francine: monday after european stocks gain. ecb president mario draghi prepare us to speak ahead of a march fed decision. stimulus search, japanese -- post is biggest gain in seven years. the pboc is the helping hand. he wants urges to the most -- the yuan surges the most in a decade. ♪ francine: welcome to the pulse. live from european headquarters,

i am francine lacqua. let's tackle the markets. we have a busy day ahead. in the u.s., bonds, stocks are closed for president's day. if you're watching from the states, happy residents day. -- happy presidents' day. on the rise. i'm tishri japan -- i want to show you japan. japanese yen falling for once. let's get to bloomberg's first word news with nejra cehic. nejra: china's yuan surged in the most -- surged the most in a decade. the central bank support the exchange rate. the currency advanced the most july 2005.ations -- hsbc has decided to keep its global headquarters in london, saying the u.k. is an important and globally connected economy.

the vote was passed unanimously on sunday. hass these it -- hsbc remained there for 20 years and it is important for both investors and shareholders. say they willders not consider a replacement until after the 2016 presidential election. scalia died from natural causes in texas on saturday. stocks and bomber could a close today. president barack obama will be at work. global news, 20 for hours a day, power our 2400 journalists around the world. francine? francine: europe's equity markets are trading higher after japan's topix posted there biggest gain. mark barton has the details.

marco rising for the third day for the industry groups for the stoxx 600. all 19 are trading higher. even oil and gas which is diverging from the price of oil which is declining today. excluding the advance. the banks industry up by 3.8%. topix, what a gain. biggest gain since 2008. this is the intraday chart. this is after the gauge sank last week, plunging by 13%, the most since 2008. heavily oversold. it is rebounding today. three industry groups rose today. we have the economy in japan contracting greater than forecast, 1.4% in the fourth quarter because of the weakness in private consumption the data confirming that japan is struggling to break free from the cycle of expansion and contraction after three years of

the armor nymex program. the yen has risen 5'6" percent against the dollar, hurting 5.6rts -- he has risen percent against the dollar, hurting exports. have a look at the yuan today, rising as much as 1.2% against the dollar, the most since the nation scrapped its peg to the dollar in july 2005. it was playing catch-up after chinaek loan a new year. exports fell 11.2%, extending their stretch of the clients to 15 months. we have the pboc governor saying china's balance of paying position is good. the exchange rate is a sickly stable against a basket of currencies.

yuan rising 1.2%. francine: mark barton there at bloomberg. speculation that policymakers will boost a stimulus effort. the third-largest economy shrank . let's go to tokyo. brad miller is our leader. -- brett miller is our leader. brett: there was weakness in consumer spending here in japan. it wasn't just about the warm winter which so reductions in clothing sales. we had a lot of weakness. people were not buying televisions. homewere not buying appliances. it was a lot more than seasonal factors. seen ins optimism to be business spending. whether that continues is a different matter. as we have seen recently, the markets have created volatility and it is starting to play into

the minds of consumers in japan. we do not know how that will play out in terms of consumer sentiment and months to come. francine: is the seesawing in the jeffries economy can -- and the japanese economy expected to continue? seen: the pattern we have -- brett: the pattern we have reason to think that is going to change. we have a lot of uncertainty. we could have an election in japan midyear. we have lawmakers talking about whether they should be considering a sales tax increase. there is uncertainty. the bank ofsure on japan about whether it needs more stimulus. credits. exchange now in january, he is added negative rates.

there is a lot of options for the week of japan as we move into the march meeting. speculation will rise about which one of those he may choose. francine: thanks so much, brett. the japanese economy's team leader talk to us. the last couple of minutes we had breaking news from hsbc. we have been speaking to the ceo and he is been saying -- this is after saying hsbc has decided to keep its headquarters in london. the ceo speaking to bloomberg saying the financial markets are at a kilter with the real economy. he is talking about the brexit. he says brexit would impact banks. he is hoping they would stay within the eu, because brexit would trigger a period of great uncertainty. docs oning growth and

the expectations. not only japan but europe. for it comes asian let's bring in enter perry -- let's bring in andrew terry. thank you so much for coming in. when you look at markets, one day, they're almost crashing, the next they are up 5%. are we going to the use to this motility? we're in a world where markets become -- that is no surprise when we have interest rates at 0% or negative, because that creates a big denominator problem. , or interest rates move when you are dividing it by smaller number, it can -- this year is a time when we have had people challenging central-bank policy. an unconventional central-bank

policy exactly working. the measures have not worked. francine: markets are rallying on the petitions on more from central banks. what you're describing is extreme he volatile and a tough environment for investors. if things go down 5% and up 5%, you do not know where you are spending. andrew: it is a tough environment for corporate as well. they have a large amount of cash on their balance sheets. you know why? fiscal policy. that leads to them porting cash, very low interest -- that leads to them porting cash, very low interest rates as well. in many ways, the actual monetary policy that the authorities are pursuing have often had the opposite impact to the one they are created. it is constrained spending. the u.s.

