>> the russian steelmaker. profits, thep in housing markets are about to cool. apparently, size does matter. an ipad andes boosts shares in suppliers.

good morning. you are watching the polls. pulse. we begin in belarus. to have a and failed resolution to the conflict. joining us on the phone is alexander. so, is there any good news here? was any good news made? >> indeed. president of the ukraine and vladimir putin are talking to each other. that is a good sign. a long conversation yesterday that took place behind closed doors.

the conversation did not yield a major break. +++ conversations will be with the military of the ukraine and russia that will aim to organize a more effective border control on the ukraine border. that is important because they allow weapons and fighters to flow across into ukraine territory. >> let's talk more about that. what can you bring us with the situation on the ground. -- ground? we hear about a buildup of military equipment that could be

supplied to the rebels. what are we seeing? >> yes, indeed. poroshenko said that he did not mean that war had stopped. this is still very troubling and, perhaps, the most dangerous development is the defense ministry saying that regular russian troops may be on the ground in the eastern ukraine. vladimir putin confronted this yesterday and said that the happening the cousin of a group of soldiers that crossed the border by mistake because they got lost while patrolling. situation is the very tense and the fighting is underway. >> alexander, we will leave it there. he was calling us from minsk. let's talk about the business impact. the russian car market may shrink 17%-18% this year. that leads us to talk about the biggest steelmaker.

akened.ults weeken so did the russian ruble. carolyn hyde has been working through the numbers. is it too much to say that they have not been affected by sanctions? have you actually looked at it? it is not so clear. >> the investors got nervous and they were worried that this was a company that had steel plants in russia and south africa. also, in the ukraine. tensions have affected this company, in terms of sentiment and in their feelings towards how secure their supply is. the main figureheads in the one in, notably being who owns chelsea has not been impacted. the company has not been deemed close enough to vladimir putin's

innerworkings. it is allowed to carry on business as usual and we saw the sales dipped not as much. they fell some. 17% because the russian ruble has weekend and the foreign currency has weekend. africa, they still have operations and minds. they can reduce the cost of production while sales have been improving. is a company that manages to push things forward and they were able to secure a loan using international lenders throughout all of this. there was fear of increasing tension and they managed to convince them to lend out to them in the geopolitical risk. >> they did not get half of what they were looking for. you could argue that there is still a sanctions concern out

there. future is all based on exports to many banks feel x loader -- exposure. this is collection if company can export steel. net-net, the currency effect is the biggest we are seeing. >> it seems to be supporting the profit. what is important is that this is a company that wants to expand more into north america and it is the biggest producer of rail track. they want to be in north america and in south america and the middle east, as well. isy want to export and this not just providing for construction and russia. they want to be looking outside, as well as a we might see an

uptick in the economy in the united states. shares in thel north american unit because many are valued more than the russians right now. >> yeah. >> so, they may be looking to increase exposure there. far, it seems that the citigroup view is that this is a company that does not have much exposure to the ukraine and can continue to deliver profit. >> thank you. we'll have an exclusive conversation with the cfo a little later on in this hour. we will get what he think's the sanctions story and the latest development in the ukraine and put it into some sort of context for you with the investment story and russia. let's go from steel to technology. bigger is better. apple is preparing to reduce the

largest ipad. that is sending shares in the asian supply base higher. we have the story. this,ms of the size of how big? >> it is the first new release of a product for apple in two years by the time it comes out. they have been doing this and they have reported that there will be larger iphones and new tablets. it is not since the ipad mini that apple has set a new product size or a subcategory. this is a push they have talked about for a while. product areas and categories and are chasing differ markets. it appears that it could be a push towards a corporate market.

what exactly people want to use it for is up to themselves. surely, a larger tablet would help meet corporate's. -- corporates. quite a file and they are working closer together towards a corporate market. this could be a play towards that. -- this is-- this is a subcategory. will we have two ipads or a separate subcategory? question. it depends on how you want to look at it stop it looks, certainly, at this stage, that the indications out of the supply chain is that there would be three tablets. would have this and whatever they call the larger one. whatever name apple comes up with. it looks like three categories or three sizes of tablet.

ipad-style, it would run on the ios. the mac os has looked more like years. over the last two they are bringing the graphic interfaces and, at this stage, he looks like that this would be a third stage of the tablet. >> we will leave it. thank you for joining us with the latest from apple. up next, silenced for now. the french president has replaced three ministers after the austerity revolt. we are going to go to paris to find out. we will see you in a moment.

