jon: europe opens higher after the global equity selloff continues in asia. japanese equities suffer their worst week since 2008. commerzbank swings to a profit. the german bank expecting a slight increase to profit this year. we will speak to the ceo. buys more thanss $26 million of shares in the bank after they tumble to their lowest price in more than two years. that is roughly his annual salary. welcome to "the pulse" live from

bloomberg's european headquarters in london. i'm going to take you to italy now. 0.1%talian economy growing in the fourth quarter versus an estimated 0.3%. that is a mess as i'm sure you can work out for yourself. negative news in the first 60 minutes of the session. let's bring up the equity market board for you. equities across europe rallying. commerzbank, one to watch on the dax. session highs of over 10%. the stoxx 600 by 1.73%. the ftse up by 86 points. let's get to the other asset classes. dollar-yen, 112.57. biggest weekly gain since 1998. your pro-nova, 1.12 76 --

euro-dollar, 1.1276. brent crude at $31 a barrel. let's cross over to caroline hyde. caroline: jonathan, thank you. federal reserve chairman janet yellen says the central bank is not to blame for the tunnel that has engulfed financial markets this year and is unlikely to roll back its interest rate increase. yellen argued that the first rate rise in nine years had been widely anticipated. germany's economy sustained its momentum in the fourth order, growing 0.3%. europe's largest economy benefited in part from cheap oil prices amid an emerging market slow down that has heightened concerns. euro region gdp is scheduled to be released at 10:00 a.m. london time today.

the reserve bank of australia keeping the door open to further rate cuts. has thetry's economy flexibility for further easing. the board is weighing the sustainability of recent jobs strength. the key question is the effect of recent global financial turbulence. the u.s., russia, and other powers have backed an accord calling for a truce in syria's civil war. it demands the immediate delivery of humanitarian assistance to besieged areas. >> we are doing everything in the power of a clemency -- of tolomacy to bring an end this conflict in a way that results in a unified, nonsectarian, minority protecting, secular whol state. jon: thank you very much,

caroline. let's get over to mark barton for a wrapup of the markets. for: second day of gains the stoxx 600. yesterday, the lowest level since september 2013. still heading for the worst week of january -- since the first week of january. this is a year-to-date chart. we are down by over 14%. the yen, the currency of the year. this is the dollar against all the major peers this week. the yen is the best performer. best week since october 2008. highest level since october 2014. since the boj produced negative interest rates, the yen has risen by 6%. speculation has grown that authorities will intervene to

weaken the currency. sayingad authorities they are watching the moves in exchange rates. we're all watching the moves in the oil price. this is the volatility index. we are at the highest level since march 2009. we are up 67% in 2016. wti rebounding from the lowest levels today since may 2013. still on track for a 12% weekly drop. this is the u.s. 10-year yield going back to 2012. that was when we saw a record low yields of 1.38%. yesterday, we felt 14 basis points shy of that. economists have been tweaking their forecasts. they are forecasting the 10-year yield to end at 2.46%. 2.46% at forecasting

the beginning of january. they were forecasting 2.82%. jon: thank you, mark barton. below $27 a barrel. the selloff has wiped 30% off the stoxx banking index this year alone. out showed no signs of updating earlier. pointing the finger at central banks in negative rate strategies. don't blame the fed, said janet yellen. there is nothing magical about the present rates. they could go lower. when people start to switch massively into cash, we haven't gotten to that point yet.

each central bank in each particular country or region assesses whether the benefits of that are higher than the cost. if that is the case, low interest rates should remain. >> in light of the experience of european countries and others that have gone to negative rates, we are looking at them again. we would want to be prepared in the event that we needed to add accommodation. we haven't finished that evaluation. we need to consider the u.s. anditutional context whether they would work well here. >> so far, at least in this economy, these things worked the way one would expect. at this level, that doesn't seem to be an issue. in terms of impact from the monetary policy side, generally speaking, rates have come down. jon: let's continue the negative

