yen rises to a 17 months high. jpmorgan's ceo says investors should be prepare for u.s. rates to go negative. voters in the netherlands as euro skeptic politicians hailed the result. means.iscuss what it so, welcome to "the pulse" live here in london.

i'm francine lacqua. it is all about the fed and what heard from the minutes yesterday. the europe 600 started -- and they are unchanged. the minute showing the policymakers won't rush to raise rates. this is a picture for gold. 1,229. we wanted to show you japanese yen, advancing to a 17 months high. brent crude 39.8. we had some stockpiles in the u.s. yesterday. oil. a note on the goldilocks number for oil is $35. dutch voters have rejected a treaty between the european union and ukraine by a margin of 221. the result of the referendum has exposed the extent of anti- e.u. sentiments.

britain decides to leave the european union the outcomes are " potentially unknown" according to jamie dimon. he says even in the best case scenario, there would -- be years of uncertainty. a brazilian congressional report has recommended that impeachment proceedings against president rousseff move forward. the report found evidence she used illegal financing. seff says the charges are baseless and her supporters call the campaign against her and attempted coup. -- an attempted coup. you can find more stories on the bloomberg at top . francine: divergence on the pace of tightening within the fed. minute show debate on whether to hike this must. officials reduce their outlooks

two,year from four to driving down the dollar. let's welcome our chief investment officer at london capita group where he manages $4 billion in assets. what we learn from the fed is that they are a lot more divided, when we are even speaking to them. >> it certainly looks like that. minutes.they are dull it was not the case this time. it highlights -- the huge amount of uncertainty. the markets are saying, look, the fed on one side will not have a lot of excuses come june to justify why they would not raise rates. they themselves are trying to scrub for reasons why they shouldn't. they mentioned global 22 times in the minutes. francine: but that's china or is it brexit, or both?

>> i think it is china. what they are trying to do is trying to buy time to see what happens with u.s. to message conditions. domestic conditions. they mention the outside world because that gives them away to buy time. earnings are expected to be pretty bad. evenrnings are as bad or worse, that could increase the probability of a u.s. recession around the corner. that would be the thing that the fed is -- francine: are they right to be so nervous? nothing fundamentally has changed, apart from the fact that we are more aware of the risks that have been there all along. bloomberg.com >> despite what he said, it is true nothing has changed. they are right to worry because they are not that far from losing the credibility of the market. everybody is saying they waited too long and now, and jamie dimon said it recently, they

might be about to raise rates at when earnings are beginning to decline. you have seen earnings downward for the u.s. s&p at the worst level since 2000 and. -- since 2009. at a time when consumers are not yet propelling the economy as expected. francine: what are we seeing? xe are just getting some fore reserves for china. it's in line with expectations. again, we give breaking his china. it is matching. do we think there are something that is being renovated, or are the risks almost hidden? they are basically these bad debt loans. until something goes wrong, we cannot measure it. >> which china.

don't trust the numbers. we will not see it coming. one day before we go on holiday in the summertime, china's attorneys will say, we can no $70er stand -- spend 50, 60 billion every months pushing up the renminbi. we are going to let it fall. that will be devastating, that could be devastating for financial markets. yes, the data on reserves looks good. questions are how many of those reserves are i to being committed? how many of those are liquid? i wouldn't trust the numbers. francine: do you trust the authorities? they continue saying, we are not manipulating. give us time. we are not going to devalue. it is a question of trust. and what do you say we believe them but there will be hiccups? >> why would you believe them?

