friend i'm volatility returns. the shanghai composite sinks ahead of the g-20 meeting on friday. the imf says they must take bold actions. rise tode inventories the most in 80 years. scaroni aboutolo the future of energy. and economists say a brexit would triple the chance of a downturn. figures outd of gdp this afternoon. welcome to "the pulse" live from

bloomberg's european headquarters in london. i'm francine lacqua. let's check on the markets. we had quite a lot of volatility on chinese markets. the shanghai composite finished the day lower by 6.4%. in europe, the stocks are gaining. they climbed for the first time in about three days on the back of lloyd's gaining some 9.2%. this is after the bank raised its dividend. it is the first time in about five years that the ceo got compensation increase. crude, we will speak about it with paolo scaroni. let's get to the news with nejra cehic. nejra: apple ceo team cook believes helping the u.s. government unlock an iphone used by one of the san bernardino shooters would be bad for america. he explained to abc news why he was fighting the judge's order.

>> we know that doing this could expose people to incredible phone or ability. this is not something that we would create. this would be bad for america. it would also set a precedent that i believe many people in america would be offended by. when you think about those which are knowns compared to something that might be there, i believe we are making the right choice. thea: the imf has warned world's biggest economies urgently need to come up with new ways to support demand and contain risk as the global growth outlook deteriorates. itsimf is likely to cut growth outlook in april. shares in sharp plunged after the announcement of a deal for foxconn to take a majority stake in the company after buying new shares at ¥180 each. news 204i was a day

powered by our 2400 journalists in more than 150 news bureaus around the world. fran: nejra cehic with your bloomberg first word. chinese stocks plunged today as officials from the world largest economies are hitting to shanghai for the g-20 meetings tomorrow. as well as faltering global growth, they need to weigh the market volatility which has characterized 2016. let's welcome paolo scaroni. great to have you on the program as always. thank you so much for coming in. we have quite a lot to talk about. if you are a g-20 central banker, do you talk about china or start with market turmoil? where do you think the angst is coming from, fundamentals or these markets that perpetuate nervousness? paolo: we have a series of past bad news, no really bad news, but kind of bad news. the market is suffering for

that. china is one of the biggest worries for the market. the reality is nobody believes in any number that china authorities put forward. uncertainty on the second economy of the world is certainly one of the things the market doesn't like. fran: one of the things we are also trying to figure out is, there's a two dollars to three dollars move in the price of oil. markets correlate that with bonds. is it money from sovereign wealth funds that needs to get pulled out or that people worry about the banks' exposure to commodity traders? paolo: both things. oil producing countries are selling lots of securities, bonds and equities, and this creates an offer to the market which puts prices down. second, the situation in the tools, morenancing oil companies in the shale

sector, is worrying to everybody. fran: are you expecting a default? we spoke to jack lew yesterday. he was saying we are not in a crisis recession. you speak to some of the hedge funds, some of the bond managers, and they say this is almost a lehman moment. we either need to do something to stop it or we may look at a lehman-like moment. paolo: i think we are not on the verge of a crisis. people don't look at the positive news. with this oil price, there is a lot of money going into the pockets of the consumers. the consumers will start .pending consumer products will be very much on the rise. every european household with this oil price has more than one held in -- more than 1000 euros in their pocket to spend this year. i'm expecting the economy will

go better. fran: this is not what the markets are saying. i was raised to believe what you said. the problem is that markets are nervous. if there's not a left liquidity in the markets for them to function properly, or our markets ahead of the curve? our markets seeing something? paolo: i think the market is getting it wrong today. they are not looking at what consumers will do with this new money coming in their pockets. on the other hand, the market is not bad. it is simply volatile. it has never been so volatile as it is today. i'm not particularly worried about the future of the stock market in europe. fran: talk to me about the price of oil. andad saudi, russia, qatar others saying, we are going to freeze production. you have iran saying that is ridiculous. the politics are tricky. paolo: the only good thing for

