it to be. how has that played out? not much of a move compared to where we started the day, 1.3367. we had seen some psychologically important markets, specifically the fund yield drofplg let's have a broader conversation about the eurozone data we've had out this morning, what does this mean for europe? thank you very much for coming in. we've had all of this data laid out for the second quarter. what worries you then looking

here at this data? are you more worried about france, more worried about germany, italy? where's the big area of worry for you? >> probably the new news is in germany. everyone was seeing germany as a very weak house. we were always expecting something, but there's just more to it than payback for a very new start to the year. >> q-1 was quite strong, q-2 was weaker. but you say there's more going on here. >> some of it is true. what we are seeing is the i.p. numbers, the factory order numbers is out. we have the first signs from slower data exports, and there you can see russia. russia is not a big player in the global trade. it's fairly important market in germany.

before things turn absolutely sour, it's not the sanctions, it's the slowdown in russian activity. it seems to be triggering some wait and see attitude in some big german businesses. we've seen some signs of investment programs being postponed. we were down last week expecting, and again, there's more to it. there is a lack of traction at the moment, which in a country where 5% comes directly from others. >> so there's a russia effect in these numbers, but it's not the effect we might see later on in the year, the effect of the actual sanctions. it's more to do with just the slowdown in the russian economy that was taking place earlier. russian investment was falling a loss in hey have

russia. the sanctions create an additional problem. things escalate further to the fact we have the surprise energy, it's a possibility. then you have quite a significant impact on german costs, because as you know, russia stands for the balance of the german energy mix, so it has quite a bit of lack of confidence to the system. >> even if that doesn't actually materialize. you can very easily how that weighs on investment decisions y business and a number. >> u to see if it stays in. italy is probably more the he flexion of what we've known for, which is that there's an intrinsic lack of growth, which

is, again, showing its ugly face. i would say the result, france is probably the fact that we have a combination of a fairly tough fiscal stance at a time when the private sector, the business sector is reducing spending as well, this is definitely an issue in france. the news may not all be related to the same image. it plays a big role for germany, not so much on italy and france, but it creates this sentiment of slowdown. >> and for france reporting flat growth, no growth, the second quarter, does this mean they have to dig deeper to find greater structural reform? is that going to be in the cards for france later on this year or not? >> i would hope so. i think that's what france could do at this juncture is probably say, ok, we're not going to deliver on the i think what t,

france should do is intensify the positive things that he has done. for instance, reducing taxing, as axes reduce copper tax well, they should have these measures, and they may not want to compensate this with even more effort on spending. i would understand if france uld say, look, given the conditions, we are going to accelerate our tax cuts, and e're not put in more effort. it's only there if at the same time they do structural reforms and is clear on where it wants to go. >> structural reform has born through, whether you look back to germany, reunification and when you look at what happened on the iberian peninsula in the most recent round of reforms,

what is it that france should be doing in terms of reforming their economy? is it around labor market reform? what is it that should be happening? > this should be the priority. maybe there are things that are less grand, less spectacular, but would actually yield quick results. i'm a big fan of structural reforms that helped by reducing costs, by reducing prices. one of the things that have helped the best is the . troduction of another player it's nearly 30%, just the mechanical impact, which has given back to people a lot of power. so if you start fighting, and there are some people trying to reduce the services sector since targeting the professions, then you have a

very nice impact on the cost, creating, again, this much eeded boost. >> it already looks quite weak. where does this leave the e.c.b.? >> at this date, it's probably not in panic mode, and we are ot in panic mode either. there are offices in the system, we are, first of all, seeing the benefit of what the e.c.b. has done in june with lower euro, which, you know, with a lag is going to help. have the very sign of the survey that was better. >> and even the bank of england governor was saying, well, you got to wait for that. we have seen the impact of that. >> they're happy to play with this before another one. at this stage, i don't think

they're ready to throw in the towel, concerned for the scenario, it has to be given up. they have quite the potential to lift a little bit origination in the eurozone, and this has been one of the main issues in europe. >> we talked about sanctions and the story there is not set in stone, of course. we've heard from the russian side about what they've done to block impacts of various food products from europe. there's been talk in russia that that could be widened, we could see the automotive industry, for example, targeted. would that be a bigger worry for europe, or does the size of russia as an export partner for europe mean that it's never going to be that significant? >> for the car industry, it will be significant. actually, the first signs of weakness we've seen, some of it probably comes already from the automotive industry. food, well, the part of food that is targeted by sanctions

is less than .1%. >> we read that the swiss cheese industry is booming, as people are searching alternatives to brie and the like. >> what is likely to happen is that you've got a lot of suppliers who obviously won't be able to sell in russia, which will have to get rid of their inventories in western europe. it's another reason to think that food prices are going to fall further, which complicates the story, but at the same time it creates a little bit of power, a boost to consumers. >> thank you very much for joining us today. good to hear your thoughts. we'll take a short break. ♪