duration -- look at the u.s. the ratio is rising. francine: geeky cash? d put money under the mattress -- do you keep cash? do you put money under the mattress? andrew: the one thing that 2008 told us is that while the global financial system is under pressure, that did not mean every signal company was teetering on the edge. francine: a lot of companies get sold off. the market will develop an industry group. andrew: that is a short-term phenomenon. companiess healthy adjusting their share prices, that means you are buying cheaper assets. we should always be focusing on. we don't want to be buying high, we want to be buying low. wrecks usually, you voted money,

but people expect the money that people accept the company to do well. -- evil expect the company to do well. andrew: they are still following the growth really. that is been our map in our stockpicking. all of them have done very well term. short to medium companies whose outlook is less dependent on central-bank policy, the general economic health. taking control of the own destination through restructuring by consolidating industries. all of those companies that have more secular growth opportunities. there is a lot of positive change in the world. new businesses and opportunities on the rise. rapid change in technology. that is enabling a lot of business opportunity. francine: andrew, the optimist. we'll be back to talk to you

about china next. lots more coming up in today's show. but if the years after moving to london, the world's largest bank decides not to go back -- decides to not leave london. the world's second-largest economy derails buy a property bubble. the start and peak of equities -- of china's equity boom. chooses aobama nominee for the supreme court. should he go for a consensus option? all of that and much more coming up. ♪

♪ francine: welcome back to "the pulse." let's get to the bloombergs business flash with nejra cehic. nejra: playmakers -- playmakers pinning their hopes on china. boeing says chinese airlines planes in the000 next decade. that is 70% -- that is 17%. banks are taking a hatchet, the casualties -- about 70% of credit traders cut -- about 17% of credit traders cut last year.

that is according to data compiled by hedge funders. there are claims the former volkswagen leader was told about the emissions cheating. german newspaper says the vw stopper broke the news to winterkorn saying the company cannot provide an expedition. u.s. regular latest would probably investigate. some engineshat have been fitted with emissions cheating software. -- setting a fixing at a high. .he skidmore -- let us get more we will be strengthening the yuan shortly here it >> good morning -- shortly. good morning, francine.

there'll be some inkling within the industry to argue for a weaker currency. given the weak export. the are two points. first of all, it is not all about the strong yuan. part of a problem is weak demand. you look at shipment to the u.s. and japan, they all fell. not all of that can be counted by inexpensive currency. the economy is subdued to say the least here it though cheaper currency will solve that problem. cyclic, you look at the messaging -- secondly, you look at the messaging from the central banks. their point is they are not interested in the competitive valuation. it is about a wider issue of looking for and expecting more volatility in the yuan rather

than unleashing a currency war good -- currency war. analysts say you will see an outright devaluation in the yuan in the near term. thanks so much. enda curran in hong kong. another push either pboc to stay ahead of the market. isn't working? can a control capital enough? still with us is enter perry -- still with us is andrew perry. we have turmoil and the markets were down 5% overall. channels close because of the tax year. this is a new china we're seeing. what is your take away. that's what is your take away? go --t is your take away what is your take away? andrew: this is going to take many years. president doesn't

have people authority many thought he would. people standing against his reform. it won't be until next year that you will have that full authority. francine: as an investor, is the endgame, you want to know if they are competitive? andrew: the message has been quite clear. a riskier yuan was very important to the chinese. if you get ongoing weakness, it is an emergency record -- emergency ripcord. there are a lot of negatives it would bring. chinese foreign currency debt has risen at the corporate level. that is going to cause a lot of problems on the banking sector. bet. not a one-way

i think the chinese will only do it if they really have to. is note: overall, and it a question, does the pboc have a good handle on how they can's dear the economy -- how can they can steer the economy tackle -- the economy? sayew: the pboc did patients. because of the nature of the andese, they do recognize it is good to take some time for them to make this transition. i think they will make it, but we will not know for another five years. that is a problem for the market in the short. francine: andrew, thank you very much. we will talk about some of the stocks he likes the. hsbc talks about staying put in the u k.

what links the chancellor that -- what length of the chancellor go to to get them to stay in the u k? that is up next. ♪

francine: this is the pulse, live on bloomberg tv.

