francine: turning positive. stocks go green as oil of moves higher. it will hike faster than the market takes. china's borrowing costs jumps as the bond boom starts to unravel. making on the dead trade. first-quarter numbers support the strategy. ♪ -- banking on the debt trade. first-quarter numbers support the strategy. welcome to the pulse. where life from bloomberg's

european headquarters. i am francine lacqua good we are expecting breaking news. let's go straight to the markets. we are seeing interesting moves. gaining crude 600 oil. i want to show you aussie dollar .ood with fx experts we have to quiz him with commodities. i want to show you gold just because it is something that we have not seen for a while at 1242. we'll get back to that as soon as it breaks. let's get to the bloomberg first word news with nejra cehic. brazil'snejra: president faces impeachment. lower house of congress voted in favor of putting her on trial in the senate. she maintains she has done nothing wrong.

>> after the legal people approve it, the president signed it. >> before i sign any act all of this weightperts -- with the full knowledge of the acts i have signed, i had a clean conscience that i did not do anything illegal. even worse is the fact i am sure they know it. they all know this. nejra: china wants to get control of the most popular fast food chain in the country. backed by sovereign backed china investment has expressed interest in buying a majority stake in the chinese business of the yum brand. it runs kfc and it's a hot. between $7lue them billion and $8 billion. the race for the white house takes center stage in new york. the front runners are aiming to reset their -- battle to the finish line.

hillary clinton and donald trump going to today's prime -- today's primaries after recent losses. the administration has revealed its choice for the bank of japan board position that becomes a vacant in june. he has been given the not -- she has been given a nod. she is the only woman on the board. the change comes as the boj negative rate strategy -- a broad. with inflation far from its 2% target. area's borrowing costs jumping. the three chilly in dollar market shows signs of unraveling up.he yuan have seen yields this triggers the bx -- the biggest selloff since 2014. 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 go. francine. francine: let's stay with that story. it brings us to the chart of the hour. china's three chilly in dollar bond market. -- china's $3 trillion bond market. we have a great story which has gone wrong in the bond market. china have driven up yields for the nine -- 49 of the past 10 days. this is spread between a seven-year in government bonds. we have been expecting and a lot of economists of course say it will get much worse. for the first me part of the show, derek halpenny . we never like news. we are also getting some news

from the ecb. they are saying that lending conditions for home loans have improved. the negative rates have hit the banks with profitability. they have said in the past that this would depend on how long they would be in place for. we have good news on the fact that kiwi may be working but not as well as we thought it would get we have a bit of china brewing. -- it would. we had a bit of china brewing. derrico with the event risk that with theed -- derek: ient risk that have passed -- think the fact that it remains so resilient yesterday is an indication about the crude oil supply versus the man's story. -- versus demand story. there appears to be optimism on the demand side.

clearly there is still demand their at this level. -- still demand at this level. it should've resulted in a bigger liquidation. the broader financial market conditions, and you mentioned china. the data we have been getting from china coupled with the policy steps that have been taken by the chinese authorities during march is improving sentiment. the debt story is not going to go away. francine: is there much -- in less there is an implosion or explosion will you take it in stride? derek: the markets will in terms of data is improving. the sense of a hard landing has ebbed away.- has when you look at the bank data,

the story has created excess debt. if the data starts to deteriorate, then i think it could have a bigger -- we could have a bigger issue on hand. the policy emphasis in check -- policy impetus focuses more on bank debt. francine: how do you resolve this macro if you're an authority you can manage it so it doesn't go -- resolve this? if you are an authority, you can manage it so it doesn't go boom. a large sum of money that is forced on the banks in terms of recapitalization. also dealing with the non-performing loan aspects. we have to see things getting worse before that comes to fruition, but at some point you would imagine a bigger sum of step and more aggressive

toward giving with the debt situation would be required. francine: this is one of many conversations will have. we are talking about yen and emerging markets next. --ek halpenny, i give tokyo bank of tokyo pierced stay with the pulse. -- tokyo. stay with the pulse. we will get what we can expect and when from europe's central bank. plus, it serves more than 100 cafes and restaurants. buffering.rts we will analyze why the service is cutting its estimates for subscriber growth. ♪

francine: let's get straight to bloomberg's is his flash with nejra cehic. nejra: volkswagen investigators are sent -- are said to be making headway for data secured for more than -- laptops. the probe has been slowed by the use of dozens of codewords including cryptic software. that is according to people familiar with the status of the investigation. have six at the desk

have accepted -- perrone, gross and meantime. the agreement is conditional on completing its takeover. sabmiller.eover with the shares are trading higher this morning. first quarter sales beat analyst estimates. the company whose advertising agencies worked for brands including vw and netflix some point 2rise 8.9% to two -- 2.2 9 billion euros. -- 2.20 9 billion euros. one of the bond market's most exclusive clubs has a new number. the brokerage arms of -- the brokerage arm of wells fargo has been designated a u.s. primary dealer. it is the first addition since february 2014.