they are there to pay lip service to what they believe. they are manipulating. we have seen in the last few weeks with and begin intervention and the domestic housing market. that is really all about a plan. what worries me is that ultimately i think people's false sense of comfort is increasing because we are week by week looking at data that does not look too bad. francine: family have all this central-bank action. ."ay with "the pulse plenty coming up including jamie dimon's bear case. he warns of a rally turned to rout. then we'd take a look at look at this china foreign-exchange reserves and the yen shrugs off warnings as it surges to a 17 month high. we will be live in tokyo. ♪

a stark warning from wall street. jamie dimon weighed in on risks and a brexit. nejra, what did jamie dimon say about the fed? nejra: what he's not worried about is the fed resorting to negative rates. he cites job growth and consumer

strength as reasons for this. he is more concerned that rates might rise faster than expected. he also says the market will love the able to rely on the biggest buyers of u.s. debt, the fed, foreign countries and commercial banks. he says, "if this scenario were to happen with interest rates on treasuries on the rise, the result is unlikely to be as smooth as we all might hope for." basically, treasuries have their biggest quarterly gain in the first quarter this year in four years. what jamie dimon is warning is that rally could turn to a rout. francine: we also heard him warn about brexit. i don't know how much of a game changer that is. jamieng to lagarde and dimon, it is clear that brexit is a worldwide risk. nejra: exactly.

the things that jamie dimon said about brexit are not surprising. he did say the outcomes are large potentially unknown. he said and one bad scenario, and he stresses this is not the worst case, he said the exit would trigger trade retaliation e.u.nst britain by w countries. you have another quote saying "it is hard to determine if the long-run impact would strengthen the european union or cause it to break apart." in the best case scenario, britain quickly renegotiate hundreds of trade agreements with the e.u. and countries around the world, but jamie dimon says even in this scenario, it would result in years of uncertainty. and this uncertainty will hurt the economies of britain and the e.u. francine: thank you so much. the very latest on jamie dimon's letter. let's get more with our guest, chief investment officer at london capital. when you look at jamie dimon, i

find it surprising that brexit is so ghigh on the risk of everyone lesss. -- everyone's lists. what are we concerned about, the eurozone does not stay together or creates some kind of shock? we're making huge would notut of -- i say nothing but i struggle to think how that could extend. yes, there is going to be reduced foreign and domestic investment at the time when current account deficit in the u.k. is at high levels. yes, it might exacerbate currency wars among countries and increase, decrease the trade relations. i'm not really sure whether politicians and systemically important financial institutions and status quo benefits them. i struggle to think about a situation where brexit will

immediately have a massive d certainlyer way an to the extent it did happen in 2008. i think the worries should be ugee focused on, as i said, h uncertainty, the fact that consumers need to develop -- are struggling to consume. nd europet in the u.s a still very low. confidence from corporate's are at low levels. matters but not really to the extent the headlines are. francine: see, my concern sometimes is that we are mispricing risk, just like we saw the terminal in china. is that people are lulled into a false sense of security and it is one risk have is that they free gout. >-- they freak out. >> i agree. we tend to do what you say, which is get lulled into this false sense of uncertainty until really we do have problems at

the time when really positioning is very bullish. we've seen a little bit of the opposite in brexit. a negative is having effect on sterling and it makes for a lot of political noise. that is exacerbating the noise. i'm not sure whether we are doing what we need to do is put it below the carpet. with sterling people archer meeting brexit to the sterling follow. th-- fall out. the main concern is account deficit, at historically high levels. francine: given the possibility of policy mistakes from the fed, or manipulation from china, how do you deal with your investments? a whatold will go up in happens. that is a strong call. intopeople are piling

yen. >> well, you're right. policy mistakes are the biggest risk. as a matter of fact, we probably already have had a policy mistake which is the fact that the fed waited too long to raise rates. would nothould take, say, opportunities of what the market is giving us the 11 of february to get closer to home. this is the most volatile quarter since the financial crisis. when it comes to political things, brexit, election cycles in the u.s. at a time when earnings are going to be having their worst quarter since 2009. investor should go back to basics as far as equities are concerned. -- have a decent amount of financial leverage. on the bond side, still i

woudld say take advantage of financial bonds. an area the probably gives you the very best risk in a world where it's tough to find appetizing, nominal returns. forcine: thank you so much now. he stays with us. we will talk about some of the currencies next. we'll also be talking about china after they came out with reserves. back in two. ♪

