i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. staying positive on the negative. mario draghi insists negative rates are working as bank of japan officials are set to eye sub zero rates. alphabet mrs. estimates- -- misses estimates. president obama urges britain to stay in the e.u. .", welcome to "the pulse i'm francine lacqua. we're just getting breaking news

and that is euro area april services pmi rising at 53.2. we were expecting a figure of 53.3. we have the services. we also need to look at manufacturing. that is also a touch, almost in line with expectations. falling to 51.5. we had forecast a 51.9 figure. maybe that will be disappointment for mario draghi. we will keep a close eye on. let's look at currencies. because we may have a little bit of impact from this loss of confidence in euro-dollar. 1.1283. we are looking at daimler and volkswagen. ryan chilcote is on the ground for any breaking news. european stocks are down. we will talk about japan.

to talk about negative rates on loans and the impact that has on currency. let's get straight to bloomberg first word news. nejra: president obama has urged britain to reject a so-called brexit from the e.u. he says "the european union does not moderate -- it magnifies it. while the u.k. faces many of the same challenges as the u.s. including migration, economic inequality and terrorism, the best way to address them is through collective action." wall street executives would have to wait at least four years to collect most of their bonus pay and could be forced to return money if their companies lose big, under roles being proposed to install one of the large planks of the dodd-frank act. it would strike hardest at senior executives and key employees at companies with more

than $250 billion in assets. government investigators have continue to search mitsubishi's research and development offices. and nissan is looking at how manipulation of test data has impacted its cars. me laterry board will to discuss the financial impact. after theoday company agreed to buy back cars. the singer and songwriter prince in minnesota,me aged 57. his publicist not report the cause. news,ich first broke the claims the star had been treated for a drug overdose days before his death. global news, 24 hours a day powered by our 2400 journalists in 150 news bureaus around the world. francine: thank you so much.

mario draghi used his press conference yesterday to defend the banks stimulus measures. while leaving the door open to more easing in the future he had this warning. aghi: any time credibility of a central bank is perceived as being put into question, the result this a de lay in the achievement of its of justice. -- of its objectives. and therefore the need for more policy expansion. francine: so mario draghi warning his critics there could be more monetary stimulus, against me. bet more stimulus is exactly what we may get from the bank of japan. having already adopted negative interest rates on some excess reserves, it is considering extending loans to some institutions, paying banks to

borrow funds. that is according to people familiar with talks. let's get more with our london bureau chief. jamesg us o for the hour, bevin. how, first of all, how creative is it? if the boj does go through with what we found out which is basically a mechanism that would prompt banks to lend more. is it because they are concerned about the side effects of negative rates are they are desperate? >> they are trying to provide a screener. -- a sweetener. if you borrow from the bank of japan, you might be able to repay it with a negative interest rate. banks heaven h-- have been hit. this might be aimed at taking a bit of the pain.

francine: governor kuroda announced negativeates, the market took at the wrong way. and so, you see the negative effects on the yen. does this mean we think there is a limit to what negative rates can do because we need a sweetener, ford does a central banks are more creative? -- or does it say that central banks are more creative? they have been testing the boundaries. it will be the test this year , having ecb and the boj been good in the sense they are getting returns. really they are testing out those boundaries of how far they can go. this is the new front here. central banks getting more creative. is quite aink there

lot of interesting difference between what is going on in japan and what is going on in europe. if he were just me to characterize the two different strategies, i would say in a case of japan there is an expectation that a sector will government debt. i do not predict there would be a collapse of the jge market. in contrast in your powered say lack of capacity to have a single unified fiscal authority that otherwise be supporting growth does mean that the target process by which the european central bank allows central banks to borrow from each other, in a climate of negative interest rates becomes fiscal transfer. will not enjoy this but the harsh reality is for germany, through the european central bank, is providing fiscal support for the peripheral economies. the big issue is what is going to happen with portugal when they have their rate decision next week. become the -- could

