francine: going down. economists predict and it -- a pound.would draw the thee standoff, iran calls saudi arabia deal ridiculous. a landslide victory for donald trump. the billionaire takes nevada as nominations really insight. we are a week away from super tuesday. ♪ francine: welcome to the pulse.

i am francine lacqua. let's get straight to the markets. that is where revenues coming from. for the first time in a long time, we're going to start with currencies. 14.pound below sayingchanges investors whatever happens, the pound will go lower. the stoxx 600 down 1%. i want to show you euro-dollar as well. the ecb will have to consider going into more negative territory. we'll get you oil and the right price very shortly. i think that may be copper. let's get onto copper because this is where we see some of the biggest falls overall. get to the bloomberg first reviews with nejra cehic. nara? declinesl has extended

after iran says -- was ridiculous. iran's oil prime minister says it is unrealistic demands on his country. should-cost producers bear the burden of the surplus and has reaffirmed the kingdom's commitment. donald trump has won the nevada caucuses. the nomination -- the when makes him the victor in three of the four steps that have voted on the desk for states that have voted on the republican side. 45%.night we had tomorrow you will be hearing you know if they could just take the other candidates and add them up. if you could add them up, because the other candidates amount to 55%. that whenforgetting

people drop out, we are going to get a lot of votes. nejra: -- policymakers should be prepared to consider raising interest rates in march. speaking to bloomberg radio, she said her outlook for solid growth remains intact. >> we again are moving from extraordinary accommodations in this economy to something more it will do that in a gradual fashion. for me, when i look at how the economy is performing and i look at the consumer, that labor market. where it 4.9% unemployment. ofking in the direction meeting the physical, it should be on the table for consideration. nejra: global news, 24 hours a day, powered by our 2400

journalists. francine? francine: think you so much. it is back in 2009 for the pound. brexit uncertainty takes its toll. let's get to mark barton. marco uncertainty -- mark: uncertainty -- just three of its peers falling against sterling today. most are rising for a third consecutive day. this is the chart of the day. sterling has sunk to a 2009 low against the dollar. it has fallen between -- it has fallen below 140 for the first time since 2009. yesterday, the 2.7% drop in the pound against the dollar on monday and tuesday was the biggest since february 2007. 29 out of 34 economists see the pound sinking to 1.35 or below within a week of a vote to leave

the eu, if the british do vote for that eventuality. since we have not seen 1985. sterling will not recover from that rate within three months it seven see the pound falling below 1.20 immediately after a brexit vote. todayer than where it is here to goldman sachs saying it should fallen as low as 1.15. that is roughly 20% lower from where we are today. we have seen it before in history. back in 1981 when the economy was mired in a recession, sterling fell by 25% in 1992. intain crashed out of the er september. in the falling -- in the following five months, the pound fell. and a height of the financial

crisis, sterling fell around with the 5% in six months. it is not unusual for the pound to follow by 25% in the space of six months. this is the pound correlation weighted in their. this measures the pound against nine of its majors -- major peers. uncertainty over the referendum continuing to weigh on the pound. francine: certainly. let's talk more about the pound and the uk's exit debate. here is where economists surveyed think the pound will fog the week after the referendum did -- referendum. let's try and get some expertise. uson derrick, also with market gilbert. thank you for joining us. -- heund, every morning

backs brexit. thesee the decline of pound, should it cause concern? >> it is a little early to say that. there are warning signs. there are several things i would look at right now. is something against the dollar are at the highest level in favor of sterling since 2010 general election. that is something we have to keep a close eye on. one-monthe range historical volatility. it can go higher than this. let's say the 9%, the space of six months. that again we have seen that reasonable number of times. we have seen plenty of moves like that. panicking.e

francine: let me cut you off. we did a's survey of economists -- of economies based on pounds. where do you see it if we exit the eu? if we do not? then: to my mind, if we see kind of price action that is reflected in what we are already seeing. in other words, the market is concerned about the uncertainty of the next. 20% moveink we see a over a six-month. od.over a six-month perid francine: that is worrying. i am never usually the estimates. simon: is it? we are in a world where the fed is hiking rates.

