francine: caution on rate hikes as chair yellen strikes a dovish tone. debt and no dividends. china's largest bank has come to an -- as the traded deepens, we look at reforms. rousseff's power slips away good -- slips away. also coming up it is the auto industry's eggs recall ever. airbag -- industries airbag recall ever. -- the auto industry's biggest recall ever. ♪

pulse.e: welcome to the life from bloomberg's european headquarters. i'm francine lacqua. let's check on the markets, because that is where most of the stories. it is all about janet yellen's dovish tone yesterday. she is giving a nice little boost to emerging markets. theoost to london minors, biggest gainers, crude oil. the german retailer that has decided to split into two entities up 8.3%. let's get straight to the bloomberg first word news, nejra cehic. nejra: japan's industrial production has dropped the most since march 2011 earthquake. domesticill explosion production at toyota. slumped 6.2% after rising in january. economists surveyed had forecast

a 5.9% drop. brazil is in battle -- brazil's embattled president has suffered a new blow. party held six ministries. she denies any wrongdoing and there is a corruption scandal that is reached the highest level of government and business. a vote on her impeachment is expected in the middle of next hadh. shares in the cotter takata have plunged this morning here at -- morning the worst-case scenario would involve millions of invaders. -- of inflator's. global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . francine: we are getting some

breaking news. i'm trying to convert the yen into dollars. overall sharp saying that foxconn is taking control of sharp. ,t's for karst -- it's forecast ¥170 billion, that compares to a ¥10 billion profit at the same time last year. means ition basically is a $1.5 billion loss. i want to convert it to you that you get the -- converted to you to make sure you get the full magnitude. yesterday stocks surged in oil rallied. janet yellen struck a dovish tone on american interest rates. >> given the risk of the outlook, i consider it appropriate for the committee to proceed cautiously in adjusting policy could this caution is

warranted because with the federal fund traded solo, the f on seas ability -- the fomc's ability to use monetary policy is asymmetric. francine: that was chair yellen. let's bring in our guests, antonio garza all of -- antonio garcia pascual. it, but she she following the markets to much? -- but is she following the markets too much? antonio: she wanted to make a case for this markdown in the long-term interest rate. weaker.al outlook is she made that point. -- sheted to remove

accomplished that ambition. investorsshe is given a list of conditions they need to watch for future rate hikes. if we look at the bloomberg terminal, antonio, it shows clearly traders that's are now for a test traders bets are for a rate hike -- traders bets are for a rate hike. antonio: evidently she wanted to guide the markets. the markets tend to overreact. we will see what happens this friday. the labor market continues to stand strong. we believe it will continue to do so. is that they are trying to force an employment rate low, 4%.

surereally want to make that the labor markets are strong before they get on with it. francine: how do you view inflation echo she seems to want wage growth in flint -- how do you view inflation? she seems want rate wage growth -- want rate growth? antonio: it should pick up. there is this global trend, and inevitably that is quite the bid. all of the large economies -- i think that is the balance that she is trying to strike good looking at the labor market, wage inflation should pick up. saying -- the beginning of a trend. we think that unemployment rates probably has to go toward 4%

before you see that number close to 2%. for that reason, we think probably to ask this year can be delivered. francine: what does it mean for dollars? we have a dollar chart. i don't know if the divergence play the euro is still there. if it means it is putting more pressure on mario draghi to do more. antonio: it is a big issue for both economies, currency and how that plays into inflation. look over near-term, there is less of an upward pressure on the dollar. when you look at this everyday, especially because of the risks in europe are larger than for the u.s. one will think that the second half of the year, you should see

farther appreciation of the dollar versus the euro. somewhere than -- parity by the year end. francine: on currency, we often focus on the pound. what happens to europe? antonio: this is an interesting question, because in the event of an exit, clearly the u.k. will exist, but the eu will as well. .ecause of all of the problems the euro will weaken as well. francine: draghi does more. antonio: the ecb to be more supportive. up instability will pick quite dramatically. both central banks in europe will have to do more. antonio, thank you so much.