next big bubble in europe. francine: we have reported extensively on the yen as well. is there a concern that we go back to the trouble that greece had? simon: we are seeing greece back in the spotlight overnight. is, still, ase decade on from the financial crisis, the ripple effects continue. central banks themselves, and australia are saying, we're not just being told by economist but they are at the limit. that makes it harder for those who say way or not at the limit. the mark carneys, the mario draghis. francine: thank you so much. simon kennedy and james bevin. james stays with us for the hour. we have plenty coming your way,

including, as mario draghi defends ecb policy, we speak to michael fuchs, a close ally to angela merkel. he's described the central banks negative rate policy as wrong. shares in the google parent company dropped after admits -- as another carmaker is asked to investigate its and omissions, we're outside the volkswagens german headquarters. ♪

."ancine: this is "the pulse let's get to the bloomberg business flash. nejra: daimler shares have fallen after its emissions came under scrutiny in the u.s. the company was asked to investigate the certification process of its diesel cars. the maker of mercedes-benz says it is cooperating with authorities. meanwhile daimler said this morning its first-quarter operating profit fell 8.5%. alphabets said profit margins could be hit by higher mobile phone use and the growth of automated ads. more smartphones means that google gets his services in front of more people, but it has

to pay more. shares slumped 6%. microsoft shares also fell after hours. and higher taxt rates weighing on the bottom line. microsoft is trying to shift away from its transactional business. that is the bloomberg business flash. francine: president barack obama has intervened in the brexit debate ahead of his meeting with prime minister cameron later today. president obama said the european union does not moderate british influence, it magnifies it. let's get more with our white house correspondent traveling with the president. cclaames bevin from investment management. first of all, what does the president hope to a compass here -- to accomplish here.

he's not going to be president for much longer. >> he believes he is incredibly isular in the u.k., and he hoping to affect undecided voters and young voters, people who are thinking about how to vote on the referendum. he believes that by lending the u.s. voice key will be able to sway them toward staying in the e.u. francine: did david cameron persuade him to come here? there are a lot of newspaper suggesting this may be counterproductive. sees obama as an ally in he believes his popularity will help the campaign to remain. he believes that bringing obama in is going to make a positive impact. he did persuade the president to come. and we will see how hard the president goes in terms of weighing in on this. francine: you have followed the brexit debate. how much do we know about the polls and the undecided 25%. what demography is that and

would they be swayed by the message obama brings? oung voters are more likely to vote to stay in, but a lot of undecideds to remain. this is a bit of a coup for david cameron. notill help those who are quite sure, ok, fine, president obama says should we stay in. francine: are we going to get any clarity at all from now until the election? the election last year taught us that polls cannot be trusted. they remain quite close. although there is a slice it -- a slight advantage. that is probably how it is going to stay. francine: how do you see brexit? we talk about it every time. do you change your models

depending on what treasury gives us. how do you sawway the polls? >> everyone has rightly pointed out this is a very close and on certain call. given that this is a binary outcome, it is not a little bit of one or little bit of the other, it is straight yes or no. we have to protect against either outcome. i would say the risk of coming out is in the short term. although i would discern two distinct flavors in the outcome. those who say o ut is out and those who say that out is a bargaining chip. i do think either outcome suggests we will have higher inflation in the u.k. later this year which would be bad news for the government bond market. foruld say it is bad markets overall and the contacts that markets at the moment have got a head of steam.

we have seen the valuation of u.s. equities looking more stressed again. i do think we will have another correction in the months ahead. francine: you travel with president obama so you get one-on-one time with him. how excited was he being in the u.k.? key had important meeting in saudi. >> this, is the longest amount of time he is spending, this in three countries on this trip and spending the most time in the u.k. he will spend time when the queen and the duke and duchess. he will have cultural time to have some fun. he enjoy spending time with david cameron. cameron wants them to have a positive impact on the remain campaign. the president is happy to be here. there is very little political risk for him being here. he's popular in the u.k. francine: does he talk freely, and this is something the brexit campaign has been trying to promote, the fact there is a special relationship between the u.k. and the u.s. if the u.k. were to leave the e.u. they could get closer to