oil producing countries of this meeting is that for the first time, russia and saudi arabia set at the same table. this didn't happen in the previous 15 years. as you know, we should take the view of consuming countries. for us, a low price of oil is a positive, not a negative. fran: even if it goes to $10? if it goes to $10, $20, there's a point where we start seeing defaults. there's a point where saudi arabia goes under. that is in no one's interest. welo: but i don't believe will go to $10 or $20. i believe oil prices will start moving up slowly the rest of the year. which is theling, $50 cost of shale oil in america. $50,annot be higher than but it can maybe move towards $40. fran: you were following the oil

market for years and decades. do you think russia and saudi coming together means that they are thinking of cutting production? saudi keep on saying that is not the plan at all. paolo: i think the simple fact that they met is a positive thing. they will find an agreement sooner or later. they want oil prices to stay below the crust -- the cost of producing shale oil. for them, and oil price of $40 or $45 compared to $30 x a huge difference. fran: the price of oil has correlated the markets. the you think it will continue to be so correlated? paolo: i don't think so. i think it will change in the next few months. fran: thank you so much. paolo scaroni stays with us. we have plenty to talk about. negative rates, the european economy, and reforms in italy. stay with "the pulse."

plenty coming up including the new central bankers conundrum. mario draghi has two weeks left to decide how to wrap up stimulus. can he satisfy both his colleagues and market expectations? then, u.k. gdp. economists say britain's recession risk would triple after a brexit. and, the man promising expansion and dividends as the imf warns of low growth. ♪

we are getting some breaking news. we had valet, the brazilian iron ore maker listed in the u.s., with a huge net loss. for the fourth quarter came out at $8.5 billion. this compares to a loss of 1.8 billion dollars in the fourth quarter the previous year. reactiont seeing any so far in european stocks. glut ins been a huge iron ore. we will keep an eye especially when they open in the u.s. and 1:30 p.m. london time. let's get straight to nejra cehic. nejra: shares in lloyds banking group have surged after the lender raised its dividends. the company introduced a special payout and indicated it may have reached the end of charges for insurance.

2015 rose tos for 8.1 one billion pounds, matching analyst estimates. ab inbev has reported fourth-quarter earnings that missed analyst estimates. adjusted operating income rose 6.6% on an organic basis. the miss underlines the brewer's need to complete its acquisition of sab miller to expand in emerging markets. shares in repsol are up today, despite proposing a cut to its dividend in the face of collapsing oil prices. adjusted net income rose 25%, beating analyst estimates. repsol is still the worst performing major european oil stock over the last year. fran: thank you so much. chinese stocks plunging the most in a month. the offshore yuan fell for a fifth straight month. richard joins us from hong kong.

what exactly is going on? the volatility returns but it is not on the back of anything. i guess it is concerned that they gained too much. >> what it really represents is a loss of faith in the government's ability to maintain stability in the stock market. we had some recovery, about 10% rebound, and signs that things were getting better after a terrible start to the year, down more than 20%, the most among global indexes. what the government has done recently is, they've been pledging growth stability. the yuan has been a big concern. top sacked and replaced the securities regulator after criticizing him for mismanagement. they've got the g-20 finance ministers meeting in shanghai. you've got the country's biggest meeting in beijing. what they want to project is

that things are fine. the problem is, as you saw with today's selling, when that doubt emerges, the market crumbles very quickly. hundreds of companies fell by the 10% daily limit they have in shanghai. all sorts of reasons were floated as possible triggers for the loss. as i said in the beginning, what it seems to show is that people don't leave they've reached the bottom yet in terms of market losses. fran: i know it's extremely difficult to say, but how much does it have to do with what you are saying? we have someone in charge of regulation that we don't know well yet. how much does it have to do with the fact that it seems g-20 don't seem to be able or don't seem to want to take extreme measures? does that also play into it? are the two correlated? paolo: -- >> there's also concerned that

what is going to be announced c, which g-20 and the np is going to set out the economic plans for china, are going to be words that are empty of meeting and aren't going to result in concrete steps that are going to assuage concerns about what is going to happen to company profits as the economic slowdown continues. important to note that valuations in chinese stocks are still very high compared to global markets. while we've had that big selloff recently, there's not a sense like in other emerging markets that this is bouncing along the bottom at record low valuations. there's going to be a huge focus on what they say. i think today's moves suggest that people aren't confident that they are going to say enough to keep investors happy. particularly in a market where resale investors count for 80% and speculation is very