>> good morning. welcome back. the new french cabinet has been approved and the critics are saying that the government or shuffle is unlikely to change the policies that have stunted french growth. joining us from paris is carolyn. talk to us about the main changes and what we get. >> the three big changes are education, kosher, and most importantly, the economy. the name of the new economic minister. remember name. he is 36 years old and he is a former banker who used to work

negotiated id and buy out by nestle of the pfizer nutrition unit back in april of 2012. that was one month before the president was elected. hollande was very active in the left-wing circle. he became the advisor to the president and an economic adviser. he was an architect of the responsibility packed. it is the big flagship economic 31 -- 41th tax cuts of billion euros for companies. did his first press conference and rebuff the criticism from the other side of the socialist party, quoting oscar wilde. saying that when people are of my opinion, i have the impression of being tricked. this is a different economic

minister from before. of finance.le now, we have other big changes in education and culture, to replace the other troublemakers who were part of the previous government. to first education minister be a woman in france. then, the person you are addressing right now, they will become the new coulter minister. >> i want to talk about the finance story. a couple of questions. what are the consequences are -- of putting a rough child you childmaker -- roth dealmaker in charge of the socialist party. >> this is a concern from the left-wing of the socialist party. thes signaling that

president and prime mr. want to maintain a line of economic policies with a target of 50 billion euros of spending cuts by 2017. the prime minister reminded us that the priority of france is to still cut the deficit that france has been -- deficit. france has been living beyond their means for 40 years. the socialist party is divided whatmore rebels supporting was being said. it will be more difficult for socialist to get support and pass reforms. they have a short majority in the national assembly and 291 seats. the majority is 289. they have to look for broader support from the greens or the far left. it will be difficult with the current policies. the next thing discussed may

have them seeking opposition votes. >> interesting. watch this. carolyn conan joined us from paris. let's get more. does the reshuffle change the economic models for france? >> not necessarily. the classification of the message is possible -- positive. issues for the european partners of france. thehe general, we will have continuation of cautious moderate reforms and we have had a few of them already. there will be a fiscal line that is going to be a bit more accommodative than what the speech implies. of argument in favor relaxation of fiscal policy for some time.

europe is conducive to relaxation. see the speech on friday. the timing of the reshuffle is interesting to some extent and surprising, in the sense that it is moresely what europe excepting of than what those who argued in favor of this are. the relaxation is acceptable only if the structural reforms come through. >> the demand-side reforms means relaxation and it needs supply-side reform. this argument seems to be couched as if it is one or the other. it is not. you need both right now. the would read -- dispute notion that you can replace demand-side reforms was supply-side reforms. act is whatbility france should do. reduce taxes further in the next

few months or years. allows what will companies to retain more force and how to restart the labor market in france. it will, in the end, abu's consumption. consumption. the reality is that -- and i think this is what the government will pursue, if you improve profitability, you create jobs and support them. >> talk a little bit about the targets. the ones that france may miss. >> will miss. >> ok. my sense is that germany keeps their powder dry at the moment. you look at the current position within the commission and waiting for a fight with both re de. and hollansd do you think germany is on the

back foot on this one? how will this play out? >> i am not sure that we are heading for a big fight. it is hard to understand what rome and paris want, in terms of changing lines. friday, itted out on was an important argument, i pact ishe growth critical. if they allow further leeway to france and italy, it will be done and you do not need to change the dynamic for that. the country is in a state of recession. that is the issue of italy -- the situation of italy and not far from france. it can, through the current guidelines, extricate themselves from the fiscal targeting. you not have to change the guidelines. you need to get through the negotiations and it is a matter of negotiating some physical twoxation and agreeing

growth reforms. >> political questions on the shape of the european curse -- curves. the rest of the curves, do they start to flatten out question mark >> as long as we have talks of qe, i do not think it will come. as long as there are talks about this and -- some of it will come through the bond market. you can probably expect a little bit more there. the movement has art event quite impressive, i would have to say. i would prefer to wait until we have money in the bond market before saying the things are starting to normalize. there is probably a little bit of supply that needs to be covered. >> the last question is about the u.k.. -- the u.k. i want to talk you about the risk and whether or not there is icings-pricing -- mis-pr

given the strong performance. >> i think it is interesting. there was interest around the issue a month or a month ago. it suggested that "no" would win. it is not necessarily a scottish issue that could trigger negative consequences. it is more the ramifications for the european referendum. obviously, if scotland leaves, the united kingdom loses the most pro-european chunk of their territory. labor tobe tough for stay in government for long. the odds of a referendum on whether or not the u.k. should stay in the eu increases. out, veryd is quickly, people will pay xit issue to the bre

than before. >> thank you for joining us from deutsche bank. still to come, the aston martin virtual showroom. they are putting on a massive reach to expand their brand. the details are later in the pulse.