the expectation is we are expecting to see the fed hike rates even without a brexit. i we saying yes, maybe another $.10 on top of that? us to levelsking that we have not seen since the mid-1980's? essentially true. that the first time we have seen weakness with sterling. i think you've got to look at this, that it is not just one part. francine: mark, i think that is fair, the problem when you speak to people in the markets is the brexit referendum will be emotional. it is extremely difficult to predict. mark: our charts show mostly all of the big drops. clear and present danger crises. this should not be seeming like a crisis yet. francine: not yet good let's take a step back.

do we understand what place london would have in the world if this country decides to leave the eu? simon: you cannot say with the deal would be like afterwards. we will still be in the eu for two years. for now, i think this is more worrying because i think it is more about liquidity. look at long-term charts, it has been declining. i think this is normal -- this is more worrying because it tells you people are not committed to the fx market and the way these to be. mark: i think you have to change the market -- you're going to get -- you only have to go back 40 much ago. ago. back 14 months sterling was down 7% not 25%.

the idea is not just about a measure of people's concerns here at it is a measure of what the market is like. francine: guys, think you so much. we're just getting started. simon derrick, chief strategist, bank of new york. both stay with us. coming up on the pulse, plenty more. crude standoff. russia's iran calls plan to freeze production ridiculous. torture -- and deutsche plan a merger. we break down the hurdles to the effort -- to the frankfurt megadeal and why both sides can claim victory in the war on cash here it -- on cash. ♪

francine: we were just talking about mark and simon. let's get to new york's bureau chief, jason kelly. he is the author of the new tycoons. the returnare at conference in berlin. you are joined by -- for an exclusive interview. jason: hi, francine. this is a big a few days every

year for the private equity industry when both the big investors, the sovereign wealth fund, the private equity investors themselves get together to talk about what is going on. dorte.re with what are the big priorities for private equities and the investors here in 2016? is how to main theme grow european capital markets. all of the policymakers in europe have understood that bank lending is not sufficient to offer to european companies who want to grow. the european capital markets are much smaller than the ones in the u.s.. --the u.s. they are developing a plan to grow these european capital markets here it just markets.

-- markets. it is an opportunity to revisit and see how can we remote across capital, removing barriers. this is the main topic in brussels. a great opportunity to also improve the conditions for our members, but also those who want to invest in the upper class. they need to generate. tests jason: what are the issues that will open up that flow. dorte: it will be to revisit this remaining regulation because in the heat of the moment, some regulation might have led to unintended consequences that no one did foresee. revisiting the regulation for insurance companies.

it is a big piece of regulation in europe. to revisit that and see how can we encourage long-term investors like insurance companies to invest in long-term asset classes, like private s&p and infrastructure. , wen: everyone in europe have been talking about the possibility of a brexit. i would imagine that is on the mind of your members and the folks you represent. what is your take on it? dorte: our members come from all over europe. if we speak about europe, we always include the u.k. organization, we welcome if they decide to stay a member of the european union. unionnk a united european would be much stronger. it would -- it makes business

sense. it is something that -- we don't have a voice. there is nothing to say on that, but absolutely, we would welcome it. jason: what is the mood among the private equity and adventure capital firms? are they optimistic? are they cautious? you mentionedood venture capital, in europe, their liking way behind. objective ofer european commissions to foster and mold venture capital. here at this conference, they are much more optimistic these days. investors, institution investors, they do show a bigger interest in investing in european venture capital. everybody knows there is liquidity in the market. if you look at the wider macro

environment, -- not only in europe, but in asia, what is going to happen in china, how the u.s. elections results impacting the macro picture. i think everybody is being more careful than people were in the past. so, things are going well. it comes down to institution investors need to generate return. this low yield environment, they need to invest in these high-yield infrastructures. the equity is showing it is a very valid business. jason: think you so much--thank high-yieldyou so much. good luck for the rest of the conference. it is great to be with you. francine, we will have more coming up here from the super term conference, including an .nterview with guy hansen

we'll hear what he has to say about the private equity industry and also about the brexit or he has some pretty strong views. back to you. francine: jason, thank you so much. guy has been looking forward to that exclusive. it is a great summit. we are tying to figure out -- trying to figure out -- making .oney back more difficult speaking of difficult, this is the price of oil. if you look at wti, it has fallen below $31 for the first time today. this is at the iraqi oil minister says the deal that we saw last tuesday, about 10 days and between russia, qatar russia. and saudi, he said that was "ridiculous."