hsbc decided to keep its global headquarters in london. this is seen as a victory for the u.k. chancellor, george osborne. latest, caroline, great to have you on the program. how much did he have to offer hsbc? caroline: plenty of the wooing. been here for 23 years already. there was a lot of stepping back from bank bashing by george osborne, particularly after they won the may election. -- keep stuart gulliver in place. that.ay move back from he managed to cut that overall levy. that was something that helped. they paid the way -- they paved the way -- the martin we believe move.

the fact that they get rid of martin wheatley and presided over some massive fines aimed at the banks. negotiation is going to get interesting as well get a george osborne has been key to that and tried to promise a cut in red tape. try to say this is your home. the u.k. will fallback if we negotiate. francine: this is basically playing into the brexit. we spoke to the ceo, stuart gulliver a couple of minutes ago. he was talking about brexit. ? the pressure doesn't come from george osborne. he has made a lot of sacrifices. now we've got stuart gulliver. it causes great uncertainty, the concern of brexit. -- 45,000 people employed by inches we see within the united kingdom. this is why the government

worked so hard to keep them within the united kingdom. it does play into the brexit negotiations and the fact that this is what george osborne has to do. hsbc wants to see a renegotiation. but they want to see us stay within it and we could have this whole thing again if we did end up exiting. -- they say we want to stay in the u.k.. francine: there are so many questions. bankso you do to u.k. compared to eu banks overall? where looking at banks -- we're -- ing at banks impacting andrew there's been a lot of fear about the negative impacts. that is driven banks down to a

very low valuation level. we have avoided banks, which they are not in control of their own destiny one thing i can say about negative interest rates, it doesn't have an immediate negative impact that many people have been thinking. it comes further out when they are reinvesting. it is why we have largely avoided the sector, except for a selected few. francine: there's a school of thought that is negative rates. we do not understand how far banks will go in negative territory. they are a mistake to begin with? andrew: i have always been in that cap. -- in that camp. we are not -- we run -- we do not know where we are going to come out. thing is it creates uncertainty.

risk, in in terms of terms of exit, if you're a u.k. bank, with exposure to the u.k., you don't know where you are sitting. caroline: they already have the self-imposed deadline of the end of 2015 is when they are going to decide if they're gone to move the headquarters. why do it now? the testthis before before we have the overall vote on brexit? francine: they want to keep the pressure on the government to say we do overall want to remain a part of the eu. it is better for business. therefore interesting we are seeing such words coming from stuart gulliver about the fact that the eu brexit debate is a concern.

caroline: i wonder if there was a political tent. it is unclear if these businesses come out and say we are staying, whether that is counterproductive. what happens to the u.k.? how do you model this in the risk -- at the risk of a brexit? andrew: the impact on the currency. does the u.k. lose its safe haven? it is not a surprise that companies are coming up favor of staying in. think of massive disruption on the administrative decisions. it is one of those uncertainties. caroline: i read some notes and one was saying the british pound was at 70%. when we stay in or go. ,t seems at the moment the u.k. sterling is one way down. andrew: after being one way up for three years. we see the weakness in sterling occurring because people began

realizing the chance for brexit is quite real. that is what they're starting to discount is a danger of the brexit. francine: andrew, thank you so much. let us get straight to the bloomberg first word news. surged byna's yuan the most in over a decade catching up with dollar declined after the weeklong holiday. currency that the most since it scrapped the peg for dollar since 2005. it just as he has decided to keep its global headquarters in london. the decision was made unanimously at a board meeting on sunday following 10 months of debate. u.k.s been based in the 423 years and says remaining here is the best option for customers and shareholders. --. democrats have pushed

from president obama following the death of justin -- justice antonin's belly up. republicans say they will not consider a replacement until after the election. causes ond of natural saturday. it is president's day in the u.s. which means stock and bond markets are closed today. the president will be at work meeting leaders of the association of southeast asian nations. their first u.s. summit which kicks off in california. global news. europe's equity markets are trading higher today. let us go to mark barton. let's check out shares of hsbc after it committed to london. shares were up more than 1.5%. it is the best performing u.k. bank stock this year.

performing lloyd's, standard charter's, and barclays. since rising the most 2013 up by 4.19 -- up by 4.9%. it reported fourth-quarter sales growth of 7% beating estimates. it also forecast continued sales growth in 2060. the company is committed to expanding its health care division. biggest jump in its shares since october 2013. gold having to its first decline since january the 12th. we have had four weeks of gains. april 2015 since pushing the metal to the highest in a year. the metal is up 14% after three years of declines, the longest losing stretch since 2000.

