francine: inflation in focus as the ecb meets in frankfurt. mario draghi will address market volatility. manus: chinese markets on holiday. stocks get a breather as the country commemorates the end of world war ii with a massive military parade. francine: the latest report says risk to global growth have fed should the remain data dependent when it comes to raising rates. welcome to "the pulse" live in london.

onus: let's check in breaking news. composite. eurozone pmi comes in 51.3. mark: the compass i -- compass it is the manufacturing report. the services has just crossed. this is the final rating for the month of august. 54.4. the survey estimate was 54.3. the prior reading was 54.3. services has come above the previous estimate. as a result, the composite has come in ahead of estimates as well as 54.3. so, it is a good piece of data for mario draghi to get his head round as the ecb meets today to discuss policy.

later, to discuss his plans for q.e. investors will want reasserts -- reassurance the ecb is willing to expand the q.e. program, the deflationary forces. let's see if there is any market reaction to that move in the eurozone pmi which is above 50, which shows expansion. the economy is moving in the right direction. earlier this week, we had unemployment fall to the lowest level in three months. bank lending is expanding since the ecb started q.e. in march. this is the intraday euro chart. the euro is up by .1%. the euro one of the better performing major currencies in the last month because of it's deemed a haven currency along with a yen because of the account surplus that the euro

area enjoys. it is back to the late 1990's, when we were contemplating, focusing on things like currency -- recently, it is all about low interest rates. i like the late 1990's. francine: the ecb makes a statement today. not likely to increase interest rates. the pressure is -- stagnating deflation. investorsecting -- looking for indicator of the slowdown in china and market volatility. hans, what exactly can we expect from the announcement today? ans: well, we will get updated view of what the ecb thinks it is happening with deflation. in june, their expectation was for 0.3%. since then, we've seen the price of oil drop by $20 a barrel. if you think oil is a big factor in inflation. is if youxt question

do think inflation expectations are not being met, what can mario draghi do about it? "about it. he can hit that he might want to tweak the quantitative easing program. it's open-ended, that it can go beyond september 2016? when you look at the pmi numbers, they tell us we have two different economies. france, and then we have moderate to middling growth elsewhere. see things are slowing down. you reflected somewhat in the inflation numbers, wher eyou see inflationary pressures in france. it is clear it is coming from the energy sector. -8.and gasoline cost down 4%. you take all of this in the aggregate and throwing a few questions about china and you

have what promises to be a very interesting press conference when mario draghi has to lap up a key things and clean up a few things on greece, but do some forward-looking on how the european economy is braced for what is a massive slowdown in china. manus: obviously, one of those institutions that has to ford view -- a forward view, the imf. those risks have increased. this is a compounding issue for draghi in terms of rhetoric, isn't it? imf isn some ways, the really talking to janet yellen and maybe a few other g-20 economies because no one expects -- the 4070 congress bloomberg survey -- expects for the benchmark industry to change. the imf is saying that should increase,eduction, an excuse me, and interest rates. it is a way to sort of was again put pressure on janet yellen but say other economies in the g-20

eight to be concerned. mario draghi, if he goes anywhere near increasing interest rates tonight, you and i will have a late night explaining it. francine: i'm not sure how i would start explaining a. thanks so much with the latest on what we are expecting from the ecb. stay with bloomberg for all you need to know on the decision. we will bring a live coverage of the announcement in a news conference. manus: what a difference a month or six weeks makes, which princess to our twitter question. how many times will mario draghi have to field questions on china? of course, what was it that last news conference he had 13 references. one in there questions -- one in three questions on greece. francine: holger, great to have you on the program. if you are the ecb, you are thinking of doing more. you can't not be thinking of

whether you should be doing more. holger: i would, of course, think about many issues but i would not promise to do more. i would reassure market that a, the domestic market looks solid, b, as risks have increase, the ecb is ready to react if they materialize. so far in the european data, we do not see the impact yet. we see manufacturing is getting a little wobbly. will probably have a decent. we see pmi keeping up very nicely. on balance, i think the ecb should send a message of sosserts -- reassurance a, far, things are not bad and b, if they were to turn down, we would react by adding to asset purchases. manus: a number of your goes mario draghi made a speech that he will do whatever it takes to save the euro.

what is it going to take to push him over the precipice to do more? what would be the driving force to push the ecb to raise the rhetoric states? holger: they will probably race them a little today by pointing to downward risk and probably by making modest adjustments to their own gdp forecast. but we are not in a situation where anything drastic from the ecb, such as a promise to raise asset purchases next month or the month thereafter would do any good. at the moment,a drastic sowonse week -- would confusion. staying calm is the right thing to do. if we are lucky, as in the case of the omt, this a promise from london, he may never have to use the safety net. francine: we have been lucky so far. would you ask mario draghi about china? there seems to be more market

nervousness. that chinese authorities are not responding with an answer that is satisfactory. holger: he can only say he is watching it as well. and remember, markets tend to be much more impatient and central bankers. i think for the time schedule, central bankers, the chinese response overcoming -- to their own slowdown would be good enough. manus: we will get deeper into your thoughts on china. in the meantime, we have got that cute parade taking place. we are seeing some of these images -- we have that huge parade taking place. it's taking place in beijing. which showcased hundreds of aircraft and 12,000 chinese soldiers. francine: the president used the occasion to announce the biggest cuts to china's military since

1997 and china's commitment to peace. david, what kind of message is xi sending with this announcement? david: i think he is sending a couple of message. one is verbal and the other is a visual message. the verbal messages the idea is what he said is that war is like a mirror. if you look into it, the harder you look, the more you cherish peace. he spoke about peace. the chinese people love peace. in that context, he made that announcement they are going to cut 300,000 personnel fro mthe p -- from the pla. you have a visual message going on. we saw intercontinental s capable ofssile delivering nuclear warheads from china to the united states. it's a message which means, don't mess with china. the leaders in china are aware of both those messages they are

sending at the same time. manus: talk to me about the actual size of the military might. we understand it there are going to be headcount cuts and he is restructuring the military in a rather western way. david: that's right or the military is 2.3 million personnel. than 10%crapes a bit off that that still leaves the huge military. what it does is it for war something coming up that we have already heard people who are involved in this reorganization, that there will be a complete reorganization of this top of the china's military to bring all the different parts of the military together under one social command. that is very much like the way the united states has got to do it. to do so, it will take a lot of work because a lot still need to be done. the chinese military relatively young. many untrained. they need to up their technology

which is why they can probably afford to get rid of some of the manpower. francine: vladimir putin was there. many stayed away. david: they did. vladimir putin, there is a tit and tat thing going on. his biggest friend in the world as china. of course, he attended just like xi jinping attended the parade earlier this year and moscow. also, there is an economic relationship which could be better between china and russia. we saw trade falling off 30% at the beginning of this year. so, it is not as good as vladimir putin would like it. the former alligators, leaders of the former -- the other former allied leaders, they did stay away. you get this sense they do not want to get caught up in these anachronistic, bombastic message failed military parades. they'd rather commemorate the end of the war in perhaps even more peaceful-looking ways.