let's talk about the challenges of regulation. with us, simon derrick. mark gilbert also here. we have to start with oil. the correlation, and we would talk more about oil. the correlation is crazy. is this a function of the markets? there is a growing political element. so -- francine: between the u.s.? simon: -- simon: i have been being used by the fact the transmission mechanism. this is quite astonishing of the course of the last year for an exchange markets fairly ignored them.

that i find concerning. francine: there is a very strong correlation. the fx market is ignoring it. equities need to selloff or on depending on the price of oil. marco one is the collapse of opec. -- mark: one is the collapse of opec. , why?her part of this they need the money. so that tells you something about the economic backdrop. .t is not just oil it tells you about the macro picture. even at $30, keep pumping, because we need the cash. francine: what do we know about the macro picture. i want to show you what is priced in and what we are expecting of the european central banks.

we are talking about possible hikes from the fed. is it possible that janet yellen can do anything this year? simon: at best, i think they could do one rate hike. forcess inflationary will intensify. what will help is a race to the bottom on monetary policy. look the bank of japan. -- look at their bank of japan. fact that thethe boj is behind. world whereshing you had to have negative rates and endlessly qe to keep us in the state of relative normality. francine: ok, this is what we're expecting. i wonder whether japan is more of a case that yen is a haven.

mark: for me, the fact that bank stocks have been collapsing since the bank of japan failed to move i can november. -- back in november. positively -- you had the interview with us to kuroda. bank stocks had briefed areening of the yen. when they going to move up that 10 basis point curve? -- the one bank stocks boj is behind the curve. the issue is who gets to that who has the weakest currency -- who has the weakest currency? francine: does the ecb need to go negative? or is it too dangerous? if you are marriott draghi

looking at stirling, banks have lost their mind. all of this effort of the last two years to weaken the euro, that has to be a motivating factor. francine: if you look at japan, this is terrible. much that has to do with yen. the global ramifications of it not, are they as big as a possible brexit? -- i think it means mark is absolutely right. you focus on the ecb itself. look at the impact when they only went 10 basis point in december. the aim is to weaken the euro or

at least keep it stable where it is. you can't disappoint the market. has a tendency to increase its expectations. if people a start thinking about -45 and 50 basis points. it disappoints, then the negative reaction of europe. he saw the policy reaction and it was huge. he is forced to do 20%, that is -- if they are not going to see the stock market blunder under increasing pressure, they have to at least mark with ecb does. it becomes this race. mark: the fed in that backdrop can do one more this year, not a chance. simon: if that happens, and we did those rates, both of them go for it, it is because the market is expecting that. francine: all right. ok.

i have 10 seconds. mark: could. francine: that is a teaser. we'll have more on simon derrick and mark gilbert. we are back in just a few minutes. more on iran. ♪

. . francine: welcome back to "the pulse." at the european headquarters in ondon, i'm francine naqua. >> iran says threatening to freeze is ridiculous. the plan to cap outputs puts unrealistic demands on his country. his counterpart says high cost producers should bear the burden of the surplus and reaffirmed the commitment to last week's accord. donald trump has won the nevada

caucuses, adding a third straight victory in his drive for the republican presidential nomination. the win makes trump a victor in 3-4 states voting on the republican side and the first caucus since jeb bush suspended his campaign for the nomination. donald: so tonight we had 45%, 46% and tomorrow you'll be hearing, you know, if you could just take the other candidates and just add them up, and if you could add them up, because you know, the other candidates amount to 55%. so if they could just -- they keep forgetting when people drop out, we're going to get a lot of votes. they keep forgetting. hey don't say. >> policymakers should raise interest rates in march. the outlook for solid growth remains intact. >> we again are moving from

extraordinary accommodation in this economy to something more neutral. nd the f-1-c said they'll do that in a very gradual fashion. for me when i look at how the economy is performing and i'm looking at the consumer and the labor market, we're at 4.9% unemployment and inflation looks to be stable and moving in the direction of meeting the fed's goal, it absolutely should be on the table for consideration. >> global news 24 hours a day powered by our 2,400 journalists in more than 150 news bureaus around the world. francine? francine: european stocks dropping with oil and let's head for a check to mark. mark: check out the wbi screen and the indices. these are the european bosses. this is the column you should be interested in. declines of 1.6% minimum for europe's main gauges today. look at the stocks and oil.