>> welcome back. we are talking about equities. the new government is ok. the ftse 100 is in the positive. german bond yields are down. new record lows. down again. guess where else we are lower? -- lower. spain. they are down another six basis points. some noises and voices talking about revenue, but is. we are pricing in deflation and the likelihood of qe. it is optimism in the recovery. not really. incidentally, italy is trading above spain by the most since 2012. 27 basis points higher. a little bit of diversions there to think about. another is betting on rate cut that could come next

week. to think about. we will talk about it in another hour. >> we certainly will. coming up, we look for dents and dings in the steel industry. what is the effect of western sanctions and on the conflict in the ukraine. we will speak to the steel producer will we get back.

>> welcome back. you are watching the polls. we are here in london. i am guy johnson. reaching a record you. -- record value. the shares have added in the last three weeks. israel and hamas have agreed to

a cease-fire that could and seven weeks of conflict. between gazangs and israel are starting to open. the u.k. real estate rocher warns housing markets. theas investors overlooking rear view mirror. let's talk about what this all means. what are they warning about? there is a lot of resistance now to the kind of prices and how fast they have been rising. the sterling has gotten stronger against some of the asian the comeback has been strong.

so, that has culled the market. the stress tests that are being introducing our calling the market. >> something to think about. .> all of the offices are if i was them, i would want to the getting the ripple effect that was happening and it ripples out from there. that is why you have record .umbers in london pitching in >> this has been a barometer for the london housing market. does it get tougher? it is not good for anyone. >> right.

>> what will happen when interest rates go up? >> there may be a correction. it is uncalled for. themselves in. >> we have to leave it there. thank you for joining us with what is happening. i am going to bring you a bloomberg exclusive. resilience in the face of western sanctions. currencies are part of the story. let's talk to the cfo who joins us on the phone from moscow. good morning to you, sir. is the fact factor that we have seen key currencies in your market depreciating? how big of a factor was all of that. >> look, it is a significant

factor. 2014 versusing at 2013. it is depreciating against the dollar 12%. so, that was a positive impact so, a much greater, obviously, depreciation of the ukrainian currency. having said that, we have made some very positive and large efforts in cost reductions and have achieved almost $200 million in cost reduction compared to last year. rallied because citigroup put out sanctions concerns and said they were overblown. cts doffects -- effet sanctions have on you?

>> well, look, no direct effect. nor anythe company others are mentioned. is a topicr hand, it of conversation when discussing financing and other deals. >> ok. we will talk about financing in a moment. let's talk about a direct effect that is coming through. you are not on the list and you were not directly affected. the economy is starting to slow and it is interesting that the german industry lobby is predicting growth as being down. they are saying that they see the russian car market down this year. in terms of domestic demand, what does it look like? >> we produce products for

infrastructure and the construction industry and we are not exposed to the consumer side of demand. i find it difficult to comment on that. on the construction side, the demand has been strong and we have managed to sell all of the products we can produce. slowdownot noticed a in infrastructure and construction investment. >> are you were at about russia game's? >> well, look, we have discussed the impact of infrastructure investment for the world cup and it would be positive. be a vitalt

this.ent in russia is a large country and there is a lot of investment going on. >> let's talk about financing. indirect effect that we talked about. andraise $425 million people were pretty impressed that you have been able to do that. how tough was it? tougher than it was last time. we did this exercise and i would say it was more because the first time we, as a company, and as the banks with us, were facing sanctions. we wanted to actually be as clear as possible in the beginning about what to do in

the sanction landscape if it were to change further. is that the case? what does it look like for future capital raising? towe started off wanting raise more because we were not one -- a number of actions. we have $1 billion in debt coming due in the next 12 months. also, ourecks and free cash flow has been quite strong. refinancingcts, the

is reduced over this. the money is enough to take care of all the refinancing needs until the fourth quarter of 2015. >> ok. do you think we'll find ourselves in a situation where it will be easier for russian companies to go east, rather than west, for financing? any talks about raising financing in the east? >> we have had talks with asian banks. if you think about the japanese banks, they have traditionally asported us in financing long as 10 years ago. it would be nothing new. abouteral, i am pragmatic the financing and would look around for the best in capital markets

and banks to work with. >> ok. we will watch this space on this one. thele were talking about directions. >> we're looking at a number of , and terms of optimizing corporate structure and we are not ready to make any specific comments. >> ok. there is a valuation gap that seems to exist with the valuations of steel producers and foreign-owned steel producers. do you think you can close without making a sale of that business? theoretically, anything is possible. we are not ready to make specific comments.

