>> the breakthrough. they agree to distribute to shareholders and and a four-year ban. the shares are sliding on the news. a storm cloud. home depot may be the latest target. we'll talk about security later in the program. president obama says that nato members are safe from russian aggression. we will bring you his speech live.

good morning. welcome. you are watching the pulse. we have a busy show for you. what else is coming up? a selfie. is the latest craze. it requires more than a smart phone. let's get to our top corporate story of the morning. the breakthrough. the shares are down a little bit this morning. state and the company. e in the company. why is this so important question mark the french of and getting hot under the collar about it. why? we will find out. >> handbags at dawn. conflict is over. >> the taunt. -- detantente.

sincee angry board member 2010. they have taken a sizable chunk. it was a bit of financial engineering. they bought derivatives and converted. they got a hold of the financial gamesmanship card and they played it two years later, meaning that they have a hefty stake in the share. furious. ever since then, they have been calling. they were fined last year because the breaching of disclosure rules. they were not as open as they should have been when they were purchasing. the president has stepped in and has come to save the day. we have seen a disagreement. it happens to favor.

what's i will stop you there for a second. i mentioned in other kind of detente. apparently, putin and poroshenko have agreed to a cease-fire. then,s is the case, you're going to see a significant financial market reaction. . would argue that this is at the moment, there is a red flash across my screen saying poroshenko have agreed to a cease-fire. if that is correct, we will bring you the details. we will see a market reaction and a drop in futures a little bit. lockheed is rising as obama arrives in the baltics. wewas made very clear that

are very much on board from a nato point of view. i can take you and give you some more details. we will see a reaction coming through the white house team that is traveling with the president. she is traveling with the president of the united states in estonia. this news is breaking in the last couple of minutes. we may have a cease-fire in the ukraine. it is too early to get a reaction. presumably, we will get one shortly. as we speak, president obama is in a closed-door meeting with the estonian president. there will be several opportunities for president -- toto speak, could speak publicly.

leaders,ting with the we expect them to comment on issues of the day and what he talked about in the meetings here. tripe objective of this that has been tacked on to the going to be nato and its presence in the baltics. nato notparcel oh is backing down. >> definitely not. obama will be speaking. president obama is here to deliver a message in vladimir putin's backyard. he is here to deliver the

message to vladimir putin. he wants to tell vladimir putin that the u.s. and nato stand behind the baltic nations. andukraine is not a member many other soviet republics are. including these three countries and president obama will likely say that if there is any russian aggression, he and nato will serve to stop that. the organization was set up to use the u.s. security. is there a sense from the that there will be pressure to step up defense spending? how much will be about that message? >> we would hear about that in

the next couple of days. wantingbe the u.s. european partners to be true partners in nato. they want other countries to contribute more defense budgets partto spending and it is of the message that obama is bringing to the summit. he wants partners to step up in commitment and rhetoric. fit.ere does this we have the president in the baltics. we have him in the baltics and it is a bit of a game changer. he started his administration and he talked about a pivot to asia. rightis the white house now? how important is the trip and this stop in showing a bit of the fact?

>> it is important. was to pivotntent to asia. world events have assumed the planned agenda and the u.s., especially obama is forced to focus on eastern europe and the middle east with everything going on in those places. it will be a big part of the nato summit. the official agenda is focused on troop withdrawal in afghanistan. so, to stop here in estonia is important for obama to show that the u.s. is a force and that he means what he says. the sanctions have had a desired affect in crippling the economy. we have not seen vladimir putin pull his troops out of ukraine and that is the ultimate endgame

as far as the u.s. is concerned. >> we will leave it there. we will hear what the president had to say with this news. we were joined from the baltics. we will take a break. youre we do, i want to show the stoxx 600 spiking on the back of this announcement. we need more details. the trade is fading a little bit. it is just north of 55. people are saying that the trade is being seen as an opportunity to load up on shorts. that is where they are at the moment. poroshenkotin and are apparently having a cease-fire.

>> we have had news that portion go in vladimir putin -- poroshenko and vladimir putin have had a cease-fire. starting to come through. we need those details stop it is important for the shape and form the ukraine will take. we are joined from moscow and from bloomberg news. can you tells what we do not know? >>

poroshenko putin and have agreed to a permanent cease-fire. micex is rallying. the ruble is rallying versus the dollar and the oil is up. the markets worldwide are celebrating this. >> do we have a sense of what needs to happen next? situation where the there hasill stop been the suggestion that we could see a federal state. is it too early to talk about

that at this stage question mark >> i'm afraid so. we have a statement from the ukrainian side. there is nothing that has come through. there was only a statement from the kremlin spokesman and the two leaders have spoken. so far, we have very little details. situationllow the very closely. we were supposed to have new sanctions against russia by the end of this week. do we know if there were further talks this morning? is that will we understand?

spoke last night and we get the announcement now. >> we know about last night's talks and that is the latest. >> ok. you. we were joined from moscow. let's get some more details. cranny. >> this is front-running the nato summit. take some ofg to .he escalation what a prospect it is.