>> welcome back to "the pulse" live on bloomberg television and streaming on the ipad and bloomberg.com. it's something old and something new for rolls royce motor cars. the luxury carmaker's latest launch is combining a traditional design with new tech knoll. matt miller spoke with the company's c.e.o. >> this is all about perfectionist, and one of our founding fathers, and for that reason we are always searching for latest technology to make sure that our cars are living up to the unbelievable high expectations of our customers, and for that reason, we also updated and made it a serious tool with the headlines to trade the transmission and many, many other features to really assure that customers

are buying the best car in the world. >> much like the cell phone industry where every few years i have to have the best and the newest, i feel like a lot of times that's the case in the car industry as well. how do you build a rolls royce so that the ghost ii doesn't make me feel like i need to sell my ghost i? how do you build it to elongate the life cycle? i'm assuming most rolls royce owners want to have that car in their possession for decades rather than years. >> matt, you're absolutely right. you might see that the design changes in the ghost ii series are really subtle, and that's a good reason. that is particular with also our clients, and you don't to want see your car being outdated after a couple of years. we are making sure that our technology, but we would never change just for the sake of pure changing the zivene our

cars, because we think our cars are timeless masterpieces. >> i have to ask you about s.u.v.'s. it's a craze that, you know, has gone too far for some carmakers. i feel like it's unforgivable for porsche to make a s.u.v. it's laughable for lamborghini. but rolls royce has a historical break. you made one back in the 1920's and 1930's. are you planning on coming out with a new s.u.v. soon, next year maybe? >> we haven't confirmed any plans yet, but we are working on it. it's an interesting segment for us, and the more we are talking about it, also with our clients, the more i get really the feedback from our clients talk, why aren't you bringing this to the market? i can tell you we are making progress. there's no final decision yet because for me it's very important at the he happened of the day that it needs to be true rolls royce, which lives up to all the problems our clients do have towards our

brand. >> that was the c.e.o. of rolls royce motor cars speaking to matt miller earlier. still to come -- it's lights out for r.w.e.'s profits. the german utility giants swings to a loss. we'll talk to the c.f.o. ♪

>> welcome back to "the pulse" live from bloomberg european headquarters in london. i'm anna edwards. here are the top headlines this hour. iraq's caretaker prime minister has lost the support of his own party. the group is undering its members to abandon the current prime minister and back the nominee. however, nouri al-maliki insists the attempts to replace him are illegal. r.w.e. has turned to a loss in the second quarter. a surge in clean energy power generation hit prices. they're cutting capital spending and selling ago sets

to reduce costs. it's their biggest producer of electricity. we're live with the company's c.f.o. later in "the pulse." and the eurozone recovery unexpectedly stalled in the second quarter and its biggest economy failed to grow. germany shrank more than expected, while france flatlined. that underlines the vulnerability of the country and the deepening crisis in ukraine. so 10:31 here in lone done. let's get inside the markets with our markets editor, manus cranny. >> quths are finding it tough. you've got virtually flatlining growth here in europe, and that's pretty much before the impact of russia. have a look at the fund yield. what is that telling you? this market is either, a, assuming inflation is a historical facet, b, that quantitative easing is potentially on the way at a

quicker face than originally anticipated, so fund yields have dropped this morning, as i say, below 1%. part of that translates to the response from the market. portugal getting off less, but you have still not gone through this year's lows. the euro is now up, rising by a quarter of 1%, so short that there was nowhere left to turn. a lot of the bad news was essentially baked into the market. that's what pimco said and citi said at the start of the week, and to a certain extent we have that discussion this morning with u.b.s. saying that the hedge funds actually were so underinvested. that's the play on the euro-dollar. back to you. >> manus, thank you very much, in about 25 minutes' time, it will be time for "surveillance." tom keene joins from us new york with a preview. tom, we've been obsessing about eurozone g.d.p. data today. please tell us you'll be continuing that fascinating