its 1988 peakow of 46. netflix shares tumbled an extensive trading after forecasting weakening subscriber growth, especially outside the u.s. it expects to add 2 million new international customers in the second quarter. fell after-hours despite third-quarter earnings beating estimates. the forecast for the third quarter also fell short of analyst estimates. francine: the ecb says lending conditions for this is his east in the first quarter but conditions tightened. more than 60% of economists surveyed by bloomberg figures more monetary stimulus to come from mario draghi most don't expect it when the bank meets this thursday. what is your reading of the latest bank lending survey? what does it mean for the ecb?

president mario draghi is going to -- the ecb stimulus combined with stronger backing system test stronger banking system is feeding euro area recovery. -- stronger banking system is feeding euro area recovery. a tightening for mortgages a little bit of a surprise. an increase in demand. low interest rates when driver for that. the demand for investments according to the ecb. the liquidity continues to calm. interest rates stay low. the demand continues to improve. it should be relatively -- they should be relatively pleased with that. francine: if ecb does expand stimulus, what can they do? paul: there are some risks. the survey did not know the impact on the bank profitability has been negative both in the qe program and the negative deposit

rate. they do not have any inflation out there. they do -- that does suggest that are limits as far as the ecb can go. it could increase the program but stocks will run into liquidity problems. what you need to do next -- helicopter money is not on the agenda. it is not being formally discussed. debate.public maybe now is the time to start thinking one day, what can we do? francine: exactly. paul, thank you so much. let's get back to our guest host. he is from the bank of tokyo mitsubishi. we look at the options mario he was tryingt, to do was move currency. with yellen's easing, it makes

his job so much more difficult. derek: the impact of quantitative easing is easing. another piece of data that came out his the payments here at addressing the financial accounts within the details of the financial accounts, up until january, what is clear is what we call the portfolio affect. this policy that gets money out of the euro and helps to weaken the euro. the impact of that is fading. there was a -- there was an outflow in september of last year. that slowed to 144 billion in january. there in lies the problem or you have a surplus. the impact on portfolios and quantitative easing is ebbing away. that is making a job on the ecb

more difficult. francine: 11.1 billion. overall what the ecb is arguing, thanks to what they have done they have a stronger banking system. that is due to companies being able to borrow. isn't that right? the demand side of the survey, that is good news. correlationlear between what actually happens and demand three months ahead. within that you have the actual lending flow figures. .7an annual basis, it is year on year positive growth. that is still very this it. the survey tells us the potential is good. correlates tow it

real gdp, .7% annual growth, we need to see figures higher than that to get the economy going on a better level. francine: if brexit happens, how this mario draghi deal with it? if brexit happens, there are near-term consequences. speaking on fx, there could be some good news. my guess is the euro would take a hit. it euro sterling would not be a wouldver but euro-dollar quite significantly. it is very difficult to get a clear picture. stories on both sides of the fence in terms of what could be outlook. francine: the math doesn't come into reality anymore. derrico the u.k. treasury -- derek: most economists would be in terms of protecting what is going to be the case in 2030.

this idea of real gdp being 6% lower. ,hey divided per household 1300. when you look at what the -- where the government projected gdp would be in 2015, they missed by nearly five percentage points. consumer confidence in 2015 had not arrived. we've got to put it in context. 6% on gdp over a 14 year period is not huge. francine: it is the unknown. we don't know. derrico is trusted -- derek: it starts to be in spent on economics -- spin on economics. the bank of england is going to have a big role to play in terms of managing.

so it will be tricky. francine: derek, thank you so much. he stays with us. we will be talking about emerging markets and oil. ♪

francine: it is the pulse. morning, derek good thank you so much for sticking

around. we talked about brexit. we talked about the oil price and how the last seven days, the most important factor was how limited impact it had on oil. are we to dovish about we are expecting from the spread -- from the fed. we had great remarks saying we have guest saying we are just mispricing it. -- saying we are just mispricing it. derek: this broad improvement in risk sentiment and recovery in e.m. fx, there are going to be question marks. it -- at some point if we continue on the trajectory in terms of market, i think it is enough for them to move. at some point the market is going to come around. they will go in june and rates are going to start moving higher. that is when this current market condition is going to be brought into question. i would imagine we need to get

to the gdp data. we also got the employment cost index. the week afterl it we need to get through the next two weeks. usualally -- we got the the week after it. we need to get through the next two weeks. the markets are going to start looking at age and move. -- at a june move. currently the probability is zero. what does that mean for emerging markets? say thatain, i would if we have not gone into a risk off mode going into that great move and if they do hike, i would still say that is going behind that dude them mark -- going behind that.