guys? manus: thank you very much for joining us. david tweed in hong kong. francine: we are back with erenberg'sg' -- b chief economist. we understand that china's blame game on basically accusing financial journalists and analysts to causing this milton is -- this meltdown is spooking investors. holger: that is a risk that chinese markets will remain volatile. financial liberalization is always difficult. it has been in other countries. china is finding it extremely difficult to understand how investors financial markets react, how they behave. they have problems getting their regulations right. the recent rhetoric is definitely not good for the long-term reputation of china on

financial markets and with currency as potential reserve currency. manus: you mentioned currency. one of the most fascinating thing is that the euro has become a reserve. holger: the euro is a great currency. it plainly is. it is only slightly undervalued to the u.s. dollar. an accountne has surplus. what would you expect the euro to do? to be stable. francine: that creates a lot of problems for mario draghi. we will talk about that next. here is a look at what is out -- what else is on our rater. growthgn risks to increase. the imf cautions global growth remains moderate. remaingaps and inflation in the world's advanced economies. manus: -- he's willing to brave a fresh round of strikes to push through the airline's cost-cutting plans.

unions have warned that strikes could happen. francine: while disney is not planning to renew its film distribution agreement with dreamworks studio. steven spielberg is said to be in talks with comcast and other studios to find a new match. manus: still to come, natalie calls it quits and net-a-porter. then we're on to the u.k. francine: we bring you the data market reaction at 9:30 u.k. time. we will look at the latest gadgets. ♪

fed release date bookleased its beige yesterday. mattingly breaks down everything you need to know about that report. the u.s. economy expanded across most industry providing a positive look at the domestic picture for federal reserve policymakers. that is according to the central bank's survey of the fed's 12 regional banks. six ordered moderate growth -- reported moderate growth. a mixedey showed picture for manufacturing. regions reported stable or

positive growth. but five deserts reported strong dollar had dampened manufacturing. cleveland,hirer in and san francisco and home sales were increasing. most is to solve moderate labor demand. all of this information compiled in the beige book gives policymakers a new set of data to consider. ahead of their market, one way they would will consider whether to raise rates for the first time since 2006. the report comes amid positive second growth quarter of 3.7% and job growth at a steady clip. still, policymakers are facing growing concern with china's economic health. there was little mention about the recent market turmoil, something to factor in any decision made by policymakers in two weeks. francine: that was blubbered's white-- bloomberg's

house correspondent. manus: let's pray back in berenberg bank's chief economist into the conversation. so the imf is saying wait and see. the interest rate markets are volatile to say the least in terms of what they expect. what you expect? holger: i expect the imf to heed imf'se fed to heed the advice and not move in september. the most market friendly thing to do is to hike in september and make sure that there is not any follow-up later this year. to get over the hurdle of the first hike. very gradual would remove the uncertainty in markets. if they do not hike in september, we will all be talking -- uncertainty is something that spooks markets more. francine: if you look at the

data, it wants a rate hike. why do you think they would not have a rate hike in september? holger: the problem is what happens, in the risk case of something going really long? if three months from now it looks like you should've hike but they did not, inflation will still not be there. and something goes seriously wrong in emerging markets for reasons nothing to do with the fed, the fed we get the blame. manus: the emerging markets are fred the -- the fed then went as well. forcine: but policy emerging markets. manus: but they do have to refer to china. howa and external factors, important are they? holger: of course, china is important but china is among those emerging markets which

would have zero effect. china is not dependent on capital inflows. other emerging markets are much more. the big one, china, is not. once again, the best for the fed would be to create certainty. all forecast as they will delay the hike. francine: they have the link to the dollar. which is why people say that -- holger: they've donna -- francine: at the worst possible time. holger: in the worst possible way, but there is logic. you should do that much more intelligently. china has to learn a lot more about how to do with financial markets. francine: on that note, thank you. manus: coming up, natalie massenet calls it quick at the online retailer. details of her resignation coming up. -- calls it quits. ♪

francine: net-a-porter founder natalie massenet has quit. she was said to be the chair of the combined company after a merger. i spoke to earlier this matter -- this summer, and asked her where she saw herself in the next three years. natalie: me, in three years? i guess being happy. fullymy family and hope innovating and looking towards the future, but enjoying the moment. i'm a very future thinking

person, always about the next thing. work-life balance, i need to focus on the moment. francine: now, when we spoke, we cannot talk about the merger. this is not a specific reference to the merger but i was asking where she saw herself in three years because she is really a pioneer in terms of selling luxury e-commerce. we know that net-a-porter felt cheated because they had a valuation which was considered too small. they are vastly different because net-a-porter is so much more editorial. yukes more of a money machine because they are quick and dirty. manus: there is also the concept that you will have this clash of titans. founders. it is a week for founders. the last person standing is the yuke's father.

nder.u there was always going to be a potential for a difference of opinion. francine: coming up, manufacturing data for the u.k. this is a check on the pound, 1.5266. ♪

francine: welcome back to "the pulse" live in london. i'm francine lacqua. manus: i'm manus cranny. we are getting u.k. data. let's head across to mark barton. mark? mark: some disappointing news on the u.k. economy u.k. services growing at the years, pace in two underscoring signs the economy is slowing and the first quarter. the index of activity dropping to 55.6 from 57.4 in july. yes, that is above the 50 level

that divides expansion from contraction but it is the lowest reading since may 2013 and compares with the prediction of 57.7, an index of new orders low.ed to a 28-month it comes after a pmi manufacturing report on monday, on tuesday, excuse me, which show the industry cooling. export orders falling. companies blaming the drop in foreign demand. weak sales in the eurozone and the chinese economic slowdown. it highlights the potential risk for britain's economy, of course, because net trade in the second quarter contributed the most to growth in at least four years. but we have had weak services, weak manufacturing, yes construction activity grew into light -- few in j-- grew in july. let's see how the pound against the dollar in eight days.