rate debate with christian schultz. arnab das is also with us. gents, great to have you with us. mr. schultz, negative rates in europe since when, middle of 2014? it was all good. then japan happened and the focus has shifted to the negative consequences. where do you sit on that debate? do we need to pay attention to what is happening with financial volatility? christian: i think what you can see is that the more central banks use negative interest rates, the more you get currency wars. people focus on that particular channel of transmission from negative rates. if you look at the more domestic transition channels, i think the negative rates have worked. the interbank rates have continued to follow the deposit rate lower. are no signs that banks

will be passing on the negative deposit rate to their borrowers. there's no sign of people switching massively into cash. domestically, it has worked, but there is this fear of currency wars, using negative interest rates to boost exports. jon: the banks are accepting the losses. pimco is saying that maybe it isn't good. maybe it doesn't help push people to take more risk. what it does is make the least risky assets even more risky. they are the negative consequences according to pimco. i wonder what your thoughts are on that. does it make things a whole lot riskier? arnab: i suppose it may have some of that effect. perhaps another concerning channel is the effect on banks' business models more generally. i think the underlying pressure for risk aversion is not coming

from negative rates. it predates the riksbank move. the underlying common thread in all this, i still think, he's about the deflationary impulse coming into the rest of the world, or the fear of a deflationary impulse from a chinese and emerging-market exchange rate realignment. we are not quite there yet, but the fear is still stocking the market. that has spread through the energy market and through the rest of commodities and emerging markets. that is causing some concern about impairment of credit portfolios in various banks that are exposed to energy or emerging markets. jon: are we also recognizing central-bank limitations? a lot of people talk about the impotence of central banks. we are pretty near the lower limit on rates as well. christian: globally, we are at

probably the cost of a global recession. they may go lower. we may end up in recession. there's no real silver, gold, whatever the let out there. banks may still have effective tools, doesn't look like they are going to use them any time soon. jon: christian schultz, arnab das, stay with us. lots more coming up today. draghi addresses the parliament. we look at gdp numbers. where europe's banks go amid global volatility. plus, oil rebounds from 12-year lows. this is "the pulse ." ♪

jon: hello and welcome back to "the pulse." let's get you up to speed on equity markets. we are higher across the board. the ftse up by 1.5%. the tax up by 107 points. gains.ers leading the energy and gas also higher.

commerzbank, the vague gainer on the stoxx 600. have a look at the other asset classes. other-yen, a real slog down to kuroda-nomics. dollar-yen a little bit higher today. stronger japanese yen. the biggest two-week gains for the japanese yen since 1998. let's wrap up some of the news now and cross over to caroline hyde. caroline: jamie dimon, chairman and ceo of jpmorgan, is buying shares of his own bank after they tumbled to the lowest price in more than two years. maderce says that dimon the purchase because he believes the stock is cheap. jpmorgan is down almost 20% this year. thyssenkrupp posted a net loss through december, missing

analyst estimates. germany's steelmaker is struggling to whether a drop in prices. chief financial officer kirk of said in an interview on bloomberg television at thyssenkrupp may exceed its cost target. they reiterated a 2016 profit objective. renault shares are swinging between gains and losses after the carmaker reported a profit jumped last year. the stock rose as much as 5%. said it looks like a huge loss in russia, where unsold vehicles increased. global news 24 hours a day powered by 2400 journalists around the world. jon: thanks, caroline hyde. fourth quarter eurozone gdp data in just over half an hour after inmany recorded 0.3% growth

the final quarter of last year. let's get out to hans nichols in berlin. germany holding steady. disappointment in italy. give me the rock up. hans: that is the story of the eurozone. soft growth in germany. stronger growth in spain. italy disappointed. 0.3% isn't the number to focus on. it is the inflation numbers. whether you think german resistance to quantitative easing further dipped into negative rates. the cpi numbers, you know, i know, we love it when the details come out of that federal statistics office. my favorite one, the cost of potatoes is up in germany 31%, but potato chips are down 9%. puzzle that one for me. what is your best. ? jon: i just know that the hans