the airbus shares are down by 1.8% today. profit rose less than estimated 1.6% last year. ramped up deliveries of the a-350. figures were held back by the higher development spending in the fourth quarter and a level contribution. poso shares are up by 3.6% today. it will set new profit goals it announced today after cost cutting and demands in europe helped beat demands two years ago following the bailout and listed the profit plan april 5 and will start paying a dividend in line with this year's earnings and will be peugeot's first dividend since 2011 and this is a sign the company believes it can sustain this turnaround amid the slowdown in china, the world's biggest auto market and the

peugeots' dal, denies their sales rely on the same engine type. dollars gold, 1,228 an ounce. this is a five-year chart. the price of gold may rally to 1,400 should risk intensify and drawn in purple dotted line to signify where $1,400. the last time we reached that was june of 2013. this is according to the top ranked precious metals forecast who dubbed bullion a superhero when he raised outlook. his name is barnabus scan, the overseas china banking economist. watch out for gold, it's the best performing commodity in 2016. francine? fran even sirkse mark barton for bloomberg. we need to go to janet yellen and market volatility and talk about gold.

your comment on gold, where is it headed? mark: the key chance is the gold chart this morning and it says one simple thing and it plays out exactly what we've been discussing, a loss of faith in fear currency, as simple as that. if you look there's only been three great trend in the last 40 years in gold. you have the rally and then you have the decline thanks to mr. volinger and the successes from 80 to 2002 and introduce the q.e. and gold goes up. we have an attempt to tighten rates in the u.s. and explains the move to the end of last year. it is clearly a direct reaction to what central banks are doing and specifically a direct are ion to the ecb and eoj doing. there's a fantastic story on

bloomberg in japan of people hiding bank notes under mattresses and the fact that 10,000 yen now accounts for 92% of paper currency there. this lack of trust, this idea that -- the front cover of "the economist" have central banks run out of ammunition. the idea central banks will rescue the economy has been proven wrong so far and people are losing faith. in the financial system. francine: there's nothing to be optimistic about, then? what's the end game? simon: they're still fighting the fight and not that they've concede. francine: and we talk about helicopter money more and more. simon: in the same way the concepts of negative interest rates was normalized. nobody thinks it's a particular unusual concept. five years ago we would have been aghast. now the idea of outright unsterilized precipitationing of money is becoming the norm.

astonishing. but we're still a way off from that. the bank gold chart tells us there's a genuine loss of faith starting to build towards fair currencies. it's early days but if that continues -- francine: is there a level, simon, meaning a total meltdown? simon: no, it's not about the levels but the pace of the move. and you see the move that sends an early warning signal about that shift. mark: shares up as well. i'm not a big believer in the bit kind story but all those pressure points, all simultaneously. francine: the pressure points build to what, a recession, a kind of new normal but where central banks put so much money and then we're in a recession when we have to reverse or is there a shock or something that needs to happen so we know go in a more normal path? mark: to come back on what simon said, there's a growing

body of literature asking the question, maybe negative rates are the problem, not the solution. because the more you drive rates negative, the more you're telling businesses and consumers, we don't think things are getting better. and so why would i spend during that if my central bank is telling me the world is a scary place and getting scarier. francine: if the mistake is done you can't reverse it once you've implanted that bad match. simon: there's a problem. the reason the outcome that anybody easily can pave it is because the investment, gold, just piece of stuff that basically you can't do anything with. mark: the pet rock. simon: people are buying because they'd rather own that than cash. francine: where is the solution, does it have to come from pobc in china? is that the only thing that will give c.e.o.'s enough confidence? mark: if the china economy