it has fallen on every single one of these days. yes, that is the longest losing run since october 2014. way, itperiod, by the is down by 3.3%. interestingly options prices signaling further losses versus the dollar and increasing pessimism versus the euro. that comes after hedge funds turned positive on cable for the first time at a year last week. maybe the timing was not so good. over to you, marquand in the bank of england. theey -- mark carney and bank of england. he has warned of external risks with china and the eurozone. they are clearly weighing on the u.k. economy. francine: thank you so much. the very latest on the pmi services figure, falling to 55 .6. here are the other top headlines. we can commodity prices slowing trade make it likely the ecb will downgrade its inflation forecast today.

policy action is unlikely to be announced at today's meeting but they will be watching for language indicating the ecb 's q.e. program could be expanded. china is set to cut its army personnel by 300,000. the president made the announcement to start the military parade in beijing to mark the end of the second world war. thousands of soldiers are marching through the capital and hundreds of warplanes and other military hardware are displayed. francine: president barack obama has secured enough senate votes to convince long -- prevent lawmakers from sinking its iran deal. meaning the president can stop opponents from overriding it. both chambers of the congress plan to debate the deal next week. manus: let's take a check in on the price of oil. with volatility given a whole new meaning when you look at this market. where are we? wti, 46 bucks.

seen the biggest three or four day moves in 25 years. brent 50 bucks, down .3% " oil oiling in the analyst. the redefinition of volatility is doing your job. these oil markets, are you seeing people come back in, take this opportunity to hedge? >> we haven't. we have seen a lot of hedging on the part of producers that is far. what we've seen is volatility between 65 brands and 42 brent. indeed, a volatile market. the higher that range, you can see producers adding rigs in the united states. we have to worry about production being interrupted. francine: why is oil fluctuating so much? we read about it. there is an oversupply. we do not know what demand will be like. at the same time, nothing

fundamentally has changed in the last two weeks. made: the key point you his we have an oversupply of market, and price discovery becomes difficult. now, the volatility, i think, you are encouraging things like stocking of inventories when you get to low levels, but what has changed fundamentally is that the economic data coming out of china has been disappointing. if we're going to have a rally range, it has$60 to be demand driven. came tohe issue that the for over the past couple days is iran making a variety of statements. i caught up with bank of america saying they do not think iran can produce one million barrels. they say it is more like 600,000. what is your take? we have spoken often about iran/ . he agreewould general

that you are not going to see one million barrels. the halfly will be in million barrel range. that does not occur until late 2016. sanctions have to be released before we see anything. the one factor that is concern 40 that iran has over fou million barrels in storage that could, to the market quickly. francine: is saudi ready to cut production? we have not heard otherwise, but the same time, they cannot look at this and do nothing. jason: saudi has been at record levels. you have some extraneous things going on. 400,000f all saudi has barrels a day of internal consumption for air conditioning purposes. they have also been ramping up a refinery. i think it will go down, but i do not think it is going to be a cut. manus: one other story which caught my eye, and this is been an ongoing debate which is the house of representatives are planning to vote on a measure to

lift the export ban in the u.s. this goes all the way back to the 1970's. this is one of the seminal moments, isn't it? if america begins to be allowed to export domestic production, any thoughts on that additional supply issue? jason: what will do is push wti towards brent. so, you get roughly a 2.50 decline in brent but you are still at levels that will not encourage incremental drilling. but it does begin to make the u.s. and even more important contributor to the overall supply situation. and it is generalist speaking going to be bearish for brent oil prices. longer-terme worry is that if the price continue sliding or if it remains volatile, then big producing oil companies will stop investing their -- therefore, we will look at a price that is $100. is there a danger on this?

it seems that a lot of these big oil majors are still saying, we are putting investment behind it. jason: the cure for low loi low oilrices is prices. capital prices are down 15%. there are very few big project moving forward right now. so, we are looking at severe declines from existing production leading to flatter production from the integrateds and lower supply overall. manus: you also have an additional cap. we look at the equity side of this and you mentioned some of the oil majors. are we going to see defaults? are we going to see forced mergers next year? what is your horizon for the corporate side of this story? we know the capex story. what is the next pressure? jason: the integrated company

still have strong balance sheets. we think protecting the dividend will be there priority in the near term. they will use balance sheets to do that but it will not force any drastic action. but as you start to get down the market cap, the ability to recapitalize is becoming more difficult. bank loan redetermination's come up in october. raonic's g or, you start to see distrust that could lead to an m&a cycle -- i think by early next year you could --rt to see emanate m&a. at a low levelre medium term. you probably continue to see high volatility. we are moving into refinery maintenance. youre demand goes down, will see testing of low levels over the course of september and early october. i do think we will get a recovery in 22016.

we will see prices average above $70 in 2017. francine: thank you so much. we have some live pictures from the president of the european parliament. he's addressing the crisis in brussels with the migrants. we saw some horrific. pictures about migrant children being drowned. rethinking -states the hon gary and president. a lot of the eastern europeans are meeting tomorrow. -- prompted by the hungarian president. we have seen them coming out of -- the pictures coming out of the budapest train station is really -- moving not towards germany.

francine: coming up on "the pulse," a blockbuster move from disney. withset to part ways dreamworks studios. ♪

manus: welcome back to "the pulse" live in london. top headlines. sweden has kept its benchmark interest rate unchanged.