he stays with us. we will be talking about china. stay with the pulse. plenty coming your way. making off bad credit. china's biggest lenders report a surging bad debt. 1990's, -- has put a $24 billion. shares drop by 24%. just think the president. -- a rousseff loses her bid ♪

francine: let's get to the bloomberg business flash with nejra cehic. has clinched a deal to buy sharp after years of pursuit. to affiliated companies are 66% stake in sharp. the deal brings together the main assembler of apple's iphone's with the electronic maker who built japan's first television set. shares of metro are surging after its proposed plans to split into two companies. the german retailer says it will split its business into two entities. neither the management board or supervisory board will has --

board has made a decision yet. consideringeal is selling its u.k. steel division. global also -- mobile oversupply mean trading conditions have rapidly deteriorated. they cut jobs and the k last year -- in the u.k. last year. that is your bloomberg's business flash. -- help stocks to its biggest gains. concerns over new government plans to deal with bad loans. in the current is standing by. what are we expecting from today's banking. enda: i think the overall mood for china's banks is quite bearish. it is a quite subdued sentiment.

bad loans are at a decade high. that is the backdrop going into this earnings season. the government has tried to slope is a wayy of delivery -- a way of alleviating pressure. three of them should be coming later tonight. the expectations are we might decade-long run of profits, -- marge's are under pressure. -- margins are under pressure. picturepretty subdued for what is the engine of china's economy. francine: overall ecb bancorp -- bad loans growing at a slower pace. >> the bad loan story will not be going away anytime soon. whether they think will they will have test whether they think they will have a better

year this year. -- whether they think they will have a better year this year. whether they can turn a corner and get motoring again. oncan see the lending going as opposed to an efficient lending that is marked china's economy over the past decade. it comes down to whether the government can hit the growth target. it will be the economy story that will drive the china taking story this year. seecine: overall, analysts bank earnings decline this year. growth is expected. good --xpected 6.5% 6.5%. and a coke i think that is the expectation. they had a very good -- and the -- profits will fog.

because of a depression in margins. -- sinceank is taking late 2014. all of these factors together are worth putting pressure on china's bank system. it is hard to see why that story will turn around in a hurry or anytime soon. francine: enda curran, let's get more on antonio garcia pascual. have bad loans. we need to make sure that the authorities managing -- credit crunch. back to credit boom this month. , a lighterime proportion of bad loans are generated. they should clean out the balance sheet.

problem ofte of the those bad borrowers. they have capacity to deal with the issue. they had the money and fire fire -- fire power. [indiscernible] will be a problem for growth going forward. the heavy measures to deal with it. significant -- for now -- francine: will they do it back oh are they on top of it? -- do it? are they on top of it? think they have no choice. right now, the market [indiscernible] there will be further drop in profits reported.

francine: is this systemic? how big are they compared to the rest of the world economy? antonio: potentially this is an issue. they have the resources to deal with it. i don't think you're going to see a massive credit crunch. the economy decelerating rapidly and -- rapidly. large.blem has to be all economies with credit booms, including asia. , it is different, maybe. i do believe the father drops in profits will be coming. more conversation will have to be done. they do have resources. francine: we are getting some of the bank earnings, icbc, the net

income coming in at ¥277 billion billion.7 that is better than expected. you're not seeing the bad loans. they report af lot of those issues separately. there talking about commission income. we'll have to monitor these headlines to see if we have any more breaking news. overall janet yellen which he talks about loans out there, the economy, she is looking at china. her? 30%?oes it worry 50%? antonio: clearly the chinese are doing their part in the sense of leading against us with more aggressive fiscal policy. whether they do more or they attack problems head on.

there are more policies reports. little bit of pickup in growth in the second quarter in china. mainly policy driven. i think that provides every spite -- provides respite globally. u.s. is faster than expected. that remains. that you have more policy action .nstead of china it is the biggest global risk to u.s. global growth. we're just francine: are getting more -- francine: we're getting more breaking news. -- this is similar to how we decorate things in europe. it is my understanding that they are comparable. i will try to get to the bottom

of this. antonio garcia pascual will stay with us here at we are going to be talking more about emerging markets next. this is a good moment to bring it in because china is the biggest maker of world's steel. as you can see in our chart of the hour, prices are rallying. some analysts fear producers will be tempted to return mothballed plans into operation. you can get new charts every chart. using an eye top it is the world's biggest car industry recalled good -- recall. we will bring you that exclusive next. ♪

francine: we're getting breaking news. icbc out of china talking about chinese banks. bank of china net income and little better than expected. billion will go back to chinese banks. a worst-case recall scenario will cost you $4 billion. that is according to a person familiar with the matter. this, let's get to bloomberg's craig trudell.

ata portraying this recall? craig: this is a worst-case scenario. that has been something that has really been difficult for outsiders to arrive at any sort of reliable figure. up until recently, there has been little looking into just how many of these airbag inflator's to kind a has made -- takata has made. the material you use to make these airbags go off is not safe. recall them all. that has been put out there as a potential way forward for regulators, particularly in the u.s. you see this figure today as one to somey have provided of its stakeholders according to people -- to a person that we have spoken with about this figure.