let's get straight to the bloomberg business flash. dippedsamsung shares despite better-than-expected first-quarter profit. the early release of the galaxy s7 gave it a head start on their rivals. 9timated sales of the s7 hit million units, triple those of the s6 last year. overseas chinese banking corporation has agreed to pay $320 million for barclays wealth and investment management operations in asia. the private banking unit, bank of singapore, will use its own cash. the company says the move will deepen its presence in its core markets of singapore, malaysia, indonesia and china. looking to sell its

business as part of a plan to do best $6 billion of assets. the move comes as dell, which is buying emc, pushes ahead with the largest technology takeover ever. nomura traders have been accused of increasing the spread on their trades and generating $7 million by line how much they paid. ross schapiro, michael -- and tyler peters have pleaded not guilty. suzuki plans to step down according to the nikkei. directors voted down personnel changes for the company's core 7/11 japan convenience store unit after an activist investor warren the firm against never firmhim -- warned the against nepotism. exchange china's form

reserves are expected to increase in march after capital outflow pressure eased. fx editor joins us from hong kong. this expected showing of the fx reserves, how much should we read into this data? should read into the data is if you remember the wild swings that happened in january, camea into the market, interfered with the fixing, ith speculators. this is achieved some sort of success in stabilizing the currency, easing depreciation expectations and easing capital outflow pressures. the first increase in five months in fx reserves is a reflection of how the pboc has managed to ease depreciation pressures for now. francine: robin, weave a story on how the exchange turmoil has

affected chinese companies, leading to a currency loss of $7.5 billion. do you see that getting better? is the central bank trying to address that issue? robin: earlier this year we had the chinese exporters take the rare step of speaking out against currency volatility. and the pboc has was is. what the pboc is doing is oflowing this duel policy allowing appreciation against the dollar, and appreciation against the currencies of its trade partners. how this is achieving this is by limiting the yuan's advances against the dollar. if you take the euro, it has advanced 5% against the greenback since the start of the year. and the yuan has only strengthened .4%. this is a stealth intervention. so, this is allowing it to achieve its aims of easing capital outflow pressures, the strike against the dollar. at the same time helping its

exports which fell 25%. francine: they do so much. in hong kong. -- thank you so much. that brings us to our chart of the hour. we actually have two charts. there is a great piece by a chief asia correspondent by chin-- aboutchina''s debt. analysts say that borrowing is out of control in the country is on the edge of a crisis. others .2 china's long list of assets. to china's long list of assets. you can see the savings ratio. still with us.is when you look at some of the charts, you're in the camp that would err on the side of caution when it comes to china. >> yes, but beware. it is true that china has to -- but it's also true that the --

on this side of the world, the thelems were in both banking system and the private sector. whereas in china you have the local authorities and some of the corporates, which, by the way, are somewhat owned by the authorities. that means that while the problem is of the same magnitude, it can be extended. that debt can still be -- from the public sector which still is running at low levels of percentage of gdp. that china does not have a problem but it does mean that china has enough time to engineer a landing in a soft manner. francine: why is the fed so concerned about it? are they trying not to do something that would upset the chinese? >> as i said, the fed probably is using global financial

conditions and global volatility to explain and buy them time before they have more visibility on what happens inside the u.s. pretty, the u.s. is a close economy. exports do not matter nearly as much as they matter for china but even for the u.k. in the u.k. you have twice is much export dependency than the u.s. u.s. employment and u.s. growth -- they are using what happens around the world, volatility till february and china doubt, to buy them time. seconds, apart from wage inflation, everything else is on track in u.s. >> yes, wage inflation is taking time because most wage increases have been on the lower pay. that does not really make a big problem. take the corporate sector. the ability of corporates to

maintain earnings. the consumer is doing pretty well. i don't expect the u.s. to enter into recession, but this talk of -- between corporate warnings and consumers will continue. francine: we will talk to your politics. -- geo politics. ♪

welcome back to "the pulse and qualify from bloomberg's european headquarters in london. i am francine lacqua. let's get straight to the bloomberg first word news with nejra cehic giving. 'sjra: the world largest currency or rose last month after capital outflow treasure eased as the nation's capital n.c. state. dutch voters have rejected a by a margin treaty of nearly two to one.