europe andlan from the action is on the dollar-ruble. the dollar dropped like a stone. the european equity markets are falling. inalso have seen a move terms of the bond markets. we saw the negative yields in germany. that was on late. the ten-year bond yields are rising and we are seeing one-week lows and one-week highs with yields in the futures market. andare seeing yields rise if this is a significant step changing risk, think about the context. if you are talking about trade coming from here and migrating ,tself across the context

exports are going into russia. and thethat with poland sanctions that are in place. if it is a lasting peace, we wait for those significant levels of detail to come through. definitely a combination of a potential peace agreement between russia and the ukraine is driving the markets. a number of other factors are coming. the market indicators on services are rising. we have an overall composite level. you make the right pitch and you get the right number. it is a little lower than the markets had anticipated. let's have a look at the euro, as well. u.s. equity futures. we will run you through that. the euro-ruble is another significant indicator of where terms of real drop in

rising. we hit record lows for the ruble in discussions where they had to raise the interest rates again. that is volatility dropping and, hadhis is deal -- real, i of the political debates. it makes a really clear noise that nato needs to be prepared for the next flareup. >> it is mario draghi's birthday today. details on all of this and find out more about what is happening here for the ukraine. we'll talk about that we come back and will talk about cyber security. another potential hack attack in the united states. implicationsss the

of that. could it be your company? we will see you in a moment.

>> welcome back. breaking news of a permanent cease-fire. this is the eastern ukraine. the gekko of the events of the ukraine. waleson the way to south

and the nato summit is taking place. is a master of the unexpected on the eve of the nato summit. is this another example of that? >> it may be. it is -- it is certainly surprising. we have had to state moving towards and they will be trying to figure it out in the ukrainian's website. agreementd that an was reached between the ukrainian president and the russian president. this was the internal conflict in the ukraine. it was fancy and the rebels lay down their arms before their

wishes and demands were met. statehood for the region was surprising. , they arerior to that talking about a definite surprise. presidente ukrainian and russian president have been talking frequently. both would like to characterize the relationship as pragmatic. let's not forget that there is a major war. it would actually be imposed and practical. conflict a chaotic that could be omitted.

>> interesting. they used to get an understanding. we get reports now. let's talk tech. home depot may be the latest company to suffer a hacking scandal. joining us now is alastair. it helps companies secure their digital footprint. we have another hack attack story. this is front and center. companies are moving their businesses into the cloud. will this stop them?

the cloud is bandied around. there is nothing magic about it. >> they added some control to some extent. it is outside the boundaries. it is like mobile and the internet of things. the boundaries around companies are coming down and there is more information outside of the boundaries to worry about. >> the good thing from a competitiveness point of view is not having the option but to embrace this kind of technology. the downsides to it. aspirations of what technology will deliver and the risk to our businesses. companies defend the bottom line and try to increase revenue.

at the same time, they are and itnt of the risks can really affect profit lines and make a difference in the business. >> what is the advice? it about security people? are the options i'm faced with if i'm sitting here at the bottom of this and try to figure questionis going on mark >> the first thing is to understand your unique decision is a company and what your threat is. the risk is different. treated theny's same. are you approaching this in the same direction? >> and a lot of traditional andors are commoditized very much one-size-fits-all.

customize and get money in the right places. >> thank you very much. digital shadows. we will take a break and see you in a moment.

>> good morning and welcome back to the pulse on bloomberg's headquarters. i am guy johnson and these are the top headlines. poroshenko has reached an agreement with his russian counterpart on a permanent cease-fire in the eastern ukraine. the cease-fire came out after a conversation with the president, according to a statement on a website. impact on obama.

he is in estonia in wales and later this week, he makes a stop to reassure nato members of security. conference inws around half an hour. we will take you to that for his reaction. home depot is working with law enforcement. of debit cardh data was posted for sale online. switched in the united states. we had service data out and it was stronger than anticipated. right. the market reaction to these companies. markets are on the move. manus cranny has it all. >> european equity markets are rallying. the prospect is easy for the ecb.

they are taking equity markets higher and volatility is dropping. that is a gauge. protect yourself. some of the biggest names on the biggest issues with exposure to europe. why the biggest exposures in russia is up. they said they would have a tough time with performance and expected russia to decline 10%. and wee carlsberg rising have seen a significant shift in some of the key names under sanction. the financials are moving risky and it is state under the radar, in terms of this. we have russian stocks that are seeing an acceleration on the back of the prospect. we are getting into those.

perhaps a little bit out of sync there. prospectit up and the of them not being able to raise are under what they at the moment. merkel is talking about the ability to move towards higher sanctions again. if the prospect has dissipated on the back of this, we will wait to see what happens. this is the euro declining and the ruble rallying. we have seen record lows for the dollar ruble as of late and you are seeing a complete capitulation. you see the ruble rally and the dollar fall. you see momentum return and this , who hasant to russia rising inflation on their side into europe and they have german and polish exports under pressure.

the currency is a significant one, as well as the and terms of the dollar ruble, russian stocks are getting a relief rally. still a distance away. believe in the u.s.. europe intort of russia, that is what you are really beginning to see. those are companies that want ruble exposure and country exposure. they are seeing significant shifts. there is exposure from the french banks and the italian banks into russian exposures. we'll have that in the back of the map and it will be reflected in there.

it will show up a little bit more. and they werea up considering reducing their overall retail exposure in russia on the back of those original sanctions in italy. and ite the banks rally was a lead charge. in paris, let's have a look. it is rallying and has its own story today. divests the 23% holding's, giving it back to the christians. it is up over 3%. you are seeing the momentum built and it is these companies thatexposure or rhetoric have dominated the agenda.