>> ok. let's wrap up with a conversation about your business and how ucf. you are a business that has footprints in many places. it much of a handicap is being russian? how much more difficult doesn't make life for you as the cfo of ? steel company how much tougher is it to get the job done? >> first of all, i would say that by being russian, first of plc the company is a u.k. and listed in london. company.e a u.k. about two thirds of assets are in -- are in the former soviet union and the ukraine. with the rest, they are mostly

in north america and some are in south africa. so, i would not exactly call russian.all that yes, the majority of the operations are here. in terms of doing business, again, my main day-to-day concern is managing our debt and financing to make sure that we had the liquidity and the financial stability to operate. bit of discover a little the context. so, now come with have a basis in understanding of what impact sanctions may have going forward. we will use it as a blueprint for ideals. >> it is really fascinating. thank you for your time.

it is great to get your take on your business. it is an interesting time. we were joined for exclusive conversation. we are going to take a break and we will weigh in on the stand up between russia and the ukraine. in another bloomberg exclusive, he says that italy is wise to stock up on gas because tensions could threaten the energy supplier. >> i think what italy is doing and stocking gas just in case. i think the problem is not really the gas supply, itself. it is a larger problem of security in a very large country and a part of europe that is a little bit larger, and times of problems -- in terms of problems and the gas supply issue. >> the ceo spoke to us

exclusively there. in a few minutes time, we will talk about apple preparing the largest ipad ever. is it enough for tim cook to stop sales sliding on this particular product? >> we will look at the low profile getting ready to lead the biggest mobile phone maker.

>> welcome back. talking tech, asian suppliers were soaring. everech giant's largest ipad. cory johnson has this report. inches is some size. we were used to nine inches. that is the average sign. of the the average size ipad. 9.7 is larger than the average size these days. and a lot of competitive makers and have been going down in size and measuring. applee have learned that is going to be releasing a 12.7 inch -- i am sorry a 12.9 inch. is 33% larger than right

now. a significant change in this company and a product that we expect in early 2015. i think what is more interesting here is that, at the same time apple is increasing size and deciding that size matters, we expect an announcement on december 9 about bigger size. one mean that the same ones who were looking at the larger one don't want one value thet starts to argument that microsoft made, the tablet replacing the laptop and being there for the adjustment. once that is interesting, given what is going on. changes afoot at samsung. success and plans at the company -- succession plans at the company because the head of the company has been in hospital since may. successor, his son?

we will find out. we know a little about dad. a larger-than-life character. god-like, in the way that he is treated at the company. >> the sun, and personality and what we know, is very different. he is low key and has not given an interview on the record to the press. he is much more approachable and subtle. his dad is revered. perhaps, it is not fair to compare them. when his father was unhappy with the products, and he burned thousands in front of the executive. his son, try to make the same made his office up in rival competitor products. >> a different style. >> there's interest in the

future and the succession. >> how nervous should it make us that we know so little about the man. >> at his reflection of korean culture. is a reflection of korean culture. there is more deference to senior members of the family" from norm. when he steps forward, he may express himself more openly. >> right. we do not know a lot about the sun. fit into the he story question mark >> it is a complicated web. you have the patriarch. you have the sun. -- son. he has two sisters. they have a smaller stake and our billionaires in their own right. again, they keep themselves ready close to the shadows and they basically run the shopping and fashion arms. >> thank you for the update.

we were joined on the succession story at samsung. reality test drive takes a user experience to a whole new level. we are going to check out the latest rides going to a screen near you.

>> welcome back. you are watching. let's put the pedal to the metal. let's not. the new super-car has everything you would expect. dramatic curves, power, speed. if you want to take it for a spin, you have a problem. this new car was built exclusively for a virtual world. we spoke to the top designer. >> the car is a real car in the virtual world. it is incredibly exciting to design a car for the videogame. you do not have real-world constraints. it is time to push the out hugees with

investment. you have to design it as if it was real. it had to have a real engine and a suspension. we had to give it a weight and performance figures. they could tune all of that into the game. the reality is there in a virtual world. there are elements on the car that may find their way into the production cars at the end of the day. it was really important to see it as a physical model. if i go through some of the highlights, the front of the car , it does not feature a typical grill and you know it is asked and martin -- aston martin. we have a very pure and simple side to the car. very dramatic. the back of the car has a lamp shape, if you like. we have deconstructed that and put all of the led's into light pipes.

we do reach a huge audience with this. you think about the amount of people who download and play granta resmed and it is huge -- grand torismo it is huge. they all want to download your product and become part of your brand. they understand the brand more. it is vitally important for us. the virtual world is becoming our reality. most people play the game and the car in the game and then, they see the model. this is unexpected because they are used to seeing at in a virtual world. it is the way of the world to try things like this. >> a cool car. it would be great to take it for a real will ride. the first word is up next. for our viewers, a second hour. what do we have? french fallout stories after the

reshuffle. what next for the french economy? we will go to that conversation and the rich russians feeling the squeeze. of all speak to the ceo concierge service. are the russians changing their behavior? we will find out in a moment.