nichols family are saving some money. headingnister cameron to your city to speak with angela merkel in germany. i wonder how this plays out and who has got the leverage. program,lier on the toid bloom broke your move new york from london. i think you may have broke my move. hamburg.s going to it is such a trade-dependent city. it is really the best place in germany for cameron to find a pro-european and pro-british sort of audience. his challenge is how to convince the french on banking rules, how to convince eastern europeans. in terms of just finding a friendly audience, hamburg is the friendliest place you can find in germany. jon: hans nichols, thank you

very much. joining us from berlin, about to go to hamburg. christian schulz, citigroup director of european economics, is with us. i just asked who has the leverage, because i'm not convinced that they are really taken by the negotiations with prime minister cameron and the rest of europe. it is not much for renegotiation at all, is it? christian: i think the reform demands that the u.k. had to the .u were already quite modest the results are not more striking than the demands originally were. given that we have some next week, it is unlikely there's going to be a massive breakthrough in terms of changing the eu. i don't think this is going to the a major argument for the pro-eu side of the referendum which could happen this year.

it is more, this is out of the way now. now everybody can say what they want. cameron could start campaigning in favor of staying in the eu. he's been successful in recent years. we've seen that in the elections. jon: do you think he will be successful this time around? aristian: we still only see 20% to 30% chance of brexit. that may have went up recently. it is still not our base case. we think that in the end, he will get his way. jon: christian schulz, thank you very much for joining us on this program. head foras investors safety, where does that leave emerging markets? surely one and done from the federal reserve? is it all good news? he and global market turmoil,

that is next. ♪

jon: hello and welcome back to "the pulse." live from bloomberg's european headquarters in london. emerging-market equities headed for the worst weekly drop in a month. china has been notably off the scene as the country celebrates lunar new year. will its return on monday mean

even more pain for emerging markets? let's continue the conversation with arnab das. if you were to take a long holiday and come back and i said, the fed hiked once but p.m.are done now, bullish would have been the story a couple years ago. it seems the emphasis has shifted away from the federal reserve to china, to commodity producers. is that the story, china, and the fed is an afterthought? arnab: china is very front and center. i don't think the fed is an afterthought. this is a risk off dollar weakening. people are starting to expect divergence between the fed and the ecb, boj, even the pboc, to be limited. in dollars ise being unwound. i think that is going to leave us with a structural issue. i don't know if i call it a

dollar shortage, but a problem with the dollar. the u.s. current account deficit is much smaller than it has been in the past. that is probably a structural change. he threw price of oil is very low as it is now and the value of oil imports his lower, and a lot more oil is being produced on shore. i think emerging markets including china, but not just china, have to get used to this petrodollars being recycled through the international system into e.m. jon: how does that shape your view more generally? arnab: we are starting a long process. our view at invesco has been, there's an external adjustment. there's been a big currency adjustment. most of the adjustment has been through import, rather than through export growth. there's been a big credit buildup, a big credit boom in

some countries. that needs to be worked through. that is the next phase of adjustment. jon: south africa, it is not my fault, we're up against a tight schedule. what is your view? what is the endgame here? domestic politics is almost the key focus, particularly in south africa. another, they or term is coming to an end in 2017. to us, it feels like there's a tug-of-war within the anc between the leadership and the elite. has a serious problem of legitimacy. i think the state of the nation address last night said a lot of the right buzzwords. the question now is, what about delivery and implementation and specifics?

for that, the budget is the next test. jon: arnab das cut invesco, thank you for joining us. up next, rocksolid after germany's largest bank had to reassure investors. this is "the pulse." ♪

jon: welcome to "the pulse" live from bloomberg's european headquarters in the city of london. equity markets charging higher. waiting for portuguese gdp to cross. the story in portugal, yields over germany blowing out, the highest in several years. waiting for the gdp figure coming in. the estimate, 0.4% quarter on year on year. caroline: let's cross over to caroline hyde now. caroline: fed chair janet yellen