about $24 billion. francine: very quickly, does this affect other companies share prices. -- share prices? craig: it is worth checking out autoliv today. you also saw the japanese automakers take a hit toward the end of the day. moves forlso see some some other airbag suppliers like here in japan. francine: thank you so much for the update. craig trudell in tokyo. up next, it did less than 10 minutes for brazil's largest party to decide to leave the party. we will look at where it -- at where that leaves the president. we are getting some banks out of marketsporting -- the stopped rallying did this is only back on what we heard from

janet yellen yesterday. -- rallying. this is on the back of what we heard from janet yellen yesterday. ♪ you shouldn't have to go far

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x1 makes it easy to find what you love. call or go online and switch to x1. only with xfinity. francine: welcome to "the pulse," live from london. let's get straight to the bloomberg first word news. nejra: japan's industrial production has dropped the most since the march, 2011 earthquake. a steel mill at explosion which halted domestic car production. output slumped to 6.2% in february, after rising in january. economists had forecast of 5.9% drop. brazil's embattled president has settled a new blow on her

future, with the biggest party leaving her coalition government. they held six ministries in her administration; she denies any wrongdoing in the corruption scandal. an impeachment is expected next month. first democratically elected leader in more than half a century has been sworn in. he took the oath of office and begins his term friday. is predecessor was barred, but she says she will lead the government. day,l news, 24 hours a powered by our 2400 journalists and more than 150 news bureaus around the world. you can find more new stores on the bloomberg at top . francine: thank you. markets are up this morning, quite a lot on the back of janet yellen.

let's head straight to the check on what's moving. caroline: i'm owing to be digging into the dollar first, because relief falls into the market and janet yellen says she will move cautiously, look at the effect that we see on the world currency rancor. currency isle actually down versus the dollar, which is falling against every one of the major currencies. it's the most beaten up one, most related to commodities which are surging,. the kiwi dollar, the south korean won, all on the upside. in fact, we are expecting not a hike until november; that's what the market is telling us. the dollar is heading for its worst month in more than five years. check that out. meanwhile, other assets are jumping on the back of the dollar's depreciation. oil and gold are jumping higher; brent crude up 1.4%, so clearly we are seeing money flood into oil.

hope is that we might see less dollar,d that cheaper meeting that commodities are cheaper for foreign buyers. even ahead of that u.s. crude inventory number we are t 3 million more barrels to be added to the glut. nevertheless, oil continues to trade higher. gold is starting to flatten out, but gold has been on a tear. could we see gold slow down on his rampage as we see the rally inequities? the stoxx 600 up; every single industry group is higher. basic resources, miners. yesterday's laggards, today the highest. they are the best performing industry group of the year, oil and gas quickly behind them. lastly, i've. metro. -- i've got metro. it popped the most since 2013; they planned a stock split,

and the investor base likes it. francine: a bit of a surprise. thank you. largestby brazil's party to leave the coalition has raised the odds that the president will lose an impeachment vote. another ally will meet today to discuss. let's speak to our bloomberg executive editor for transnational government, and our guest from barclays is still with us. how bad are things for dilma rousseff? >> she is in big trouble; no getting around that. the historical kingmakers in brazilian politics -- that they have left, it to symbolic moment. it's not over for her there is a long way t -- there is a longo go. but right now, we'r have to see how she will sit about. francine: this she have a

guardian angel? the former president lula? >> yes, and this is interesting hand, she is faced with the risk of parliamentary numbers, see how she gets the numbers to survive. against that are street politics. lula is extremely popular, certainly in the northeast of the country, the heartland of the workers party. he's extremely popular, and there are a lot of people who say he is responsible for why my family is not starving. people are terrified that if that will be taken away. a is certain extent, lul a not her guardian angel, but he personifies her biggest selling. francine: what i was struggling to understand is that a lot of it -- there are charges of

corruption, turning a blind eye to stuff, but it is also economic incompetence. if you look at the heart of the brazilian economy, it's a terrible state, and it became that way very quickly. >> that indeed is the case. i think it has persisted for a long period of time. you look at the fiscal performance, very poor, a steady decline over two years of deficit and public debt approaching 90% of gdp. rates,uation -- interest central bank interest rates, north of 13%, funding costs for the country between 13% and 14%. indeed, there is a fundamental problem here. the fact that there is a potential change, we will see about that. that can't guarantee structural reforms -- francine: this is the problem. what is the best case scenario? an impeachment quickly, or her staying on?