conversation or giving us something else to think about. >> no, we're going to do that. we're going to obsess about europe as well. when you see .998 on the german 10-year, that gets your attention. we'll carry forward the conversation manus talking about. we're going to have one of america's great economists associated with republican politics. he's the former congressional budget office director. he's got some interesting ideas on the minimum wage, but particularly holtz-eakin on global instability as seen through the repo market. that's a mouthful. it's a jumbo. but it really directly ties in to some of the dynamics we're going to -- that we see right now in europe. as well, we'll speak with we'll look at technology in buying and selling stocks. he's associated with stock twist, but with a lot more, including twitter. it's got to catch up with him on technology. all that going on, and we'll have lot look at the very

interesting news overnight in iraq. anna? >> absolutely. tom, thank you very much. tom keene and the "surveillance" team at the top of the hour. let's turn to ukraine, where pro-russian separatists continue to battle. at the same time, a convoy of almost 300 russian trucks carrying humanitarian aid travels from moscow towards ukraine. we get the details. bring us up to date then on what's happening with this convoy. >> convoygate. the 280 russian trucks are on their way from the southern russian city. they're headed south to the ukrainian border. under normal circumstances, we would expect them to get there in a few hours, but they stopped yesterday unexpectedly. what's changed since yesterday is today the ukrainian government is saying that they are expected to accept these trucks as long as the russians allow the ukrainians to inspect them first and as long as the international committee for the red cross does the distribution. that's movement. we haven't heard back from the russians yet, but just yesterday the ukrainians were

saying the russians sent the truck empty, but their fighters they sent over the border and sent them back home, they can, you know, as the interior minister of ukraine said, putin can take his 30 tons of salt and shut it. >> take it elsewhere, yeah. >> take it elsewhere. soolingts bit of movement, and you see in the russian market, you see it reflected today, optimism that maybe things aree escalating. >> let's talk about crimea, because the fact that president putin is there in what the russians consider to be the newest path of russia, the newest territory, does that sound like the climate for deescalation? >> well, i think you got to think about on the part of ticks here. you've got the russian president in crimea. i think he might even be at the palace where churchill and -- >> yeah, that famous photo, yes. >> exactly, the three of them, stam inand -- stalin and roosevelt are sitting. he's addressing the russian parliament, going about the business of governing, and at the same time, that's usually

popular with the russian people, who by and large supported the idea of annexing crimea. at the same time, they're saying that humanitarian outside convoy to ukraine, so it looks like russia is doing all the right things, he's doing all the right things that russians want. i think that's -- we'll have to see. he's going to talk about sanctions as well. he's going to talk about how much money they're going to pump into crimea. but really, this is a public relationser and sismse >> yes, twitter, somebody tells me that the prime minister of russia's twitter account has been hacked. what's happened? >> well, i was surprised myself. the russian prime minister's russian language twitter account was hacked, and all the sudden we were we were getting tweets about how crimea is not ours, forgive us, please retweet. >> you didn't, did you? >> i did not retweet, but i did tweet about it, surprisingly. you can follow me.

i have not been hacked yet, though i may make that claim later, depending on what tweets i errantly put out there, get in trouble for. but it will be interesting to see how this plays out. this is very embarrassing for the russian prime minister. within the kremlin structure, he's considered to be very liberal. there are a lot of guys in the kremlin that don't even like twitter, would like it banned. one might think this might push some folks to think that, there's validity to the idea of banning twitter. they haven't said that yet, but it does put the russian prime minister in an awkward position because he's been seen as progress whiff it comes to social media and tweeting. >> build up the technology industry. >> and meanwhile you've got the other side of the camp that thinks quite negatively about these things. it will be interesting how that plays out. it's sbenl something to watch. it's funny, but it's also potentially a tad serious for how the russian government views social media going forward. >> could have serious undertones. ryan, thank you very much.

it is 10:37 here in london. coming up next, over to germany and those newly released discouraging g.d.p. numbers with export accounting for a huge part of the numbers. hans nichol social security live next. ♪

>> welcome back to "the pulse" live from london on bloomberg television.