the results have exposed the extent of anti-eu sentiment in one of the bloc's founding members. as britain decides to leave the european union, the outcomes are large and potentially unknown according to jpmorgan ceo ginny dimon. he says that even in the best case scenario, there would be years of uncertainty. a brazilian congressional report has recommended that impeachment proceedings against president dilma rousseff move forward. the report found evidence of the main complaints against her, that she used illegal financing to hide the size of the budget. she says the charges are baseless and her supporters call the campaign and attempted coup. global news powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . francine: market slightly higher this morning. let's head to bloomberg with mark barton for a check.

mark: this is the stoxx 600 and is 90 inches street groups. health-care stocks are leading the advance for a second day. the speculation increasing the likes of shire, glaxosmithkline, and astrazeneca. could the potential takeover targets after the pfizer-allergan deal fell apart. the stoxx 600 is up by 0.4%. one of the reasons is the fed minutes. this is current implied wirpbility via our function. these were the probabilities on monday. look at the probability of a hike on monday in april, zero. in june, 23.5. in july, 34%. a tochange the date to get show you how those probabilities have come down after the fed minutes. the message was steady as she

goes. several fomc members holding the view that a cautious approach could be printed. some say an increase might well be warranted in april. investors taking that to mean we will not see a rate increase in april. the probability standing at 0%. the yen today falling below 109 against the dollar for the first time since october 2014. that was the month when we saw above the oj and stimulus. this is the yen today against all 16 of its major peers. all 16 are trading lower, despite jawboning from japanese officials. an official saying authorities would take necessary action on foreign exchange if needed and if reason moves were one-sided. we had the japanese keith --

chief cabinet secretary say the government is watching yen movements with vigilance, leading many to speculate the boj could intervene in the market and sell again for the first time since 2011. back in 2011, we had the yen at 85 to the dollar. clothing sales falling less than expected. a bit of a win from the new chief executive. this is an and s versus next, its big competitor in the last 12 months. both shares falling 24%, no can do over the last year. francine: thank you. let's head to japan. yen surging to a high this morning. joining us for moore is andy sharp. what exactly is behind the surge? is it just markets trying to look for havens? >> basically, that is the main reason why.

the markets looking for the yen as a haven right now just as they did alone the -- around the time of the financial crisis, which led the yen to strengthen against the dollar. perhaps another driver was in a newspaper interview, when he said he would refrain from arbitrary intervention in currency markets. that clearly send a signal. this is backpedaled by the government spokesman today. abe was justt pointing out what the g-20 said in february rather than referring to japanese policy. a few factors driving the yen stronger. francine: what have lawmakers been saying today? >> quite a lot. spokesman, itment really appears as if they are

trying to hook the yen up. the government, clearly, on the surface, seemed to want a weaker yen. it helps exports. it would help them try to reflate the economy. with the yen strengthening, it seems they are trying to jawbone the yen. suga said today that the government is vigilantly watching markets. little effect be so far, as we can see. the yen is continuing to strengthen. francine: thank you so much, andy sharp. let's continue the conversation with pau morilla-giner. the basics of abenomics and what governor kuroda is trying to do is weaken the yen. it has a positive effect. then you hear from jpmorgan saying, look, it looks futile.

what can they do, if anything? pau: they can do a lot more than they have. francine: successfully? pau: in the yen, not successfully. what they are doing hasn't worked. it hasn't really translated to a huge increase in the balance sheet of the central bank. the percentage of gdp hasn't translated into any meaningful increase in real gdp activity. significantng a squeezing of the middle class in japan, which continues to suffer. even corporate's that should have benefited from the yen falls in 2011 really haven't taken advantage of that. it is structural problems which will take generations to solve. all of this is window dressing. meantime, further intervention, they can do helicopter money. they can increase the size of

the balance sheet. it will not work. francine: for a very short term? would it work on yen? pau: not on the yen. it could work on demand, stimulating internal demand. find real money flows in an environment in which global uncertainty is at pretty high levels. it is normal that all these huge amount of savings the japanese invested -- let us not forget, it is massive. your average japanese investor is the highest saver in the world. it is tough to fight these flows. i don't think that will make a huge didn't. i think there is a tide that will be punctuated by pretty aggressive yen correction when the bank of japan blinks and it is certain to blink. francine: but this tide would go