again, iag is up. a relief rally. the question is the validity of this piece proposition from poroshenko and vladimir putin. there are two days of meetings and they demand more's bending and action. in this vladimir putin being the dexterous leader we know him to be? a meerkat in his reaction. he is ahead of economic impact on his country and he is taking the initiative now to go for peace. perhaps the de-escalation or the climb down that europe needed to offer clearly ahead of the meeting. ryan chilcote will be on the southwest coast and covering everything that happens. the equity markets are rising in the volatility is falling. the dollar is coming off against

the ruble and the euro is coming off against the ruble. it is delivery and reality. back to you. >> thank you very much. manus cranny sets up the question for the next guest. is vladimir putin being clever? we get his and her take. is a master of doing what you don't want him to do. we are getting the opposite of what we expected. edit the timing suggests that the russian president moves fast and i have to say that it takes to foreign agreement and the ukrainian president has agreed to a cease-fire. more importantly, the report suggests that they are talking about a permanent cease-fire.

the attempt to reach a permanent cease-fire failed because both sides felt that they could gain more from this conflict. the situation deteriorated the past couple of days and it has become clear that the military solution to a conflict is not the solution. that the cease-fire will hold. i have my doubts about that. >> why do you have your doubts? details of this deal will tell us a lot more. ofwe are going to see more the same that we have seen in the past, meaning the ukraine that militants there will russia,

be a return to status quo and the a taunus right to this. perhaps that is not a viable option right now, given the high number of casualties and the fact that they have managed to change the momentum. a lot depends on the details of how they are going to reach a permanent cease-fire. >> in terms of a longer picture, a place?ading towards it is hard to see vladimir putin pushing down -- backing down completely. illusionst see any that they can go back to what it was. it is not realistic.

the minister in the region was seen with heavy fighting and the demands were greater. insisting on the right to self-determination. part of what moscow uses in the future. the ukraine is joining the military or political alliances. the conflict will be dragging on. it will not be a hot conflict. that is the hope. it is not over by any stretch. is this an example of sanctions working? have sections had nothing to do with this? some.hink they had

not significant. i do not think the russian president is responding well to sanctions. it is more about what russia wants to achieve and how it wants to achieve it. the situation escalated on the ground in the ukraine and the russian president has come under pressure, domestically. sentiment is high to act. any military intervention is not really in the russian interests because it will basically violate one of the principles that they have been advocating for all of these years. in principle of sovereignty. probably be it will best for russian interests to continue covert support for not to go into hot conflict. that does not serve the russian

interests. >> vladimir putin is in mongolia as we speak. ethnic russians outside of russia, how much do they have to fear from aggression from vladimir putin? this is the reason why obama is in the baltics right now. it is the reason why poland is nervous. thishould we be perceiving russian aggression when it comes to other countries. stateyou mean a baltics and a few other states, i do not think there is any risk of russian aggression. tohink it is probably best view the events in the ukraine in the context of what happened and how this led to developments. especially when we talk about

the baltic states, these are member states and i think that russia has given up designs of having control over the former soviet republics. they had given up the design when they joined nato. i do not think that. there is a lot of talk. i do not think it will stick. >> thank you very much. that is the cease-fire that was announced this morning. we are going to take a break and we will continue our analysis of the cease-fire. we'll speak to an economists about what a deal means for russia and the ukraine economy. we will talk about that when we come back.

>> welcome back. we are looking at live it sure is. he will be addressing the events of the last hour. the announcement of a cease-fire in the eastern ukraine. they have been announcing that within the last hour on the website. ands talk more about this put it into a wider global context from an economic point

of view. we have a survey out. a lack of what we have seen. let's try to begin. we are joined now. a little bit of context. you say you have been conducting this for a while. in terms of the wrist post-from this conflict, how does this change the situation now? exporters are in the russian economy and they will be affected by trades or the breakdown of trades. the good news is that we hope that the trade will resume again and that russia will become a part again. a permanenten damage to the relationship?

>> definitely a breakdown in trust is that it will not go away in the short-term. i think it will take time to .ebuild the relationship >> one thing that you rely on russia for its gas. do you think there will be a need to change the way europe thinks about its? >> the need has been visible for a number of years. energy and it is something in europe will have to think about in the situation in the future. >> rumor has it that it is mario draghi's birthday today. a number of fronts. one of them was the ukraine. of what needs to happen , there is in effect spreading around the world.

europe needs to see changes in the way that we approach the fiscal. i was interested in seeing the reports of spain being more successful. i am curious about that. it is a country going through i wonder what success looks like and what spain looks like. level isloyment massive. worry about if the paradigm is rising. >> we have seen structural reforms in the labor markets and the goods markets. labor regulations, as well as a now, it will translate into labor markets and better employment opportunities, as well as the it has not happened yet. it takes more time. we see some success with

football and in the index, it was offset by a drop. there is a perception that it has increased in the meantime. it is a mixed picture. you think we have the balance right? is there a sense with spain and portugal in the next? austeritynot pursued or structural reform in the same way. countries like spain, we have part of it right and we do not have the full picture and policy formulation correct in the entirety. you need to reset the internal valuations that we are seeing with other policy measures. we are not getting those and we are getting an uneven recovery with lagging indicators and elevated levels. >> yes. there, a certain --

to a certain extent. it will pay off and many reforms taken are labor market liberalization and education reforms that are important. we have seen them between the needs of the business treaty and what is available. it is important for ensuring -- it goes up and >> do they need more help? we will bring you to the monetary policy side of things. we are seeing these things these -- this morning. the ukraine needs a less active ecb and that leads to more help for medium-sized businesses in spain. i worry about the linkages here. >> we see a significant constraint with liquidity in these countries and we need it to see the sector to grow and put growth on a sustainable footing. now, it probably can be

alleviated to a certain extent and it has been done a lot in this extent and from the significant issues. >> is your competitive? what do they need to do to become more competitive? they run businesses. what do they need to do? what to the need for policymakers? commitment to structural reforms and more even structural reforms across the country. we see a complacency sneaking and. like germanyies and austria stagnating. those countries will need to continue the structural reforms. the only way your can become competitive is through structural reforms. europe will not be able to raise

productivity levels and competitiveness. as painful as it may be. .> will have to leave it there a little short on time and a lot of things happening. margarita joined us and the economic form. we are taking a break and we be back in a couple of minutes.

