francine: extra liquidity as the bank of england make sure there are enough funds for banks here it just banks. -- banks. it jumps to the most since 2009 outweighs ac demand slowdown. taking trade. china's first tumble -- china's -- 6.5% growth. ♪ francine: welcome to the pulse. life from bloomberg's european

headquarters. i am francine lacqua straight to the markets because they have been hoping for an hour. stocks overall dropping. u.s. stock indices are on the downside. oil and copper falling. we have report showing that it is slowing -- slower than expected. u.s. treasuries are rallying. let's get to first word news with nejra cehic. nejra: german industrial production jumped more than forecast in germany. from december -- it climbed 3.3% from december. european union leaders have its toward an agreement with turkey to halt to the inflow of migrants. is jean-claude called plans a

real game changer. >> the separation without turkey's willingness to take back all irregular migrants who had been apprehended. beay we were assured it will possible. all of the above-mentioned ofisions that the days irregular migration to europe are over. francine: -- nejra: china's .xports slumped more than 25% imports continued their streak of decline, falling more than 14%. it included the chinese new year holiday. a challenging environment faced by policymakers. the yen has strengthened for a

second day after the chinese , evidence that the world's second-biggest economy is slowing. revised data for japan's fourth quarter gdp shows the economy contracted but at a slower pace than initially estimated. global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. francine? francine: think you so much. let's turn to central banks. the federal reserve governor has laid out one of the most detailed arguments i fed it official on downside risks to the outlook. that is despite positive reports. -- celebrated foreign demand to the policy path. >> critic's have argued that qe together with the interest rates is no longer effective in either japan or possibly in the eurozone. that case has not been

empirically estimated. i believe that central banks have the capacity to qe and other measures to run expense three -- expansionary monetary policies. francine: that was stanley fischer striking an optimistic tone on inflation in the u.s.. comments from fed officials coming as the ecb president mario draghi is expected to unveil further stimulus measures on thursday. let's bring in carsten brzeski. at the j.p.hughes morgan asset. he is here from the u.s. thank you so much. does it feel different being here in europe? we are still talking about normalizing the fed. we are still talking about one

possible hike this year. in europe, where talking negative rates. carsten: it feels very different. it doesn't everyone is talking about policy focused on stimulating. the ecb opened the door to fiscal stimulus coming from those countries that have balance sheet capacities to do so here to germany, for example. francine: you may look at the mystic policy -- look at domestic policy. carsten: i think there is a growing feeling in the u.s. that the world is in a growth slowdown. whether that leads to recession, we will see. it looks like the federal reserve is out to sync with the rest of the world central banks. francine: does that mean we may look at a cut? robert: it is the first time ever we have had these two major central banks going in opposite

directions. the ecb will not change its course. draghi will do more easing. up to the fed to see whether they can get back into sink. francine: carsten, what the you worry about the most. -- what do you worry about the most? carsten: i am worried the most about what the central bank can do it even if draghi -- there is an increasing atmosphere of despair. not knowing what to do on top of that. a future with very low growth rates. robert: it feels like the central banks have done what they could but where is final demand? where is demand for loans. the liquidity backed up as their at what is missing is that credit extension. we look at gold. if you look at gold, it does well on risk on days.

we were talking about one of the greatest drawbacks to gold has been historically there have been no you -- it had no yield to it. francine: does that mean we were mispricing risk? robert: what is going on with the central banks is starting to distort the way you look at financial assets. maybe for the last year or so. things like gold become a very valid currency and the lack of yield is not a drawback. francine: carsten, you look at today and merkel's future, she is having a great day. production much better than expected, at a nine-year high. and yet we have a refugee crisis. carsten: i disagree. i don't see that we will get it yet. .t is a preliminary agreement

the german industry, yes, we had a big month. if you look back since last ammer, we went through stagnation period. in german politics, there is an increase of parties. we will be the first test case for angela merkel's stamp in the refugee crisis. francine: robert, we often talk about what investors are mispricing in china. you feel there is something that institutional investors in the u.s. misunderstand about europe? carsten: i don't think so. by and large, u.s. investors have looked at europe. they have looked at the healing that has occurred. it has caught the attention of the fed, because the decline in the euro versus the dollar has created a pretty nice tailwind to european corporate process. to me, that is another reason the fed is talking more openly about backing away, because financial conditions indicators

have been tightening since the middle of 2014. francine: all right, robert and carsten peggy so much. robert michelle from jpmorgan asset management. mark carney breaks his silence on brexit. how political will he get? that is coming up next. ♪

francine: welcome back. this is the pulse. mark carney is testifying on the brexit. let's get straight to the bloomberg is a splash with nejra cehic. nejra: michael bloomberg, the billionaire former three term mayor of new york has the sided against entering the 2016 u.s. presidential race. the announcement memos one of the remaining uncertainties and what has been an unusual and unpredictable election year it michael bloomberg is the finder and majority owner of bloomberg lp, the parent of bloomberg news. the very shares are trading higher that is from speculation that the uk's biggest luxury producer -- against a takeover offer. after a mystery investor built a the -- about 5% in

growth will shrink the .5% this year compared to an estimate of the .45% a year earlier. -- shrink 3.5% this year compared to investment of 3.45% a year earlier. bank of england governor mark carney has managed to avoid -- on the eu leaving so far. that is poised to change. still with us to discuss this, carsten bresky and robert michele. thank you for sticking around. robert, how do you view a exit -- how do you view brexit? it is impossible to predict. how do you make a choice? i think it would be very unfortunate if it goes through. i think the dislocation that it

could create through the markets could be relatively significant. i also think if there is disagreement and you are part of the club, then forward your solutions and work through that. francine: how do you view it, carsten? germany and france would be much worse off. rhetoric, there is the analysis that in the end, europe might benefit after a long while. in the long run, i think it is hard to say whether there might be more positive impact. in the short run, it is going to be disaster. the market will going to turmoil. in the long-term, moving away rom the u.k. francine: carsten, politically, you are france and you have marine le pen, do you not have a

frexit? it would create a turmoil but you're not sure what the in game would be. carsten: that is across the board. by agreeing to a deal with british government, the rest of europe already opened itself to be blackmailed by other countries in the future. there will be follow-ups. francine: what you make from what we heard from the bank of england yesterday to make sure the banks have enough funding you go are we looking at a potential shock? the transmission mechanism because people are scared of what comes next. robert: you can ignore it and hope for the best that there is no brexit. i think that is what is going on with the bank of england. francine: what of the u.k.? what does the u.k. look like june 24, if the u.k. decides to

leave the eu? -- do thels clash guild's clash? carsten: financial markets will look different on the 24th of june. goes will look the same this would only be the start of a lot of negotiation between the u.k. and eu. on,rt: the world will move there will be bilateral trade agreements put in place. europe worked well when it was fragmented before the eu pulled editing together. there could be some short-term dislocation. if we get to the point where there is a brexit, they will price into the market before the 24th -- before the 23rd. francine: i wonder if it is the shock or whether it is the polls that let people down. do you even think the london as

a financial center can exist? actually as an investor you would not be buying into the they have to-- draw every single contract again. at one point, it seems as though frankfurt would be the financial center of europe, going back to 2000 and 2001. for whatever reason, london attracted all of the investment and became the primary financial center. that puts it at risk. obviously, if europe remains together and there is no frexit, we've got to move back some of the financial services to the continent again. enda: the reason that -- francine: reason that london is not doing too badly -- carsten: france will be looking for to the first national charge as an alternative to london. francine: what this is me for policy from the boe?

we will be listening to mark carney and he will be at pains to not give a view, but at the same time discussing the potential for a brexit. carsten: it is impossible to come up with an objective. you have to take a position. mr. carney cannot. i am curious on how he is going to manage this balancing act. francine: me to it is a lesson on political management. robert: i think he will go through a laundry list of things. francine: if we do have a brexit, is a cut and policy in interest rates, because the economy will collapse short-term? carsten: not only the boe, but ecb, the less we had was 9/11.

robert: y tick the risk of not doing it? -- why take the risk of not doing it? francine: it is another risk that is difficult to produce -- to predict. it feels like the fed is the onlycond-guessing interest rate increase. when we see a rate cut or turn on qe again toward the end of the year, that is a more interesting question. francine: is there something that angela merkel that others can do to convince britain to stay in? or is anything they say will be counter? up to thehis is about british government to convince the british people there is more for britain to gain staying within the eu than leaving it

the u.k. would be the big loser. francine: do you agree with that ? would also lose, right? they lose a key ally. confusei think we can't the near-term with the longer term. in the near term, there will be some disruption. francine: near-term would be three years? think they will move in very quickly here at whatever the operating model and europe is, that would take hold very quickly. francine: carsten and robert thank you very much. this is a quick pound check ahead of that carney testimony did this the first time we would hear from the boe governor talking about the risks of -- the risk of a brexit. we are back in just a couple of minutes here it -- couple of

minutes. ♪

francine: welcome back. this is the pulse. this is your market check. dropping with u.s. stock

futures. let's get that board up to have a look at what the pound is doing. we have movement on gold and everything else spirit asset classes including yeah, gold and u.s. rallying. there are haven assets. we have reports showing japan economy in chinese exports are shrinking. concerns it about japan and china. this is the market. we are watching out for mark carney he is due to speak any moment now. he will answer tough questions on brexit and what that means. guest,et back to our robert michele and carsten brzeski. we spoke of the risk about china and negative rates and the side effects that they could entail. the trouble this would entail for banks. give me a sense of yen in japan. carsten, if you look at japan, this was meant to be the great financial experiment. it is not working.

extra news monetary policy is not working. the -- they need structural reform. they need deleveraging. so much debt in the economy, i think it shows more monetary policy unfortunately. we don't have any other option. carsten: we do have more fiscal spending. the other thing would be facing a long period of weak growth. robert: or you loosen immigration policy and you cut taxes or do things that are more stimulative. the problem with going to negative rates is they are starting to in trench some bad behaviors. francine: from the banks? robert: from everything. from banks seeing the interest margin shrink.

when you talk about the consumer, the interesting story to us is there are no more six for sale in japan. they were all sold -- no more safes for sale in japan. they were all sold. he is going to be damped it is moneys went to burn up. you are against helicopter money? there is so much written about helicopter money. this would be a way to spurn inflation right away. robert: it hasn't yet. you need something on the demand side. the supply-side is there. how about some fiscal spending and reform. how about something on the tech side? -- on the tax side? carsten: you could sell it as a consumption voucher which expires. francine: fiscal expansion is not coming anywhere in the world. why? are we interest in europe?

carsten: we are forgetting the done nominator. the denominator is growth. people are throwing money.

find fantasy shows. when it comes to the things you love, you want more. love romance? get lost in every embrace. into sports? follow every pitch, every play and every win. change the way you experience tv with x1 from xfinity.

bloomberg's european headquarters here in london. let's get to the let -- news. >> german industrial production jumped in. that is the first increase in three months. european union leaders of edge toward a agreement with turkey. it they are doubling financially

to the country. plans for turkey to take back migrants are a real game changer. they welcome progress made in the talks. operation without turkey being ready to take back migrants who have been apprehended. today, we were sure this will be possible. above is a message that the days of irregular migration and to europe are over. >> china's export plunged in february. an extended their streak of declines to 16 months. it fell almost 14 months. yearcludes the chinese new holiday.

there is a challenging environment. the chinese data added to evidence the world's second-biggest economy is slowing. revised data for japan's fourth quarter gdp shows the economy did contract, but at a slower pace. it was revised up from the initial estimate. news 24 hours a day powered by our 2400 journalists and 150 years -- news bureaus around the world. to the house of parliament where mark carney is about to testify. he will be talking about the financial impact. mark: comments around these issues and i will summarize them in terms of the united kingdom's

relationship to the european union, the status quo and changes to the status quo are limited to how that relationship those responsibilities, those agreements. financial stability is the principle with which is suspect to the agreement. you asked a second question around limits. stability isncial important. this is not the sole determinant of economic outcomes. our comments and our analysis do not provide a comprehensive assessment of the economic case furthergainst any status quo or a change to the status quo. with respect to the european

union and to state the obvious are importantse in terms of the broader decisions that people have to make. they are not the totality of the upon which people will reflect and make the decision on a vote. and thisot be making should not interpreted as making any recommendation with respect to that decision. >> we have that on the record. to look at your approach in considering the risks of staying in the union. have you any thoughts on the risks from the transaction tax? hierarchyerms of the of remaining in the european union, i would not put that new the top.

we did think there are risks for remaining in the european union and risks related to the development of the euro area. i'm sure we will come to these questions. the institutions and the rules and supervision around the euro area develops harmonization that would be necessary, how that can impact our ability to achieve our core agreements. with respect to the financial the institutional view of the bank of england is any financial transaction task supplemental to the debt duty in at u k would be best pursued a global level as opposed to any partial level by just a european level.

what is being discussed today is a subset of european union members that would have potentially an element of extra territoriality. subject to legal challenge. challenge cannot be formally pursued or pursued it to its full extent until an actual directive comes into force. that is my understanding as a nonlawyer. the back-and-forth with the ec j. agreementtext of the incorporation will be encouraged. surprised in your balanced mention thet you. transaction tax as a potential risk or in -- risk.

mark: i think that's based on several points. theerms of the risk to financial stability, as i have adicated, i don't view it as first order or second-order risk to financial stability. it's an issue in terms of market functioning. this is not in terms of imperiling stability. if i may finish. own point.ered your mark: i'm not sure i have. >> you mentioned the cost of regulation. you're trying to answer for a different section. i am looking at the full context of your letter and speech.

letter, i say a comprehensive assessment of the cost of regulation is not within the duty of the back of agreement. monetary stability is. letternsistent with the and my response to the chair and consistent with the framing of our report and not over and my speech in october, limiting myself to answers which relate to our readers. the agreement relates to financial stability. i can give some context on that. if i may with respect, the start of your question related to the financial stability implications. to theid it related risks of continued membership. to ensure balance with the bank of england, it emphasizes the risk.

was that you did not consider this a significant risk. the council ministers have the numbers. let's move on. you seem to make no reference in your letter. participating in the union will not create obstacles. in this agreement, you have to any treetability for a fiscal union. the you consider that a risk? -- the you consider that a risk? : it is a very important point.

i think it's only reasonable. i appreciate it if i can complete my answer. we have made judgments in the report, cross-referenced in the letter, about elements of european regulatory compact. couldnk it's imperfect or have implications for agreement. triggers,ent of capital instrument, the absence of macro flexibilities, in our judgment and you can disagree, those are our judgments and we have been very clear about those issues. we have been cleared to the extent that we have followed up on those issues with the commission and a host of other issues. for evidence in terms of the review of existing

european financial stability and regulation. we have identified a series of things. in the hierarchy of those issues, financial transaction tax is down for two reasons. it is an efficiency as opposed n issue. judgment ifmake the it comes into force. that is not ignoring the issue. we've been very clear about a series of issues with which he have some disagreement and would like to see change. we have pursued avenues in order to have those changes. on to the next question. the issue of giving away in the agreement the ability to stop relationship.

this could come as a significant disadvantage to the u.k. i think it's in the interest of the united kingdom that european monetary union is put on much sounder institutional ground. that is a greater degree of private and public risk sharing. the bank union is part of that sharing. the capital markets union is part of the sharing. as many in this institution including myself have long advocated, an element of public risk sharing through physical -- scal integration. some element of a form of transfer in my judgment and i am

on record on this on multiple occasions, i can refer to a speech i made in january 2015 in london, it's in the interest of completing monetary union and making it more stable. the key issue that the settlement addresses is how will the interaction, how will there be an interaction between the institutions of monetary union in those who are never going to be part of the monetary union? and recognizing that there would be a greater degree of harmonization within a monetary union, i would advocate it's in the uk's interest. ofould say the advisability , that is inal unity

our interest. of the in the interest financial stability of the united kingdom. >> i don't think any agreement they come to will be in our interest. , does thatldn't say give carte blanche? i will give that to legal experts. there are legally binding agreements, legally binding one way. mark: not surprising, we have focused on sections of economic evidence and the emergency brakes which we will come to. those elements of the agreement are legally binding. i am not a lawyer. to the many experts on this but the judgment

is those the advice elements of the agreement are with thenflict existing treaties. effect.e interpretive to move on to your relationship with the government . minister told us sunday that he was quite sure the government will have something important to say. how could he be sure? mark: that's a question for the prime minister, i have no idea. >> that's unusual in the relationship in the prime minister and the bank of england.

in my time as governor, i have conversations on occasion with the prime minister. conversations are about the most important economic issues facing the country. that's the relationship that exists. >> you are not denying you've had conversations with the prime minister? mark: i have not had conversations about what i might say about the european union. say, i was repeating your phrase, as you would expect, in the context of this subset of issues which the government was negotiating as , it of this new settlement

had conversations with the prime minister and the chancellor. entirely consistent with what we have in the public to main in terms of our concerns about the future evolution of the european union and to be more's precise againe precise, our view as expressed in a detailed report published in october and supplemental testimony has been the current status quo, we have the tools to deliver. our concerns are about the future evolution of how the area could affect our tools. i have had detailed conversations with the prime minister about those aspects. our concerns in the public are reflected in the settlement in the economic

governance section. there is detail around that i'm sure. i have got a bit more, if i may. i want to look at the speech that you gave. this is last year. it has some nonfactual evidence. they are your opinion about the relationship. particularly this argument reinforces dynamism in the united kingdom. when the state of the economy is faster from 1948 to 1973 that it

is from 1973 two 2012. pro-euto say some mildly things. all: the growth rate like major advanced economies experienced more rapid post-world war ii growth than subsequent growth. that is a common phenomenon. in terms of the relative performance of the u.k., you see two pickups and i will refer to the work of others, there is substantial evidence of this. the evidence is consistent with that statement. you see to acceleration's.

early 90's on the formation of the markets, you see that. the second point is to look at the speech. it's based on the report that goes into much more detail and you have to summarize for a speech. there is an advantage to having a 100 page report and cross-references. in terms of the trade directance, the foreign channel investment in the european union, with it it's one of the largest recipients. i would like to get it in now. before the supermarket was getting one u.k. was

with another of countries put together. mark: i disagree respectfully. relativethe performance. ofre is the advantage speaking to business people in understanding the reason for the investment in equipment activity in this country. you are active in the financial services sector. there is a reason why a substantial proportion that more global banks are headquartered in london than any other european country combined. that is because of the cluster of expertise that is here. , i have hads numerous conversations with ceos who affirm this, it's because of

the past putting ability of this economy in terms of the activity and being in london. this is what is standing between your reputation, you are coming out with a standard , butment of a pro-eu group the u.k. received more than france and germany combined before we were part of the european union. we received more foreign investment. it is speculative and beneath the dignity of the bank of england to be making a speculative pro-eu comments. mark: i'm not going to let that stand. let's take the example of trade i will give you a single response.

take the example of trade. >> you make a specific argument. mark:u are switching to -- switching. mark: i would add that in the completeness, we do our best to this aggregate foreign investment. that is a difficult thing to do. trade, one of the things you have to adjust in is forf transfer, gravity models. you have the weight of trade with your nearest neighbors.

is there a greater effect? it's very relevant to all trade deals. what you see and this is detailed in the report, growth of u.k. trade with the rest of because ofrguably the single market. we are going to move on. you may get a chance for rejoinder at the end of the session. tom: a spirited conversation as mark carney is being cleansed. we hear a lot of analysis saying threatens the recovery. he is not giving a political view.

if you want to continue following that testimony, you can do it by finding it on the terminal. let's check on the analysis. mark: he remains neutral. we will see if he manages to stay neutral. he is being grilled by mps from all side. this is sterling against the dollar. sterling is down by about a fifth of 1%. tailored to harsh. last week, it rose the most since 2009. today, it is falling once again. there is concern about a brexit. boris johnson joined the leave campaign.

it's been a similar story for euro sterling in recent weeks. the first week we saw it jumped by 2% against sterling. the euro is rising against the pound. the pound is falling against the dollar, falling against the euro today. this is the pound market. there is a chance because of the china trade data. yield across the u.k. bond market from one year. you can see the yields are falling across. this is the broad market. this is the second best performing bond market in the world. mark carney is seeming to have little influence. who knows? there is still time to go. he didn't say much.

he said they have the tools to deliver the agreement. bloomberg surveillance is up next. we will talk about exit. -- brings it

francine: asked to liquidity as the bank of england make sure there are enough finances for banks. he did not talk much about brexit. is the eu really stronger than we think? 25%.'s exports tumbled there is a challenge for policymakers as they target 6.5% growth. tom keene is in new york.