the u.s. a it is very rare for president to way and so directly on a political campaign in a different country. he believes there is a special relationship that allows them to speak frankly and speak his mind and say that that special relationship is worth keeping. e.u. it.k. leaves the will have an impact on trade and potentially not make that relationship is strong. unusual's is quite to see a u.s. president waeig h in. areja: the brexit camp outrage. they accuse obama of double standards because he is seen as protecting u.s. sovereignty on one hand and interbeing and a political debate. that is not really his own. but it does appeal to this big warning we have seen from the remain camp if britain exits the e.u., our

relationships will be damaged, such as china and the u.s. depends on membership of the e.u. francine: the message could not be clearer. u.k.o you model if the were to leave, how much would we lose in gdp? how difficult is it given we do not know what kind of relationships he would have with the u.s. and other partners? james: over the long-term it is extremely hard to understand what the net impact would be. reasonably there would be new agreements forged. the near term damage would be substantial. we would hit -- we have had to your debate of what the world will look like. it is very clear if you want to join e.u. you have to sign up to the premise that you will join the single currency. that is not where we are. leaving is very risky. i completely understand the debate about what we might be able to achieve further out, but don't think markets are

interested in 10 years time. francine: very quickly, what is the one thing the president is looking the most forward to, the duke and duchess? ofi think the 90th birthday the queen is something the president is interest in persistent -- in participating in. he's going to have lunch with her. the president enjoys being in the presence of the queen. he has called her very gracious and he does believe it is important to improve their relationship and keep it going into the future. francine: thank you so much. what a great conversation. now, coming up next, we go back to corporate stories. it has been a roller coaster ride for equity so far. we will get news from james bevin. i will ask them about banks and automakers. ♪

it has been a rocky start in 2016 for equity investors. what can we spec from the rest of the year and where can stock pickers find value? -- and what can we expect? james, can you get any returns on banks? there is one story that caught my eye.

suisee may look at issuing some kind f cat bond. it is what insurance companies do to protect themselves, catastrophe bonds. they're looking at applying this bond to kick in for cyber security crimes and rogue trading. know there is a hefty risk premium required in the marketplace for entities that are not seen to be robust in terms of controls and ongoing activities, particularly those in cyberspace. cyberapparent that a attack can lead to a company being brought to its knees. there have been a fair number widely reported in the press, along with rogue trading. in terms of shareholder value, we need to avoid deep down drops of reported earnings, it's very

smart. people should be prepared to pay a price to have that risk removed. there is a second angle which is what are the investment banks going to do? investment bank in the markets have been very dependent on merger and acquisitions. the investment trade, which has been a mainstay of activity, are much less on the table. a number of investment banks are going to say what is a new way we are going to make money? this is going to be a mechanism. francine: but this is not out of their control. a rogue trader, you put mechanisms in place. is it fair to talk about cat bonds and linking earthquakes and hurricanes to things that happen behind the scenes at banks? traderthere is the rogue and if you have more oversight, you can remove that challenge. cyber is something that is pushed upon you from the outside capable, competent and

highly motivated people whose only interest is taking you down. i think that is extremely voracious. and not dissimilar to a builder of a large hotel say what are the risks? earthquakes, hurricanes. ly sensible organization is going to say what are we going to do about cybercrime? event they do manage to cause damage, what is going to have an? we're going to write a check to ensure that we get value back to the shareholders allows us to quantify the risk. push up the fair price of the company -- the share price because we have looked at the risk. the big problem is the risk we do not understand. francine: thank you so much for commenting on credit suisse. said to be studying novel bond sales to offset cyber security and rogue trading.

we will talk about carmakers and tech later on. coming up next, germany versus draghi. negative rates are wrong. we speak to michael fuchs, a close ally of angela merkel. ♪