to steer the economy out of a deflationary trap. the central bank cap the rate at a record low of -.35%. policymakers maintained a bond purchasing program at 136 billion kroner. vivendi has reported second-quarter sales ahead of analyst estimates. 19%mates were boosted by a increase at the company's universal music division. manus: the skyscraper nicknamed the walkie-talkie is the worst new building in britain, according to a panel. tower story twoer in -- was made famous when a beam of light reflected from the building melted parts of a nearby car. it has since remedy that

problem. francine: dreamworks will part ney after seven years. with more on the blockbuster news is caroline hyde. caroline: it is pretty amazing. the fact these hero filmmakers tend to align themselves with major film production companies, major studios to be able to finance and, to help distribute their films. this is been going on for seven years between stephen -- between steven spielberg and di sney. there are couple more films to be eked out. one,bfg" and another "bridge of spies." notably, they have been a money spinner for walt disney. raked in the cask on the last

film -- raked in the cash. we saw a "100 foot journey." it earned four times the amount. at $89 million. much more than the $22 million it made in cost. why part company with the man behind "jaws"? walt disney has a few more strings to its bow. cash when itashing comes to acquisitions, bringing in major winners. 4arvel that just raked in $1. billion worldwide from " avengers." and they have lucasfilm. the deal, the $4 billion deal. one ofings "star wars," the most lucrative franchises ever. this is how they want to make their money. squeeze the money out -- merchandising and theme parks. we are seeing it.

friday threeforce month ahead of the new star wars film, they are launching toys. they are going mad in toys "r" us. at midnight, they have a social media frenzy. this is how you get bang for your buck. so, they are focusing on other assets. what then with steven spielberg's dreamworks? he's in talk with comcast universal pictures. there is already a close relationship. he was executive producer of "jurassic world," the top film made for this year. $1.6 billion. they are reminding ourselves that this is a costly business. he's already having to find new ways of financing. potential in talks with participant media in terms of financing. this is a costly way to make

money, but in the end they do rake it in. if you can make more than $1 billion on one film. already talking to universal. francine: caroline hyde it with the latest on spielberg looking for a new home. dreamworks -- all of my favorite movies are done by dreamworks. and then, you see much more chinese purchase a patient. i went to see -- see much more chinese participation. so much of the things he grew up with are now sponsored by chinese cinema. manus: absolutely. a whole new paradigm. let's talk about shifting paradigms. the latest ajit -- gadgets on show today in berlin. we are there to find out what the tech fans are talking about. give us the lowdown. what is the buzz? the inducingne of

things about being here so early is that we are still basically witnessing the show being set up . which is why you may hear some of the noise is in the background here. one of the things we are seeing for the first time is 4k technology coming to mobile phones. we know what hd television is. is.now what blu ray the next generation is 4k, big enough for a 100 inch television. we are seeing the first phones ising out with a screen that 5.5 inches in size. sony was the first one to show this yesterday. which is an incredible amount of resolution. a tiny space. i tried to push my head is close to that screen as i could. you can tell the difference between an iphone or android

phone. francine: it sounds like fun. twitter still does not have a but there board is meeting today. are we any closer to finding a suitable candidate? nate: there has been discussion over the future of twitter's leadership. i am not 100% sure where we are going to be seeing twitter's the next twoer years, but it seems we could be finding more over the next few weeks. i think it would be good for twitter. they need to be pushing themselves in a new direction if they want to keep the momentum up, particularly in, titian with hitting that's been crazy figures. with competition heating up on mobile app fronts as well.

and instagram. a lot of people are flocking to it for keeping in touch with friends. manus: thank you very much for giving us the update. our bloomberg senior editor in berlin. francine: coming up, the latest on the migrant crisis. you are at live pictures of the budapest train station. we are hearing a live conference from the european president, together with the hungarian president. we will have more on the migrant crisis next. ♪

francine: welcome back to "the pulse" streaming on your tablet, phone, and boomer.com -- bloomb erg.com. suspendedgary has trains from budapest to western europe. but reopened the main railway station or you have thousands of refugees there. hans, this story has escalated and the hungarian response has gone full circle, hasn't it? hans: the hungarians have escalated it. the prime minister is in brussels. he said hungary does not have a migration or refugee problem. germany has a refugee problem because he says all these refugees want to head to germany hungary'ss not

problem. that was the implication. that is going to be very difficult to harmonize at the e.u. level. merkel's position is clear. a lot of other governments positions are clear. when refugees arrive within the e.u. member states they need to be registered. potentially can have some sort of free settlement distribution plan. the distribution plan, if there is going to be one, is going to be exceedingly politically difficult. you heard how difficult when you said that mr. obanrban hungary does not have a problem. of state oure heads meeting tomorrow to find a solution. we had shocking images coming out of the last couple of days, especially of a toddler drowning in turkey. how does that go into the issue of how we need to deal with this crisis? seems to beverybody

on the same page on is there needs to be a unified response that needs to come from brussels and it needs to be a single response for the entire european union. the problem is you have so many different opinions within the european union. lovakii sayingm s theya would be willing to accept christian refugees. that would be difficult to square with germany's commitment to human rights protocols. we are in the middle -- the beginning of a humanitarian and political crisis. there is no easy end in sight. manus: for those listening on bloomberg radio, the first word up next. for our viewers, the second hour of "the pulse." francine: it is all about the ecb. that is our second hour. we will bring you live coverage of the announcement and news conference from 12:45. we have a look at fx and commodities and our twitter question -- how many times will mario draghi field questions on

china at the news conference? manus: 11 times in the fed's beigh be book yesterday. stay with us. ♪

manus: inflation in focus as the e.c.b. meets in frankfurt to set policy. draghi will address market volatility as he wrestles with lower commodity prices. francine: stocks get a breather as the nation commemorates with world war ii and a parade. manus: risk reward says risks to global growth has risen. the fed should be data dependent hen it comes to raising rates. good morning to our viewers in europe.