significant news over the

last hour. a permanent cease-fire. you are looking at a live shot. we are waiting for him to speak and when he does, will bring you his comments. in the meantime, the markets are reacting. let me show you european stocks bouncing. you see equity markets broadly there this morning and are key stocks on the move. you have banks moving higher this morning and airlines that have been affected. flights are rising and you have stocks moving higher. you have i ag trading up. companies with significant investments in russia and the ukraine. businesses are trading higher.

they are getting a bounce off of this. this is the story. we are watching a situation bring youd we will those comments from the president of the united states.

...

>> cease-fire confusion. petro poroshenko says a cease-fire has been agreed in eastern ukraine, but russia is disputing this. president obama speaks from estonia shortly. we will bring it to you live. we have a breakthrough. agrees to distribute its stake. shares sliding on that. hackers strike again. home depot may be the latest target.

good morning to our viewers in europe. a warm welcome to those waking up in the united states. i'm guy johnson. this is "the pulse." it is a busy morning. we have a very fluid situation. thehearing in my year that president is speaking. i'm not sure if we can listen in to hear what he has to say. oneunited states air force is up in estonia. the president will be speaking shortly. he is making a pitstop in advance of the nato summit, which is taking place in wales. let's listen in. we have the two leaders in estonia speaking. alliance,oining the estonian soldiers have defended

the freedom of others in afghanistan, iraq, and in the central african republic. defendcate resources to and our consistently increasing our national defense capacity. we are grateful to the united states for sending troops here and for actively participating in the baltic air policing mission. your presence underlies the credibility of nato's article five. your bilateral contributions have helped set an example for other nato allies. a robust and visible allied presence here in estonia is the best way of discouraging any possible aggressors. we look forward to the nato summit tomorrow confirming this. for we face a completely new security situation in europe and we are pleased that this is reflected in many of the summit

's documents. we expect the nato summit in wales to adopt the readiness action plan that will guide allied nations for years to come through a set of practical steps , reassurances, and deterrence. that our pleased bilateral relations are strong in many other areas, including cyber and energy security. globally, we are working together to promote our common values, democracy, human rights, and the rule of law. estonia is a world leader in internet freedom and eat governance. -- e-governance. we believe these are crucial efforts on the part of the

european union and the united states. let me once again welcome president obama to estonia, to of europe'sope, one most prosperous and successful regions. our country's share values and interests and i'm certain that we can and will contribute to free andn of a europe at peace. thank you. i want to thank you and the people of estonia for welcoming me here today. it is a great honor to be in estonia as we mark our 10th anniversary is nato allies. thank you for being such an outstanding partner. i was proud to welcome you to the white house last year. we spoke about the situation in ukraine. your life reflects the story of your nation.

the son of refugees to return to help chart a path for a free and democratic estonia. as many of you know, that long journey also took thomas and his family to america, to new jersey. it was wonderful to meet your daughter today and find out she had gone back to new jersey as well. he said he knew bruce springsteen before he had his first record. you embody the deep ties between americans and estonians. i want to thank you for your friendship. i have come here today because estonia is one of the great success stories among the nations that reclaimed independence after the cold war. you have built a vibrant democracy, a new prosperity. you have become a model for how citizens can interact with government in the 21st century. estonians can use smartphones to get just about anything done online, from children's grades

to health records. should have called the estonians when we were setting up our health care website. most of all, i am here because estonia has been a loyal ally. -- forces have served with courage and skill in iraq and afghanistan. as nato nears the end of our, mission, -- our combat mission, i want to think estonia for helping to a stain -- think estonia for helping to sustain the combat force. estonia contributes its full , its full 2% of gdp, to the defense of our alliance and

it meets its responsibilities. as we head into the nato summit in wales, estonia is an example of how every nato member needs to do its fair share for our collective advance. theve come here to reaffirm united states' commitment to the security of estonia. we have article five duties to our collective defense. that is a commitment that is unbreakable, unwavering, eternal , and estonia will never stand alone. i have made sure that we are fulfilling that promise. to updater alliance our contingency plan for the defense of this region early in my presidency. additional nato forces began rotating through the baltics, including estonia, for more training and exercises. and response to russia's actions in ukraine earlier this year, the united states increased our presence further. we have contributed additional

aircraft. we are not continuously rotating additional personnel and aircraft through the baltics. i look forward to joining the prime minister and thanking the service members later today. on him -- my visit to warsaw this spring, i announced a new initiative. we are working with congress to make sure that we deliver. today, i can announce that this initiative will include additional air force units in the nordic baltic region. we agree with our estonian allies that an ideal location to host and support these exercises would be estonia. congress andort of our estonian friends, i am confident we can make this

happen and i look forward to discussing this further when we presidents this afternoon. time on a great deal of russia's aggression against ukraine. for now, i just want to commend estonia for being such a strong voice for both nato and the european union, on behalf of the ukrainian people. estonia has provided assistance. because we have stood together, russia is paying a heavy price for its actions. nato is poised to do more to help ukraine strengthen its forces and defend their country. more broadly, i want to commend estonia for being such a strong leader beyond nato, whether it is contributing forces to the european union mission in the

central african republic were supporting relief efforts for the syrian people, helping nations like tunisia in transition to democracy, or standing up to -- for internet freedom and human rights. this nation of 1.3 million people truly punches above its weight. the world is better for it. it is another reason why the united states will always be proud to stand with our ally estonia. finally, i want to say that today the prayers of the american people are with the the journalist stephen otloff. he was taken from us overnight in a horrific act of violence. we cannot begin to imagine the agony that everyone who loves him is feeling right now, especially his mother, his father, and his younger sister. today, our country grieves with them.