do we need resolution either way, or his impeachment the better solution for international investors? >> that is what they seem to be hoping for, if you look at the run-up to the market, which has slowed as they realize it will take longer. someest case scenario is sort of government unity. the vice president will probably take over. course,t in line, of and perhaps he can cobble together some sort of consensus government and maybe even incorporate the opposition that will get brazil through to the next presidential election. what investors want to see is direction. they want to see some list of policies that will help the economy, that have a reasonable chance of getting through. francine: but the problem is we don't have any guarantees . it's unclear who that person would be. overall, is brazil fairly insulated? the problems in brazil seem to be staying in brazil; it's not systemic.

>> my perception is the following. the problems can be solved. this is not -- brazil will not go into a debt crisis. there's a way to resolve this. put up a credible fiscal plan, you can get the dynamics back to a sustainable path. and brazil can eventually produce an interest rate, and the pressure will spread. francine: we're looking at trade partners -- these are figures from 2014. china has cash. >> well, china also, as we were discussing, they may need to lead against capital outflows. they already lost 20% of international shares. they may need to pull some money from their banks eventually, but not just yet. i think they have problems of their own. again, it's not an issue of more cash. there is liquidity.

it's an issue of the right structural reform. it's an issue that brazil can resolve. >> he made an important point about fiscal consolidation. there is a sense that the vice president -- it will be easier for the next president to pull together some sort of fiscal package that will alleviate the concerns that investors have about lula. francine: very quickly, in terms of the timeline, we know dilma rousseff is working with small parties to make sure she doesn't get impeached. >> it depends how long she can stay in the game. she will probably dig in, two to three months. francine: thanks very much. up next, taking on spotify and apple music. we speak to the ceo of the french music streaming service.

♪

francine: you are watching "the pulse." let's get to the bloomberg business flash nejra: thanks. foxconn has clinched a deal to buy sharp after years of pursuit. the parent and its affiliated companies are taking a 66% stake. the deal brings together the main assembler of apple's iphone's with the electronic data that bill japan's first television set. shares in metro are surging on

the proposed plan to slip into two independent companies. it says it will transfer its wholesale in philly business into a separate entity, while it's consumer-electronics farm would remain under is a listing. decision, made a which says that it should increase the stock market value. of steel division is considering putting itself up for sale. they say global oversupply in high manufacturing costs mean trading conditions have rapidly deteriorated. tata cut jobs in the u k last year, and china's exports surged to an all-time high. that your bloomberg business flash. francine: thank you. competition is heating out amid french business spotify.eezer and

the ceo was on the phone with me. i want to talk about the ipo. the markets are going crazy because of what janet yellen said. it seems like the markets are volatile. you shelved plans to ipo. is a back on track? to you want to ipo or will you take a break? >> we decided the time was it right. we had some parts which were complicated, and we just finalized it. we keep all the options open, no rush. francine: when you talk about the options not being there, is it because it is difficult to get funding on the markets, because markets are volatile? >> i think there were two issues. a, the market started to get volatile, and it takes good market support in the first place. second, it was just after the apple launch. there were some concerns about

how it looked, which didn't make the environment -- of course, we had options. francine: how do you make yourself different to spotify or apple? you are incumbent, right? you are the new guy. >> we are the new guy, but also the biggest in france. we have been around for a while, everyonehree areas -- else is focusing on music, but we focus on lived experiences, based on algorithms. we have a unique product called flow, and we are the first to go beyond music. we do sport events, we do talk shows. francine: there you go. you can do "the pulse." breaking news on bloomberg -- give me a sense of the u.s. market. it's the toughest to crack. i know you heard a lot of investors say you are too close

to orange.how do you make sure you crack the u.s. market ? is a pricing? is offering something different? do you need to get music and act on board? >> no, in our case, i think the u.s. needs good partnership. we built up partnerships with orange and vodafone, and once the u.s. market opens up for those kind of deals, i think we will be there, because we want to be the big three, and we have a very successful partnership with at&t. we operate in the market but we haven't gotten into the right mode. francine: do you have to spend more on marketing? >> a good example of other companies -- with a few hundred million, you don't do the trick. you haven't committed very strongly. hence, it's a question of options. francine: but how? is it social media?