>> no breakthrough. poroshenkotin and failed to --. a jump ining despite profit. u.k. housing markets are likely to cool. apparently matter. apple prepares its largest ever ipad. good morning to our viewers in

europe. a warm welcome to those waking up in the united states. i am guy johnson. this is "the pulse." we are live in bloomberg costs european headquarters. -- bloomberg's european headquarters. two leaders tried to broker a deal in the conflict in russia and ukraine. talk about the progress. ukrainian president and longan president had a conversation yesterday, which lasted two hours and took place behind closed doors. the fact that they are talking is a good time. still, there has been no major breakthrough. both sides agreed to continue talking to each other and the next consultations will be

between the military of ukraine and russia. -- consultations will aim to more effective border control. the crane accuses russia of andwing tanks, military rebels to flow across the border into its territory. seer this week, we may talks about supplies from ukraine to russia. >> what was happening on the ground? what was the story in eastern ukraine when it comes to conflict? and --shenko and food and vladimir putin shook hands yesterday. news from the eastern ukraine is still quite disturbing. pro-russian rebels are mounting a counter offensive and

ukrainian forces are fighting back. developmentther which is troubling. ukrainian defense ministry says not just the rebels, but regular russian troops are on the territory of ukraine. vladimir putin acknowledged this yesterday by saying that russian shoulders were captured in ukraine. incident,yed the saying that the soldiers were just patrolling the border, got lost and happened to end up in ukraine. >> thank you very much. let's look at the business impact of this story. spoke to the cfo of --. sales weekend at the company and so has the ruble.

i spoke to the cia f o and he downplayed -- i spoke the cfo and he downplayed it. >> having to go for export financing, finding ways to give security to the banks that are going to lend to them. certainly that is what deutsche bank has done. they have lent service to this business for the shirt term -- for the short term. on russiajust focused and ukraine, although a lot of the production does come from there. we are not russian. that was a nice take. 32% -- they have not been deemed to be part of food and cost

inner circle. this is what analysts have been saying. steelmakersy held are not as exposed as other industry groups will be. that has partany of its business in russia annexed soviet states. america, asia, europe. we have seen an uptick in demand. sales are down, but not as much as expected. profit is up. she -- productive and -- production is cheaper. is bring it back and it

rather positive. >> let's talk about the sanction plans. boy on whether they will be selling the north american business. the impression is still being looked at. >> they're looking at selling shares. >> they loaded themselves up with dead a couple of years ago and now they find themselves -- that is actually more a valuable at the moment. there seems to be more valuable companies. they're looking to sell shares in the united states and get some of the value out, bring it down, reduce debt. become less worried about their overall financing costs. they want to expand across the board. they want to go into the middle east, into south america more. on the dealstake in japan and austria.

up, theyf they keep may be able to. hyde, let's focus on france. francois hollande has appointed a new cabinet after a revolt from the left-wing. talk about the main changes. who is in and who is out? one name to remember if you have to remember just one. emmanuelle. he will replace --. debate on the policy. he is young. 60 years old. a former banker. he used to work at the bank and negotiated the deal between pfizer and nestlé. that was just before president

hollande was elected. been active in left wing circles. as part of the team, macron was behind the responsibility packed. reform thatship includes 41 billion euros in tax cuts for companies. played ad that macron key role in the alstom deal. he's a reshuffle the deck. these are the guys that have come in. about the impact of all of this. what will we see? these signals, they have a

target of 50 billion euros of spending cuts by 2017. if this is what is being called austerity by -- and by his supporters, who are not part of the left-wing socialist party. impact onhave a big economic policy is handled because the government needs a majority to pass their laws. predatory -- the priority is to catch the deficit. i will seek a vote of confidence in september or october. we will get the majority. i have no doubts. it cannot be otherwise. >> they have a short journey in

parliament. ina short majority parliament. small room for maneuver. the next budget will be discussed in the next few weeks. they may have to seek some votes from the opposition. >> life will get interesting in france. thank you very much. let's turn our attention to tech. apple is betting that bigger is better. they are preparing its largest ever ipad. our news reporter joins us now. size matters. how big is this news? good afternoon. how big is the news? it depends on -- many consumers, including corporate customers may feel they want a larger ipad. .his is something new for apple

they had not had an ipad as big as this before. it is a large amount larger than the current largest ipad. it is their first new sub product category for a couple of years. they have been upgrading their iphones. they will be coming out with another iphone. they will be coming out with another iphone. the ipad mini has been a popular product for apple. they did good going from a standard size down smaller. in next up is to go larger. one area it could appeal to his corporate customers. that is one area of the tech market, pcs themselves are not doing well. one area they are doing better is in corporate customers. as the economy picks up, that may be an area that tim cook is

looking to tap into. he has said so before. the corporate market is something apple wants to get into. we keep the other two. outill get three ipads there. a large one, the normal one, and the ipad mini. they will all be separate subcategories, right? >> that would be right. we just recently reported in the last month that the two versions , they are both entering into production and we expect to see them out by the end of the year. on a a pretty busy pipeline for apple. after that, there is the larger size ipad early next year. there will be three ipads.

i have seen no indication that they would discontinue any of the previous product sizes. that means that all three would be coming out to market. >> okay. we will leave it there. thank you. that is the story surrounding apple. some news we are getting regarding the boss of the imf. back to a case that has been a little bit of a shadow over her career over the last few years. politiciansinessman, -- it is a long-running case in france and it could have an effect on christine lagarde. figaro is reporting that she has been charged in the tapping case. this is according to figaro. keep an eye on this news and we

will bring you more as we get it. certainly a significant story, not just in terms of global, economic policy formulation, but french politics as well. we will bring you more on the story when we come back. we're going to take a break. we are back in a couple of minutes. ♪

>> welcome back. you are watching "the pulse."

