manus: welcome to on the -- guy: welcome to on the move. i'm guy johnson. here's your morning brief. sleep deprived men and women are deciding the future of europe right now. negotiations continue in brussels. what will these men and women the able to achieve? what will business play in the story? we will talk to sir roger carr from bea systems -- b ae systems. the pboc is getting nervous. this is a great blue book story. and world economists are negative on the negative rates. they are a family great when you

want to control a currency -- they are apparently great when you want to control a currency. not so good -- we're a to bring that survey later on. negative on negative rates. that is what we're talking about. we have great guest lined up. here's caroline hyde bloombergs first word news. caroline: the people's bank of china has raised reserve requirements after determining the increase in loans to quickly. sources told bloomberg the move by the pboc comes data desk comes after data -- comes after -- with the p boj following -- with the boj falling the pboc with negative rates, 27% of respondents in a survey say negative rates will reach thenor kuroda

feeble inflation. the volatility is succeeding in the euro area. a $9 billion fund manager made a mistake about the outlook for markets. 99% in the last -- has most of his fund in cash. he said he had no immediate plans to buy shares. donald trump has described pope ," afteras "disgraceful -- not bridges is not christian. republican president joe -- presidential front runner once a wall along the mexican border to battle immigration. global news, 24 hours and a, powered by 2400 journalists around the world. guy? guy: we are 28 minutes to go until the european open.

how are we going to open? lenny breaky -- limited to the fair value -- let me take you to the fair value calculation. looks a little negative. london looks like it is going to open flat. after the week we have had, unsurprising that people are lightening up their positions toward the end of the week. the portfolios taking the profit off -- some of the other assets worth watching. brent is trading down. we are down about 1%. dolly yen continues to be very that's dollar yen continues to be very interesting. the risk on this golf. but it with the koreans are having to do. think they are fairly

instructive. interesting to see what the central bank is saying right now. let into that brexit story, it is dominating the agenda here. no deal yet. were metas proposals with his -- david cameron's proposals were met with resistance. let's get to brussels where ryan chilcote is standing by. ryan, sleep deprivation probably something of a story overnight. let's talk about why these folks are bothered. there are a few sticking points that remain, the british demand that benefits for eu migrants working in the u k be incurred and specifically how long it would take for eu migrants working in the u.k. to

be eligible for british benefits. remember in the draft agreement pulled outesident that it was going to be a periodear waiting e before they vested in those benefits. migrants we need to wait for seven years but actually we might want three-year extensions in addition to that. that caused eastern european countries -- that caught eastern european countries off guard. they were very negative in general. they suggested five, the talks went on. there is also an argument between the french on the one hand and the brits on the other about mitchell formalization -- about financial formalization. non-euro using banks within the

european union. the belgians and the french said i've had enough. this deal needs to spell out it would be the final agreement. what they want to do is preclude a referendum in any of the other 28 countries. british prime minister was hoping to get home by noon. that looks unlikely good the english brexit has turned into a belgian brunch. he wants to get the deal he wants as opposed to any deal. he will stay as long as he needs to get it. guy: the war of attrition seems to be on. thecan stay in brussels longest. ryan, thank you very much indeed. we are going to bring in new the live shot. there good start fairly soon. maybe a little later. later.arr will be here he is the b ae chairman -- ba chairman.b ae system

let's talk more about the story and the market implications. -- good morning. very nice to see you. i am not going to get to the politics. how much is the market priced in for the risk of this story? how much of a problem is a going to be for assets such as sterling and u.k. equities? >> it is hard to believe price in such uncertainties. such political risks. today, more action in sterling. i would argue that if you have more uncertainty, there is more to come. the way we are looking at the u.k. is you have the commodity witness story. on the other side, dollars which are hardly -- which are hard to