says the fed is not to blame for the tunnel that has engulfed the financial markets. winding up two days of testimony on capitol hill, yellen argued the fed's first rate rise in nine years had been widely anticipated. germany's economy sustained its momentum in the fourth quarter, growing 0.3%. europe's largest economy benefited in part from cheap oil prices amid an emerging market slowdown that heightened concerns about global growth and send equities plunging. euro region gdp is scheduled to be released at 10:00 a.m. london time. reserve bank of australia is keeping the door open to further rate cuts. governor glenn stevens told a they haveary panel the flexibility for further easing. he says the board is weighing the stability of recent jobs levels. the u.s., russia, and other powers have backed an accord

calling for a truce in the syrian civil war. the siege delivery to areas of humanitarian assistance. >> we are doing everything in the power of diplomacy to try to bring an end to this conflict in a way that results in a unified, nonsectarian, minority protecting, secular whole state. caroline: global news 24 hours a day powered by our 2400 journalists around the world. were expecting portuguese gdp and i can bring it to you. fourth quarter prelim number quarter on quarter, 0.2%. the survey, 0.4%. a disappointment. year on year, 1.2%. the survey, 1.4%. a disappointment there as well. the quarter on quarter figure up from the previous number but

significantly below the survey results. 10-year yield up around 16, 17 basis points. good news for the bowls. equity markets rising again in europe. thickgs continue to come and fast. let's get over to mark barton to dissect the market moves. mark: let's start with the french automaker. profit rising a better than estimated 44% last year. it gained market share in europe thanks to new models like the suv. it also forecast higher sales and improved operating margin this year with european cardin and projected to rise by 2%. look at commerzbank. up by 14%. it returned to profit in the fourth quarter. earnings at the consumer banking business almost doubled. losses narrowed at the unit from winding down soured loans. it plans to pay a dividend of

$.20 a share, its first payout since june 2007. rolls-royce holdings, the jet engine maker, has cut its dividend for the first time in almost 25 years. it said it will need to deepen its cuts amid sluggish sales of marine turbines, slumping demand for older wide-body jets. it did maintain its outlook, which is why shares are up 14%. causeors are relieved the the company issued six profit warnings in the last two years. to its the first cut dividend since 1992. the msci world index slumps into a bear market. quick bit of technical analysis for you. above the averages 50-day moving average. this is when the death cross happened, when the 200-day moved

above the 50-day. look at the rsi as well, the relative strength index. we are below 30. that means the market is oversold. we've seen a 20% decline from a last year. the momentum is still on the downside. , you're goingjon away present. jon: thank you very much. another one where there is significant momentum this morning, to the downside for 2016, germany's commerzbank. it is a rare bit of positive news for europe's banking sector. let's hear from some of the ceo's and guests we featured on bloomberg over a turbulent week for financials. >> we have had italian headlines for a while. kind of retrofitting the story with the data, what we saw last week was the first tentative

sign that the european growth momentum is no longer accelerating. >> i think some of the european banks have been slow to getting their financial balance sheets in the best place they can be. >> right now, i see that all european countries, all banks in europe, are under pressure. i don't see a specific logic in the market except that the market needs a new floor. >> we've seen differentiation in europe. ubs is only at 86 basis points. that is really important, that the bank its -- the markets are differentiating between the banks. >> credit suisse are probably in a better position than deutsche. it will take deutsche longer to get there. they have to get their risk-weighted assets down. >> the recent market evolution is fear from individuals.

my view is those fears are disconnected from reality. >> i think there's definitely a panic and fear starting to set in on the european banks. you are seeing some trade at 30% of book value, very stressed environment for a bank. jon: a lot of negative headlines, but a strong odor -- a strong quarter for commerzbank. earnings at its consumer unit almost doubling. hans nichols is in berlin. big beat, decent numbers. what is behind it all? hans: net income beat estimates. that is based on the consumer banking unit. some of those nonperforming loans weren't as bad as expected. the ratio came in at 12%. last what are 10.8%. deutsche bank is at 11.5%. you look at windows cocoa bonds would get triggered.

5.8% on thatd metric. they are better capitalized by these measures then deutsche bank. we have news that it looks like we have more clarity on who martin blessings successor will be. my colleague in frankfurt got an internal memo. they are talking about a successor. they've got a short list. they want to do it by the annual shareholders meeting in april in frankfurt. this is a bank in transition. martin blessing seems to be leaving it in good shape. jon: hans nichols in berlin, thank you very much. stay with bloomberg tv. we will be speaking to miss her blessing life on bloomberg. our next guest, otto dichtl. good news in the numbers. the cfo can't reach some of the goals in 2016, citing the low interest rate environment.

it seems that is where the attention is. maybe negative consequences of negative interest rates. i just want your thoughts on that particular debate as it goes on. otto: i think it's one of the big items that arguably are hitting the banking sector, particularly hard at the moment. implicationshas widely, across industries, for insurance companies as well. at the moment, the banks are taking the brunt of that. basically, low interest rate, there's a number of implications. one is, an indication of a very low growth outlook and for banks in particular, it also reduces earnings prospects. with a very flat yield curve, the margins get pressurized, of course. jon: in the u.s., we were hoping for a steeper yield curve. that is not materialized.

i think what is really interesting is the selloff. the banks index is down 20% year-to-date. if you bring up a long chart, stoxx 600 banking index over five years, go back to 2012. the whatever it takes speech from mario draghi. we have had several years of verbal and quantitative stimulus since 2012 and we rolled over and he raced almost all of the gains. is it justified? the knee-jerk reaction is to say no. pl's, are talking about n what that means is yes. they've boosted risk appetite. the fundamentals are still week for european banks. would you agree with that otto:? otto: i'm not sure if i fully agree with that. thanks have done a lot on the capital side, on the risk side. they don't look to me

particularly week. stickis no specific sharp items really that are particularly causing problems. i think one question -- it seems to me that is particularly an issue for the equity valuation. the thing you pointed to earlier, the outlook for profit, for growth. for high equity valuation, you need high profit, high dividends, and growth also. that seems to be priced out of the market. somewhat different on the fixed income and credit market, you could argue, although so far it hasn't happened, but you could argue that almost the reverse could apply. in a world where we have low growth, having yielding assets, credit assets, should become increasingly attractive on a relative basis going forward. jon: otto dichtl, thank you very

much for joining us. inventory, the highest volatility since 2009. we will break down a choppy ride for oil. ♪

jon: hello and welcome back.

this is "the pulse." let's cross over to caroline hyde for the bloomberg business flash. caroline: jamie dimon of jpmorgan spent $26 million on shares of his own bank yesterday after they tumbled to the lowest price in more than two years. on made theys dim purchase because he believes the stock is cheap. jpmorgan is the largest u.s. lender by assets. thyssenkrupp posted a net loss of 23 million euros through december, missing analyst estimates. germany's largest steel maker is struggling to whether a drop in prices. the chief financial officer said in an interview on bloomberg television that thyssenkrupp may exceed its full-year cost cut target. he also reiterated a 2016 profit objective. run no shares are swinging between gains and losses after the carmaker reported profit

jumps last year, beating estimates. the stock rose as much as 5% while also moving to the lower side by 3.8%. it looks like a huge loss in russia, as unsold vehicles increased, taking its toll on the company's balance sheet. global news 24 hours a day powered by 2400 journalists around the world. jon: crude rebounding from the lowest level in more than 12 years has comments from the uae's oil minister added speculation. ryan chilcote is here. we've heard this so many times. it is the opec rumor mill in overdrive. people are comparing it to the eurozone debt crisis. that is kind of opec right now. what did you pay attention to? ryan: it is noise, but i think the crazy thing about the market is, it is the most volatile it has been since 2009.

it is all over the place on a daily basis. the axis on which the whole market moves his, speculation on commentary as to whether we get a deal between opec countries and non-opec countries. the uae oil minister said absolutely nothing new. that has always been the position of uae, of the saudi's. if you cut, i will cut. i will not cut if you don't cut. they are in this mexican standoff. nobody wants to cut production until everybody agrees. this is what i heard from the ceo of post left -- of rosneft. we will cut if the saudi's cut, the brazilians cut. those are countries where the state controls the oil industry. shale producers, you tell them to cut, no one is going to cut. he said iran, is iran cutting? they've been -- imagine the

mexican standoff. these guys have been in jail. they just got out. everybody has their guns out and they are being told to walk away. jon: really, the story is state versus private actors. on,'m hearing this going i'm wondering if it is going to gain traction. that is great news for me. i have decisions to make based on profitability. the state versus private scenario -- about how italking would be crazy for the iranians to cut production. that would be a subsidy for the higher cost producers. these guys in north dakota are saying, please, because it will bring them back into the game. this is the point ian taylor was making as well. we are to have a natural buffer for the next five to 10 years. as soon as prices recover, the shale producers, no matter what

opec does or doesn't do, are going to come back into the game. when does opec bring them back in? jon: ryan chilcote, thank you very much. the energy players clinging to their dividend. how long can they do that? let's turn over to rolls-royce. i'm reading benjamin katz's story. shares surging. investors shrugging off cutting the dividend in half. ben katz joins us now. if the energy players did this in the short-term, it would be bad, but it is a restructuring effort they are celebrating. you wonder if that is the message in the bottle for a whole load of sectors. >> good question. the ceo has made quite a pitch. he said to the company, we need cash for the next two years. roles has, unlike some of the energy sectors, roles is quite certain they will achieve quite large growth.

we are seeing increases in airplanes and aircraft sales. rolls supplies the engines. that will inevitably grow. it is just a matter of getting to the other side of this crisis. ben katz, great to have you with us. 13%,tock is up by over rolls-royce, this morning. big question, are central banks to blame for the stock selloff? david bloom told me they are getting mixed signals. i will give you some of that conversation, next. ♪

>> riksbank cutting rates at 4% gdp. bank of japan intervening with a massively undervalued currency. ratesith low unemployment , not raising rates. and we've got the fed with a weak u.s. economy raising rates. no wonder the markets don't know what they want to do. central banks are taking completely different views with similar circumstances. , headhat was david bloom of fx strategy at hsbc, speaking to us about how policy from central banks is confusing the markets. is he right? joining me, richard jones and guy johnson. really interesting conversation. talking about

divergent monetary policy. his message this morning, that is over. you think that resonates with the fx market. guy: it does. you wonder where the next that is going to me. we now move on to the fiscal channel. that is going to be interesting. we're going to get monetization of debt. that is going to be in favor of japan rather than the eurozone, easier for kuroda to manage that. jon: for the currency players, if i told you yes tear the bank of england -- told you last year, the bank of england, they are going to hike, you wouldn't have thought euro-dollar was going to be well north of 1.10. you thought the ecb was going one way and the fed was going the opposite direction. it is not. what does that mean for the forecast? richard: the key element here is that, i think all the central banks david mentioned -- rewind

back to the end of december. we have either had dovish action or expectations completely flipped. i think the big driver was the fed. we had the fed saying, markets not quite buying into that. now there nothing priced in this year. jon: janet yellen didn't throw in the towel on the nothing. she's still looking to do something. backu think she can push against the market? has she got to accept this is what the markets are doing? her testimony didn't suggest a woman that has given up. guy: look at the direction of travel. listen to her in december. it is out there. listen to it and listen to that testimony. she is still talking about the probability of rate hikes, but listen to the spread that has opened up. it really is quite significant. she is significantly more dovish

than. show, you take over on "surveillance" with tom keene. guy: that is going to be an interesting conversation. he's been saying for quite some time, qe is not the way forward. thaton board with the idea negative rates are the way forward. martin blessing is coming as well. really interesting conversation. his stock has popped today. what are negative rates doing to the banking sector? jon: a conversation we've got to have. richard jones, guy johnson, that is it from me. guy: we going to do this again? jon: that is it from me. just a message to the city of london. the city has taken a beating over the last couple years. it has been a privilege to be part of this city. guy johnson, richard jones, thank you very much. you will see me in a couple weeks in new york city. ♪

overnight, asia >>. s places a buy order for j.p. morgan shares. ure central bankers are confounded on what is next. b.y consider a negative plan to the weekend, there markets abound worldwide. "surveillance"rg and we are live from new york. friday, lincoln's birthday. i'm tom keene. with me, guy johnson in london.