rose .3%.n bullion they have expanded 8.9%. wti after the massive surge on friday, 12.3% up on friday. this is the two-day chart. laste down about .5% friday's jump was the biggest since february 2009. we are hovering narrowly below $30 a barrel. iran loaded its first cargo to europe. speculators long positions in wti climbed to the highest level since june in the week ending

february the fifth. investors choosing to overlook high whilst at and 86 year and warnings of a persistent gluts. china's yuan surged by the most in more than a decade today but our next guest says joining us from -- kong is the you were one of the first ones to actually protect the boom and bust we have had in chinese equities. what is your main scenario? just before the chinese new year we had a new property policy about lowering the down payment for cities outside the cities with the purchase restrictions. what happened is that outside the cities -- the tier one

cities, we have seen property price consistently languish and even decline in some of the cities since mid-2014. if you do a very simple calculation you will quickly figure out that the property that is under construction is tough to push the chinese -- when hundred percent. it would quickly saturate the market. property developers in china are --ll not in the popular property sector and it would put continuing pressure on chinese growth in the coming years -- francine: increasing pressures? financial crisis kind of pressure coming from real estate or are we just thinking it will put more pressure on policymakers to get it right?

for the policymakers because pressure on growth is so strong. they are between a rock and a hard place. they can either ease monetary policy to boost economic road but at the same time put pressure on the currency or they can try to maintain the strength in the chinese yen and at the same time not doing enough stimulus to maintain chinese growth. the speech of the chinese central bank governor yesterday -- it seems they have not made up their minds. francine: we also had some pretty dire economic figures in terms of exports from china. what does that tell us about the strength of the chinese economy? experts tend to be a leading indicator on chinese growth and for global growth. today's data is substantially below expectations.

in terms of export and import growth. you see import growth from hong kong reached the highest level since we have had data. thatthat means to me is there is a lot of fake importing activities going on masking capital outflow as import numbers. because of weaker itwth in import and export, is a strong indicator of weaker growth ahead. francine: are you concerned about a huge correction in china that the market is still not seeing because we believe pboc will do a good job? appreciation is related to the currency thetility we have seen in currency market during the chinese new year.

we saw the u.s. dollar weakened substantially against the basket of currency. maintaintrying to relative stability against the basket of currency. year,the beginning of the we have seen when of the worst january's in history. the decline in the chinese equity market, it's management is substantially worse than what we saw last summer during the bubble burst. in order to boost market confidence and to move away from the yen being depreciated the chinese central bank has to fix the rate substantially higher today according to the volatility in the currency market we saw during the holiday season and trying to maintain stability against the basket of currency. francine: should we be a lot

more pessimistic about what china will see or do we just need more patients? -- patience? we need to be very patient with the chinese market. with the growth slowing down, the chinese currency reform is in the middle between the rock and someard place other negativities from international markets. --t is why we are seeing even though the overseas market is having strong rebounds, especially in hong kong and japan, the chinese market closed lower with 1500 stocks closing lower as well. the trent come the secularist rent is in for the equity market in china and we need to be very patient with the equity market waiting for a better entry point

somewhere down the road. francine: you seem to be indicating that the endgame is not currency devaluation or even if it does a little bit, it is not the main political aim that the chinese are trying to achieve. >> the endgame is to maintain a certain level of growth because would translate into unemployment situations in china which could create social instability. the endgame is to maintain economic growth in china to achieve that end, we are trying to experiment with different types of policies. because we initiated the currency reform at an unfortunate time so that is the reason why in terms of policy choice we are facing some different -- difficult choices.

the endgame is to maintain economic growth. francine: thank you. saudi arabia banks are set to be the -- thebid on country has been hit hard by the oil prices which remain firmly below $30 a barrel. ryan is here with the latest. what are they being allowed to do now? ryan: they can now lend 90% of the deposits a half. for the last month and a half, that ratio has stood at 85%. for most of 2015, the ratio stood at 80%. saudi authorities are trying to do more in terms of credit with a depleting pool of deposits in the country. the other thing they are doing is legitimizing something that is already going on. we spoke with one analyst in saudi arabia that told us that

five of their 11 commercial banks were already at the end of 2015 exceeding that 85% limit. they're trying to bring the banks in line which is what is going on and help out the economy which has been starved by the oil price. francine: the world's biggest energy consumer has cut oil imports. what is the news from china? ryan: when you look at crude imports for the last month, they were down 20% month on end, 5% year on year. china is still importing 6.3 million barrels of oil, about a 15th of world production. an awful lot but we also -- we often talk about supply. this is not an encouraging sign for people that think there will be a rebound in oil price on the demand side. the latest from saudi arabia and oil. what might be at

mario draghi's next move as he goes off to appear before the european parliament today. ♪