the market is going to start pricing it in more and more. of course the fed and what they do is important. when you look at the instability particularre, in from august of last year through february, it was not just the fed. it is important to emphasize that. china was an important element because of the devaluation of the yuan after august. we could get to a scenario despite greater stability in the than beyondmore going in june. perhaps the idea of september comes back into play. francine: are there any opportunities in emerging-market currencies? if you get on the wrong foot of the fed, then leave that market. , buyingking at rand opportunity?

not so much? derek: there is a bit of a momentum behind it. to be honest, i think a lot of e-mail fx has come quite a long way -- e.m. fx has come quite a long way. i would favor may as being a more gulf month -- a more difficult month for emfx. , where we have got to the point where impeachment looks more likely. -- with the authorities intervening. so much political good news is boys. francine: and you don't know what comes next. ." exactly. -- derek: exactly. francine: derek, thank you so much for today's program. up next, the crunch.

the world needs another brazil to produce coffee. that is coming up next. ♪

francine: welcome the "the pulse." let's get to the first word news with nejra. geta: china wants to control of the most popular fast food chain in the country. may have expressed interest in buying a majority stake in the chinese business of yum! brands. it runs more than 7000 kfc and pizza hut eateries. it could value yum china between $7 billion and eight ilion

dollars. the race for the white house takes center stage today. the democratic and republican front runners are aiming to reset their campaigns and catapult themselves towards the finish lines. administration, -- has been given the yet -- been given the nod. bojchange comes as the negative rate strategy generates controversy and with inflation far from its target. china's corporate borrowing costs are jumping. investors are spooked by enterprise defaults. trillion dollar market shows signs of unraveling.

this triggered the biggest selloff in junk debts since 2014. you can find more stories on bloomberg at top . francine: markets in the green. let's head to mark barton for your asset check. mark: oil clawing back most of the 6.8% losses from yesterday. rising onstry group the stoxx 600, up one point 26%. goldman sachs scheduled to release results. about three quarters of the 43

companies on the s&p 500 that have released earnings and have been projections. let's get into what is happening on the european earnings. first-quartered revenue that beat estimates. strong demand for the mixed makeup speeding up growth in north america. with french matters, shares are up by 5% today. first-quarter sales the estimates on more business from digital ops and growth in north america. eric -- it said it recorded no growth in september. want to show you what is happening to the u.s. treasury market. this is the yield on the 10 year.

it is creeping up. interesting comments from blackrock. it expects losses from securities and eurozone debt over the next half decade. investors will have to accept higher volatility and reduced liquidity to generate returns in an era of negative global interest rates. investors are skeptical about the global economic outlook of propelled treasuries maturing in 10 years or more. blackrock says it expects losses for longer-term debt over the next half decade.

francine: i have the world benchmark for a rabbit good coffee. for arabica coffee. more than 80 years later, the coffee is served in over 100,000 cafes and restaurants, i am pleased to welcome the ceo and president of a cafe. place, we are all running on coffee. coffee is going through a renaissance. you believe we need more production of coffee because otherwise it is going to be a consumption much and how much you can sell to people. are you seeing anyone come online? >> there is a need for increasing production.

if we extrapolate the growth we are having now, which is four times as much as we used to have 20 years ago, we are now growing 3%, 2.7%. we used to go 1.3 of 4%. we would need twice as much from here until 2050. the problem is the coffee agriculture is impacted by climate change. theexpectation is half of suitable land will be available from here to there. know the algebra now, but we might need to -- productivity to satisfy the demand. it would be a discontinuation compared to what happened since agriculturefee

started for centuries ago in brazil. francine: are countries ready to pick up the challenge? do prices gained by 50% or 60%? competingntries are for increasing production. the leader, brazil is heading the lead. vietnam.have the they are reaching all-time records. you have countries that have been impacted by climate change in the past that are coming back thanks to an important program, talking about columbia. other countries are suffering and having volatility and having volatility in production, like ethiopia. then you have regions, like central america. it is suffering from the effects

of climate change. we will see in the future. costsne: do you pass on to consumers? this has been coming down since early 2015. we try to average the by any means, but yes, in general, because of the value added, it is what it is, not to live. need to transfer the cost increase to the consumer. francine: what surprised you the anything in the last five or 10 years that you thought that is surprising, coffee orrink less

