francine: ecb exclusive. negative bond yields are just temporary. the forecast for inflation and the euro. deutsche bank fails the stress test. citigroup passes out right. we talk retail and spending. welcome to "the pulse."

i'm francine lacqua. we have been looking at the euro-dollar all week. for the first time in 14 years it briefly touched below 1.05. it has retraced some of its movements. 1.0597. bank of america merrill lynch expect parity by the end of the year. that is the latest on euro-dollar. we will keep a close eye on the foreign exchange markets. in an exclusive interview with bloomberg, the ecb governing council member said that negative bond yields are not here to stay. he spoke with jonathan ferro in frankfurt yesterday. they spoke about the bond buying program. >> one has to be aware that on the other hand, for the central

bank there is an inherent risk of future losses if we buy at negative yields. so, basically, because one would like to avoid this kind of future losses by buying into long opportunities. francine: jonathan joins us now with the latest. it is a great interview. he was trying to warn the markets. jonathan: in a way. you are guaranteeing a loss for the ecb if you are going to hold negative holding debt securities through to maturity. they have not decided how to manage that risk yet. maybe you can avoid negative by buying longer maturities. the big issue 50% of the debt

in finland almost half of the debt in germany with a negative yield. the ecb have got to try to manage this risk. that is difficult to do. francine: was he surprised? he is linking it to inflation. jonathan: exactly. you compare this to the fed with the ecb. the fed wanted yields to go lower. the ecb, yields are already low. if you're are going to generate higher inflation expectations yields should go higher. maybe, in a weird kind of way, the measure of success is yields going higher because people are pulling out of this stuff and inflation expectations are building. francine: some of the things that we talk with guests is when you look at the level of the yields, you are not pressing risk. jonathan: i was looking at the 30 year german this morning. i looked at it against the 10

year irish yield and both are below 0.7%. which one is the bigger distortion? that is what i asked myself. i'm not so sure. he calls it a distortion. maybe that exactly what it is. these can go on for a while before anything happens. this rally keeps going on. they told us it was priced in and it is not. francine: the market often price things quite wrong and then there is a panic move. you were in frankfurt. what was the main take away from mario draghi? jonathan: it sounded like a victory lap and maybe i am sounding cynical. better forecasts, things are less bad, things are getting better. the forecasts are implemented on the full condition of implementation of policy. it has been very quick. in typical journalistic fashion i'm going to ask the question

what is the level they are comfortable with? what are they uncomfortable with? way below one? francine: a lot of people said that qe was going to play on the currency. how much is the dollar strength --is this dollar strength? jonathan: a lot of it. a lot of it has been dollar strength. how tolerant is the fed going to be of the stronger dollar? expectations for a hike they are getting closer and closer. will we get one in the summer? that is a big focus. francine: thank you so much. 1.20 is where it should be. parity will not hold. jonathan: that is not the french -- first french policymaker to make a call like that. francine: thank you so much. to greece and stillness sign

that the country can reach a long-term agreement with creditors in sight. the great finance minister told local television -- greek finance minister told local television that the ecb is applying pressure to his government. he had strong words for germany's finance minister. let's go to berlin and hans nichols. what did he say about germany? are the comments getting attention? hans: they are getting a lot of attention. what he is essentially saying is that he does not have or at least the german people have lost trust in him or do not have it at all. here is the quote from an interview. he has told me that i lost the trust of the german people. i have told him that i have never had it. that is not starting from a great trust basis. the background to all this is

that they are going to need to build trust and relationships if they are going to have some sort of deal to release that 7.2 billion in additional funding that the greek government clearly needs. they are drawing on emergency liquidity. 69 billion is the limit that is set. there is going to be a conference call about potentially raising that and some officials in the ecb are opposed to raising it. the greek finance minister did not help his case with this comment about the ecb. here is what he said. he said the ecb is pursuing a policy that can be considered us fixie aiding -- asphysxsiating to our government. they want to get a sense of how much money is going into the great treasury and how much is going out. one important note, it appears

that athens has reserved the right to approve every visit when you have officials coming down to athens to ask -- inspect the books. they apparently are going to have to get the go-ahead. francine: you just talked about the numbers and the situation. we had a former italian prime minister and one of the big lawmakers in germany and both of them were saying they were fed up with the rhetoric from the greek government. is that fair? hans: in some ways, the rhetoric is not all that material because the german position has been remarkably consistent, that greece needs to fulfill the program the initial bailout program, if they want to get an initial 7.2 billion. they are going to need that money. they are going to need additional money to make some

payments. they are going to need to follow the program. the rhetoric is not helpful, but the germans are shrugging it off because their position is unchanged and has been for the last 10 weeks. francine: you are right. thank you so much. that brings us to the twitter question. do you agree that the ecb's stance toward greece is asp hyxiating? who better to talk about greece -- i sat down with the former french president in an exclusive interview and i asked him where the euro should be trading. >> the real zone for the euro should be between -- it is now 1.08. it should be up to 1.20.

we were too high at 1.45. it was too high. for some exports. now we are devalued by 15%. it is enough. francine: would greece be better off outside the eurozone? >> can greece create additional wealth for its citizens? probably, with a currency lower than the euro to be competitive. in a normal situation, with tight competition they have good tourism, they have good industry for shipbuilding and restoration -- [indiscernible] i think they should have the freedom to use a national currency. [indiscernible] francine: what does it mean for

the rest of europe if they decide to leave? it is not a lehman brothers moment? >> the euro has nothing to do with the greek situation. sometimes the euro goes up. [indiscernible] even when the greek -- [indiscernible] a few years ago, it was different. [indiscernible] francine: let's continue to talk currencies. jeffrey joins us on the program. this former french president was saying that there is such a thing as a euro that is too low. you don't agree with that. >> i do.

if you look at the model, the euro is well above. this is a competitiveness windfall for markets on top of the current account windfall that they have already have. this can start to exacerbate some of the imbalances. francine: what is fair value? >> anything that can bring the german and dutch down to below 5%. francine: we are on parity watch. you are not. >> i don't think it is going to happen. my neck is on the line. [laughter] francine: geoffery stays with us. he is one of the few strategists who do not expect parity. here is what else is on our radar.

the imf has approved $17.5 billion loan program for ukraine. they will receive an immediate $5 billion disbursement to stave off default. their economy is expected to shrink by 12% because of the conflict in the east of the country. china's central-bank has a lower deposit rates, which they had raised to maximum allowed levels. that is according to people familiar with the matter. they conducted window guidance earlier this month to encourage banks to lower the rates. they were concerned that some banks were moving to aggressively on raising deposit rates. alibaba is planning to invest in snapchat in a plan that would invest the start up at $15 billion. they plan to put 200 million dollars into the mobile app that allows users to send each other photos and videos that then disappear. coming up, we talk more fx. let's check on the single

currency. we broke the 1.05 level earlier on. it is that 1.05 -- at 1.0592. we will have plenty more next. we also have some numbers before we had to break. the operating profit for full-year 2014. it is less than analysts expected. the 2015 outlook is more cautious. ♪

francine: welcome back to "the pulse." we are live on tv and radio and streaming on your tablet and phone. let's continue to talk currencies. we are back with geoffrey yu. before the break you were telling me that you don't see parity and this is not fair value for euro-dollar. we are currently at 1.0588. geoffrey: two things to bear in mind. when the fed talks about international development they are supportive of ecb policies. i don't think the euro matters as much as the canadian dollar and mexican peso for the fed

targets. if you look at where the mexican peso and canadian dollar are going, they will be a huge headache for the fed. they may wrap up the rhetoric slightly. that is one calculation we have to look at. secondly, with the euro here, you are going to see trade numbers to the upside. crucially for the central bank to drag a currency away from value to keep it undervalued, that is not going to last long. francine: how much is this euro weakness and how much of it is dollar strength? the markets are expecting the fed to hike rates sooner than they were a month ago. geoffrey: from 1.40 down that was euro weakness. the most recent figures were dollar strength. you are seeing the correlation

between strong u.s. data and higher yields coming back. francine: when are you expecting the fed to raise rates? geoffrey: we are looking for a june move. francine: does it matter if it is june or september? geoffrey: i don't think it is going to matter too much in the grand scheme of things. they are a technology that the u.s. economy has healed and they are moving away from emergency levels. if the latter is the case, the dollar could precede verbally -- perceivable he go much lower. francine: do you think they will go cautiously? geoffrey: we think they are going to go toward a full cycle. follow the dot plots. if we are going to follow that, we are going to get a refresh. why should we doubt them if they can do that? francine: jonathan ferro give an

interview yesterday. they were talking higher inflation. do you think the yields early temporary? geoffrey: we have upgraded the eurozone forecast. if they do get there with the euro where it is, all the risks to the upside, they can get there early. francine: how much are we pressing the potential? the rhetoric with greece is still heating up in the markets are ignoring it. the could be an accidental greece could still potentially move the eurozone -- leave the eurozone. geoffrey: there is always that risk. markets can afford to ignore it right now. they probably have a short euro position anyway or they almost all have a long dollar position. it is not like they are not protected against it either by accident or design.

from the fx side, i doubt that many people don't have a long position, so they should be happy with it. francine: think so much for joining us, geoffrey yu. coming up, to banks failed the u.s. stress tests. details after the break. ♪

francine: welcome back to "the pulse." streaming on your tablet, your phone, and bloomberg.com. the second stage of the u.s. stress test results of come in and the banks did not all pass with flying colors. notably, it was the european units that let the side down. caroline hyde this year with more. caroline: it is quality, this time, not quantity. last week all of the banks, all 31 passed in terms of when you stress them with scenarios such as 60% drop in share prices. they all whether that particular economic storm. they were strong enough to

survive. when you get into quality this is where the banks started to fall over. the two that failed were our side of the atlantic. it was deutsche bank and second there -- santander. deutsche bank was labeled with significant deficiencies across risk identification, the measurement, and aggregation processes. santander had deficiencies in terms of capital planning practices. they are not led to give out dividends and do share buybacks. bank of america merrill lynch slightly tripped over. they got a bit of a rap on the knuckles. they have to resubmit. the rest of the banks all did well. francine: what are the next steps for the banks who did not do so well?

caroline: they are already promising changes. they are going to make meaningful changes at santander. they're going to address qualitative concerns. deutsche bank says they are committed to strengthening and enhancing capital plans. but they are saying, the u.s. is already 5% above global assets. they are saying, this is the first time we ever did this. the others have had five goes at it in previous years. they have also hired. there is criticism being labeled that even the ones that passed. are the stress tests tough enough? francine: that is the question we always have for stress tests. coming up, we speak first of the chairman of john lewis following the company's results, charlie mayfield. stay tuned for that interview. follow guy and i on twitter.

it is all about the ecb. ♪

francine: welcome back to "the pulse." i'm francine lacqua. time for the top story. the ecb governing council member said that negative bond yields are not here to stay. he said that the ecb's bond buying program should push yields higher. >> the tension of the program is that we will get into the territory of higher inflation rates and higher inflation

expectations. that could cause -- should translate into higher yields. francine: south korea has become the latest country to join the monetary easing bandwagon. they cut the key interest rate to an all-time low to counter slowing inflation and a weak economic recovery. south korea joins more than 20 nations. two police officers have been shot outside the police station in ferguson, missouri. the shooting followed riots. ferguson's police chief stepped down after a government report concluded the city fostered systematic racism. let's have a look at one of the main stories of the week. let's have a parody watch, as we like to call it on "the pulse." the currency dropped below 1.05

against the u.s. dollar for the first time in 12 years. we just spoke to moncler --geoffrey yu of ubs. he said he does not expect parity. we had a call earlier from bank of america merrill lynch and they expect parity by the end of the year. they expected by around and of 2015 early 2016. when you look at the pound it is significantly strengthened against the euro, over the last couple of weeks. keep a very closeeye -- keep a very close eye on the foreign exchange markets. john lewis partnership is just out with results. let's go straight to anna edwards, who is standing by with the john lewis chairman. over to you. anna: welcome to the john lewis store.

i am joined by sir charlie mayfield of john lewis. thank you for joining us here on bloomberg. run us through the numbers. >> we had a great sales year. sales are up in both brands. we have seen a great performance -- [indiscernible] profits are up by about 25 million. it is net-net. [indiscernible] anna: how is it performing? in the most recent figures, we saw that the market share was down for the first time since 2009. why is that? >> it is because it is comparing against very heavy promotions. actually, they have outperformed the market. [indiscernible] we have seen great growth.

anna: we have a slight problem with microphones. we are going to go back to francine in the studio to see if we can fix the problem. back to you. francine: we will get the technical issue fixed and then we will get back to anna. john lewis is a british retailer and it is still relevant head of the u.k. budget story and only six weeks until the u.k. election. coming up, u.k. gets a $17 billion lifeline from the imf. is it enough? ♪

francine: welcome back. let's get straight back to anna edwards. anna: thanks very much, francine. let's try that again, shall we? you were telling me about the pressure, you were comparing the numbers. losing market share, is that just a blip? >> that was just one month and it was a month when we were heavily promoting our online business. it is about the comparison between that period and this one. the 69 months we have been in the market have been at a record we are proud of. it is down to the innovation and the work we have done to pursue

this change our perception. anna: how is the business performing? is this an industry that will feel the full benefit of the u.k. economic recovery or will some of the recovery pass this business sector by, if you like? >> it is a mixed picture. we are seeing a great recovery and home goods -- in home goods. we have seen a good move back into good growth back into the home side of our business. other parts are looking pretty robust. in food, it is tough. it has been very well documented. the grocery sector is going through a tough period. it is more about deflation. the fact that prices are going down. broccoli is about half the price it was one year ago. you and i are not eating twice

the amount of brockley. -- broccoli. that is where the pressure is. anna: looking ahead, we are just weeks away from an election in the u.k. how do you view the coming election? charlie: first of all, we are constitutionally we don't take any sides at all in politics. the thing about the general election is it is set -- is that it creates a certain amount of uncertainty in the minds of consumers. this time around, it could be greater than a normal general election. anna: are you seeing any evidence of that yet? charlie: not really, not yet. i'm not sure we will in the run-up to it. one of the things i read about this morning is that the housing market in london has slowed down a little bit as a consequence of

the uncertainty about the election. we will see. anna: looking ahead, we are going to get the details of the john lewis budget next week. is there a message that john lewis's retail sector wants to give? something you want to hear more about? charlie: i am lows to -- loathe to make suggestions to the chancellor. we want to see the recovery continuing. very important to that is that we increase productivity of the u.k. -- particularly businesses in the u.k. it is about industry, as a whole upping its game in terms of skills and building capabilities and building great pathways for people to get into work and get on in work, so that we have a productive economy and that we have great careers and great professions for thousands and

thousands of people. anna: let's talk about one of the issues that could be thrown up the possibility of the u.k. leaving the european union. does that weigh on a business such as yours? charlie: we absolutely have not taken any sides in this. it is really difficult. people don't really know what you are talking about. what really matters is what does it mean? no one really is quite answering the questions about what it means. what would it mean in terms of the trading relationship between the u.k. and the european union? there is a lot of employment legislation that has come in over the past 10-15 years, which is very important. there is a question that has to be answered by politicians -- if you are suggesting we leave the eu would you repeal that kind of legislation? it is understanding a bit more

about that that is necessary before anybody can form a considered view about whether it is a good or bad thing. anna: thank you very much for joining us. charlie mayfield, the chairman of john lewis who i am speaking to at the john lewis store on oxford street. francine: thank you so much. staying with the retail space the new chief executive is named for marbury. -- mulberry. sales at the uk's largest online only fashion retailer rose 19% after the company pushed to improve performance abroad as currency movements hurt its u.k. business.

profits slid by 14% as the group's cops cutting push failed to make an impact at volkswagen. they're boosting profit through reduced spending and higher productivity. the imf has approved a 17.5 billion dollar bailout package for ukraine to help the country avoid default. it is a much-needed lifeline for an economy struggling because of the continued conflict in the eastern part of the country. let's get straight to tony in moscow. how urgently does ukraine need the money? tony: extremely urgently. it has been hanging on to this lifeline while it fights the twin problems of the economic crisis and the conflict in the east. the government expects the economy to contract by 11.9% this year and the currency has hit a record low in february

before the central bank decided to intervene and raise its key rate to 30% last month, which meant that that is the highest in the world. ukraine is fully in need of the money. the finance ministers said early today that she said she has to begin talks with ukraine's bondholders on restructuring the debt. francine: is this part of a bigger support package that ukraine hopes to obtain? tony: yes. both the imf and ukraine's government said that they hope the $17.5 billion will be part of a bigger $40 billion package that would include contributions from the u.s. and the european union and, with the government hopes will become a $15 billion of saving in debt renegotiations in bond holdings. that will be an important element of the package. francine: thank you so much, tony. we are just getting breaking

news in terms of tsb. spain's bank is looking to acquire tsb. it is basically valued at about 1.7 billion. that is the price they are ready to acquire it for and that is so they get a little bit of a leg into britain. tsb shares were up 25% of the news. the spanish lender is going to pay in cash. we will get the share price for you and we will bring it to you. let me check. it is gaining some 25.9 percent. there you go. you have it on the screen. the greek finance minister accused to the european central bank of pursuing asphyxiating policies. joining us now for more is tom

metcalf. great to have you on the program. give us some background. the greek billionaires and shipping magnate's are not really taxed that much. tom: it is actually written into the constitution that all international earnings on the shipping companies are basically exempt from tax. instead they pay a tonnage tax, a fairly nominal charge on the entire fleet. this is the hot potato right now, in terms of will the shipping industry pay more in greece or not? the billionaires at the top have already made their money and they are quite comfortable moving their things abroad if they need to. francine: we had a greek billionaire on this program maybe a month and a half ago and he was saying, we are just being compliant. you have other places in the world where they are paying a tax.

it would be easy for these billionaires to just move their operations abroad because they don't actually make anything in greece. tom: you could literally just move the ships across the ocean. they have a lot of the management companies in athens or other suburbs. one of the four billionaires on record saying that the situation does not bother him. francine: what does it bring to the greek economy? have you spoken to billionaires who've said, we want to pay our fair share. warren buffett said he was happy to pay more taxes in the u.s. are there realizations in the greek shipping industry that they want to pay taxes? tom: there may be an agreement with the government that they basically double the share of the tax. they say, we pay more if we were

based elsewhere. that would be their argument. people on the streets miss that sometimes. the other side of the argument is that you walk around athens and you will see the foundations that are really making huge cultural investments and that is something they would .2. francine: there are always two sides. what are the attitudes in greece about this? is it hatred? do they accept it? tom: there is anger, against the wealthy, but not necessarily the shipowners per se. it is the nature of the industry. it is a breakdown from the government to the ordinary person on the street. they realized that the industry does add to the economy. it would be shooting themselves in the foot.

francine: thank you so much. coming up, we will talk luxury retail with the ceo of moncler. give it right here. ♪

francine: welcome back to "the pulse." streaming on your tablet, phone and bloomberg.com. we have had breaking news on

tsb. this is a banking unit in the u.k. we understand that a spanish bank is in talks to buy tsb 41.7 billion pounds to push into the u.k. -- for 1.7 billion pounds to push into the u.k. that is according to a statement published by tsb. tsb's board said it is willing to recommend the offer. britain's lloyds banking group owns 50% of tsb after taking the bank public in june. now alibaba is looking to invest in snapchat. cory johnson sent us this report from san francisco. cory: $200 million only get to

about 1.3% of the company. it is that interesting to alibaba to be a part of snapchat. it is a huge valuation of this company. it is about the popularity. it is not just about sending naked pictures to someone that disappear. at the same time we are seeing a real decline in the tech messaging business that has been the biggest carrier of the biggest growth for carriers. the revenue model is not clear. the profit model is probably imaginary. so many people messaging on this platform and gathering users on both sides -- it seems like a ridiculous idea for young people to send naked selfies, but there is a lot more to the business. i will wonder how jack ma looks at this business.

is there some implicit blessing by china itself to allow snapchat to exist as a communication service in china where it is not currently? that could get very interesting. it is a huge market and could be beneficial. francine: where are these valuations going? i am looking forward to our conversation with mike lynch about valuations in the tech industry. we also have exclusive interviews that we will bring you in the next hour. we spoke to a european central bank minister who said that we will not have negative yields any longer once inflation is under control. i also spoke to the former president of france, who renegotiated the last bank rate in 1975-1976. i asked him if he was concerned about a possible grexit. and what he thought about euro-dollar parity. >> it is not, in itself

excessive. it is the way it is handled. too many commissioners -- [indiscernible] each of them produced -- [indiscernible] it must be simplified. the system resists simplification. [indiscernible] it is not easy to simplify. the british will possibly find

the problem. they will still have relationship with the other. [indiscernible] [indiscernible] there is not much to gain. for us to ignore the u.k. which is now two hours of train -- [indiscernible] francine: that was the former french president speaking to me yesterday. up next, a second hour of "the pulse." we speak to mike lynch. he is the founder of invoke capital partners. we will ask him what britain needs to stay ahead of the game. do we need to be where the money

is? we also talk luxury with the moncler ceo, remo ruffini. you can follow us on twitter. we will see you in a couple of minutes. ♪ . .

>> this is "bloomberg surveillance." tom: it is not dow 2000. it is the janet yellen's dollar it is mario draghi in the global

economy problem. and we consider the beverage of your choice. the good and the bat of "i will have another one." good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in new york. i am tom keene. joining me is olivia sterns. we have a packed top headlines. olivia: violence directed overnight in ferguson, missouri, and police officers were the target. two officers were involved in a shooting near the ferguson police station during protests after the police chief resigned yesterday. last year, writes broke out after police officer shot in on arms black teenager. the police officer said the shooting occurred just as many were heading home. >> then i was fairly uneventful until people started heading home at midnight. several of the officers had left the area.