good evening to those in asia and africa and welcome to those waking up in the united states. i'm manus cranny. francine: i'm francine lacqua. this is "the pulse" live from bloomberg's european headquarters in london. the e.c.b. makes a statement today after meeting to discuss policy. manus: it does indeed although not likely to increase interest rates, pressure is there to tackle stagnating inflation. investors will be looking for indicators on the slowdown in china and market viability. hans nichols is standing by. what can we expect today? hans: don't think of this as a traditional rate day. think of this as a research day. as an outlook day. what does the e.c.b. think about the state of the economy after we have seen what happened in china and inflation or deflation in some member countries. what we're really going to get is this quarterly update on where they think inflation is going. remember, three months ago they had inflation at 0.3%. it really hasn't had that much

positive economic news and you look at some of the underlying assumption that was in that june report with oil at $63 a barrel for an average in 2015. it went down to $43 per barrel. that gives you some of the calculations they will have to reconfigure and if they do reconfigure, what does that mean for quantitative easing? know it is spoasted to be 1.1 trillion euros through september 2016. you could hear a hint from draghi that they were going to extend the length. and extend the asset classes. those are things we're really looking forward to. what he says about china, what he thinks it will do to growth, that is what we're tuning in for. the rate, the 43 economists bloomberg surveyed, no one is expecting a whole lot of rates. on any of the

guys? francine: the i.m.f. issued a warning to risk to global growth will increase. it is all about china. hans: yeah, the i.m.f. is looking at the same data that the e.c.b. is looking at. they are concerned. the i.m.f. is warning central bankers all across g-20 economies, saying don't fiddle with your interest rates. it is really a message to janet yellen and a few other central bankers as well. it doesn't really apply to draghi. it is not on his radar screen to raise interest rates. in some ways it is again the i.m.f. trying to manage and regulate the global economy and trying to encourage growth when there is not a lot of optimism, aside from the u.s. and germany and a few other pockets but there is not a lot of optimism for global growth and how central bankers and s.e.c. e.c.b. is going to countenance all of this is the key thing

that we're going to be looking for today. guys? manus: hans, thank you very much. hans nichols in berlin. you want to stay with bloomberg throughout the day because we're going to cover the e.c.b. decision. we'll bring you live coverage on the announcement at 12:45 today. francine: that brings us to today's twitter question. the word china was mentioned 20 times yesterday. we want to know how many times will draghi field questions on china? we'll try to answer your questions. hard to answer. manus: exactly. i don't think anybody has the data or the answers on that one. let's talk about the global issues. reserves. our next guest calls it quantitative tightening. let's bring in deutsche bank's

o-head of global fx. quantitative tightening. discuss. >> so what we tried to do with this piece we put out a few days ago is try to take a step back. we know last month you had this step change in chinese policy. we know the chinese have started to draw down reserves. we took a step back and tried to look at what's happening to the global picture. the conclusion you come up with outside of china, with its big reserve -- happening, the petrol dollar recycling because of the oil price decline. they have been accumulating large amounts of reserve in previous years but have now stopped. if you look at china and the rest of the world, this huge trend of reserve accumulation that started pretty much in the early 2000's looks like it has stopped.

the key question is why does that matter? even bernanke and green span were talking about these things -- greenspan were talking about these things. francine: so why is china doing the? -- this? >> the problem is china is not doing it but rather reacting to something that has happened. we know they moved the currency. what has happened as a reaction to that is you're starting to see -- from china to the rest of the world. these inflows that went in. what is china supposed to do at the moment to prevent further significant depreciation, they are winding down reserves which is the opposite of what was happening from 2000 to 2010. manus: we ran a story yesterday saying they will stop it . they will protect the currency through to tend of the year and then they will pretty much draw a line under there.

tell me what affect that will have on the yuan. draghi has to consider this oday the impact on the euro. haven status is being established. there is a lot to contend with. >> this is why the market is so uncertain. it no longer understands the chinese reaction function. now we have the uncertainty. one option is that they do give up. the other one is you get a more gradual move with reserve depreciation. my opinion is we'll end up with the latter. incremental moves. the key thing here is that the market needs to resolve the uncertainty. we have wouvent major central banks in the world and the market no longer understands the reaction function. francine: that is the a problem. the chinese are seeing pressures on i guess market participants saying you caused this.

this means analysts are very uncertain and maybe even a little bit scared. a climate of fear is no good for transparency for china. as investors, how do you deal with this? >> markets are about action and reaction. the market also react to the fed. it is a confluence of factors. it needs clarity. we'll look at how authorities managed to fix. it has been moving slightly lower. outside of the fed, it is really being able to understand the size of the outflows and the future path that is affecting markets. if you look at markets, you have a huge drop in equities. yields have been grinding higher which is unusual. i think the only consistent explanation of that is this idea of q.t. you have negative news on the growth side but at the same time

you have this unwinding of resurfs which is pushing yields -- reserves, which is pushing yields higher. manus: the dollar, the dollar in itself, if we look at the fed and the -- we have one more fomc and one more jobs report. the overall trajectory of the dollar. is it at the beginning of its next big move higher or how do you perceive what's happening with the fed and the dollar at the moment? will they raise? in the next quarter? this is their window. >> this is a huge dilemma faced by central bankers in europe, the u.k. and the u.s. you have a domestic picture that is doing pretty well. in europe, core inflation started to go up. the p.m.i.'s are looking good. similar thing in the u.s. domesticically, we're not booming but we're doing ok. the labor market is tightening.

what policy makers and the fed have to deal with is managing a fairly negative environment versus the drivers pointing higher. the solution is gradualism. conditions are tightening. the unemployment rate is moving lower. they have to be cautious purchasing it is the risk managements prore approach. i think they will go this quarter but september is looking for difficult. one away. i think this quarter based on what's happening domesticically in the u.s. is still looking like the most likely one. francine: thank you. george stays with us. manus: let's take a look at wh else is on the ray czar. the i.m.f. says the downside risk to global economic growth g-to creased ahead of the finance ministers meeting tomorrow.

francine: u.k. services grew at their weakest pace in more than two years in august. the lowest p.m.i. reading since may 2013. really underscores signs that the economy is slowing in the third quarter. manus: he is willing to -- a fresh round to push through the cost cutting. strikes could happen across the group with immediate effects. francine: walt disney is not planning to renew itself grem with steven spielberg's dream works company. he is looking for other studios to find an arrangement. manus: still to come on "the pulse," there is a bit of a shock for you. details on a resignation. that is coming up in the next block. francine: europe's biggest tech

center takes over. we'll look at the latest gadgets. manus: china never ever leaves our list, does it? it marks the defeat of japan in world war ii with its military parade. the show of might. stay with "the pulse." ♪

francine: welcome to "the pulse" live from bloomberg's european headquarters in london. manus: we'll take a respite anywhere it comes. talking about japan's defeat world war ii. mark: 131 hours of peace to commemorate the end of world war i. get in here. have a look at the nikkei 225. it has risen for the first time this week. this is a 12-month chart for the nikkei 225. before today where index closed as much as 12% higher. it actually fell the previous three days. since that red circle right there back in june, the nikkei has slumped by 13%. june by the way saw the highest level for the nikkei in almost