the german economy shrank more than experts had forecast. the nation's exports industry accounts for a large part of that economy. let's go to our international correspondent, hans nichols, who joins us from the port city of duisburg, where they are busy exporting all around you, hans. >> they are busy exporting. they're importing coal. this is the city in the heart of german economy. i'm joined by the c.e.o. of a company that's so core to the german crew, core to the global economy. it's a process control, you make process control equipment. tell me what that means. my understanding you is can't build a chemical plant or a mill without t. >> well, wherever you have to control processing or chemical industry, for instance, you need equipment like we make. we make flow meters, level meters, we make density equipment, anything you need to know in the process of control

to prevent manufacturing in germany. >> that basically makes you a barometer, a barometer for what's happening across the globe. >> exactly. >> where are you optimistic and where are you concerned? >> opt mistech, we are right now, because the world economy is growing. we have considered that the growth we experienced in asia is above average. it's also quite strong in the u.s. market, and also the european market is doing quite well. we do have our concerns, of course, with some areas like in russia, especially in ukraine, where we see some issues which do affect our growth, but only to a small extent. >> so small extent, but not massive concerns about what's happening in russia and ukraine. >> not massive, but we are watching the situation. right now we see that embargos from the european union also from the u.s., and we are right now not affect by this because

we're not delivering to any military companies in russia. we only serve the single market. >> if these embargos get tighter, you make industrial equipment, could you be affected? >> it will be affected on what will be the embargo and what will be forbid ton deliver. the embargo does not really touch us off, so we continue, and also we have a big advantage because we do have a local manufacturing operation which can serve the russian market from within russia. >> so you have a plant inside russia. does that plant continuing to grow as demand is strong? >> it's continuing to grow. it's not quite strong because the economy is affected so far, but we see growth even this year compared to the last year. >> when you overall look --

you're in so many countries. newer europe, throughout the world. where do you see some of your strongest growth happening? >> strongest growth for us has been over the past year, specifically in asia and in china. china for us now represents more than 50% of our global turnover, and we strive on exports, as you see from international business, not only exports, because we do manufacture overeast. we do manufacturing in china, dia, over europe in the u.s. and also in brazil. >> you see ukraine, loading docks. there's a great deal of commerce taking place near duisburg. is there a sense of the german core economy can ride out softness throughout the european union because they're so well diversified? >> well, we are also quite well diversified as a company, and that helped us to the crisis we also in 2008 and 2009,

diversification in different industries, different countries helps. >> what about currency? i suspect the euro is going to become weaker, more speculation that mario draghi may be doing something. are you that affected by a strong euro or a weaker euro? >> we're not really affected, have not been in the past. of course, a stronger europe will not exactly help us because you get less competitive in the market, and a weaker euro will help us. but globally it's not a big issue. >> what happened you like to see it at? >> oh, right now it's quite confine, 1.35 should be ok. >> you're fine with 1.35. >> yes. >> when you look at russia, it's not been great. sanctions are going in effect this quart. how quickly do you see this resolving, and do you see ways through this crisis? >> it's difficult to see what will happen in russia.

i hope we'll stop supporting the rebels, rebel forces, because i think to really do at, but whorns what will happen? we have our own employees with their own view, which is not exactly the same deal we continued to have in the west. right now we are not really affected in russia. we are affected, however, in our ukrainian business, which, however, does not represent a big portion of sales. >> one final question for you. you know, if there were increased sanctions, tighter sanctions, could angela merkel count on sort of the core german industrial companies to support her for tighter sanctions, even if that meant less profit, less revenue? >> i think you could say so, yes. we would support this, and you've seen recent comments also from the german industry that they are in favor of supporting whatever sanctions

are put up. the sanctions are put up by the government and the political area and not for the company, but we will follow whatever sanctions are in place. >> ok. well, i thank you for your time. i wsh you the best of luck in this complicated moment in history. anna, back to you. heard a very clear answer, and that is that german businesses will continue to support strong sanctions, even if it may cut against their bottom line. anna? >> hans, thank you very much. hans nichols joining us there from duisburg. g.e.'s appliance unit may fetch about $2 billion in a sale. the unit is said to be drawing interest from eletrolux and a start-up company. our bloomberg news deal reporter joins us now. remind us why g.e. wants to sell this iconic business, its appliances business. >> well, this is all about g.e. getting away from these lower-margin, consumer-facing

businesses and into the really heavy industrial stuff, equipment for power plants, trains, things like that. g.e.'s appliance business is iconic. this is how most people know the g.e. logo, the brand. we were just debating who invented the toaster, and we came up with a consensus -- >> you might wonder what fascinating conversations take place off air, and that was one of them, yes. >> and that g.e. was the first company to commercially market a toaster over a century ago, which is quite amazing. this is the core of g.e., but out it goes, because jeff immelt, the chief executive, wants to be a industrial player. >> there is a scottish inventor who claims that he was the one ho invented the toaster. eletrrux, and tell us about quirky. > eletroux, they're the one.