-- anro dollar interesting middle session. a pop back up. .e are up interesting to hear -- talking about the fact that may be draghi has been over interpretive. we will see. he may be over interpretive, but he is clear about the direction of travel. i think the ecb boss is attracting the limelight right now. are overextending it, maybe we are not. the direction is clear. tomorrow will be fascinating. out oflation data germany will be fascinating. if we continue to see stagnation, then mario draghi, the emphasis on him increases. and get our focus

back on france and the economy. reshuffle,s hollande the new cabinet, guys close to him being brought in. this is his fourth government reshuffle in two years. joins us now. good morning. the market is fairly clear that this is something that is good news for the french economy. the focus on the supply side is the way to go. what is your read of the situation at the moment? >> it is true that the government has been very keen to implement reforms in france. including a particular to reduce the cost of business and has ins that macron mind.

liberalizing sunday shopping hours and trying to do regulate some of the independent professions such as taxi drivers and pharmacists. also, fiscal policy remains important. here, there is not a big difference between president on thee and manuel valls other hand. all of them want an easing of posterity and at least more time to meet the fiscal deficit targets. the prime minister and president or not keen on having an open conflict with germany on the sin -- in the central bank. >> in terms of the stability of nde administration, this is designed to bolster it. there is concern that it may be a splintered socialist party

that could lead to an early election, a difficult cohabitation with other parties. what is your read of the political end? >> i don't think there is immediate danger of the government being defeated. if there is a vote of confidence and the government and the parliament in the next couple of weeks or so, i am sure he will win it. of ahings will play out longer-term, the next year or so on, if unemployment shows no chine -- no sign of falling, there will be pressure to change policy costs or call new elections, new parliamentary elections. nothing in the near future.

2017 feels like a long way away. -- this is only going to work towards your interest. the -- is that the right read? >> effect of the french economy is stagnant, unemployment is continuing to rise. the parliamentke to be dissolved, and such as safari out, they would do well. they would win a number -- looking towards 2017, from the -- or wouldpective, have a chance to get through to

the second round of the elections. in terms of the speed at which the french economy can be turned around, we look at what is happening in spain and the structural reform taking place. , how long are they going to have -- how long will it be before they have an effect coming through into the french economy? >> these reforms on the agenda and france are certainly far more limited and far more modest than those in spain. i would expect them to achieve -- have a big effect. for a quicker effect, you would probably have to bring about an easing of monetary and the school policy. france and germany becomes important. and between france and the european central bank, where has suggested

some evening -- some easing of fiscal accommodation might be a good. >> thank you very much. we're going to take a break. we will see on the other side and a couple of minutes. ♪

>> good morning. welcome back.

you are watching "the pulse." china's telecom says profit rose. that is as internet and mobile data businesses grew as one of carriers have been squeezed by intense competition. snapchat is said to be close to a round of funding. theart him made disappearing photo messages. it had previously rejected a $3 billion bid from facebook. it is the third most popular app among adults under the age of 35. .- sales rose the real estate broker said it and marketr rates sales and transactions and prices during the second half of the year. we will talk about that in a few minutes. let's bring you today's pulse number. 20 million. that is how many users have signed up for privacy messaging

app. in application was developed new delhi. it hides all chat interactions. we will take a break and be back in a minute. ♪

>> welcome back. you were watching "the pulse." i'm guy johnson. let's talk about the breaking news. lagarde. she was france's finance minister. let's go to paris. saying she won't resign. what else do we know?

keep her jobng to as imf chief. to 2008, dates back when she wins finance minister -- was finance minister under nicolas sarkozy. the french date paid 400 billion tapie.o bernard at the time, the state owned , he climbed, defrauded him when he sold his stake in adidas. gave 400 million

euros. the investigation is whether nicolas sarkozy did the duringge to get support the 2007 election. christine lagarde has been heard as a witness in this case, but she had not been charged. now it is the case. the investigation is still ongoing. the chief of staff at the time was also charged in the case earlier. the investigation is still taking place. christine lagarde is going back to washington and working to keep her job as the imf chief. >> interesting. she is under investigation, but has not been charged.