20 years. investors breathing a huge sigh of relief as china is taken out of the equation. i want to take a look at the basic resources industry. european stocks are rising here under a second day. this is an industry that is being pummeled by events in china and the yuan devaluation just over three weeks ago. the industry that suffered the most along with chemicals and oil companies is the basic resources industry. this is the mining industry. it is rising today. since april 22, the industry, this is the high right here. april 22. the industry is down by 30%. a 30% increase since china devalued its currency on august 30. probably -- august 13. glencore in the last three weeks as fall bin 38%. battling its commodity price slump. this slowdown in china.

it has a $30 billion tech pile. it is selling assets. glencore is the biggest gainer in the miners today. before the e.c.b., we have had the swedish central bank. take a look at the swedish kronor a f they decided to keep interest rates unchanged. it maintained the size of its 135 billion kronor bond buying program. what is astonishing in sweden is these methods to stave off inflation appear to be working. consumer prices rose 4.9% in july. the economy expanded at an annual pace in 3%. the krona in the last month on a trade-weighted basis versus the basket of currencies big nine

developed currencies has risen by 3.9%. that is the best performing developed currency along with the swiss franc, the yen and the krona are perceived as havens. now mr. draghi, it is all about you as you decide on interest rates and q.e. . he will hold that news conference just after the monetary policy meeting. this is the chart you should care about. this is draghi's preferred inflation -- yes, we know we want him to reassure us to, soothe our nerves. he is willing to expand monetary policy because of the deflair -- deflationary threats. this is gauge of price growth expectations in the five-years starting 2020. now it is 1.69%. it was 1.8% two months ago. inflation in the eurozone is pretty much at zero.

you know the e.c.b.'s targets just below 2%. this is problematic for draghi. mario, you need to address this today. manus: thank you very much. i would he has probably tuned in today. he got that message interest mark barton. francine: we're back with our guest. george, i wouldn't want to be a central banker now. i wouldn't want draghi's position. >> it is incredibly difficult for a policy maker. this dilemma i talked about before, you contradictory signals. the external signals are pointing the other way and you have the additional factor of unpredictable financial markets. it is a very hard circumstance toll square. -- circle to square. it becomes difficult to understand their reaction. everyone is in a sit and wait game and waiting to see what

everyone else does in response. manus: ultimately if we take it very simple, e.c.b. on easy mode. federal reserve, whenever in tightening mode, differentials come back, dollar higher. euro lower. hanging on in there if the parity camp. will get back to normal? china will right size itself. will we go back to a lower dollar? >> we were one of the first to significantly revise our forecast lower by a couple of years ago. we anticipate this change in the e.c.b. the q.e. is negative. what that has done is caused a large wave of outflows from europe that have persisted throughout the year. now the question becomes what the recent events, how do those change that vaw? on the one hand you have the fed

otentially delaying. on the other hand, they should be placing downward pressure on the euro. the reason is all banks intervene in dollars. they will be selling dollars as a result. once they do that, they need to reallocate reserves. what that involves is euro selling versus the dollar to rebalance reserve which is the opposite of what happened in 2000-2010. back then china was accumulating reserves, buying euro versus dollar. we have this reverse dynamic happening which helps contribute . petrol dollar recycling. we're hanging on. still bullish on the dollar. froif parity by year end? all right. brave man. thank you so much for that.

head of global fx research. manus: you'll be our first guest in january to see whether we got to parity or not. thanks, george. coming up, details of a resignation. that is up next. ♪

francine: welcome back to "the pulse" live from bloomberg, on

the ipad and bloomberg.com. atalie massenet has quit the founded ompany she years ago. >> for me, i guess being happy th my family and hopefully innovating and looking towards the future but enjoying the moment. i think i'm very future-thinking person. always about the next thing and the next thing and i guess rather than work/life balance, i need to be more in the moment and focus on the moment. francine: she was quite coy about saying what she would do in the future. we didn't talk about the merger. the news today is interesting that she is leaving because

people have been asking whether this chris more value for the merged company because you have a strong c.e.o. at the head. others saying there is a huge loss with natalie massenet leaving because the pictures you see here are glossy. it is editorial. sexy. anus: this was her effort. francine: when i asked her why she founded net-a-porter, she said it was about doing something that her girlfriends wanted to shop in. that is what has driven her success. she is very good at understanding where the next wave is. anus: it is said that she is leaving with 100 million euros. there is one man left standing. marketi.

francine: disney is set to part ways with dreamworks. why the change? find out after the break. ♪

francine: welcome back to "the pulse" live from bloomberg's european headquarters in london. i'm francine lacqua. manus: i'm manus cranny. here are some of our top headlines. hungary suspended direct trains for security. thousands of refugees were camping outside. francine: weaker commodity prices, slowing trade make it likely the e.c.b. will downgrade an inflation forecast today. policy action is likely to be

nnounced at the meeting. the q.e. program could be expanded. manus: plans to cut its army personnel by 300,000. biggest reduction since 2000. the announcement was a made at the start of the military parade in beijing. thousands of soldiers are marching through the capital and hundreds of war planes and other military hardware are on display. francine: president obama has obtained enough votes for his iran nuclear deal. 34 senators indicated they will back the agreement meaning the president can stop republicans from overriding it. both chambers plan to debate it next week. manus: it is 10:3031. time to check in with jon ferro. stocks are up. jonathan: in china, a sigh of leaf. markets closed for two days. no data out of the world's

second largest economy either. the dax up by two whole percentage points. a relief rally on the periphery as well. here in london, a u.k. services p.m.i., the weaks reading in over two years. high on the ftse 100 by 1.66%. look at sterling down against the dollar for an eighth straight day. you think mark carney is going to raise rates any time soon? the fx market saying a big fat capital n.o. the e.c.b. meeting and draghi, the big question is whether he will have to downgrade the inflation forecast. the last couple of years we have talked about the fed and their dashboard and which data points they are looking at. is there any reason for draghi, the president of the e.c.b. to be concerned? is there any red flashing lights? go to the bond market. look at spreads. yields in germany lower. yields in spain a tick higher