quirky is a startup that solicits idea from an online community of products to develop. what they're really going after is connected devices. they're already working with g.e. on connected devices. this is so you have a refrigerator or determine washer that is plugged into wifi. >> it's really interesting, because g.e. knows something about connected devices in other parts of its businesses. it's really going along with this craze. so in the engine side, we spoke recently to the g.e. engines business, and they were talking about this technology where you can connect all kinds of parts of the engine and then all kinds of things about the way the engine performs, and yet they want to get rid of their consumer business, their appliances. they don't see much of a future in that area, as quirky does, because quirky does see a future in it. >> perhaps not, and i think there's still an open question as to whether connected appliances in the home are going to be a gimmick or something that really catches

on. google, interestingly, has made a very big bet on this. they bought a company that does very high-tech thermostats, not a product most of us ever think about, but google does believe there's a future there. so there is interest in this sort of thing, and we're seeing that in this particular situation. >> yeah, what's next for g.e.? they've got a lot on their plates at the moment, focusing on the industrial side now, as you say, away from the consumer businesses, and they've been acquisitive so far this year already. >> for now, they have to integrate all of them. this is what they bought in france, or most of them, shed say. they're in a very complex situation. they've made all sorts of commitment. that's a big bite and a big acquisition for them to integrate, their largest ever, actually. they're also trying to spin off their consumer finance unit. that has had an initial public offering. the rest of it will probably be spun out at some point. jeff immelt is a very, very busy man. he's particularly so right now. >> just trying to work out

whether g.e. still makes toasters. they don't mention it very prominent on the their website. >> no, i imagine not. >> matt, thank you very much. let's get some company news then. thyssen krupp beat estimates. this after they made money as its previously unprofitable american unit ajustd earnings nearly triple in the last quarter and beat analysts. in may, thyssenkrupp posted a profit. and airbus a-350 has ended tests this. paves the way for the first delivery of the plane to qatar airways later this year. the trials have lasted 14 months. the final flight from helsinki completed a three-week tour with a test plane visiting 14 destinations. qatar airlines is the largest economy with 80 on order. and r.w.e. has turned to a loss in the second quarter. a surge in clean energy power generation hit prices. r.w. september germany's biggest producer of

electricity. we'll be speaking to the c.f.o. in around 10 minutes' time. and as we head to break, let's get today's pulse number for you, $11 million. that's the price of the world's most expensive watch. the henry graves super complication was made in 1933 and has been called the holy grail of watches. it's the most complicated time piece ever to be constructed entirely by hand. ♪

>> welcome back to "the pulse" live on twoorg television and streaming live. one of the most prestigious luxury brands in the watch industry, but just how much are their watches worth? take a look at some of the highest priced patek time pieces ever sold at auction.

>> the watch that actually plays chimes like big ben, but it's a little lighter to carry around. very nice. let's get a check on what's happening on the cancer a markets. .

>> u.s. troops land on mount. the white house is relieved. 20,000 becomes 4,000. what is next for america in iraq? the german 10-year yield falls

below 1%. does it signal deflation across europe? the crisis in gaza kills israeli tourism. good morning, everyone. this is "surveillance" live from new york. it is thursday, august 14. i'm tom keene. joining me, scarlet fu and adam johnson. let's get right to our morning brief. here's adam. >> overnight, european economies kind of stalling out. france's second-quarter g.d.p. comes in flat. turns out germany's declines. >> it's a mix, where it's germany, france, and italy, the big nations are the ones struggling. >> yes, and that's not what we would have thought. portugal actually picked up on the most recent data. south korea, we should also point out, the central bank cut its rate. some signs of slowing. >> you wonder about, when does the i.m.f. weigh in? >> the i.m.f. has reduced its estimate for global g.d.p. growth twice since january, twice. i believe it's now under 3%