103? what kind of level could we be looking at for yen? how strong will it be? pau: a lot stronger than people believe. you could really see the situation, if you see a situation where, let's assume brexit has to happen, or the fed is forced to backtrack, and not only not raise rates in june, but begin to manage expectations . we might be forced to stay where we are if earnings are reduced. i wouldn't be surprised if you could see some pressure upwards for a currency that is reflecting their policy makers' inability to make a dent into what really matters. francine: good luck to governor kubota. thank you for coming on the program. up next, european disunity has

dutch voters redirect -- reject a treaty with ukraine. what that means for the rest of the bloc.

francine: dutch voters have rejected a treaty between the eu and ukraine.

the referendum exposes the extent of anti-eu sentiment. if honored, the result would make netherlands the only eu member not to ratify the treaty. is an important political fact. it means the ratification cannot proceed as was expected before. we have to take a step-by-step approach. in the cabinet, with the parliament, with our partners, also with the ukraine, to see what the consequences of this decision might be. francine: let's bring in ian bond at the center for european reform. the problem is, british campaigners that are trying to campaign to leave the eu, hail to news from the netherlands. so did marine le pen. there is anti-eu sentiment sweeping across the european union. ian: i think this vote has more to do with that than the ukraine.

most of that is focused on trade and has already provisionally been applied across the european union. the organization that campaigned in the netherlands made clear they really didn't care about ukraine. this was all about showing the finger to the eu. francine: how bad is the sentiment in the netherlands? will it actually mean that the government will end up losing their positions, or is it 30% which is crucial, but actually it can be contained? ian: good question. the dutch government faces elections in the next year or so. clearly, they will be looking at this as a bad indicator for their chances for staying in power. anti-eu parties are doing rather well. they will be certainly looking at it from that perspective. on the other hand, almost 70% of

the dutch people didn't turn out to vote on this issue. francine: how worried should we be about this issue? is it a sweeping generalization to say there's anti-european malaise in europe and we are not seeing it yet, or is it just because the campaigning was great and a lot of people that would have voted for this treaty didn't turn out? ian: what this shows is there is a lot of populist sentiment in the eu across many countries in europe and the fact that people didn't vote on the merit of the treaty with ukraine in order to send a signal they were unhappy with the eu i think speaks for itself in terms of the risks that poses for europe. francine: is it something to do with the fact that there's an anti-moderate politician sweep across the world? i'm thinking of donald trump, bernie sanders. .

how much does it have to do with the eu policies and how much does it have to do with antiestablishment votes? ian: this has a lot to do with people who feel very dissatisfied with the establishment, who feel they may have lost out from globalization. you are dealing with very complex issues which governments often failed to explain well to their populations. francine: how much of a risk does a brexit posed to the eu? ian: that would be an enormous risk for the eu and the u.k.. that would be on a much larger scale than the dutch turning down a trade treaty with ukraine. francine: does this really play into -- when i go to vote at the referendum, do i think, even the dutch are against the eu? to me, it's unclear what we're talking about when we talk about a possible brexit. unclear onody is

what a brexit means. the campaign is against remaining in the eu. they are so reluctant to say what they think it would mean. they talking rather vague terms about sovereignty or being able to reachs. in actual fact, we already benefit from more than 50 free-trade agreements the eu has and we would have to start renegotiating those. we are being asked to vote on a very vague proposition that somehow or other life would be better outside the eu without a detailed description of how that would come about. francine: let's have a look at the charts relating to brexit. how much of a risk when a brexit beta europe's banks? if britain left the eu, they could need to replace up to 108 billion euros of securities. you can see here, the market for