like jim fully before him, his sharp contrast to those who murdered him so brutally. they make the absurd claim that they kill in the name of religion, but it was stephen who deeply love the islamic world. that theys claim defend the oppressed, but it was stephen who traveled across the middle east risking his life to tell the story of muslim men and women demanding justice and dignity. whatever these murderers think they will achieve by killing innocent americans like stephen, they have already failed. peopleve failed because around the world are repulsed by their barbarism. we will not be intimidated. horrific acts only unite us and stiffen our resolve against these terrorists. those of make the mistake of

harming americans will learn that we will not forget and that our reach is long and that justice will be served. mr. president. think we can open things up for some questions. two from estonian journalists and two from president obama's entourage. as the host, i will give the first opportunity to one of our tough questioners. >> thank you. i have the same question to both presidents. the partnership between russia and nato is not the same. an agreement signed in 1997 between russia and nato. opportunities -- new opportunities to our region? >> from our side, nato did

abridge its relationship with russia several months ago. on that issue, we cannot do anything. it says that these conditions hold in the current and foreseeable future. for the security environment of the current and foreseeable future. that was the security environment of 1997, when boris yeltsin was president. there had been no violations of , the 1990 paris charter. i would argue this is an unforeseen and new security

environment and therefore one has to hold on to certain provisions. it does not mean we have to give up the whole act. agreementnly, when an no longer holds in certain parts , then it is time to make you change. the nato russia founding act has been violated by russia. we continue to support the , butn of that document it's substance has changed dramatically. i am confident that all of nato's actions are and will be conducted in accordance with its international commitments as an alliance. >> the circumstances clearly have changed. i think this will be a topic of discussion in wales.

beyond the issue of that particular document, our top priority has been to make sure that there is no ambiguity when it comes to our article five commitments to our nato allies. as a consequence of the rotations that have been increased, the presence of u.s. troops in the course of those rotations and additional nato allies, we want to send a clear message to everyone that we take those commitments seriously and what is going to be clear during the course of this summit is that given the changed landscape , not only do we have to make sure that these rotations are effective and designed toward current threats, but nato has to look at its defense capabilities thatwhole and make sure

they are updated and properly resourced. for certain period of time, there was a complacency here in thate about the demands were required to make sure the nato was able to function effectively. my former secretary of defense came here and gave some fairly sharp speeches repeatedly about the need for making certain that every nato member was doing its fair share. secretary-general rasmussen during the course of his tenure and to size the need for us to upgrade our joint capabilities -- emphasized the need for us to upgrade our joint capabilities. what is happening in ukraine is tragic, but he gives us an opportunity to look with fresh iss and understand what necessary to make sure that our nato commitments are met and

that is one of the reasons i am here in estonia today. i'm going to call on ann compton. she is on her farewell tour. >> thank you very much, mr. president. now that you say a second american has been slain, what is your response? will air strikes expand into syria? will you have a full strategy now on isis which will satisfy those like prime minister cameron who called an imminent threat to all the interests? will it satisfy some of your supporters like senator feinstein who fear that on this you may have been too cautious? >> keep in mind that from the outset, the moment that isis we were clearl, that this was a very serious threat, not just to iraq come a bit to the region and to u.s. interests. -- not just to iraq, but to the

into the u.s. interests. we have been putting together a plan to make sure that americans were protected in iraq, and our embassies, consulates. number two, that we worked with iraqis to create a functioning government that was inclusive and that could serve as the basis for an iraq to begin the coming offensive. the airstrikes we have conducted in support of protecting americans, conducting humanitarian missions, and providing space for the iraqi government to form have borne fruit. we have seen that on sinjar mountain. we have seen that in the town that held out against a siege by isis. we are seeing progress in the formation of an inclusive government.

what we have seen is the strategy we have laid out moving effectively. what i have said from the start is that this is not going to be a one week or one month or six month proposition. happened inhat has as vacuum of syria, as well the battle hardened elements of isis that grew out of al qaeda in iraq during the course of the iraq war, it is going to take time for us to be able to roll them back and it is going to be form theime to regional coalition that is going to be required so that we can reach out to sunni tribes and areas that isis has occupied and make sure that we have allies on the ground in combination with the airstrikes we have already conducted. the bottom line is this -- our objective is clear.