some would say that she is also a potential contender to take a critical role back in europe. has that been dissipating recently? does this make it more unlikely? >> of course, we all have in our of whate example happened with the former imf who did not return to politics like he was planning to for the last presidential election. is christine lagarde, it slightly different. she wantst said that to be a candidate for the next presidential elections. if this investigation does not go in her favor, that could jeopardize your chances.

nicolas sarkozy still remains the candidate of the right wing party. french politics. never dull. thank you very much indeed. at the helm of "surveillance." let's find out what is on the show. >> good morning. you see the headline across the bloomberg terminal. a dull moment in august as we go to the imf meetings in the second week of october, october 10 and 12th. today, we will look at the equity markets. you have been away using my vacation days and we have seen equity markets surge ever higher. we will also look to brazil. international markets. liz and saunders will join us from charles schwab. she has been a resilient bowl.

-- bull. we will also look at american housing. a little bit of a stagnation there. a lot going on in ukraine and in israel and gaza, as well. >> thanks for the update. tom keene coming up very shortly. these are the bloomberg top headlines. french manufacturing fell+++

half. president want deals with political turmoil within his government. yesterday, he replaced the prime minister after a revolt in his cabinet. vladimir putin says that talks with his counterparts were positive. israel and hamas have agreed to an egyptian brokered cease-fire. it could settle the conflict in gaza. does that and israel are opening fishing zones and they have been extended. let's get to our other corporate stories. the real estate broker warned --t the u.k. housing broker the u.k. housing market is about to call. our real estate reporter joins us now. how seriously should we take

this warning of a slowdown? >> you don't see many of them outside london. >> perhaps that is something they should be thinking about. there is a ripple effect with house prices. it goes up quickly in the middle. when that slows, it falls out. perhaps they want to be thinking about getting out there. record numbers are already cashing into the city and moving out. foxtons my want to do the same. >> let's talk about why this is happening. in theecause governments bank of england are introducing regulatory changes. what are the mechanics? >> during the recession, it was largely cash that was driving london, especially from the asian economies.

the sterling has gotten really strong against those currencies since then. now they're saying, we have had enough. you are seeing asking prices start to tumble. around april, may, the bank of england, tougher affordability checks. price caps. a lot of the media coverage. >> is what we're hearing from from othersistent across the board? >> i would say so. the london market is looking like we are still going to see about 15% of gross this year, but that will go down to about zero by 2016. the story is about the regions. it there. leave patrick, thank you very much indeed. london house prices. let's check on the markets, the

other markets, the other asset markets. jonathan ferro come over to you. >> stocks seem to be taking the headlines. everybody talking about the s&p 500. it is pretty flat today. the dax is doing nothing. up by 0.1%. this market might make the headlines. very significant moves in european bond markets. what will they do next week? what a turnaround and a turnaround in the bond market this year. low.erman 10-year, record how low can we go? the japanese yield. 0.5% this morning. that is where germany could go as well. the big mover is the spanish

10-year. down another six basis points. 2.11%. outright deflation. that is a big move. a lot of people digesting that this morning. is it crazy? growth,ooking for low low inflation. that is not optimism, that is concerned. that is where the bond market is at the moment. the euro is up 0.1%. about at the ecb next week. a couple of weeks ago, i told you that meeting was going to be the big one. >> i thought we had already had the big one. the headline of the story seems to be celebrating. the time mario draghi has to reflect and whether the policy has had an impact seems to be coming to an end. >> i think it is changing rapidly.

inflation is expected to come down to 0.3%. ecb,ings get away from the we could expect qe from them. seen big moves happening this last year ahead of the meeting. i leave that one with you. will they pull the trigger on actually buying government bonds? very difficult mechanical process. thank you very much indeed. plenty more pondering to have on that story, i can tell you. , we have life imitating art or maybe the other way around. aston martin roaring into life. virtual reality. why the car in a video could be a prototype for the future real aston martins. ♪

>> good morning, everybody. welcome back. you're watching "the pulse" on bloomberg television. story, russia and ukraine conflict. sanctions. there is fairly interesting stuff going on here. we have kind of a breakthrough. president poroshenko and president putin did talk. they were in front of each other talking. russians looking at

those tensions? let's find out quickly with the u.k. global focus. the ceo of pen group joins us. how many of your clients a russian? meaningful changes in behavior over the last few months? >> our russian members are still happy to be in london. increasingly, we are finding that they might have assets at and in otherondon places as well. dubai, singapore, other parts of the world. it is already happening up to a point.