important. fran: richard, thanks so much. the imf says the world's biggest economies urgently need to come up with new ways to support demand after the german business confidence dropped earlier this week as exports fell more than expected. how can europe overcome sluggish growth? with more, antonio garcia pasqual joins us. still with us, paolo scaroni. thank you so much. antonio, thank you for coming on. are you look at china, we expecting more volatility, more turmoil when it comes to stocks. what does it mean for the european economy? we're seeing germany, german figures a little worse than expected. antonio: indeed. we will also get today a revised gdp on the u.k., and we think also that the contribution from

exports is likely to be negative. i think this is a factor that will continue playing into the weakness. global weakness, weakness in the euro area, and the eu more broadly. we don't think this is going to stop. there's a structural slowdown and that has to show in trade. fran: when will the slowdown become a recession? you come on like every three weeks and i'm a broken record. you revising down your forecast? are we going to be in a recessionary mood? antonio: oil has been a big tailwind for europe. we still see it being a big tailwind for europe. i think domestic demand is still resilient. it is part of a gradual recovery. it is still early to say that we are close to a recession in europe. we don't see that in the data yet. fran: paolo, what is your

feeling? you speak to ceo's on a daily basis. there's all this refugee issues. europe politically is not as strong as people wanted it to be. are we really not going to get much worse from where we are now? paolo: the refugee crisis is going to be the real problem, particularly next summer, in which the flow of refugees will start over again. schengen is in danger. view, political point of europe has never been as bad as it is today. on the european economy, i'm more positive for the reason that antonio was explaining. the oil price would be beneficial for our consumers. therefore, consumers see the future relatively well. understand, don't and i see the same figures as you is, why does the ecb expect

to do so much more? we talk about further negative rates. antonio: i think they have a massive challenge with inflation. every time they come up with a new forecast, it is revised three months later, and not just marginally. if you look at the forecast for 2017, probably we are more than 50 or 60 basis points away from what they want the target to be. they cannot just stand still. is growth that there in addition to missing the inflation target. you put the two together, and on the growth side, inflation is real. they clearly need to do more. the question is what to do so those measures are beneficial. that is the big challenge for the ecb. fran: antonio, thank you so much. we have plenty more coming your way. we also have earnings from noble group.

lost 1.7 compared to a net income profit last year of $132 million. it seems a lot of the earnings are disappointing. how does that play into fundamentals in the economy? we will also be listening to st. louis fed president james bullard. he says low inflation expectations shouldn't be ignored. ♪

fran: this is "the pulse." we speak about central banks, look at the markets, talk investment. the challenges facing central banks are worrying the bankers the most. james bullard is also an fomc voting member this year. he says the decline represents an erosion of central bank credibility. >> i regarded as unwise to continue the mobilization strategy in an environment of declining market expectations. the decline in inflation expectations represents erosion of central bank credibility. guests,t's bring in our antonio garcia pasqual at barclays and paolo scaroni at rothchild. also a little bit of an expert in energy and oil markets.

antonio, when you look at central banks and the fact that james bullard is talking about credibility, for me the biggest credibility is, the pboc needs to do their job and make sure the world has that confidence. peopleo, janet yellen, are questioning whether you can hike at all this year. some are saying she might have to cut. what is the probability of that? antonio: clearly, this financial volatility, we saw it in september with the pboc decision, and now this volatility remains. on the back of that, it will be surprising to decide to hike anytime soon. we think the earliest they can do that is june. the u.s. economy, [indiscernible] eventually, you should see some wage pressure. i think we will probably look at

the labor markets carefully and look past this next fed decision and think about whether june presents a better opportunity for a hike. as for the inflation expectations, indeed, they are on the low side. they are really on the lower range of where they would like it to be. crisis think it on a level for them. aolo, you lived through and run, very different from the talks of a default. what is the likelihood of something going down because they are big and the exposure is so large? paolo: not just on oil, but on all minerals, because minerals are so low that a risk of failure exists. no doubt about that. today, all eyes are focused on