to degrade and destroy isis so that it is no longer a threat to the region and to the united states. in order for us to accomplish , we have to make sure and iraqi government is in place and we are blunting the momentum that isil was carrying out and the airstrikes have done that. now, we need to make sure that we have got the regional strategy in place that can support an ongoing effort, not just in the air, but on the ground to move that forward. last week, when this question was asked, i was specifically oferring to the possibility the military strategy inside of syria that might require congressional approval. it is very important from my perspective that when we send job thats in to do a

work and weoing to are very clear on our objectives and are targets, we have made the case to congress and to the american people, and we have allies behind us so that it is not just a one-off, but it is something that is going to be effective over time -- and so, bottom line is this, anne, it is not only that we are going to be bringing to justice those who perpetrated this terrible crime against these two fine young men , more broadly, the united states will continue to lead a regional and international effort against the kind of ultimately empty represents andl

that is going to take some time, but we are going to get it done. i am very confident of it. >> did you just say that the strategy is to destroy isis or to simply contain them or push them back? >> our objective is to make sure an ongoings not threat to the region. we can accomplish that. it is going to take some time and some effort. qaeda,ave seen with al there are always going to be remnants that can cause havoc. with any of these networks. in part because of the nature of terrorist activities. you get a few individuals and they may be able to carry out a terrorist act. what we can do is make sure that the kind of systemic and broad-based aggression that we have seen out of isil that

terrorizes primarily muslims, ,hia, sunni, terrorizes kurds not just iraqis, but people throughout the region, that that whereraded to the point it is no longer the kind of factor we have seen being over the last several months. my question is for both presidents. ukraine is facing a difficult time on the ground. it may become even more complicated in the run-up to the parliamentary elections in october. in your view, what more could be done and should be done to support ukraine politically, economically, and from security point of view?

what do you think about the idea of providing the ukrainian armed to counter weapons russia's attacked in east of the country more effectively? thank you. well, most importantly, ukraine needs continued political support above all. from that support comes decisions that involve everything else economic aid, humanitarian aid, and also military aid. from that comes decisions on equipment. the nato ukraine committee will gather and decide how to increase the nato defense operation with ukraine. this is the kind of decision nato.e take together at

on the humanitarian side, we have doubled our humanitarian and are looking for what more we can do. we have already brought wounded ukrainian soldiers to our top-notch rehabilitation center here and we will continue to do so. thing weertainly one know the ukrainian slack and we have it -- ukrainians lack and we have it at a superb level. we also have the assistance of the united states at walter reed hospital. the next months leading up to the parliamentary elections will be very tricky. doredict russia will everything in its power to undermine the elections. of thethis in the case

presidential elections. it will try to destabilize the government in kiev. it will try to keep ukrainian forces from regaining ground in the east. prepared for a tough month and a half. that willovernment have the full legitimacy that comes with a new parliamentary election must show that it is a clear and better alternative to the one that the people of ukraine ousted half a year ago. i also see that making sure and ensuring that the elections are carried out in a free and fair manner will be a topmost osce.ty for us, for the

one of the issues should be the kind of interference we saw in the presidential elections. that it not be allowed or fully addressed and recognized by the monitoring in the elections. , especially we all after the presidential election, we all know what the russian disrupt theo to democratic process. i think we should be far better prepared to document all of that when we get to the election. >> political support is absolutely vital. one of our goals at the summit over the next several days is to once again project unity across nato on behalf of ukraine's efforts to maintain its sovereignty and territorial integrity.

the sanctions we have applied so far have had a real effect on russia. i think it is important for us to continue to impress this on russia, so long as it is violating basic principles of international law. so far, we have been able to combine efforts between europe and the united states and some of our allies around the world and the results are a russian economy that is effectively contracting, capital flights, including a burden on the russian economy that at the moment may be overridden by politics inside of russia, as a consequence of state run wepaganda, but over time, will point to the fact that this is a strategy that is not serving russia well and not serving ukraine well. beyond that, the ukrainian

economy is something we have been paying a lot of attention to. imf toed work with the make sure ukraine had the resources to get through emergency financing issues that they had to get through. there is more work to do. the military efforts to deal with russian finance, russian trained, russian supported and often russian directed separatists has meant -- has meant a jain on the ukrainian economy, not -- drain on the ukrainian economy, not to mention that you have industrial areas inside of ukraine that have been impacted by the conflict. we are going to have to make sure that the international community stands behind the ukrainian economy in the short term, even as we encourage and

advise and work with ukraine to carry out some of the basic reforms that are going to be required in order for them to achieve the kinds of models of success we have seen in estonia, poland, and other places. that is a tough row to hoe. it took a couple of decades for some of the countries who are currently in the european union to achieve the sort of market-based reforms that have led to such great prosperity. ukraine is not going to be able to do that overnight. we need to make sure we are helping to build a bridge to where the new future. efforts with those a commitment to continuing the nato-ukraine military relationship, they are not a member of nato, but we consistently have worked with their military in terms of iaining and support, then

think that not only will ukraine feel that in words we are behind them, but they will see that indeed we are working with them as well. up, will you have this military strategy on isis ready for discussion with nato allies this week? in your view, what should nato be prepared to do to take on islamic state? lastly, how much stock you put in this reported cease-fire between russia and ukraine? >> it is too early to tell with what that cease-fire means. we have not seen any details. we have seen a couple of wire reports. we have consistently supported the effort of president poroshenko to achieve a meaningful cease-fire that could lead to a political settlement of the conflict. so far, it has not helped.

either because -- so far it has not helped. d. either because russia is not serious about it or it is not an -- controlling the separatists. the separatists have not abided by the cease-fire. we have not seen a lot of follow-up on so-called announced cease-fires. having said that, if in fact russia is prepared to stop inancing, arming, training, many cases joining with russian troops activities in ukraine and is serious about a political settlement, that is something we all want. strong,erence is a productive, cooperative russia. that is byachieve

norms, to international to improving the economy, to focusing on how they can actually produce goods and services that other people want and give opportunities to the people and educate them. that is not the path they have been pursuing over the last several years. wheninly not in evidence it comes to the strategy in ukraine. i will leave that to others to interpret mr. putin's psychology on that. in terms of actions, what we have seen is aggression and sentimentsnational -- nationalist sentiments that have been historically very dangerous in europe and are rightly a cause of concern. so, there was an opportunity here. let's see if there is follow-up.