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thank you, ping. reliably fast internet starts at $59.95 a month. comcast business. built for business. to "the pulseome ". i'm francine lacqua. let's get straight to first word news. nejra: president obama has urged britain to reject a brexit. "the european union does not moderate british influence, it magnifies it. while the u.k. faces many of the same challenges as the u.s., including migration and terrorism, the best way to address them is to collective action." meetsupervisory board will

later. day after the company agreed to buy back cars and a deal that will cost $10 billion. prince hassongwriter died at his home in minnesota. his publisher confirmed his death but did not report the cause. first of the news, claims the star had been treated for a drug overdose days before his death. global news 24 hours a day powered by our 2400 journalists in 150 news bureaus around the world. francine: now, the ecb president mario draghi has defended stimulus measures saying they are working. me after german critics said he was on the wrong track. mario draghi: it is pretty evidence that pension funds and insurance

companies and other actors are really affected by the low level, are significantly affected by the low level of interest rates. by the way, i would urge all the actors in this sector to resist the temp tatian to -- the 10 tatian to -- the temptation to low interest rates for everything that went wrong with this sector. francine: michael fuchs, a close ally to chancellor angela merkel joins us on the phone. dr. fuchs, thank you for joining "the pulse." what do you make of this german criticism that low interest rate is hurting a lot of your savers. mr. draghi says this criticism makes matters worse. michael: as a matter fact, mr. draghi also acknowledge that the low interest rates is difficult for insurance companies and so on. pension funds, they are really suffering. didhe end of the day, it

not really boost the economy in those countries in the southern hemisphere. the problem is in those countries. they did not do enough reforms. what i would expect them to do is to push them for more reforms. low interestney, rates is obviously not helping too much. so, i'm expecting the ecb to press the southern hemisphere countries in order to do the necessary forms because reforms at the end of the day will lead to a better economy. i'm afraid it is not at the moment and therefore, we need to do something immediately, pressure from draghi would be great. francine: i'm sure that president draghi would love a lot more reform in the southern hemisphere. he has said it many times. but governments that need to do their bit. he does not really have a choice but to do more q.e. or be sure he does not miss the boat of t he boj does so much.

q.e. did not ease the situation. i'm not seeing that there is anything that may the situation any better. instill have no real economy italy or spain. spain is the best one. sorry, spain not. but we don't have it in france. and we have it, not in greece. and it did not help to have a lower interest rate at all. of course, the situation for these countries would be even more difficult for the budgets if they have to pay more interest but on the other hand, it is not a good remedy what he is using at the moment, i think. francine: do you acknowledge the fact that actually a, the ecb is independent. michael: it has been germany insisting on that. francine: right. why do we hear politicians

coming into the debate? michael: because we think we have to at least let him know that we think it is, of course, it is his decision, it is not our decision. we do not have any interest rate we can only tell our opinion. our opinion is that the lower interest rates did not really boost the situation. they have to do reforms could without reforms, the situation in these countries will not be any better. and the medicine which we gave them at the moment is low interest did not really make it goi away. helpede: i guess it has a little bit on currency. is there a level that, that is beneficial for german exporters? higher it would be to the detriment of german exporters. rmanael: for us, ge exporters still growing a lot. the situation is very good. it is more or less, of course,

we are benefiting from the weaker euro. because in those countries where we have the u.s. dollar-based currencies or u.s. dollar currencies which are close to the u.s. dollar, we have a good chance for our export. and the export situation in germany is so good at the moment. our gdp is growing. we will have a growth rate of 1.8% up to 2% this year. this is a good sign. francine: i thank you because thecompe up here on program. in the past, you told me are concerned about risks, china and brexit. is brexit now much more of an unknown then china is? this is now a real possibility and how do you see it as a german politician? michael: i can only warn the great britain people to really think about brexit. brexit would be bad for the u.k.