everybody knows spotify in the u.s. if you want to tap into market share, what kind of narrative -- >> it's a makes the social media, traditional media, communication -- it's all about explain to people what's different. to be fair, the biggest issue of all streaming companies is what are the best sales channels, and the partnerships are a good solution. francine: a lot of your acts have more to say on what music goes into what service. some of your competitors have given into that. will you? >> we are in a constant debate, and we will explain to the artist in the music industry what their values are. the big debate has been on the free side. which is fair . overall, i think the opportunity is huge. we are at the beginning of a

big, big market. 60% of the revenues are digital. we cbs a potential. francine: emerging markets? are there any countries willing to pay -- >> we are the leader in the emerging markets. for example, in africa and latin america, and some asian markets. , there was a very small market but now it is double-digit millions because of our leader position. south africa, other places -- those markets will leapfrog as people jump into streaming. francine: what will happen? infrastructure? >> its infrastructure, it's a mobile economy. it's payment infrastructure. francine: 5, 10 years away? shorter? >> i think it's shorter. you can see the top level of customers taking service, and in latin america a goes very fast. africa may take longer.

francine: latin america -- we talked about brazil, the politics. at?these things you look i do know how you do your pricing plan. >> well, we pay in local currency, and we pay the royalties in local currency. we adjust pricing to the purchase of the individual market. you have to understand -- in most of those places, there wasn't anything. every revenue you generate is very positive. francine: what's your biggest headache? distribution, funding, currency? you get back all the money in euros. explaining what a superior project it is, and your customerkeep costs under control. those are the two issues he really have to focus on. francine: a fascinating conversation. the ceo of deezer.

up next, we bring you the latest charitable foundation of the hedge fund billionaire who said it was duped by a wall street banker. ♪

francine: hedge fund billionaire luis pagan says it fell victim to a wall street banker who stole $25 billion in investment scams. the foundation said he lied to

them about a potential investment, which prompted an investigation that led to his arrest this monday. for the latest, ryan chilcote joins us. this is an amazing story. we are all hooked. what were your first thoughts? ryan: mine was if such a savvy investor, or the people that work for such a savvy investor, can be duped in the scam like this, what does it say for the less sophisticated investor? that's the exact same thing the sec said when they announced their suit, that even sophisticated investors are not immune to financial scams. working forsen was ae alleged culprriit, blue-chip company when it comes to raising funds. when you approach a group like that, natural you think they have credibility; you believe what they say. that the same time, you know,

sure, they blew the whistle, they called up the general counsel when they discovered there might be a problem, they notified the attorney general in new york, but they only did it after they handed over $25 million. this scam, if the allegations are true, was only caught after they handed over $25 billion, and he was asking for an additional $20 million. they were never put off by the fact that he was promising a 15% return, risk free, which for a group of financiers should be -- francine: alarm bells, if you look at the return. tell us about luis pagan. ryan: that's even more extraordinary. he is an extraordinarily successful hedge fund manager. his firm ranks money managers. in 2015, they said he was the

10th most successful for the year; he raised $18 billion in terms of net gains to got in the business in 1990. he's also a big conservation a list and birdwatcher. the other thing i noticed about him -- and i say this not to be flip -- when he appears in the media, he always seems to be associated with tales of woe. three weeks ago, he was out there, publicly accusing his that he has a house next to him in the bahamas, plotting to kill him. his labor responded -- they had a 10 year long feud. you and i may have just chosen to move to a different island or something. it's been very unlucky. francine: unlucky. a diplomatic word. thank you, ryan chilcote with the latest. there is plenty coming your way; we have eurozone consumer confidence at midday, u.s. mortgage of locations, followed

by german inflation data. all of this on a day when markets are rallying on the back of a we heard from janet yellen yesterday. stay with bloomberg "surveillance,". next. you can see a lot of these stocks still rallying in asia, resources thatg, are driving these in terms of what we heard from janet yellen. she clearly laid out her approach, she basically reasserted the central bank's gradual approach to raising interest rates, or also rallying the dollar, headed for its worst month in five years. concern is not only for euro-dollar, but the main concern is what this means. does janet yellen now change the market? there is a great piece talking about that.

that yes, she has laid out her thoughts, but it feels somehow that the markets are dictating with the fed should do. that conversation is up next. ♪

francine: rate hikes. chair yellen strikes a dovish tone, and the dollar drops. debt and no dividend. a decade of profit growth at china's largest banks come to an end. away;usseff's power slips the largest party pulls away from her coalition, as impeachment surges. this is "surveillance." tom, what a day. we are seeing a little bit of a rally from