in my discussions with president poroshenko, i have said that he needs to follow up on the kinds , soeforms that he proposed that eastern ukraine feels as if it is fairly represented and that the russian language speakers are protected against discrimination. these are all things that were a part of his platform. we encourage them to move forward. no realistic political settlement can be achieved if russia says, we are going to continue to send tanks and troops and arms and advisers under the guise of separatists who were not home grown. the only possible settlement is itskraine seeds it -- cedes territory or sovereignty or ability to make its own dishes and -- decisions.

beh respect to iraq, we will his cussing this topic -- discussing this topic even before isil dominated the headlines. one of the concerns that we have of is the development terrorist networks and organizations separate and apart from al qaeda, whose focus is often regional and who are combining terrorist tactics with the tactics of small armies. theave seen isis to be first one that has broken through. we anticipated this a while back and it was reflected in my west point speech. one of our goals is to get nato to work with us to help create the kinds of partnerships regionally that can come back, not just isil, but these kinds

of networks as they arise and potentially destabilize allies and partners of ours in the region. already, we have seen nato countries recognize the severity of this problem, that it was going to be a long-run problem. immediately, they have dedicated resources to help us with humanitarian airdrops, to provide arms to the peshmerga and the iraqi security forces. we welcome those efforts. that we areake sure more systematic about how we do these, that we are more focused about how we do it. nato is unique in the annals of history as an alliance. thatve to recognize

threats have evolved and they have evolved as a consequence of what we have seen in ukraine, but also they are revolving in the middle east that have a direct effect on europe. if you go back to what i said that if we arew joined by the international community, we can continue to shrink isil's sphere of influence, its effectiveness, its financing, its military capabilities to the point where it is a manageable problem. be question is going to making sure we have got the right strategy, but also that we have the international will to do it. that is amething continuation of the problem we

certainly since 9/11, but before and it continues to metastasize in different ways. what we have to do is make sure that we are organizing the muslim world and the international community to isolate this cancer. this particular brand of extremism that is first and foremost destructive to the muslim world and the arab world in north africa and the people who live there. they are the ones who were most severely affected. they are the ones who are constantly under threat of being killed. are the ones whose economies are completely upended to the point where they cannot produce their own food and they can't produce the kinds of goods and services to sell in the

world marketplace. because falling behind of this very small and narrow, but dangerous segment of the population. we have got to combat it in a sane and effective way and i'm confident we are going to be able to do that. all right. think you very much. i appreciate it. -- thank you very much. i appreciate it. and thedent obama president of estonia speaking and addressing the situation on the ground in the middle east, but also what is happening in ukraine. confusion this morning about whether or not we have a cease-fire in eastern ukraine. initially, we thought we had. sense we got from the website of petro poroshenko. the russians denied that they are involved in that process

because they are not involved on the ground. let's try and understand a bit more about the situation. a confusing morning. actually about the intentions of president putin and this cease-fire? >> this is not as much is -- of clarification. i think what they wanted to highlight by saying that russia did not agree to the cease-fire is that russia is not a party to this conflict, as has been their position for a long time. putins important is that is backing the idea of an immediate cease-fire in ukraine, he supports the idea, and that him and poroshenko discussed toward the cease-fire in a phone call. >> tacitly, reading between the

lines and having an understanding of the situation, is moscow on board with a cease-fire in eastern ukraine? >> russia does risk a new round of sanctions at the end of this week if it does not back down in eastern ukraine. it is understandable and it is important that this statement this putin backing cease-fire comes before the end of the week. does not wantsia a new round of sanctions. the economy is in a recession already. the timing is very important. putin has been making conciliatory statements before. what is important to point out is that the spokesman for the donetsk people's republic has

rebelsat the donetsk will not cease firing while ukrainian forces are still in the region. to lookally important to see if the fighting actually ends and that there is a cease-fire on both sides of the conflict. statements sometimes do not have much weight here. again, a confusing situation. thank you very much indeed for clarifying some of the details. is market reaction reflecting some of this confusion. let's find out what we have seen over the last half hour. manus cranny joins us with the details. >> it is a series of known unknowns. russia denying they are involved. everything that the market sees and hears which is progress toward thisb -- progress toward reestablishing trade

and less fear is good news. equity markets are rising, volatility is falling. fear gauges are falling. have a look at the mine section -- on the exchange in russia. the companies under sanction or specter of sanction. if there is progress and no further sanctions and no further cutting off of assets, have a look at these. these are the financials within russia. let's have a look at three of the biggest come in two of the biggest stocks. -- biggest, two of the biggest stocks. sanctions could have a future impact in terms of the use of

technology impact for finance for these kinds of companies. relieved if there is progress here. that is the russian complex. come with me on a journey around europe. the exposure to european companies -- of european companies to russia is very significant. we have got adidas. they have over 1000 stores in russia. the stock was down 16%. there was a mere read of issues issues.d of a third of their profit comes from russia. if we take it forward into the exposures, the financial exposures, into russia.