and that for europe as well. particularly it would be bad for us in germany. when it comes to questions of economic policy and security, without the equalizing force of great britain, the voice of certain partners would get louder. i really want great britain to stay in. we are doing our utmost best to have you as partners. francine: what happens if the u.k. does exit? do you model, have you looked at what kind of relationship germany would have, or the e.u. would have with the u.k.? michael: we have really great relationships. it is over 400 billion pounds last year with the e.u. great britain and the e.u. that is really an important figure. and, of course, this is not going to be any easier because you cannot have it all. you cannot be in and out of the

e.u. but have the same rules and regulations. we are pretty much afraid that this is going to come to a situation in europe which is going to be bad for each and every country but in particular for great britain. do you think it does some kind of shocked that hurts world growth? michael: well, i remember the days when johnson announced that he's going to be pro-brexit. immediately the pound lost power. and the ratio between the pound and euro went down. so, you have to see this is going to be not an easy game for you. the markets are going to react meagerly -- react immediately. francine: probably the next day. deputy leader and a close ally of chancellor angela merkel. s pretty much flat or let's head straight to the

bloomberg with manus cranny. s: european equity markets giving back a little bit of value this friday. it is the longest stretch of gains since the 11th of march. but this is the culprit -- the autos. giving back of value, down over 3%, the second worst-performing group. if you look at the past five days, you see a different story. bank and autos., we had a reprieve in volkswagen. this is the culprit today -- dobler dies as risk rise. -- daimler dies. the department of justice investigating there. drop in profits, by 8.5%. still selling more than bmw. risk.t's the new

when it comes to volkswagen, it dropped by 30%. until we winnadir, on to lose 45% of its ipo to we have recovered 38%. likewise in the bonds, you are a real reprieve in the bond. the question is, do you step in now? there are 11 million cars possibly affected. the company has set aside $7.6 billion for the u.s. investigation. in total, $16 billion has been set aside. that ticket could rise. brexit probability according to the poll of polls -- we have your bre -- go to ncplbrx. this is delivered by the man who called the general election correctly. this is his probability. putting them all together. we started at 24% probability

of brexit. we are now down a 20%. as obama writes his editorial. by the way, goldman sachs, they pushed back the call for a rate hike in the united kingdom, the second quarter of 2017. probability of brexit is 15% l ower. it is a great fountain. -- a great function. is wall street right to be worried? an earnings miss cost alphabet $32 billion in stock value. we break down the numbers next. ♪

but, formerly google, shares are plunging in premarket trade. -- alphabet, formerly google. earnings-per-share came in at $7.50. now, while revenue rose 18% from a year ago, it was not enough to appease wall street. i am joined by richard kramer. and still with us is james bevan. ingle is actually lower premarket trade. it was in after hours trade. you believe it is well piling too much pressure on google? richard: the company generated

$7.6 billion in cash flow. the top line came in line with our expectations. the main difference in the millionl was a $400 swing based on some reevaluation of equity stakes they had in other companies. if you look at the fundamentals and the performance, friendly, it was another continuation of google's roughly 20% growth. $3 billion of incremental sales, and generated $5.2 billion of free cash. francine: is the valuation too big, is it overpriced? richard: we don't think so. you look at google in the context of other internet companies that have lower levels of cash or erarnings, it doesn't seem so. there is a tendency of wall street analysts to want to have

the street, want to be the most bullish. i think that tends to backfire on companies like google. it does not help but sometimes there approach to investor relations is minimal. i've alwaysogle been told is going to do great because it is a winner take all kind of environment for tech companies and they are the clear winner. tohard: we don't subscribed that thesis. if you thought that, you would not see the rise of facebook. that said, google has $68 billion worth of cash. they have incredible market power in the advertising business. they have a tremendous scale position. and the reason they are investing in other bets in so many different areas is because they realize they cannot keep up that rate of growth in perpetuity. francine: are we putting too much pressure? is wall street putting too much high expectations on google? james: we are holders of

alphabet. amongst others personally term earningslong outlook is robust. i worry about the long-term earnings growth presumptions that wall street has. the whole market. what is the believability of the numbers? the streak for the s&p 500 is 10%, which looks way too high. but they were not far off for the banks. we are talking about the difference between short-term and long-term. we are going to pay up for the long-term. there is much more credibility in chunks in the tech sector, despite the fact that the numbers are very high. 10% is a loony tune number. francine: again, why? firms wantl street