turns around that's good and if the figures are robust and the kiwi in europe turn around and france and italy and spain are serious about getting their economies into better shape and if you finally see governments doing some fiscal relaxation and spending on infrastructure and helping their central banks achieve the goal of better growth, that could all come good this year, it could. so it's not all doom and gloom. there is scope. francine: simon, the likelihood of that? simon: it goes against the trend the last 30 odd years it suddenly comes good. i just think at the very least, the most conservative thing we can say is we've had a bubble inflation over the course the last 15 years but money coming out of the u.s. is deflation and the more cynical view and depressing view is it's been building quietly since the late 1980's and a series of policies

which technically always look good from the central banks, are left in a situation whereby we've got truly through the looking glass monetary policy and i don't know what to do next. mark: i'm so glad i'm not a central banker. simon: absolutely. francine: we just get to write about them. simon, the chief currency advisor and mark gilbert from bloomberg. we heard from two of the biggest oil producers with iran to pause output ridiculous and saudi's oil minister telling u.s. producers to lower cost or leave the business. the latest producer to weigh in is iran. joining us with details is ryan. where does iraq and iran stand? ryan: interesting mark saying he doesn't want to be a central banker, what about being an oil minister? it's the question all of them are being forced to ask. we ought caught up with the iraqi oil minister. interesting eants, he sort of

indicated perhaps they'd participate in a freeze in production if everybody else does but sure didn't sound like he's intending to do it any time soon. have a listen. >> this year, maybe by march 4, trend? others with the >> we maintain our plans. we have our plans. we are not doing something surplus. our plans have been decided through 2015 and january 2016. we're maintaining our plans. ryan: they're not doing anything surplus when they're exporting four million barrels a day. probably an arguable point i'm sure other ministers would take up with him. there you have it, would participate in a production freeze if, if, if. it seems to be the way all the oil ministers are approaching the question.

francine: thanks so much, ryan. this is where we ask our guests, they come on and have to choose what they want to be, a moderate politician, oil minister or central banker? next, could there be a break of london stock exchange?

francine: the london stock exchange is considering a merger and would create a

superexchange. for more on the marriage, we're joined now by our correspondent to talk about it. >> scale is important and we've seen regulations making the collateral more expensive and this combined company would have equities, derivatives and clearing and we're talking about a combined company if the deal goes ahead, a combined business worth $28 billion and would be europe's biggest exchange and a stronger rival to c.n.e. group which is the world's biggest derivative market. this proposed deal follows a trend in the exchange industry and we've seen intercontinental exchange and c.m.e. growing through acquisitions. shareholders certainly reacted positively to the prospect of a deal and saw l.s.e., london's stock exchange, the stock jump the most since 2008, deutsche boerse rose as well and

deutsche berse heading lower last time i checked. there's no guarantee this will go ahead because regulators will scrutinize this deal like they've done with a lot of other major exchange deals to weigh whether it's actually going to limit competition so there could be stumbling blocks ahead. francine: the timing of course is very significant. >> the c.e.o.'s of these companies are keen dealmakers but you're right, the timing is interesting and it was announced three days after of course david cameron secured that deal in brussels and the l.s.e. c.e.o. argued there's only a handful of firms around the globe when he said the u.k. must's insure one of the companies is among them. they do see this as l.s.e.'s

way of hedging risk in the way of brexit because it has a significant amount of business in europe. francine: thank you so much on the very latest on the possible m & a deal. let's talk cash. mark gilbert is with us. he's written about how e.c.b. president has considered outlawing the euro note and plays into a bigger debate in he world of sluggish growth. guys, thanks for sticking around. we had a spirited conversation so far and expect this one to be even more spirited. mark, when you look at cash, 500 euro notes, mario dragic, what's his argument of trying to withdraw them? simon: he's made it very eloquent. and standard charter made it first and the bank of england mentioned it. their claim is high denomination notes help criminals because can you move paper cash outside the banking system and no one can track it.