dollars ofeuro exposure. the financials are getting their relief on this potential breakthrough. back to you. >> thank you very much, indeed. let's go to wales where we find ryan chilcote. he will be traveling to south wales to join the nato summit. the word permanent has been removed from the statement on petro poroshenko's website. in terms of the timing, the fact that it has been done in advance of these conversations at the nato summit, how significant is that? >> i think it is very significant. maybe not in the sense that he is trying to get ahead of nato in any way, but ahead of the world opinion, and head of the sanctions. the nato summit is just a

leaders, of 60 world most of the european union leaders, obviously the united states. they are looking at sanctions which could come as early as friday. no later than friday, they are saying. that we getthe idea this news just a couple days shy of the european union self-imposed deadline, a lot of people are going to see this as an attempt by the russian president to throw stardust in their eyes. do something, say something to get them to hold off sanctions for fear that they might punish the russian president just as he is making a constructive step. angela merkel, the most powerful individual within the european union that can unify them and build a consensus necessary for

all 28 countries to get on the same page and agree to some kind of sanction, has already been clear in the past. she has sort of been burned before in these kind of situations. she said she has always moved to judge situations by what has happened on the ground, not by what the parties are president putin say they are going to do. we disturb president obama say much the same thing in a press conference there -- we just heard president obama say much the same thing in the press conference there. he sounded very skeptical. he wants to see actions, not words. >> we will leave it there. we will have further analysis over the next few days at the summit in south wales. your thoughts on this morning? confusion seems to be raining. -- reigning. seem there was some

discussion around a cease-fire. maybe the ukrainians got a little bit ahead of themselves. it seems some progress has been made. servicesian security announced they will be focusing on defense. they're going to stop pushing on the pro-russian positions. betweenersation president putin and president poroshenko did happen this morning. is notactly they agreed clear. russia still says they are not apart to the conflict -- a part of the conflict. it would be difficult for them to agree to a cease-fire. it might be a question of semantics. neither russia nor ukraine is actually able to guarantee that the cease-fire on the ground

would be implemented. in cease-fire that was wasjune, that cease-fire broken by the pro-russian forces and there were over 100 attacks in those days on the ukrainian forces. agreed a cease-fire was and will be agreed, is it going to be implemented on the ground? >> is this an example of how sanctions are working? is this an example of sanctions not working? we're about to get a nato summit and further sanctions -- the possibility of further sanctions. it is a side motivation. the russians would like to avoid further sanctions. it is more about the ability of russia to negotiate from a position of power. they have regained the ground for pro-russian forces in eastern ukraine. they are in a much better

situation than they were 10 days ago and they can afford to negotiate. >> is that with the surge was about? was it designed to put them in a political situation? >> yes. they lost about 60% of ground since june. they were going to lose the whole campaign by the end of september if there was no additional support from russia. they provided air cover, more troops and equipment. they effectively convinced of the ukrainian army that they are unable to defend themselves in the region. >> we will probably get some federal structure in ukraine. how close are we to that now? >> the question is whether ukraine can agree to such a structure. there are several possibilities. it is a possibility of calling those eastern regions with a

veto on foreign-policy questions. >> right. cutting ties and effectively create a new fence done the middle of europe. that is russia, that is not. nation hasinian suffered severe losses in terms of lives, economy, housing, infrastructure. they want to prevent this sort of an outcome. if he agrees to a deal, president putin, that implements these conditions, it is likely , therefore the elections might be street protests again. there was a strong possibility that any sort of a deal might not be implemented. >> a busy morning. joining us.r

we will take a break and have more on breaking news when we come back ♪. -- when we come back. ♪

>> welcome back. you are watching "the pulse." we are getting more news coming out of ukraine. a lot of moving parts this

morning. the ecb tomorrow. how does today's news change the position tomorrow? isi think the biggest impact in dollar yen. it has been rising, but has been held back by some fear of potential blow up. if we don't get that, we could see it moving higher. we think it will continue to move if the cease-fire sticks. >> is the reaction in euro-dollar more limited because we are waiting for the ecb? >> i think that is correct. we have had a significant move lower in euro-dollar in the wake of the jackson hole. there was a lot of pressure on mario draghi to back up what he said a jackson hole. some investors have taken a short outlook because they are not confident. the trend lower continues. >> what about the ruble on the

back of this news? it has been battered. >> we would argue that dollar ruble is higher than it would otherwise be on fundamentals. there is a discount to the ruble because of the stress. probably around one big figure. we think that the ruble will continue to strengthen. if the cease-fire sticks. >> right. in terms of further moves beyond that, clearly relations have been damaged for some time. does that keep the ruble hamden? -- hemmed in? >> if you look at fundamentals in russia, they are not looking great. we think growth is going to be negative this year. next year, we see a move to a deficit in russia. that suggests longer-term ruble depreciation. >> nice to see you.

thank you for joining us. this has been a busy morning. we will continue the conversation. the surveillance team is up next. this wraps up "the pulse." we will see you tomorrow. ecb day. ♪

>> this is "bloomberg surveillance." >> the president reassures the baltic states as poroshenko and putin agree to an understanding on peace.

markets surge on news of a cease-fire. the american job economy improves. when will wages rise? the first tuesday of november beckons. at beckons for senate republicans. good morning, everyone. this is "bloomberg surveillance." we are live from new york. it is wednesday, september 3. i'm tom keene. joining me, scarlet fu and adam johnson. let's get right to the morning brief. >> i want to start with what happened in the u.k. overnight. the purchasing manufacturers index rose. it is now a 10 month high. it is one of the highest in the world. the irish are the only ones who are increasing more. >> it speaks of the discrete miss of the united kingdom. way, you can also understand what david cameron is talking t