the shale oil producers in america. this has been a business growing on debt, very much on debt, and today, to sustain this is difficult. aolo and antonio, stay with us. we talk brexit next. "the pulse." ♪

fran: welcome to "the pulse" live from bloomberg's european headquarters in london. we are getting breaking news out of u.k. gdp. it is in line with what was expected. the economy grew 0.5%. that is matching the estimates. if you look at the breakdown, everything is in line with expectations. private consumption a little bit weaker. government spending a little bit higher. now let's head to mark barton for a market reaction on those

u.k. gdp figures. mark: sterling down for a fourth consecutive day against the dollar. this week, it has fallen by 3.4%. sincerst four-day decline february 2009. we did another survey today. economists say that voting to leave the eu would increase the you k's chance of falling into recession. they say the probability of a slump sparks to 40%, compared to 13% risk predicted in the most recent monthly poll. this is a great chart showing sterling against the dollar. we are just below 1.40. 1.3924. on march 10, 2009, we fell to 1.3753. this is 2001.

1.05.1985, was those are the key levels that charters will be keeping their eye on. chinese slacks -- stocks slumping today. biggest drop since january 26. we saw surging money market signaling higher volatility. the offshore yuan fell for a fifth day. today's declines have almost entirely wiped away the 10% rebound since the chinese stock market fell to a bottom on the 28th of january. the g-20 kicks off in shanghai tomorrow. up by 10% today. biggest rise since 2010. 36% drop in6% -- a full-year net income, but pretax profit excluding ppi actually

met expectations. the company is cutting jobs, closing branches, investing in technology. earnings missing estimates. shares are down by 2% today. sales volume dropped, underlining the need to complete the acquisition of sab miller to expand in markets like africa. there you go, francine. fran: thank you so much. now let's get to the bloomberg first word news with nejra cehic. nejra: apple ceo tim cook believes helping the u.s. government unlock an iphone used by one of the san bernardino shooters would be bad for america. he explained to abc news why he was fighting the judge's order. >> we know that doing this could expose people to incredible vulnerability. this is not something that we would create. this would be bad for america. it would also set a precedent that i believe many people in

america would be offended by. when you think about those, which are knowns, compared to something that might be there, i believe we are making the right choice. nejra: the imf has warned the world's biggest economies urgently need to come up with new ways to support demand and contain risks as the global growth outlook deteriorates. the imf is likely to cut its outlook in april. foxconn has said it would postpone any signing of a definitive agreement with sharp as it is reviewing new material information. earlier it, it was announced that foxconn would buy a 55% stake in sharp. global news 24 hours a day, powered by our 2400 journalists in 150 news bureaus around the world. fran: let's talk more about the u.k. economists surveyed by bloomberg say the property ability -- the probability of recession rises

to 40% if the u.k. votes to leave the eu. scaroni,ng in paolo deputy chairman at rothchild, and our tonio -- and antonio garcia pasqual. just a quick comment. do you think ceo's would leave the u.k.? i've lived here for a very long time. theill find it crazy that london mayor says london will be fine outside the u.k. paolo: i'm not expecting the brexit. i think at the end, brits are very reasonable people and they will be reasonable in economic terms. therefore i don't think brexit will happen. the position of the mayor of london, the mayor of london is always kind of original thinker. i wouldn't think that this would really change the balance between yes and no. fran: how do you model it? is it more difficult to model a

donald trump in the white house as an economist for a brexit? brexit is pretty darn hard. it is difficult because -- first, the legislation. the legislation is well laid out for countries to join in. it is not so clear, the process to exit. that will take long. oft happens in the 20 half -- the second half of 2016? in 2017? those market moves will be driven by sentiment. sentiment will weigh significantly. we saw your survey, which is saying -- investment probably will suffer. you don't know what is going to be the labor market arrangement. ceo's are probably going to freeze hiring. you can see how sentiment