but at 2.16% spreads on the periphery adding 17 basis points over the last month. that is not a cause for concern for draghi. no cause for concern in this sovereign debt market. no cause for concern in credit. maybe the cause for concern was this last week. a euro/dollar that kissed 117. up 2.6 pbt. not a big 2.6%. if you don't get a plan from mario that they can do more if they need to, maybe you get an even bigger rally in the euro. that is what he is fighting against today. not the data so much but the expectation. back to you. manus: that is what they are fighting against all the time. thank you. let's cross over to tom keene. our focus is squarely on central bank and what draghi says. we're still going for parity on this currency by christmas. tom: yeah, i think those are

some of the bold calls you see. i had a conversation with mark clandler yesterday and he managed as well to reemphasize a weaker euro. there are some real headwinds in the way. some of those are what drag cy are talk -- draghi will talk about today. after jackson hole and tomorrow's jobs report in the united states. we'll have a real focus on emerging markets and commodity currencies. having challenging moments this morning. and yesterday afternoon. and christopher whalen will join us. we're thrilled to bring you chris whalen, the american banking system, one of the back stories august into september, the challenges brian moynihan is facing with bank of america. we'll discuss that directly with chris whalen. it is odd to have a day when the markets are not in turmoil.

what do you do in early september? manus: you take a break. 113 our countdown started yesterday. the chinese will be back on monday. don't worry, tom. tom: the chinese will be back on monday. i will not. i have just been ordereded not to work on monday. labor day in america. i'm the only one. i'm not going to show up monday. francine: i don't believe you. manus: are you going to the hamptons? tom: no, i don't go to the hamptons. come on, manus. do i look like a hamptons -- can you see me looking like this in the hamptons? manus: i can see you and olivia sterns hang ought there. francine: "surveillance" in 25 minutes from now. manus: steven spielberg, his

dreamworks set to part ways with disney according to people with knowledge of the matter. here with more on the blockbuster news is caroline hyde. caroline: filmmakers toned team up with major studios such as disney to promoted and market their films going forward and indeed to finance them but the agreement that they have been in standing for seven years since 2009 we understand will expire come august 2016 and it looks as though it will not be renewed by disney with dream works. there are still two more films to come. a cold war-based film. two more still to come. interestingly, steven spielberg is a money spinner. his last film about an indian family traveling to france setting up a restaurant made far more than it cost. it cost $22 million and made $89

million from the box office. why on earth end a relationship "e.t.." man behind behind "jaws." they have been buying two key assets. note ply marvel. and of course lucas film. this is the jewel in the crown for disney at the moment. of course one of the most successful money spinning film franchises ever sold. this is what plays into walt disney's future. it is all about driving merchandise. they don't just want the film. they want to be able to sell good off the back of it and tie it into new rides and attractions at their theme parks. you can see it full front and center. this friday, three months ahead of the new "star wars" film

which is coming out december 18 to be called "the force awakens" they are selling toys already. you're going to have them on american broadcasts. "toys r us" will open at midnight to start cashing in. where does he go? he has plenty of places to go. he is already in talks with several studios. one of them he already had strong ties with. comcast universal pictures. he was executive producer on the most successful film of the year totallying $1.6 billion. thank you very much "jurassic world." maybe this could be the match made heaven come august 2016. he is also looking at financing. already in talks about the financing of dreamworks too. many fingers in pies. i don't think he will go adrift.

interesting that walt disney feels it can focus its attentions elsewhere. back to you. francine: thank you. caroline hyde with the latest on steevep spielberg. bloomberg's nate lanson is the is at the tech show in europe. there is enormous buzz but what is buzzing the most? >> at the moment what is buzzing the most, the show is still technically being set up. if you'll pardon the pun, it is watch the smart watch. that is what everyone wanteds to watch. asics. samsung, sony, everyone seems to have a smart watch here. it is interesting because only a few days ago a lot of these smart watches, are now supported

with an app on the iphone. for the first time they have been compatible with the iphone which makes these watches that we're first starting to see this week incredibly exciting. it is not limiting them now to just people who have android phones. everyone wants to have one. they are quite nice to look at. manus: ver very lovely to look at and they are going to know more about our health and pace of living, nate. i suppose the only thing it is not going to be able to do for me is count the calories but it is not going to stop me eating those carbs, is it? let's talk about twitter. they have no permanent c.e.o. where are we in this discussion about twitter? the board meets today. are they any closer to finding somebody that can reconvince the market that it is time to hashtag rejoin twitter?

>> yeah, well, understand the frontrunners for the next c.e.o. position is none other than jack dorsey, one of the co-founders of twitter and more interestingly perhaps the c.e.o. of square, which the payment service, also believed to be on the verge of an i.p.o. which makes it a very interesting conversation to be having about somebody like that coming back and taking over the c.e.o. reigns of twitter. twitter has never had a stable relationship with its top management and it is definitely something that has caused internal politics to be tense in the past. really what twitter needs now is stability and a very strong guided mission for the next few years because it really is sort of make or break moment for twitter particularly as the ompetition, given things whatsup, instagram. that is where the growth is now. we'll see how that pans out

after the board meets. francine: thank you so much. bloomberg's senior editor in berlin. of course jack dorsey is said to be the frontrunner in this race. interesting. manus: china, it preaches peace and that as it showcases its military might. we'll have more on the parade commemorating the defeat of japan in world war ii. that that is coming up next. ♪

manus: welcome back to "the pulse" live on bloomberg television. huge parade marking the defeat of japan in world quarter ii taking place in beijing. it showcased hundreds of new weapons including aircraft and missile launchers and featured 20,000 chinese soldiers but despite the display of china's military might they used the position to introduce the biggest cuts to the military and china's commitment to peace. david tweed joins us from hong kong. a very good day to you. what kind of message are they send with this double edged presentation of strength but announcing some kind of shakeup? david: first of all when you look at the visuals, we're

looking at the vulnerability of china. that is what you're going to hink when you see some inter ballistic missiles, announcing it can deliver war health heads all the way to the united states is a pretty clear message but at the same time it is preaches the message of peace. china is a peace-loving country. 3 hoont cuts to the p.l.a. personnel that will take place. i think it was less actually an attempt to calm the frayed nerves of some of china's neighbors and more a presage of a big military organization that we expect to see probably to be announced before the end of the month. francine: the pictures are simultaneous amazing. how big is china's military might? >> we're looking at 2.3 million personnel in the peems liberation army. 300,000, it is just over 10%.