price in. in larger premium over the next few months. i think there is more downside to come in sterling as we head those are two the weekend in terms of negotiation. guy: the pricing looks like this and the pricing market looks at this. -- we look at the u.k. economy because the markets have overlaid the brexit. probably more aggressively than appearing on the surface. thushka: it is hard to see what is priced in. it is such a big unknown. for example the market priced in cuts are later this year are not infeasible if you go down the road of questioning the uk's position. at the states, we are cautious on feeding market pricing. test taking a very

strong view of something that could go against you very quickly. guy: their concern is you get a domino effect. if the u.k. were to leave, you start to ripple affect around europe. to any of the other curves around europe that would suggest that is a reality? thushka: i think there is less risk affect priced in. focus.ll be a big france would be a particular area you would expect weakness. on the other hand, we have the ecb playing a very strong hand, pushing yields lower. starting the way we are pricing in the european curve. i see little risk in those markets. guy: think you very much. we'll talk valuation and what is happening with central banks

later on. the stepmom roche will stay with us. friedrich uris and joins us next. ♪

guy: welcome back. a possible grexit -- a possible brexit. a challenging climate. joining us now for an exclusive joussen., friedrich good morning. incredibly troubling times with a huge amount of volatility. to survive this tests isavel industry that the only way you could have the capacity movement? friedrich: it is a good way to

did -- a good way. [indiscernible] new destinations, you weaken your flight and you get customers and to other destinations. one thing is very certain, people do not stop traveling. guy: is this the new reality guy: -- new reality? a issue inthere is north africa and turkey. inre is a rise in travel spain. -- youe long distances look to the caribbean. guy: you were 40% downward to? friedrich: that is true. at the same time, this is the for the which generate summer season. we look at the bookings and generate test in january for or sixeasons, for weeks

weeks ahead, that was on the level of years before. we leave that turkey will be a more short-term business. a little bit closer. spain is booming because people are shifting their behavior. guy: peter long said in a recent interview that the u.k. membership in the you is critical -- in the eu is critical. he said eu states is essential to protect the security of our holidaymakers. is that a good reason to stay in the u.k.? friedrich: i think there are many good reasons. , europe without the core of europe which is potentially france, britain and germany, would be odd if that fell apart. there are many good reasons for

that trading business. the boss of easyjet, she mostly penned in one of the sunday papers. how much you pay for your holiday depends on how much influence britain has in europe. would you agree? friedrich: i think in one of the areas is a question of how does a pound actually compared to the euro? if it been down, then definitely compared to the euro, the holiday would be more expensive. as getting such deals done between airports, all of these things, with the friction go up and running a business? friedrich: the risk is there. the proof is in the pudding.

my personal view on this is as a european, many industries and the tourism industry would risk to be a little bit under pressure with the brexit if it happens. i hope that they are convincing arguments that britain stays. as a european but i also know when you have feelings and emotions, arguments are difficult. guy: that is an interesting point. what about singing that's what about schengen -- what about schengen. think we have the refugee situation right now. therefore, you know, you see a lot of fences being put up. i think this is the wrong direction. trading free travel and

. my personal view as a european you will only miss it if it doesn't exist anymore. market is open that you can move freely around europe. the direction will be going that way. guy: what is jpmorgan's call on the price of crude right now? thushka: we are expecting civilization in the near term here it the issue is a supply and demand balance. in the second half of the year, we thought it be closer to a balance and h2. crude where it is now slightly lower looks more possible. thing was theg breakdown in correlation of crude to stock prices. that has been an encouraging sign. there is more to be done to understand why that is happening. that would take us to the next level.

that would make us more positive on equities. with whereu happy the oil prices are now? it is better for sentiment in the market. customers have to spend less, therefore getting gas for the car. have more available funds for holidays. despiteday industry -- turbulences. guy: a more specific question on the business itself. that price in, what does the m&a story look like? desktop is outte there, are they going opportunities out there? friedrich: potentially, but i merger.so an enormous there are times to make m&a deals. there are times to make

performance. we have promised for three years in a row the compound average growth of 10% of our -- including oils and synergies which are significant. guy: a great pleasure seeing you this morning. given us so much of your time. interesting to learn what is happening inside of your company. friedrich joussen, thanks. he's going to leave us. stay with us. jpmorgan global strategist will talk more about the markets. 10 minutes away. looks like we're going to be seeing it flattened. good she reported fourth-quarter revenue growth -- good she reported fourth-quarter revenue growth. ♪

guy: let's talk about the stoxx need to be watching. its key: pimco one of itst managers -- overall profit did miss when you dig into these numbers. it rose 60%. analysts -- rose 16%. analysts wanted more. they wanted a bigger boost in the dividend. 7.30 seven cents this is a great dividend yield but it did not live up to where analysts hope it to rise to. they are claiming natural catastrophes. this is a company that is grappling with low interest rates. have grappling with the regulations. they are grappling with those outflows from pimco. that is starting to slow. have a look at alianza on the

open. profit up some 6%. showing a loss for a fourth straight year. 12 million euro losses. their splashing the cash. they're trying to get content. they are going into the channel be in and france. splashing on acquisitions as well. -- onn eye on the vendee the vendee. carolyn group so important. gucci is about 35% of their revenue. two thirds of their profit. gucci turning around. we're seeing sales up a percent. -- sales up 8%. guy: we are four minutes away from the cash open in europe. it is the b-flat open. we have had quite a week when it comes to the story on the equity market.

to 6000 but wet backed off a little bit. 59 46 is where we are trading on the future. next, the market open. ♪

guy: you are watching "on the move" and i am guy johnson. we are moments away from the start of european trading. down to the wire, david cameron's negotiations with fellow eu leaders are spilling into a second day. credit crackdown. oncould raise requirements federal lenders. and, a double negative. why most economists don't think subzero rates will work for japan or the eurozone. what we have is a situation

where the market is looking a little quiet. out exactly what is moving and what we need to be watching. the cash open is happening right now. let's go to caroline hyde. caroline: we were up more than 5% on the stoxx 600, on track for the best week since 2011. itwe maintain these gains, will be the best week since 2011. money has spilled into the equity side of the equation. on the weekly gain side, we can see a track higher. the cac 40 is completely dead. we have been having a negative day over in asia. in, trying tong draw out some of its exuberance. we saw a record amount of new

credit injected into china over january. meanwhile, we are tracking lower when it comes to oil. we are down 5/10 of 1%. we are up when it comes to wti crude. today, the focus is more on the supply glut. we can see 504 million barrels, a record high. -- there, godld is no risk aversion today. it is down on the week as well. money is continuing to go into the yen. the dollar is down and the yen is up. we are once again getting that next correlation going on. ad, you are picking her assets and deciding where to put your money. let's have a look at the xts.

down 4/10s a of 1%. they are having to splash the cash and content. they are looking to snap up a mobile gaming company. overall, this is a company that needs to persuade the market about its rejuvenation and the restructuring of the tv unit. kering is up almost 3%. the owner of gucci, a significant amount of its profit comes from gucci. alilanz is reaping rewards. -- sales doubled where people have been expecting them. watch out for alilanz, it is europe's biggest insurer.

we can see fourth-quarter profits up 16%, but it was a m iss. the dividend is missing as well. guy: caroline, we will do the right now. thank you very much. let me show you the map. just to give you an idea of what is going on, we are looking at discretionary health care stocks. usually those are the safe haven areas. we are seeing those at the bottom end of the story. utilities are rising. it is a very flat picture at the moment. we do not see that much rotation in the market this morning from top to bottom. deleting getting sector is up the losingand sector is down 4/10 of 1%. check it out on bloomberg ap. let's talk about this now with hans nichols.

what do we need to know? what is behind this mess. hans: the cfo says it has to do with some asian life insurance. that is their line. we saw net income come in lower than expected. at $160 million less than expected. %. is down 2.5 so often we talk about their ability to their make a profit in this low interest rate environment -- with the added side of what is happening at pimco. told manus cranny the outflow is slowing down, but going in the right direction. they are in line with the industry's standards. they are coming in at 7:30, but 0.e estimate was 7:4

cranny was pushing the cfo on that question. guy: what is the deal with negative rates in this business? we live in a world with negative rates now. hans: nothing explicit have they said about that thus far. we will see if this will be blamed on what is happening with goodwill in asia. you have heard and a lot of concern on that point on the german banking regulators. every time i go to frankfurt, they are very concerned, not just about asset bubbles, by about the health of banks an insurance companies as they try to keep their. balance sheets in order. we will see whether or not alilance will be dragged into this. this could create more challenging times ahead for the

entire insurance agency. guy: thank you, hans. our ma keep the focus on rkets. beat 99%l equity fund of peers. turmoil,of the recent douglas says he has no immediate plans to buy shares. he does not say that he thinks china is going to crash. his biggest issue right now is a theseions of this k -- of key stocks. do you agree with that? >> yes, i agree with that. we also think global growth is fine and the u.s. economy is not very close to recession, but valuations are the main factor keeping us in a low risk type environment. i would say, they are valued in

credit markets. being selective within high yields is the key thing. we like european and u.s. high-yield credit markets. environment,growth credits should perform as long as the u.s. interest is low. with the ecb more focused on the credit channel, the negative side effects of cutting rates below zero are becoming more apparent. we expect them to move toward the credit channel, which would be supported. guy: the earnings season. if we are going to improve valuations, you have to get the top line moving. you have to do something with the margin story and you have to get the bottom line moving. we are not there. >> exactly, q4 was a big disappointment. we had sales growth at the worst levels since 2009.

that comes back to valuations. we need to see a turnaround in sales growth. guy: this is interesting. people are positioning themselves for a bounce to a certain extent. take the view of concern surrounding valuations, that will happen overnight. >> it feels like a much more range bound market. we don't have the fundamentals pushing. the parts of the u.s., where we are positive, a lot of that is in the price already. for us to become more positive you need to see a much more clear picture on china, much more transparency there. it is tough to see that in the near term. that is why we are keeping to a low risk range bound -- guy: is this just valuations? >> you need the macro picture.

arnings, ase you point out. guy: are there any areas of the market that are beaten up? >> i agree with that. the recent move as you mentioned, is rotation away from health care. we think the opportunity is there in the near term. the other is tech. we have seen weakness. that is very well-positioned already and that is why we see weakness. we are close to the point where there is value there that will be attractive. guy: a lot of people sit in the chair you are sitting in. definitelys have been falling. i think it is very hard to focus on the stock-bond relationship.

markets no longer reflect fundamentals. it is much more of a liquidity premium thana macro premium. we started the year expecting yields higher. we had to bring out forecast lower. nominal growth environment, it is very hard. guy: i think you are ok on that one. stay with you. we are going to be talking next about china. the central banks there are hiking reserve ratios. some have been lending out money a little bit too quickly. details from beijing, next. ♪

guy: welcome back. you are watching "on the move." let's get to bloomberg first world is with caroline hyde. caroline: david cameron's negotiations have spilled into a second day. resistance is facing over demands for more welfare curbs for non-british citizens. and objections for plans to protect the financial industry in the city of london. the boj is following the ecb into negative rates. a good amount of the economy is in the subzero club.

many say negative rates will help the governor reach his goal of boosting global inflation. only 42% say the policy is succeeding in the euro area. described popes francis as "disgraceful" after he criticized his anti-immigration stance. he told reporters that someone who thinks only about building walls is not christian. the presidential front-runner wants a wall along the mexican border to combat illegal immigration. he says it is disgraceful to question someone's faith. we have news 24 hours a day howard by 2400 journalists in 150 news bureaus around the world. guy: thank you very much the people's bank of china has determined that some banks raised the required amounts of reserves too far.

let's get to our beijing chief, nick. a great story, nick. how should we interpret what they are saying? all saw that big spike in credit at the beginning of the week. nick: there is the landing data from january that was up the charts. it showed a huge ramping up in banks. primarily, that lending was done by smaller banks. we learned today is the pboc has fired a warning shot across the bow of those smaller banks. it has been encouraging banks to lend, but to the smaller banks it is saying, you went a bit overboard. we are going to require you to hold more depositor assets in cash to rain in some of that lending after those boisterous january numbers. guy: people are trying to figure out what is going on inside the pboc right now. walk us through the priorities

of how the credit story is interacting with the economic story. nick: i mean, they have a very daunting task to be sure. on the one hand, they want to quiddity, what they don't want to stifle growth. they want to spur further growth. at the same time, the government is confronted with a this debt overhang. a huge amount of debt has built up. they are trying to control these two contradictory priorities. what you can see is a push away from big gun stimulus measures like interest rate cuts. they will lower the cost of banks lending to each other and they will send warnings like this to regional banks. make smaller moves that do less to shake people's confidence

about the direction of the economy./ guy: thank you very much, indeed. let's bring back in jpmorgan global strategist. you said earlier in the program that you are not concerned about china. it is a very difficult balancing act for the chinese authorities to manage at the moment. you wonder what is going on inside the pboc. they are having to deal with some very difficult debt issues. credit stories are having to be finally balanced. it is a difficult task. >> we are concerned about china, especially in terms of their communication. the one focal point we are looking at now. obviously, the currency is fonccus.sly in we are focusing on the march budget. there has been a prioritization of recognizing loan losses. the budget will give us the best signal of how the government is

going to deal with the sort of the low performing assets. i think that is where the market is focused. yes, we're going to take on more of the nonperforming loans. that would be a good sign in terms of reforms. guy: what is your read on that? >> we think this year we will see more reforms from the government. essentially, after their december statement where they prioritized the capacity within the commodity markets, the capacity within certain parts of the banking sector,. that was a big shift some of thato see action and we think we will see some of that in the march budget, but it is not a trigger to get long risk assets. we need to see the actual fruition of the policy. guy: you talk about being near the peak dollar stories. how much easier is it going to be for countries like china as we work our way through this

dollar rollover, test some people are calling it -- as .ome people are calling it >> it is depending on what is driving the dollar weaker. risk of inflation is at risk for the global economy. other economies that are doing better like the euro area can see that rate differential moving. guy: we need the right kind of dollar rollover. reporter: we need the right kind. reporter: which one do you think it is going to be? reporter: it is very hard to call. actions from the ecb will support european assets. camp where it will

be a positive story, but there are many steps before we get there. guy: how much a pricing in right now? >> we have between two and three. that is much more than the market is pricing. was very clear that financial conditions is doing the work for them. when that happens, do you think the markets are already there -- you think the ripple effect is already understood? >> i don't think so. if the fed gets their balancing act right and they are conscious willobal conditions, that be positive for risk assets. it is a very fine balancing act. that is the dilemma that yellen faces. up to now, she has done a regional job keeping that balance. guy: the job gets harder from here it looks like.

>> the does get a lot harder and her speech is going forward will be -- she has to strike that balance. the ecb has the same problem. in their minutes yesterday they said, we can't sound gloomy about the economy. central things globally have a tough task ahead of them. guy: the market surprising there ir ability. thank you for your time howext, we take a look at crude prices are being affected. ♪

guy: welcome back. you are watching "on the move." let me show you what is happening with european equities. the stock since hundred is down by 4/10 of 1%. 600 is down by 4/10 of 1%. index is down by 1/2 a 1%. the ftse 100 is clinging to the flack line right now. 4/10 ofx 600 is down by

1%. we can now look at what is affecting crude prices and how badly. caroline hyde has the chart of the day. caroline: the chart shows you have a billion barrels are stuck. this is the highest we have same since 86 years ago. seene highest we have since 86 years ago, since the great depression. we are now at 504 million barrels of oil stuck in the u.s. meanwhile, we can see the opposite reaction in terms of the oil price. we are now at $31 a barrel overall. yes, we have the worries about the u.s.. we're going to add more pressure. showinggadfly piece that the stockpile of gasoline is at the highest since 1980.

along thefeedback system. caroline: the iaea and the eaea are both predicting when we will see an uptake in the summer. goldman sachs is predicting double that. the oecd is downgrading u.s. growth. will we see that many people take to their cars over the summer? there is a concern that gasoline will remain in very high stockpiles. they could say, we don't want your oil. for, they could say, we want some for a discount. whatever happens, this will put more pressure on oil prices. guy: and volatility. you end up with a lot of volatility surrounding the stockpiles.

we will talk about that up next. up next, we are going to talk about the boj negative rates. ♪

guy: will come back to "on the move." let's see how things are shaping up. here is the picture of the markets. stoxx watching the 600 down by 1/2 of 1%. the ftse 100 is clinging to the level right now. here is caroline hyde. caroline: going to the worst performer to kick things off. you may know its name a little too well because it is on the card reader of many payments.

, the worst13% day for this stock since 2002. they claim their results were outstanding for 2016. they said they met their targets. bank of america and jpmorgan seem to be not so hopeful about these numbers. 10% say the light growth of is costing currency. that measure of profitability -- they say that will be 21%. analysts at j.p. morgan wanted at least 23%. meanwhile, ubsoft is up 7.5%. they make video games.

they are well-known for building market shares in certain companies. they have been doing it for the company they are currently working with, gameloft. they have been trying to fend this off. they are going to have 16% sales growth, they said. they said they will have doubled their margin over the next three years. the investor base either likes what they are saying, or they like the fact that they are having to fight off th bivendi. owner of gucci is reaping the rewards. sales pick up double the pace,, analysts were expecting. back to you. hyde.hank you, caroline

bloomberg survey 63 economists. we will have to watch the experience over a longer period of time. money,inct is, easier even if it means a move towards negative rates, tends to be stimulative. guy: larry summers. in's speak to jeff frankfurt. some economists thought negative rates were better for some central banks than others. explain why it worked for some and not for the bigger ones. surveyoutcome of our was, if you are a small central-bank managing a small

currency, negative rates can be a good tool for you. for example, for denmark and for switzerland, the survey gave the danish central bank a 90% approval rating for their negative rate policy. if you are a big central-bank trying to manage reserve currency, you may end up just starting a currency war with your trading partners. guy: what does this mean? if we extend this, can we extrapolate this into a settlement of which central banks are going to go further than others? the outcome of the survey was that the economists assumed that the bank of japan cb are going to have to pursue negative rate policies well into 2018. ont has a knock on effect smaller central banks that surround them. there could be a good bit of skepticism right now as to

whether or not these policies do what they are intended to do. we will be stuck with them for a while yet. guy: can we extrapolate from what we are talking to these guys about? we were having a conversation on the program about the kind of symmetry of whether or not you can actually look at rates going up or down, including negative territory. economistsome of the smburveyed was that the would be the central bank that goes furthest. -0.75.e already at to -.5.is going many other economists can see a deeper floor, but are not there yet. greatreat stuff, great

survey. let's talk hungary. its central bank is also breaking news, but for different reasons. they are now beefing up their security force, citing the migrant crisis. 200,000 rounds of life in munition and 412 handguns for the security company. it is interesting to see what one central-bank is deciding to do. extending its ability to own assets across the entire range. up next, the chairman of bae comes to talk to us about all things defense. that is next. ♪

guy: let's get you your bloomberg business flash. the market is just fractionally higher. caroline: apple is getting more time to argue against a court order that would force it to break into the iphone of one of the san bernardino shooters. pushing to protect customer privacy against the u.s. government's efforts. apple will fight the court order. the lender boosted profits past

the federal reserve's annual stress test. fourth-quarter profit rose 16%, falling short of estimates. shares trade lower this morning. europe watch biggest insurer cited claims of a natural disaster. some have written down -- it is a little bit with our net income. however, we are increasing our dividends. citadel has cut 15 investment professionals from one of its stock trading units. that is your bloomberg business flash. guy: thank you, caroline. no deal yet regarding britain's membership in the eu.

what does business think about the deal and britain's place in the european union? you told us earlier this year, yuou said businesses need to be more vocal on the topic. good morning. give us very quickly, your sense of where we are and where we are going. >> i think we are a classic work in progress. everybody is fighting at the last moment to get the best deal possible. that always means 4:00 in the morning. i think a healthy break and a renegotiation, a restart, post-breakfast and hopefully, we can get it done today. it is a good deal to be done, rather than a quick deal to be done. guy: so david cameron is right to stick around for the weekend? >> he is absolutely right. guy: this is a very emotive set

of issues we are talking about here. britain is starting to get its say on these emotive issues. the core of this for many people's democracy and migration, things that appeal more to the heart than the head. does that make it more difficult for business? >> i think it is important for business to make its case on grounds that it understands. issues.e are emotional one completely understands that, but the business argument is that we sit next to our largest market. it is important we remain very engaged. we are potentially an agent of change by staying in europe and we could make europe more competitive, which is critical for business. beyond that, it secures our position in the world more effectively and it secures our

position as a country in the context of world security strongly. guy: those all sound like very admirable things, but it is very easy to say we want to stop migration and we want to stop brussels interfering in our day to day operations. very easytwo arguments to make that appeal to a lot of people who are very ticked off about what is happening here on those two fronts. do we need to make the arguments more emotional? the boss of easyjet said the holidays will be more expensive. >> there are things people can connect with easily and i think that was a good example, but for business, it has to make the logical argument, the business argument. that is where does most credible. the emotional piece that goes with that, if we want to participate in a country which is part of a growing economic story, if we want to have people who influence that and therefore, provide a better life and a better future for

ourselves and our children, staying in europe, and improved europe, is from a business point of view, the place to be. guy: one of the other arguments that i am hearing is this idea that the u.k. needs to stay in and europe needs the u.k. because of the defense argument. the defense argument is one that needs to be pushed forward and develop further. we have nato, but still need to be part of the eu. what are your thoughts on that? >> being part of europe is much more than an economic story. we have strong defense relationships with europe. can commitether, we to schemes and developments and very important practical things that make the defense argument a better argument. we also have to recognize that our security is much more than political security. the world of cyber security is one thing we are all under threat for.

guy: does the general public find that easier to understand? a black jet flying across our skeis from russia, that is something we all understand. >> a together group is a stronger group to be in, in an increasingly dangerous world. we also have to respect that if we were to leave europe, there is a possibility that the scottish discussion may reemerge. and of scotland were two separate from the rest of the united kingdom, that would put our submarine position at risk by the possible rejection of scottishs from waters and that would reduce our position in the world, nato, and the security council. this is not something we can ignore. there is a potential domino

effect that would weaken our position in europe and the world and our strength as a peacekeeper as a result of that. guy: what message will you sent to the politicians, who are at this point in time apparently, undecided on which way they are going to lean? to you worry that they are playing politics with such a big issue? clearly, this is a big political issue. it seems very difficult to understand where some of the key players stand. >> politics are part of this but at the heart of this, it is where is the united kingdom going to be in the next decade and beyond? is, if we get a stronger position, we can have a stronger economy, have better security, and create a platform for our generation and the next generation for growth in the

world market. i think that is the place we should be. it is an important decision we all need to make and it needs to be an improved europe, which i think britain can contribute to in a very powerful way. guy: you think the voice is stronger from british business or european business? britain has a current account deficit. we need foreign money to flow into this economy. do you think the foreign business seems to be voicing more loudly than british business? >> i think we have heard those stories. it is very clear that people do regard britain as part of europe, as a very important bridge and that attraction therefore, for inward investment. en, is anhat bridge op encouragement for others to invest in us. we heard the story and i think we can hear from europeans generally, there is a real desire for britain to be part of

this community. there is a recognition that we can be a force for good. we are a constructive advocate for change. we can help everybody be more competitive in a more competitive world. and on your think, h heart, do you think anything really changes? it is so finally balanced that it is hard to make a case either way. >> i have said clearly, i don't think exit is a catastrophe -- i don't think brexit is a catastrophe. i don't think remaining in europe is a permanent passport to prosperity. but only at the margin. i am trying to communicate this to people. -- thatt on the side of

argument, when you have all of the emotional issues on the side, make the difficult. >> it is more than finally balanced, but it is a balanced judgment and the starting point is to get the right terms on which we stay and the right attitude on which we can stay and make europe better place where everybody. waking up cameron is this morning, i suspect feeling a little bit bleary eyed. thank you so much, roger. reserve the hike of ratios. that is next here. ♪

guy: let's talk about the market. the market is just hanging up. we are up by 3/10 a 1%. the stoxx 600 was negative a few minutes ago. the ftse 100 is beginning to pick up a little bit. let's look at the other asset classes as well. brent crude is also firming. the dollar-yen is down, but the yen is up. check out the bloomberg negative interest rate survey.

toin korea are having verbally intervene -- authorities in korea are having to verbally intervene. in brussels are trying to make decisions about where the u.k. relationship with europe goes next. this afternoon, we get a reading of inflation out of the u.s. at 3:00 p.m. what is the story surrounding these negotiations in brussels. david cameron is prepared to stay all weekend. the war of attrition is very much on at the moment. how should the market price it and what is the story looking like? david cameron has had a late night. let's talk to fx strategist richard jones. much --eries ness, how

in all seriousness, how much is the market paying attention to this thing? richard: up until now, there has been very little bexit premium primed into u.k. stocks, u.k. bonds, and even into the pound. but have seen elln elevated volatility in the currency. guy: there is no way we are going to get rate cuts. there is no way. you will see maybe, some of that cut in brexit. richard: there was just a massive repricing in the u.s., i would argue very little. those differentials are what has driven the pound. you look at the ftse 100 and it is actually outperforming. it does not look like there is or themium for yields

pound. guy: we have a cabinet meeting today. dealrd: you get an actual for cameron to go out and sell. it is not something that is in the future. it is something that israel now. guy: you think boris johnson has the potential to move markets? richard: absolutely. that is one of the wildcards in this whole thing. how is the cabinet going to react? if cameron gets a deal and comes home and says, we are ready to campaign. is the rest of the cabinet happy? if they are not, those divisions will make for an interesting campaign. guy: what do the notes say? thingd: i would say, the to me that is the one thing you can be relatively sure of is th at no matter how the campaign

unwinds, that volatility will remain high, certainly in the currency space. you can also be sure that yields will remain capped because of the uncertainty. the bank of england one be doing anything in the near term. the one thing you can bank on is volatility will remain elevated. overdone?is when you look at market pricing, is that overdone? i am wondering where the market is mispriced right now. it comes down to the big repricing in the u.s. that fed into the u.k. markets. in the past, markets have been ahead of central bankers and economists in predicting where rates are going to go. guy: you are looking at live pictures coming out of brussels.

they are all feeling a little bit tired, i would think. they have another session of negotiations in front of them. the press is waiting for every single utterance. "the pulse" is up next. ♪

equities close flat. credit crackdown. the people's bank of china hikes reserve requirements for banks as it seeks to stem a lending surge. u.k. prime minister david cameron's negotiations with fellow eu leaders builds into a second day. welcome to "the pulse." l