the libertarians say this is an effort to take cash away from everyone so that you can track every transaction that every citizen makes in a un-democratic way that infringes upon people's liberties and if you google war on cash on the internet, thousands of entries, mostly from people saying this is an outrage that they would consider taking cash away. the central banks are saying -- francine: they have surveys and i remember a teenager and someone joked around you had a 50 bill because you're a drug dealer. mark: in this currency of negative rates stacking cash under mattresses makes sense. it's not just drug dealers, the right to hold a store of value in higher denomination seems a liberty that shouldn't be taken away easily. francine: if you have cash what currency would you have it in? simon: gold. francine: a comfortable mattress. simon: the argument being used

is cutting down on crime. but the reality is there will be great stories of people actually wanting to keep the money in cash. one of the really fascinating bits to me of the debate over of course the last six months is how the comment was made late last year how industry was in the idea of digital currency and he made it clear the reason why was because it meant central banks would be able to boast monetary policy more efficiently and is another way of saying they wouldn't be able to take cash out of the system if they go deep in negative territory and that's what it's about. but here's the thing that gets me. if you're in the london economy right now, we're already digital. we all use our card and you cannot use cash on public transport other than paying for a cup of coffee in the morning on the station. you don't use cash. francine: you go to the u.s. and people still use checkbooks

and they're still behind in terms of adaptations. mark: they happen by creep. it's a slow process. italy had a problem with a black economy. if you go to a cashless society, suddenly you made a black economy very hard to operate. so there is a policy reason why machavalean sense you prefer a cash economy but it takes away people's liberty in a dangerous and scary way. london went from paying for buses with cash to not being allowed almost overnight and there was no outrage, no big fanfare, it just slowly happened and people accepted it. simon: if you can impose that with 10 million people which is the size of a fairly decent country, item not hard to see it's a model for how it plays elsewhere. who knows how long it takes but you can see, if you can do it here so effectively, it's not

that hard. francine: you've written some great pieces on this. the business angle is printers will go out of business, what should we be building up for as a transition worldwide? simon: they all become princes of plastic cards instead. i wouldn't worry about the banks not printing. mark: i have a different solution. if you think high denomination is the idea, take them out of circulation one time and give people three months to hand them in so the normal citizen has 250 good notes and put in a bank account and six months later reintroduce them under a different design. you trashed all that illegal hoarded currency but brought it back in but then you threaten to do that again. francine: the cost though? mark: if your true concern is people buying and selling children on a black market the cost of printing bank notes is

minuscule if that's what you want to eradicate. francine: great conversation. i like this. we'll have you back again, mark gilbert and simon derrick. the c.e.o. of the largest power company is britain's biggest market and we bring you that interview.

francine: span jish you still company iberdrola reported results with profit coming in at 2.24 billion euros.

the company increased profit this year. guy johnson spoke with the c.e.o. who told us about which markets he intends to focus on next. >> prevent a strategic plan the next five years in which we'll invest under the range of 24 billion euros worldwide but i think the first destination will be the united states and the second destination is going to be britain. so today we represent growth of 65% of the company. so the most important markets are united states and britain at present. francine: let's get straight to the bloomberg business flash. njera: they boosted profit as they ramped up deliveries of the ambings-50 model. it rose to 1.43 billion euros, compared with analyst forecasts. the c.f.o. of airbus will be

live at 12:00 p.m. with guy johnson. peugot said it will issue new growth targets this year after it completed a restructuring program ahead of schedule amid increasing demand in the home market of europe. the carmaker said recurring operating income last year climbed to 2.73 billion euros. shares in dreamworks animation jumped in trade after the maker of the "kung fu" panda films beat estimates. the company saw growth in the tv and home businesss as it restarts its struggling movie corporation. goldman sachs confirms the executive that helped build the malaysia business left earlier this month. the departure comes with dealings of the country's state owned investment company drew public scrutiny because of the high fees the bank was paid. like it had been with goldman sachs 18 years and was mostly recently chairman of the southeast asia operations. that's the bloomberg business

flash. francine? francine: "surveillance" up next and we have a great exclusive interview coming from berlin. you don't want to miss it. .

♪ francine: economists predict a brexit will drive the town to lowe's. output as the saudi saudi arabia rules out cuts and stocks fall over. a landslide win for donald trump . he takes nevada. we are one week away from super tuesday. this is bloomberg "surveillance." i am francine lacqua in london with tom keene in new rk