when you modernize an army you don't need so many feet on the ground. you need more technology and weaponry. you need for sophisticated people to operate them. the other thing china is doing is moving toward a maritime -- something we didn't see in beijing. china has really been ramping up its naval strength. now we see nuclear submarines oing as far away as the indian ocean. that is something you have to take into context. you don't need as many personnel when you have a more technically modern army. guys? manus: talk to me about the complexion of who is there side by side. putin was there. i love the next graphic. barack obama wasn't there. avid: he was represented by

he u.s. ambassador to beijing. putin is one of his friend it is. the other one was the president of south korea. she has got a another agenda of course. she wants to actually try and keep him close to south korea. not so close to her foes just over the border in north korea. also she is trying to broke aerothree-way summit between china, south korea and japan which is really interesting because both of these countries, these former foes are moving toward a kind of detaunt and that is good news geopolitically for the region. guys? francine: david, thank you so much. david tweed in hong kong. from china's military to the plight of the markets.

ransitioning to a freer market economy. manus: our guest joins us now. great to have you with us. we see this military might but yet you give up one hand and take on the other hand and announce this radical shakeup. how are you reading china at the moment? >> well, i think china is in a very difficult transition process. it is all sort s of ways. one is the economy where they are trying to move towards a more -- based economy shipped away from this investment-led boom they have had over the last 0 or 30 years. they are trying to sort of root out corruption and get their people to behave better and then you see in the military this drive towards a much more technically sophisticated armed

forces. francine: it seems that market urmoil is putting a question mark over his future. would you read it like that or are we safe? >> we always look for political scapegoats. he is in charge of the economy. he is the premiere. the economy has not been doing nearly as well as many people expected and most people hoped. i think yes, there is a search for scapegoats. on the other hand he is a very senior figure asking a bit much i think at the moment to see him in political difficulties. francine: one of the things that many of our guests tell us from the financial side, the machination s of the chinese stock markets are not something to get overly worried about. it is not going to impinge on the growth story of china. 90 million people are losing their shirts right now in the chinese stock market. there are social consequences

and emotive consequences of volatility. >> there are. this goes to heart of the -- of the chinese communist party, which recently promised economic prosperity in return for political conformity. now you're not getting so much economic prosperity and certainly they are looking forward. the futures is much less rosy. so the new narrative or an element of it is we have built a strong new china. you see that in the parade. that you need the chinese communist party to provide that international strength for china, which is the way forward for us. the new -- the birth of the new chinese nation. they are sort of switching as it were the appeal of the chinese communist party away from simply being the economy where things are getting more problematic. francine: the pictures are absolutely amazing, the parade.

by far the biggest military parade in years in china. they also pushed these wide-ranging reforms to streamline peems liberation army. -- people's liberation army. this is a better reformed maybe more modern china but is it not concerning that -- if you're an investor or someone watching china, there are still so many questions. a peaceful question, yes, but one that is parading big. >> i think if you're an investor and you're in the arms industry, the parade is really irrelevant. . because it is the economic numbers that are important to you. and this sense of economic confidence. it is the sense of economic confidence that has been shaken both domesticically and internationally. francine: it is and it isn't. you have leaders like vladimir putin. i'm not trying to put the two together. if you have a weak economic country and the leader of that

wants to stir up nationalism, it can be very dangerous. >> it can but i don't think the chinese have gotten there yet. the word the president uses are the exact opposites of that. china is a peaceful nation. all we are doing is demonstrating our strength and commitment to preserve world peace. you need a strong china to do that and in a sense he is right. manus: they want a global position, don't they? >> they do. anus: thank you so much. francine: for a look at what we're watching for the rest of the day, we're joined by hans nichols in berlin. draghi hans: we only have about two hours before get the rate decision. what does he say about china and inflation? we will get the updated outlook for the rest of the year for the rest of 2015. how has the e.c.b. fro pro

sessed all of this -- processed all of this these low oil prices? how do they reconfigure form also a? what do they say about china? i know everyone is as excited as i am at what happens with the e.c.b. today. noip we'll have that coverage of the decision and the coverage of the news conference from 1:30 when it comes in and it all gets very exciting. talk to me about luff transa. -- lufthansa. i thought they got their house in order. hans: the c.e.o. said he is not afraid of another strike. he wants to cut about 500 million euros from costs. he said basically you depsh he is concerned about his pilots wanting too much money for too little work. what used to be german wings is

now going to be euro wings. there are some comments he made in vienna yesterday this sense to which he is preparing for battle and willing to stare down the pilotings union to he can make lufthansa competitive. next time i go to frankfurt, guys, i'll probably book deutsche -- you don't want to be stuck on the tarmac. francine: speaking of transport, talking about the migrant crisis and looking at hungary. hans: the interesting.coms we have had in the last 24 hours, on the political side you had the prime minister of hungary saying this is a german problem. what hungary has done is halted all western-bound trains from their main train station in budapest. the trains are leaving but only within the country, within hungary. that could create another

bottleneck if the refugees continue to try to make their way through vienna and on to germany. this is a big question of how brussels tried to solve this. we heard from the president of the europe council and he said he thought there needed to be distribution of 100,000 refugees across europe. that is going to be very difficult to accomplish. we'll be watching that throughout the day, throughout the week, really until they have a solution. guys? manus: they are actually convening to bring a whole discussion around that over the next 24 hours. three major issues. i think the e.c.b. is going to be the one for markets and the politics is going to be about this migrant issue. no doubt about it. hans nichols. thank you very much. francine: that is it for "the pulse." stay tuned for "surveillance" coming up next live from new york. you go follow us both on twitter. we'll be spearheading our e.c.b.

coverage kicking off at 12:45 when we get the rate decisions and mario draghi talks at 1:30 u.k. time. manus: how many times and questions will he get asked on china? ♪

>> of this is "bloomberg surveillance." tom: the people's republic of china remembers world war ii.

emerging markets remain challenged this morning. the donald trump you don't know. who is that guy? good morning, everybody. this is "bloomberg surveillance." i'm tom keene. joining me, vonnie quinn and "bloombergrendan businessweek" greeley. brendan: i'm really excited to talk to max because the pieces a good look at how donald trump makes money. is he a businessman or does he play when on tv? a little bit of both. tom: i like it because it has fun graphics. people who work for him love him. tom: great. brendan: