francine: asian stocks drop, european markets rise, investors expect more stimulus from the ecb. trump ups the stakes. u.s. moderates are dealt a new blow as donald trump takes two more primaries. bernie sanders defeats hillary clinton in michigan. asia's largest airline almost doubles its profit as fuel costs fall. we speak to the ceo. welcome to "the pulse" live from bloomberg's european headquarters in london.

i'm francine lacqua. we've had quite a lot of volatility over the last couple days. asian down, european stocks rebounding after declines as investors speculated that we will get more stimulus from the ecb when mario draghi speaks tomorrow. i want to show you banks. there is more concern about the impact of negative rates on the banking sector. yen at 112.53. the yen is the worlds is performing currency this week. losses set off by disappointing trade out of china. breaking news out of norway. just releasing its 2015 report. 2.7%und's return is about in 2015 as the stocks overall have gained. there were previously burnt by the price of oil. now they are saying this 2.7% return is not bad. we will break down the figures and of course bring you any

further breaking news has the norwegian wealth fund. let's get to the bloomberg first word news with nejra cehic. nejra: bernie sanders scored a surprise win over hillary clinton in the michigan democratic primary. he overcame a double-digit lead in polls. clinton took mississippi. donald trump beat back a barrage of attacks and scored major victories over his leading rival in two primaries. about 2% upside and 20% downside, making for a lousy risk-reward trade-off according to a money manager. he says betting on stocks is a losing proposition. french unions have been limiting rail traffic around the country and on the paris metro as they protest government proposals that would end the 35-hour work week.

the strike is due to run throughout today. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. francine: thank you so much. today marks the seventh anniversary of the s&p 500 bull market. after the best stretch since 2015, the global equity redound took a pause yesterday with the market worried about china's growth story. investors are pulling cash from stocks at almost the fastest rate on record. outflows from equities are double the rate during the financial crisis. with me this morning, richard jeffrey. he oversees around 30 billion pounds. day, we see a risk out there and every day there seems that market focus on a risk. when do you expect these risks to go away, or better news to

come out? richard: i don't think these risks are going to go away. growth is lower at the moment. i constantly make these comparisons but they are important. if you think back to the decade or so prior to the recession, we were growing around 3% in the west. if you see little dips, you don't really care. ratesou see trend growth which are significantly lower as they are at the moment, the dips below the trend feel a lot less comfortable. i think that is just the new normal environment. we are growing at our trend rate now. francine: why does it not feel comfortable? are we worried about china, inflation, worried that the eurozone -- i'm just not seeing anything terribly wrong but i'm not seeing good news. richard: we are worried about all sorts of things. when you are not growing so fast, the economies don't have

momentum. you can't plow through these worries. you feel more to them. ikey, there arer problems in japan. you just feel vulnerable. i think central banks should be doing more. i think the european central bank has backed itself into a corner, where it is being demanded to make policy actions. again this week, focusing on policy actions. why must it do something? what the european central bank should be telling us is the eurozone economy is gradually gaining momentum. he is an improving trend. we expect that to continue this year. and taking people's attention to what really matters. francine: what does matter? the central banks are trying to fight inflation or the specter of deflation. they are probably working a little bit with the currency to

give the markets no reason to sell off. richard: i don't think central banks have got to grips with this idea of deflation either. i don't think it has been well explained. are we facing deflation in the west? no, what we have is downward pressure on prices because world oil prices have come down. that is actually demand stimulus in the west. there's negative feedback if we're exporting lots into emerging economies. but the west, i don't think, is at risk of outright deflation. francine: there is also a little risk from china. let's talk more about inflation or the lack of inflation. mario draghi preparing for the ecb announcement. this measure tries to capture changes in the price of goods closely related to the margin of slack in the economy. super court isn't published by

eurostat or the ecb, but bloomberg intelligence made us a graph and it has replicated the gauge. it is available on the bloomberg with that index. if you look at super core inflation, it is probably falling less and recapturing a little bit of momentum since the beginning of last year, but the markets are reading it differently. you are telling me one thing. then the markets have a mind of their own. richard: central banks have lost leadership on this. they are not explaining the situation properly. core inflation in economies is not zero. that is something brought about by an external event. i think what is interesting is that you get the first round effect that just comes through pump prices for diesel, patrol, then you get a second round effect.

as people who use oil in production and supply processes get the benefit of lower cost, that feeds back in. that hasn't come through very noticeably. that tells me there's a little more core inflation than people realize. bankss what central should be focusing on, the real issues. they allow themselves to get back into a corner. francine: is it not a vicious circle? i know they shouldn't worry about the markets, but if the markets tank, then people's perception of the world gets worse and they spend less. that filters through the real economy. there must be a correlation. richard: i'll tell you what the correlation is, that if markets realize that they can influence central banks, they will try and influence central banks. francine: they've always done that. richard: but clever central bankers will sometimes say, this is what we need to be doing regardless of what the markets

might be trying to persuade us to do. francine: janet yellen tried that in september. it didn't quite work. richard: she should have done it in september. they should have done it a year earlier. they backed off both times. every time you back off, the next time, you have more pressure on you. you have to do what you think is right for the real economy. francine: richard, thank you so much. it is a long-term game. richard jeffrey stays with us. ,e will be talking about oil commodities, and brexit. up next, low oil prices lift cathay pacific. the stock soars. we speak to the ceo. then, trump tightens his hold. the billionaire takes two more states as bernie sanders scores a surprise win over hillary clinton in michigan. reports a 35%ock

slump as they met on the french market. how healthy is europe's retail sector and its customers? ♪

francine: this is "the pulse." let's get to the bloomberg business flash with nejra cehic. has reported its fastest annual profit growth as it added stores and expanded online sales.

the clothing retailer says net income rose to 2.8 8 billion euros in the period to the end of january. since its ipo, the owner of zahra has boosted sales more than sixfold through aggressive expansion. has become the latest wall street bank to signal a dismal start to the year. shares slid after it said it expects revenue to drop 15% on the year. citi is expecting a steeper plunge. it cites commodity prices as contributing factors. eon has reported its biggest ever annual loss after writing down the value of its coal and gas power plants. germany's largest utility company said its net loss more than doubled in 2015 from a year earlier. that missed the full-year loss predicted by 11 analysts

surveyed by bloomberg. credit agricole aims to boost annual profit in 2019. that as it cuts costs and feeds asset management. france's third-largest bank plans 900 million euros in annual gross cost savings over the next three years. francine: thank you so much. cathay pacific has reported a jump in full-year net income of over 90%. that beat analyst estimates. savings on fuel were partially offset by hedging losses. chu. speak to ivan give me first a sense of your hedging position from now on. happy with the result. we do hedge our field, but we never hedge 100%. hedgingcost to us after

has gone down by $7 billion hong kong, -18%. with ainess benefited lower fuel situation. the lower fuel situation, the strong passenger market, and strong contribution by group companies helped contribute to the better result. francine: given the outlook on the oil price now, is this good risk management? can you not hedge less than you usually do? ivan: we like it when the fuel price is low. the fuel price is about one third of our cost. while we only hedge a proportion of our fuel consumption, fuel hedging is a risk management strategy for us. if you look back, we have seen fuel price going through two cycles. to high being from $100 $120.

in the last three years, fuel prices have been between $100 and $120. we had a lot of fuel hedging gains. we took this position to protect the viability of our airlines in those high fuel price years. down, we price comes will take some hedging losses, but the overall business will benefit. improvement a 90% in our profitability. it is the best in the last five years. and your of course, share price is the highest in three months. what i'm trying to understand is the reasoning. 60%are still hedging 50% to over three years. is that because you want to have figures which makes your modeling easier? is it because you think the price of oil may go back up? take hedginge

positions to protect the viability of our operation and protect our earnings stability. gains whene hedging fuel price is high, but we would rather have hedging losses. because the business has benefited. francine: what is the main factor that you worry about? i was looking at your passenger yields. load factor was pretty good. is there something you need to work on over the next 12 months? ivan: certainly. what we would be focusing going forward is continuous increase investing in our product. we are adding more destinations. we are adding service to london. we are operating new service to madrid in spain.

we are adding more service in the region. we are bringing in a new fleet. we have 48 of them. 12 have arrived this year. we are investing. a host of things to improve our product and services. we are also developing a lot of market, particularly the china market. we have seen big growth last year. chinese left china to travel abroad. we have been a major beneficiary from that traffic. we expect that to continue. with a combination of product development and market development, and if the real economy stabilizes, i think we ll see a robust market going forward. francine: you are talking about better services. this impacts your cost.

hedging also impacts your cost compared to certain rivals who decide not to hedge fuel costs. in terms of your ability to bring down prices, do you think your strategy overall impedes you from being more attractive to customers? with wesolutely, but intend to do is attract more customers. at the same time when yields are coming down, what we are doing is taking a lot of measures to get our unit cost down. if you look at our cost last year, total cost per unit: letters come down by more than 10%. that is including fuel. excluding fuel, we are seeing a reduction of about 3% on nonfuel costs. chu,ine: all right, ivan thank you so much for joining us.

up next, another super tuesday for trump as bernie sanders scores a surprise win over hillary clinton. the battle for the white house heats up. we break it down. ♪

mean is that the bernie sanders campaign, the people's, the revolution, the people's revolution that we are talking about, the political

revolution that we are talking about, is strong in every part of the country. frankly, we believe that our strongest areas are yet to happen. francine: dallas of course vermont senator bernie sanders after scoring a surprise win over hillary clinton in the michigan democratic primary. he overcame a double-digit lead she held in polls. clinton's strong showing in the south continued with a win in mississippi. donald trump is closer to the republican nomination. his closest competitor, ted cruz, took idaho. let's bring in hans nichols who has previously been covering the white house. it,atter where you look at from the republican side, the democratic side, if you are a u.s. moderate, you would be having a headache. hans: i suppose that's right. if you really crave a centerleft or center-right politician and

want to choose between them, today is a slightly difficult morning. we are learning so much more about the electorate each time it votes. we see how different the south doesn't have the support he planned on. trump is getting close to a 50% threshold in the south. when you look at the other ohio, theorida, question is, can trump get above 40%, 45%? that is really the question on the republican side. on the democratic side, michigan makes it much more interesting. we thought we had just the small states that were entirely white where bernie sanders was going to compete well. now we have michigan. bernie sanders really upending all the polls. it is a very negative sign for hillary clinton and her campaign

on what she's going to have to do going forward. francine: are we simplifying too much if we say that michigan tells us that the democratic nomination is open? and are we oversimplifying if we think donald trump now has the republican nomination secured? hans: i would never accuse you of oversimplifying on-air. off air, i would probably do it all the time. on the republican side, i think it is clear that trend is the front runner, but he has a clear problem getting above 50%. , ifs becoming increasingly not difficult, you have to figure out how he's going to make that math work. on the democratic side, i think we are tapping in, and what these votes show is a great deal of unease and lack of enthusiasm for hillary clinton. if democrats are not excited about their ultimate candidate,

that is going to be a problem for them. if you make the argument that republicans nominate someone who is out of the mainstream, the advantage is still to hillary. we still haven't seen any head to head matchups that really factor in anyone in all this. we have to go on the road trip one of these years. maybe we have to go to ohio next. francine: ohio, idaho, mississippi, i'm in. it's a date. richard, how do you model a trunk win or something in the u.s. election? richard: i think that is difficult. what markets have decided to do is put their money on the likelihood of a clinton victory. i don't think the markets are putting much weight on the idea that trump could win. on which basis, there is the potential for surprise. francine: always the potential for surprise. richard jeffrey, we are talking

brexit next. after carney, the queen, the monarch gets drawn into the brexit debate. also, production figures are coming up next. richard stays with us. ♪

to "the pulseome ." u.k. january industrial production is a little bit worse than expected, 0.3% gain. 0.4% gain.ecting a industrial production is a little bit worse. 0.7%acturing production up instead of the 0.2% gain we were expecting. it is not all doom and gloom. we did have disappointing services manufacturing --

services data. when you factoring is strong. i'm all next up today. let's get to the bloomberg news with nejra cehic. nejra: bernie sanders scored a surprise win over hillary clinton in the michigan democratic primary. clinton took mississippi. donald trump beat back a barrage of attacks led by the last republican presidential nominee and scored major victories over his leading rival in two primaries. the s&p 500 has about 2% upside and 20% downside, making for a lousy risk-reward trade-off according to jeffrey gundlach, who says betting on stocks is a big losing proposition. french unions have been limiting rail traffic around the country as they protest government proposals that would end the 35-hour work week. the strike began yesterday and is due to run throughout the day. the action will affect some euro

starlings to london. local news 24 hours a day powered by our 2400 journalists in 150 news bureaus around the world. european stocks bouncing back. let's head to the bloomberg with mark barton. mark: i want to show you the msci world index. it is down for the second day after five days of gains. since this index fell to a 2.5-year low on february 11, it has rebounded by 8.5%. to $8.5 trillion, almost as big as the japanese stock market. there's your stat of the day. eon is one of the stocks of the day. it rose as much as 2.5%. germany's biggest utility reported its biggest ever annual loss, 7 billion euros, which was more than estimated.

it wrote down the value of power plants by billions of euros. the dividend was unchanged. pretax profit did beat estimates. check out into tax, the world's largest clothing retailer. 2001 to 2016 share price, i'll come to that. it reported its fastest annual profit in years, fueled by the zara chain. since its ipo in may 2001, shares have risen by 900%. the stoxx 600 is up by 5% in that time. just want to finish with the u.s. financial index, the s&p financials. this company is the one you want to be watching, citigroup. it joined u.s. rivals in signaling yet another dismal start to the trading year. first-quarter revenue from fixed

income and equity trading will probably drop 15%. that would make 2016 the fourth straight year the company's revenues from those operations have declined in what's typically the strongest quarter. citigroup dragging down the industry. francine: mark, thank you. let's talk brexit. son has caused something of a stir by claiming the queen is in favor of a british exit from the eu. theingham palace insists queen is politically neutral. richard jeffrey is still with us. rob hutton is also here. i need to show this. we don't do that very often. this is extremely acrimonious, rob. ,his feels like a nation split but at the very heart of the people in cabinet. was discussing this with

colleagues earlier. my baseline is the scottish referendum, which got really nasty. they had to have a church service looking for reconciliation afterwards. -- we dois is still still have four months. this is a really interesting intervention. i think there are some things we ought to say. francine: they've denied it. buckingham palace has said, not true. rob: and nick clegg has also denied it. it is supposed to be a conversation that is supposed to have happened while nick clegg was in the government. at least a year ago. in which she didn't explicitly say i think britain should leave the union. she expressed frustration in the way the european is going. those are sentiments widely held across the european union. francine: it doesn't mean she would campaign for brexit. rob: a week ago, i was talking

about surveys that showed that people don't like the european union in britain. if you ask, should we leave, they say no. not liking the european union does not necessarily mean you support leaving. francine: richard, we don't really believe the polls, or most people don't believe the polls because of what happened in the election. it is difficult to quantify what would happen to the u.k. if it were to exit the eu. you can't understand the impact it has on people's minds. does it make it more likely that brexit happens? itan investor, do you ignore or do you position yourself ahead of time? richard: i don't think something can be ignored. what you have to take into account is the possible outcomes. we are entering a period of uncertainty. that has already impacted financial markets.

it has had a negative impact on the pound. case not necessarily the it had a negative impact elsewhere. it probably slightly helped the u.k. stock markets. u.k. competitiveness improves. you have to take into account these various factors without necessarily factoring in an outcome. francine: we don't know. what we do know is even if it is a very close majority to stay in or possibly stay out, david cameron's political future could be in disarray. rob: i think it's binary. i think if we vote to leave, cameron goes. i think it is very hard for him to stay. stay, hef we vote to probably stays. if it is a narrow win, what does that mean? it may be that he becomes a wounded prime minister.

or it may be that he can say, a win is a win is a win. francine: i guess if it is a narrow win, we could have another referendum being promised in 2, 3 years. do you think u.k. plc will suffer? there's a tree diagram with about 2000 different branches of what if, what if, what if. when we get there, i don't think the environment will feel quite as threatening. you talk about the scottish referendum. this has been quite a bitter debate. it healed pretty quickly after the event. francine: the price of oil probably helped. richard: but i think the fact is that the contentiousness of the debate of before the referendum. once the referendum is out of the way, people settle down and

reestablish working relationships. francine: from now until june 23, can the pound only go down? richard: i don't think that is necessarily the case. against what? this situation is potentially destabilizing for the euro as well. it is more likely to come down then go up. francine: thank you so much. richard jeffrey and rob hutton, who raced here from westminster. next, why bigger is beautiful. we breakdown numbers from the owner of zara as the clothing retailer reports its fastest annual profit growth in three years. ♪

francine: the world's biggest clothing company ended its financial year in style with its fastest roughage growth in three years. bad news for a french retailer that saw a slump in profit. how healthy is the sector? daniel lucht is the global research director that has been analyzing the retail industry for over a decade. great to have you on the program. inditex is doing pretty well. it can deliver good fashion,

fast fashion, that people want to buy. daniel: certainly. francine: as simple as that? they give the people what they want? if you look at inditex in a bit more detail, obviously, they've got great effort in being vertically integrated, producing exactly to the specifications of what their shoppers want and what their stores need. francine: they are cutting their expansion goal. they want to do more online. what they don't want to become is what walmart did in the u.s., where they expanded so much that their cost went up. are they getting the online strategy right? daniel: you've hit it on the nail. we can see a lot of strong growth from the likes of -- amazon is going to be really aggressive in clothing. ina as the leading player

this space has to react. you reduce exposure to stocks and push the online bit. what we're talking about is quite a good position for zara to be in. they can roll out the click and collect offer. they've said they are going to roll out online for all of their brands across the european market. going back to vertical integration, because they produce themselves, the products are quite exclusive. in fashion, there's always copying, but if you are .xclusive, you have a hedge francine: we spoke to burberry. a lot of these fashion houses are changing the way they showcase to avoid fast fashion catching up with them. will that put pressure on inditex and zara?

reckon they will be fine. the other thing is, zara don't really advertise much. they use their stores to show the range they've got and they've got such a quick turnover in ranges. the stores are in such great locations. that should work for them for quite a while, going forward. you just need to get the whole online piece in do it. francine: so this is for zara and inditex. what about casino? they have huge spaces, huge costs, and they are not getting the strategy right. daniel: yes and no. if you look at the results, you have to kind of take into account that on -- that the exchange rates really worked against them in the last year. on a constant basis, sales are

up, but there are problems in brazil. large markete to space in france is difficult to make work. good, casino is really with the whole online integration piece. they are the retailer with the most click and collect options out there. francine: daniel, thank you so much. daniel lucht, research director at global research farm. next, trump takes michigan. bernie sanders scores a surprise win over hillary clinton. ♪

one thursday, we will have a new forecast. 2%the target of inflation at is getting further away, they need to do more. the market expects them to do more. >> what would you suggest the ecb could and should do? >> there are different instruments to use. front, try to, up purchase the amount of government bonds they are purchasing, to try to have an impact. then there is the whole issue

about negative interest rates. a conflict of interest here. i'm a banker and that is not something which is helping banks. it could be a cut. i think they can compensate the negative effect by excluding certain amount of deposits that the banks have with the syndrome banks. trying to mitigate the negative impact. mark: is there a real credibility issue here? does the ecb face losing credibility? how are we to that? >> i think in the end it depends on whether the ecb will be able to reach its target, which is 2%. it is not to present tomorrow, it is over the medium-term, so there is some time. mark: will it meet the target by the end of draghi's tenure? >> i think he will. mark: is that 100% he will?

>> he will do whatever it takes. mark: why hasn't he done it? we had christopher yesterday saying, bring out the big bazooka. do what japan did. why not just go big? there are risks. you take an action, you have to balance advantages and disadvantages. this is a new territory. you are buying assets. you want to be sure you are not tripping the boat. central banks are conservative. they are incremental. -- there's a medium-term objective. you don't want to rock the boat and through all this bazooka may be for shooting at a mouse. it is a difficult situation. not depend only on

monetary policy. if we had better policies, , that isl and fiscal not entirely in the hands of draghi. i think he will do what is needed. francine: that was a great interview. i urge you to go see it on bloomberg.com for your bloomberg terminal. smaghi speaking to mark barton. he said central banks are trying to use a bazooka to shoot at a mouse. let's get the bloomberg business flash with nejra cehic. nejra: inditex reported its fastest annual profit growth in three years. the world's largest clothing retailer said net income rose since 2.88 billion euros its 2001 ipo. the owner of the zara brand has boosted its sales more than sixfold through aggressive

expansion. citigroup has become the latest wall street bank to signal a dismal start to the year. it said it expects third-quarter revenue to drop 15% on the year. they are expecting a steeper tumble of 25% for investment banking revenue. it cites low interest rates. eon has reported its biggest ever annual loss after writing down the value of its power plants by billions of euros. germany's largest utility company said its net loss more than doubled in 2015 from a year earlier. that missed the full-year loss predicted by 11 analysts surveyed by bloomberg. credit agricole aims to boost annual profit to more than 4.2 billion euros in 2015 as it cuts costs. france's third-largest bank by market value plans 900 million

euros in annual growth cost savings over the next three years. bernie sanders scored a surprise win over hillary clinton in the michigan democratic primary. he overcame a double-digit lead she held in polls. clinton took mississippi. donald trump beat back a barrage of attacks and scored major victories over his leading rival in two primaries. that is your bloomberg business flash. francine: thank you so much. european stocks bouncing back a little bit this morning. let's look at where they are and head back to the bloomberg with mark barton for the latest. morning so far of games. this is the column of interest, the main european bosses the day before the ecb is widely expected to increase stimulus. asian stocks declined because of concerns about the global economy.

this is the msci world index. this trend right here, since february 11, when the global gauge fell -- actually it has risen, rebounding 8.5%. of $8.5ates to a gain trillion, almost the size of the japanese stock market. eon investors can't work out whether today's news is good or bad. it is germany's biggest utility. shares are unchanged now. he unveiled its biggest loss, more than estimated. it wrote down the value of power plants by billions of euros, underlying net income excluding write-downs was unchanged. the dividend was unchanged. pretax profit beat. lots of info to digest. this is a lovely chart. this shows you the price of inditex from its ipo in may 2001. i bring up inditex because

today, the world's biggest clothing retailer reported its fastest annual profit in three years, a gain of 15% fueled by its zara chain and expanded online sales. since 2001, it has boosted sales more than sixfold through expansion of its chains. since may 2001, the shares are up 900%. h&m, its big rival, is up by a mere 200%. the retail index is down by 6%. inditex very much look clothing retailer to invest in in the last 15 years. francine: thank you so much, mark barton. stay with bloomberg. "surveillance" is next. tom keene will be joining me from new york. we begin the conversation with omifchairman of the advisory board.

we will talk about brexit, citigroup, and the impact on the banks. we worry about deutsche, barclays, the sector as a whole. it is very gloomy in london. we will be back in two minutes. ♪

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rancine: asian stocks drop and investors expect more from the e.c.b. trump ups the stakes. donald trump leads two more primaries, berny sanders defeats hillary clinton in michigan. and u.s. bank shares are dragged down. tom, we o lord desai have plenty to