to be the most bullish. there is no commission on that. is it because they are in a frenzy? you had me on the show when we predicted the decline of linkedin. we showed a chart that showed that out of 45 analysts we had the only sell rating. the banks are perpetually bullish because they are trying to get banking business. they want to have corporate access business with the company. i think the analyst simply believe it is their. job to promote the company. you do not have a balanced view in the market that independent firms are trying to provide. james: there is a behavioral people and the equity space that you gravitate to equities because you are prepared to make decisions on partial information. and you have high degrees of

self-confidence. i do think that naturally predisposes equity participants to be optimistic. we do end up with a structural over optimism. richard: that could be true. the way you address it and the way firms, independent firms address it is by trying to have an equal balance of longs and shorts. look, half the stocks in the market on to perform. one ought to have half of the companies and your coverage, depending on how you feel about your sector, on sell ratings before you justify the half that is going to be on the buy rating . francine: google was in the news because they e.u. -- do we care about that? or should it not be taken into account in valuations? e.u. investigation that was announced about the android operating system is the there ise, because another ongoing antitrust investigation about google

search results. the fundamental problem for the economic to simple the issue that is bothering them, which is that they have by far dominant market share research in every one of the e.u. markets p short of a structural separation of google between the search corpus that everybody contributes to add an advertising business, they cannot really restrain google's market power easily. the more of these, recent android investigation is interesting because you also companieso find which are being disadvantaged by the android ecosystem, since you maps on to your android phone or load hotmail or your google on android phone. it is not like other, competing services are not allowed on google devices. francine: what is your take on microsoft? ofes: i'm a holder

microsoft. i think the company was pilloried inappropriateness for having fallen out of the dramatic growth the recorded many years ago. at these prices, it looks extremely well-placed. francine: guys, thank you so much. what a great pairing. andext, why daimler volkswagen are falling today. we are live at vw's headquarters next. ♪

the emissions scandal continues to hurt carmakers. daimler was asked by the u.s. government to investigate its vehicles. volkswagen shares have fallen after agreed to a deal to buy back cars. vw's supervisory board is meeting today to discuss the financial impact. ryan chilcote is at vw headquarters. what is the latest? ryan: the board meeting is underway. lot to discuss. they have to decide how much money they are going to set aside to cover all the costs associated with the cheating scandal. then they need to decide whether they are going to pay the vw executives any bonuses and if they do, what size they might be. are going to

decide what kind of dividend, how much money investors or going to get back as part of their 2015 financial statement? a lot on their plate. kind ofay get some statement following that meeting or at least in the middle of the meeting from the vw board. they do so much. ryan chilcote on the ground. what is your take on cars? james: global standards on a missions -- it is going to require huge investment. i would say that peugeot and renault are well-placed and mazda could see their share price go up. the elephant in the room is the electronic challenge. within our lifetime it will be hard to see conventional petrol and diesel powered automobiles continuing to have market shares. dialer?dowhat about you own any car stocks -- what about daimler?

james: absolutely not. the vwid, i do think share price is discounting around a $13 billion bi ll. francine: do you play the car sector through google? the fascinating way that google operates. i look at the extraordinary way this is a -- fast-moving market. there were plenty -- there will be plenty more disruption to come. francine: that is almost a four "the pulse." -- for "the pulse." we have great shows lined up next week. we talked to the former u.k. defense secretary and brexit, fo xx. and we talked to the ceo of germany's largest utility. others, they have just

launched a lot of expansion in the u.k. you can now use taskrabbit. "surveillance." is up next. we will speak about the earth day day and be joined by the u.s. energy secretary. ♪

francine: staying positive on wall street wants 6% of the stock in after-hours trading. and president obama arrive in the listened urging britain to stay in the e.u. this is "bloomberg surveillance," i'm francine lacqua and this is tom keene. we talk about yen and negative rates