they are very happy buying out in other parts of the u.k. and other parts of the rest of the world ended in europe. europe.in >> they are diversifying their assets and their identity. there is an auction where you can affect only -- effectively purchase a passport. acquiring residency. the definition of what a russian is is changing. >> we have russians very proudly from russia itself or you have russians from the baltic states and quite a few of those people have got passports within europe because they have made investments of one kind or another. >> right. they are becoming more interested in the security of their identities. how does that manifest itself

when it comes to your business? >> many of our russian clients speak fluent english and are very global. we will give them the choice of the lifestyle manager to be russian or to be european, maybe a britt. requesting atually brit, in the u.k. it gives them security that their information is less likely to be available back in russia. they arenot that exposed to western scrutiny, it is that they are exposed to scrutiny back in russia. >> it is both. nor i nor anybody else wants the government's looking. there's confidence knowing that you are dealing with a company which is very secure. day,estingly, back in the britain had a reputation for keeping data very secure. that is less so after the snowden revelations.

there. lost >> i'm sure it has changed as a result of the nsa revelations and the world is becoming the needgly aware of to protect itself, but would you say the level of security has increased? now that the spotlight is firmly on the russians and the russian relationship with the rest of the world? >> some of our top russian members here in london or in new york or across the world will a nom de plume, if you like. not underok them and their own them, but under an assumed name, so that they can be confident so that that will be tight security. >> it is interesting we're talking about london house prices today and the effect of

foreign economies on the london house prices. talked about the maybe going to dubai or singapore? is the attraction of london diminishing right now? it is an amazing city to live in. there are already so many russians are people of russian origin here and it gives a strong sense of community. the private sector is very strong and is admired by russian families. it has a reputation for being probably secure and stable. >> not a massive shift away from london right now. >> no. we are not seeing anyone leaving london. but we are seeing some of our members and prospective members having not only homes in london, but also homes elsewhere in the world. >> we will leave it there. thanks very much indeed. the ceo of ten group.

let's shift gears and look at aston martin. their new supercar has everything you would expect. but if you want to take one to sit -- for i spend, you have a problem, unless you have a consul. -- console. ♪ >> this car is a real car, but in a virtual world. is incredibly exciting to design a car for a videogame. you do not have the real world constraints. it is time to push the boundaries of what aston martin could be without a huge investment. however, you have to design the car as if it was a real car. it has to have a real engine, virtually real, suspension, we have to give it weight, performance figures, breaking figures. they could then all tune all of that into the game. the reality is there, adjusted to a virtual way.

this car thatn may find this way into our production cars at the end of the day. it is really important to see it is a physical model. the front of the car does not feature a typical aston martin look. we have a very definitive shape. , very simpley pure body to the car. very dramatic. we haveack of the car, the c-section lampshade were we have deconstructed that. all of the led's are in separate light pipes. we do reach a huge body it's. -- audience. if you think about the amount of people that download and play "rancheria's mom -- "grand tur ismo" they understand your brand

more. it is vitally important for us. the virtual world is becoming more valuable. most people will play the game and the car in the game and then see this model and not the other way around. will be used to seeing it in a virtual world. it is definitely the way of the world to try things in the virtual now. >> cool car. let's take a break. up next, christine lagarde under fire. we will go back to paris as the imf chief comes under formal investigation. more on this story when we come back. ♪

>> welcome back. lagardechief christine is under formal investigation. let's get more on this now. more from paris. give us the details of what we know. a witness andeady now she is in place in the formal investigation. we have to go back to 2008. she was the finance minister for president nicolas sarkozy and her chief of staff was the orange ceo, who is also part of this investigation. it all starts with bernard tapie , a prominent french businessman, who also did time

in jail for soccer match fixing back in the 1990's. he claimed damages from the government, saying that the state owned bank had defrauded him by selling his stake in adidas, the german clothes maker , at a much lower price than what it was worth. now there are allegations that ended up with an arbitrage case where the state paid him 400 million euros in compensation. about whatgation is christine lagarde did as part of this arbitrage decision, whether nicolas sarkozy did this arbitrage decision in exchange for his support for the 2007 election. >> thank you very much indeed. that is the story we are going to keep watching here on bloomberg television. we will bring you the latest. that is it for "the pulse." the is the french news at

moment. we will carry on the conversation, plenty of more to talk about. "bloomberg surveillance" is next. coming up from new york. tom keene and the team are coming up next. i will see you tomorrow. ♪

>> this is "bloomberg surveillance." >> fighting rages on in eastern ukraine. putin and poroshenko hold inconclusive talks.

to pronk attack meets kiev resistance. multi-p[rongeronged attack meets kiev resistance. good morning, everyone. this is "bloomberg surveillance." wednesday, august 27. joining me, scarlet fu, brendan greeley. adam johnson is out for the week. we need to get to a morning brief. bonjoure. >> french manufacturing confidence fell to a low. managing director of the imf, christine lagarde, with further charges of negligence. >> you were saying this is not a surprise. >> it has been floating out there, but now it is finally charges. >> i would argue that that news is the least of the problems. >> i would agree.