the chinese are drinking more coffee? coffee is undergoing a positive trend. the perception is improved. 60% of consumers 20 years ago foreved coffee was so-so human health and the ratio is opposite and people believe coffee is good for health. there are several studies which confirm coffee makes you live longer. quality improves substantially. cup ofasure content in a coffee did increase to such an extent it has been able to conquer the emerging countries like china. this is a product of globalization. cultureso about

cross-fertilization. globalization goes along with coffee. 80% of the coffee consumption used to be in the -- countries, now it is no more than 50%. countries, coffee producing countries contribute so much to the consumption increase. coffee could be something that is this higher premium brands, or does it take the market share? espresso was born in italy. france's i'm talking -- presso.e: i'm talking nes it did market to other

large competitors in the coffee arena, to build the positive of gourmet coffee. the consumer understands coffee is not about only the caffeine kick, but also about the enjoying the flavor that isatmosphere centered around a cup of coffee. it is led by the italian coffee culture. italianhese brands are sounding. they came, inspired their and they strategy replicated and made this italian the cool ande trendy one. francine: will starbucks be successful in italy? andrea: who knows. it depends on so many things. being loungesbout

in the city. in the city, but it depends on the experience they deliver. coffee dowhat kind of you drink? andrea: espresso. francine: what is the last coffee you had? a double espresso and my hotel. it was fantastic. up next, when a series comeback. argentina comes back with a $15 billion bond sale. who is buying? that is next. ♪

francine: you are watching "the pulse." netflix shares tumbled. here with the details, caroline hyde. estimates lower than analysts expecting. carolyn says they wanted 4 million to be added to the subscribers. that is about the population of germany. they want to see rampant growth. they are promising just 3% of net increase. they added 6.7% last quarter. how is it slowing? it seems to be the international growth that is starting to lag.

the are struggling to get amount of language content out there. they just rolled out 130 new countries, but they cannot invest quickly enough. they also have started to unleash this in france. series, a be a french japanese series, but it takes time to create the content and a lot of money, as well. -- sawough we saw him the first quarter mostly beat, second quarter shares are not where they are supposed to be, especially when you have a competitor such as amazon. francine: how does the company offset less people buying netflix? caroline: profits will fall.

they will tumble by two thirds. for the time being, investors morebeen happy to spend and more, to get out into the new countries. might start to see some price increases. this could hurt the investors. they could lose 12% to 15% of people if they raise prices over the next months. it is something they will have to do if they are going to protect their margins. maybe they will not just be going to the markets for their money to invest going forward. francine: thank you. let's get on to emerging market debt. 15 years since the record default.

selling up to $15 billion worth of bonds. this is the biggest emerging market sales since at least 17 years. first of all, on argentina, huge bond sale. >> significant. it understand -- it underscores the extent of demand. and furtherurther down the equality curve to get that yield. secondly, it is an important line in the sand for economics after 15 years of being closed out of the capital markets. policies have been put into , paying out the holdout bondholders is a positive line in the sand, even if there are a number of lessons as to

potential default risk going forward. francine: do you sell to argentina? do you see demand pickup? do you -- in these emerging markets, we look at the credit line. you have a direct lens into the real economy. re: emerging markets bad? is coffee discretionary spending or something people will buy no matter what. is an affordable luxury and the last that people cut. we don't see any changes in coffee consumption. it is an affordable pleasure. you need your coffee for keeping even ind active, difficult times. this is the typical reaction of the consumers.

francine: sales have not slowed down? andrea: no. even in china, where there has been a slowdown of the growth rate, consumption is accelerating. brazil may consolidate a little bit. it has reached saturation in the coffee consumption in the population. francine: when you look at argentina, is it a testament to the health of bond sales in general? >> you have seen a strong investment grade in an environment in recent months. argentina is walking into that. first time in 15 years. the quality of the money that will go into this, while i am been wellng it has

subscribed, investors are asking about the quality of money. term will be critical to see how it performs. francine: are you worried about currencies? if you look at the next 12 is expansionly, and the emerging markets where you can find partners to support you, or do you have to make sure your hedge to on a currency base? andrea: the problem with currency, in producing countries , which suffered a huge devaluation, this is troublesome, the situation in brazil. in the consuming market, i see less risks. francine: thank you for joining us. up next, goldman sachs waits out the debt trading slot by slashing costs. we look ahead to first quarter earnings. ♪

francine: turning positive. stocks go green as oil moves higher. the yen retreats. the market sinks. china's credit squeeze. , asorate borrowing jumps the boom starts to unravel. banking on the debt trade. goldman slashes costs as it deals at the fixed income slump. this is bloomberg "surveillance." i'm francine lacqua in london; tom keene is in new york. breaking news --