probably will influence investment and consumption decisions immediately. the impact over the long-term is difficult to gauge. lots of economists have morals over the impact on the trade arrangement. will it be more like switzerland or norway? have a hard parts time to understand each other because they are strongly integrated? i don't think they are about to pick up a trade war. i think these are uncertainties in a wide range of estimates. when you look at economist estimates of what would mean a brexit, they are wide. that reflects the long-term. are trying to figure out is who suffers most. is it london? is it the u.k. as a whole? or is it the european counterparts? says, we will be ok and

it is europe that needs to be worried. paolo: all three, i think. london for sure, because london is the financial capital of europe. moving somewhere else, maybe to frankfurt or paris. europe will suffer a lot, because without the u.k., and the u.k. financial position in the world, this would be very bad for europe. also, outside london, the u.k. economy will suffer for all the reasons that antonio laid out. for this reason and -- i'm a fairly confident on a vote to stay in the euro. brits at the end of the day are a very reasonable people. fran: we hope. so far. paolo: we will make a prophetic choice, i -- a pragmatic choice, i think. fran: are you concerned about the quickness of the drop in

pound? 20 trade weighted basis, it is not that. antonio: you are right. -- [indiscernible] surprise,'t be a big that the currency is the one that moves. it should be surprising that it has accelerated so much, so early. if you look at the issue about scotland, it was much closer. fran: scotland comes next. antonio: it could be. at these oil prices, who knows? certainly, scotland will be an issue. i'm not surprised that the currency reacts first. it will probably react more if they decide to leave. depending on the terms of the negotiations, maybe the currency stabilizes. the immediate one could be sharp volatility. i think the ones that probably

will scratch more their heads are the currency traders. fran: thank you so much. andnio garcia pasqual, paolo scaroni, deputy chairman ed rothchild. we will take a little bit about leadership and capitalism. europe's biggest water company expects demand from china to keep going. we will interview the only a -- veolia's chief executive officer. ♪

fran: this is "the pulse." europe's largest water company reported earnings, matching analysts expectations today. their ceo joins us now from paris. first of all, congratulations on those results. if i look at the share price, they are currently gaining a little bit. what is your biggest concern for the next 12 months? the last year of our big plan, we reached all our goals, all our objective, and we even passed a lot of them. now, with 2016, we enter a new phase of our company. it is the new three-year plan with two big challenges.

growth, mainly organic growth, and to continue our efficiency gains. we will be focused on these two big pillars of our new plan. fran: give me a sense of how you are operating and coping with the sluggish economic backdrop in france. i know you are doing things internally. do you see the economy being that little bit more disappointing than you were expecting? antoine: we don't see from the beginning of this year big changes compared with last year. we have a lot of differences between geographies, but we focusedeolia to be more on where we could find good businesses. first, we change our geographical footprint with more growth territories for us. he emerging countries, but also

eastern europe. but also, we change our customer mix. at the end of 2015, veolia will have activity with municipal withmers and 44% industrial customers. four years ago, it was more 80%-20%. so we move a lot. now, we are well placed to be able to capture new growth where our clients need our services. so we are of course impacted by the macroeconomy, but more impacted by the regulation rules, which are moving a lot, especially the rules about pollution, including in china or all emerging countries. so we are more impacted by our geographical choices and the

regulation even more than the macro. for the macro, we don't see a big move for this year compared to last year. fran: does it make sense for you to try and maybe merge again? you tried and a regulator said no. because of valuations, would you have the stomach to try again? enough to dore with our own forces. have a good trend. results laststrong year. we are concentrated on what we want to sell, where we want to sell, how we want to sell, to whom we want to sell, and we have enough to do with veolia today. no?: is that a i don't know if it is a no or i'm too busy. maybe i'm too busy shopping but

something comes up. antoine: [indiscernible] fran: is that a no? you are telling me that it won't happen, that you are not interested, or you have other things to focus on? antoine: i'll just answer you that i have so many things to do to grow and develop the company, and to increase the results that i have no time to think about that. fran: one last question. we are going back to a conversation about leadership. what is your priority for veolia in the next six months? antoine: growth and efficiency. our guidance for this year is to for moreour net result than 12%. and to reach in terms of free cash flow before divestment, 650