asset-backed securities has already been in decline for some time. this now flagging concerns that u.k.-backed bonds would no longer count to emergency cash reserves, potentially leaving a black hole. i'm not going to ask you about asset-backed securities, but we are trying to make a point that it is so difficult to understand the exact ramifications. is it really a possibility that this country exits the eu, and how much money would we have to spend to do something like this? ian: it is a real possibility. the polling is suggesting that the two sides are very close together. we don't know how much it would cost. the government has just published its case for why we should stay in. that is backed by as many facts as are available. but clearly you can't always

predict the future. whether that is what is going to happen to the exchange rate or the banks. what we have seen is that some hsbc, haveexample said that in certain areas of their business, they would probably have to move a significant number of jobs into the eu if the u.k. were to leave because they would no longer have what is called a passport to operate in the rest of the eu if the u.k. wasn't a member. that is one very concrete example where companies would be affected and jobs would be affected. francine: we don't know at this point whether we will need visas to go in europe. have a much clearer picture of what we are voting on in the referendum or do you think it will be murky as now, so that we are guesstimating but we don't really know? pau: a -- lot of it is about

reciprocity. those who are concerned about immigration say too many europeans come to the u.k. you can be pretty certain that europe would respond by imposing the same sort of regime in the u.k. that seems to be quite unlikely. that is probably not going to happen. there are other areas where you probably would see changes. in access to free health care, a reciprocal benefit across the eu, but it doesn't apply to countries outside the eu, that would be something that travelers in the eu would probably lose. francine: thank you so much, ian bond, director of foreign policy at the center for european reform. europe's stocks are getting a boost from health care and oil companies. we bring you the markets, coming up next. ♪

francine: let's get straight to the bloomberg business flash with nejra cehic. dippedsamsung serres this morning despite better-than-expected first-quarter profits. the is a release of the galaxy gave it a head start an apple and chinese rivals. estimated sales hit 9 million

units, triple those of the s6 last year. to divest more than $6 billion of assets according to people with knowledge of the matter. l pushess come as del ahead with the largest takeover. suzuki plans to step down. directors voted down proposed personnel changes to the company's core convenience store unit. that comes after activist investor download warned the nepotism.st that is your bloomberg business flash. francine? francine: thank you so much. let's head to the bloomberg with mark barton for your asset check. mark: stocks rising for the third day. a lot of that is down to the fed.

the gradual pace in interest-rate increases will continue. probably the most surprising aspect of the minutes released last night, 11 members of the fomc's all risks to their inflation forecasts tilted to the downside in march. that makes it the highest number since the fed began publishing data in 2012. according to a chief economist, that is a striking message. inflation gauges increased. and is a chart so pertinent eight won battle of the charts last night. i wanted to bring it out today. the yen has risen below 109 to that other. this is dollar-yen. and the boj yen index since 2011 when the the oj last intervened. againsten the yen rise the dollar since june last year. we've seen the yen index rise as well. these indices are working

inversely. one of our big writers at bloomberg, he says, keep an eye on the yen index, don't keep an eye on the dollar-yen. he says that is a distraction. he says the level of the yen index, that is what we should be looking at. we are 35% below. in theot a 35% upside saysndex before our man the boj intervenes. ignore the dollar-yen and keep an eye on the boj yen index. francine: mark, thank you so much. that is almost it for "the pulse " today. stay with bloomberg. plenty coming up throughout the day, including a historic gathering of the fed chairs. janet yellen and her three predecessors up here together on stage in conversation for the

first time ever. definitely don't want to miss that. stay with us. "surveillance" is next. i will be joined by tom keene from new york. ♪

♪ francine: the yen hits a high as fed minutes show caution over an early rate rise. jp morgan releases his annual letter and cautions of a brexit. gold rises. $35 in goldilocks ideal. this is bloomberg "surveillance." i am francine lacqua. it is all about the fed index driving commodity prices. it is a