francine: this is the pulse. let's get straight to the business flash. nejra: asia's biggest air show kicks off in singapore this week terry playmakers and airbus

penning their hopes on demands from china as orders from india and other southeast asian countries have slowed. -- ill require about that is about 17% of the global total. banks are taking a hatchet to businessestrading and the biggest casualties are the people with the most experience. 70% of credit traders cut in london last year. according to data compiled by a headhunter. claims that the former volkswagen boss was told about the emissions cheating as long ago as may 2014. the german newspaper said the vw staffer wrote to the ceo to say the company could not provide an next one nation for elevated nitrogen oxide levels and u.s. regulators would probably

investigate. they admitted last september that some engines had been fitted with software to be in missions test. european central bank president mario draghi makes a statement today after of a policy meeting on march the 10th and investors will be looking for clues for the ecb's next moves. european to our economy reporter in frankfurt. the statement is in testimony to the european parliament. think the first thing that the markets will be looking for is a statement of confidence after the week we have had last week. the view on the underlying growth prospect of the european economy is one of the first things that he will look to deliver. after that, there in mind we are at 3.5 weeks away from the next policy decision and it is a

complicated debate. i would be surprised if he is dropping strong policy had today. is stuck the ecb between a rock and a hard place with increasing pressure not to act from some orders. yes, there is the constant rumbling pressure which comes from for example the german constitutional court which is going to hear arguments this week about whether or not dom t program can be implemented in its full extent here. otherwise, what we are looking at an increasing skepticism about the main policy movements they have at the moment, the negative interest rates and the uae. negative rates increased doubts about banks stability and that is part of what contributed to the selloff last week. there are still questions about

qe effectiveness. francine: you wrote a great piece. we encourage people to look at that piece. this is a problem for central banks across -- around the world. in the past, he would come in and say whatever it takes i will do it and the markets would go up on the back of it. and now they want to see more action. jeff: exactly. at the same time, it is not clear that any old action will do. ecb wentioned, if the further into negative interest rates, you could expect the banks to suffer from that. therefore, the magic wand approach that he has taken in recent years may not simply be so available to him anymore. francine: thank you so much. quickly on the markets. we are seeing an uptick overall

for european equities. it is president day in the u.s. so bonds and stocks are closed. saying they by hsbc will keep their headquarters here in london. the topics at a seven-year high. investors are expecting more from the central bank of japan and you can see the yen is at 113.95. a rare day when we are saying -- seeing the yen falling on the back of it. in the u.s..on we find out why this is such a significant appointment. that is coming up next. ♪

francine: welcome back to the pulse. let's check in on the markets because we are seeing quite a big leg higher for the european stocks. they are heading for the best today surge since 2000 11. what is driving those gains? the banks. the stocks -- stoxx -- we are seeing a risk off kind of mood.

yen, 113.92. the japanese yen lower. let us get straight to the bloomberg first word news. nejra: china's yuan -- china's a decadeh by more than catching up to dollar declines after a weeklong holiday. after the central bank chief expressed support that the currency advance the most since the nation scrapped the peg to the dollars in 2005. it is easy has decided to keep its global headquarters in london saying the u.k. is an important economy. the decision was passed unanimously at a board meeting on sunday. it has been based in the u.k. since -- for 23 years. pushedmocrats have congress to vote on the appointment of the supreme court nominee for president obama

following the death of justice antonin scalia. republican leaders have said they will not can it or a replacement until after the presidential election. he died of natural causes on that day. it is president's day in the u.s. which meets both stock and bond markets are closed today. president obama will be at work reading leaders from the association of southeast asian nation for their first u.s. summit which kicks off in california. david cameron is entering the final week of negotiations over britain's future in the european union. the message for his count financial counterparts is simple -- brexit would hurt you also. this happens after long deliberations and after the prime minister attended meetings on friday posted by europe's most powerful politician. my wish is that the united

kingdom remains an active member of a successful european union. the british will decide for themselves. this is in germany's interest but also even if i can say it quietly for britain's and in the interest of the entire you. francine: stay with bloomberg. today is president's day in the u.s. stocks and bond markets are closed. mario draghi speaks at the european parliament's economic committee in brussels. we will bring you that live and in full. on wednesday, the fmo see meeting minutes will be released. in the meantime, we have plenty more coming up on surveillance. i will be joined by guy johnson.

-- we will be going through the markets, china and japan and we will give you a market update. they are closed in the u.s. but here in europe they are gaining 3%. we will be back in a couple of minutes. ♪ we live in a pick and choose world.

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francine: yen and gold stall. drawdy plans to speak. falls, investors expect more from the central bank. pboc, the yuan surges. "surveillance"rg with guy johnson.