million euros, meaning that we ,ill have the room for including our dividend but also investing more for our development. in this year, 2016, 400 million justcompared to last year for new growth in the company. efficiency, and increasing of net result of more than 12%. fran: you have a lot of contracts in the u.k. how do you view brexit? 5 antoine: we have a lot of activity in u.k. and we are developing them strongly and quickly. i think it will continue. we are very well-positioned. with our present mainly in the west business, and especially with -- [indiscernible] we are continuing to develop it. all our costs are in the same

currency. we have our revenue increasing our investment. the label of the pound compared the euro has no impact on our business, just when we transform at the end of the year. we're going think to see a big change with brexit. frerot, thank you so much. we will be talking about leadership with paolo scaroni. let's take a quick look at what analysts think of veolia. the stock is up. half of analysts rate the stock as a buy. next, we continue our conversation and talk leadership in a very high risk environment. that is coming next, right here on "the pulse." ♪

fran: let's get to the bloomberg business flash with nejra cehic. nejra: shares in lloyds banking group have surged after the lender raised its dividend. the company introduced a special payout and indicated it may have reached the end of charges for wrong protection insurance. rose torofit for 2015 8.1 billion pounds, matching analyst estimates. vale has said its fourth-quarter

net loss widened to $8.75 billion come at compared to a loss of one point eight $5 billion a year earlier. the company pointed to the slump in iron or prices. rose, helped by higher life insurance sales. france's largest insurer saw a net income beating analyst estimates of 5.39 billion euros. that is your bloomberg business flash. fran: thank you. let's wrap up with a discussion about leadership. still with me, paolo scaroni, deputy chairman at rothchild, also on the veolia board, but that was completely unintentional. we just wanted to have a great conversation about management. what is your biggest concern? you were talking about priorities? what is your biggest concern? is it losing your top talent?

is it keeping them motivated? is it reading the markets? is it your shareholders? antoine: my main priority is to embody the company, meaning that you saw the company as a lot of stakeholders. my first mission is to check that all the stakeholders are ok to find what they want to find by committing in the company. many stakeholders, shareholders, clients, employees, but you have also -- [indiscernible] and a lot other smaller stakeholders. my mission is to be sure that all the stakeholders are able to continue to work together and to commit more and more to the company. and to be sure that none of them will progressively leave their

interest in the olea. it is a way to be able to be stronger in the company. fran: this is what most ceo's would want, but i guess it is how you do it. what kind of leader does one have to be to lead companies nowadays? paolo: everyone thinks that our times are more difficult than in the past. this is not true. times are always difficult. i've been chief executive through 19 years. i've lived through volatile times. for me, the recipe is simple. veryecipe is to have a easy strategy, easy to explain, and to motivate everybody around the strategy. the difference between having motivated people in the company and non-motivated people is immense. all the motivated people can reach any objective. fran: do you remember when the crisis happened in 2008? was that one of the most

difficult times? what was your reaction? paolo: 2008 and 2009 were dramatic. were collapsing. creditors were not paying us. again, motivation. keeping people together is fundamentally the one thing that ceo has to do. ne, how often do you speak to shareholders or analysts? is it more difficult now than it was 10 years ago because the market is so much bigger? antoine: i don't think it is more difficult. i think the shareholder community, for example, i understand that there is all the stakeholders, and it is of the interest of the shareholder, medium and long-term interest especially, also to be sure that everybody is really back in the group, in the company, including employees, customers, and so on.

i think now, the shareholder communities, the financial community, they understand they are not alone in the company. fran: antoine frerot, thank you so much. paolo scaroni, what a great conversation. seems it is all about inclusion. "surveillance" is next. ♪

francine: european stocks climb. all drops. lloyds bank the biggest gainer in europe as a triples its dividend. shanghai comp said staying over 6%. must takehe desk they bold action. economists say a brexit would triple the chance for a downturn driving the uk's economy to 12 straight quarter growth here it i'm francine lacqua in london with tom keene in new york. we will t