francine: don't fight the fed. as the central bank talk sunday june rate hike, global stocks rally. g7 finance ministers meeting japan. yen strength sharpens the debate about stimulus versus austerity. and a hunt for the missing egypt airplane with 66 passengers and crew enters a second day. greek authorities dismissed reports that debris from the jet had been found. welcome to "the pulse."

i'm francine lacqua. let's get straight to the bloomberg first word news with nejra cehic. nejra: france's foreign minister says there is total cooperation between his country and egypt after a plane flying from paris to cairo vanished over the mediterranean. the mystery surrounding the disappearance has deepened after greek authorities dismissed reports that debris from the aircraft and been found. investigators say flight 804 made a series of terms before descending rapidly. 66 passengers and crew were on board. the pilots sent no distress signals. aircraft washe approximately 10 to 15 miles inside egyptian airspace at an altitude of 37,000 feet, executed a turn 90 degrees left, then a turn of 360 degrees to what the right, dropping from

37,000 to 15,000 feet, and then the picture we had was lost at about 10,000 feet. nejra: new york fed president bill dudley says the federal reserve is moving closer to raising interest rates. his remarks echo sentiment in minutes at the fomc's april meeting published this week. >> june is definitely a live meeting. when we do depends on how the economy is going to evolve. looking at the market expectations, it looks like june is roughly one in three, and the july meeting looks like about 60%. nejra: double iron n blackrock traderss time for bond to start pricing back in the federal reserve. blackrock says fomc officials are like to wait until july to gauge the outcome and

implications of britain's eu referendum on june 23. the u.k. economy has slowed and may require additional stimulus if it doesn't rebound quickly in the event of britain opting to stay in the european union according to the bank of england. if additional stimulus is needed, both rate cuts and more quantitative easing should be on the table. he also says so-called helicopter money isn't consistent with the central bank's mandate. deutsche bank has halted bonus payments to a group of employees while examining whether they improperly traded. the company says it is reviewing a transaction that may have involved conflict of interest. global news 24 hours a day powered by our 2400 journalists in more than 150 news euros around the world. find more stories on the bloomberg at top . francine: thanks so much, nejra cehic. on to the markets.

this is what european equities are doing. seeing a little bit of a rebound. financial markets in general showing signs of stabilizing after being zigzagged this week by a surge in expectation. this is a picture for the ftse, the dax, and the cac 40. i want to show you the price -- i don't know if we have gold, but brent crude at 49. that is also regaining a touch. the yuan headed for a third week of declines against the dollar. this is on the back of dollar strength, unaided speculations the u.s. will raise interest rates. we will get back to the markets and currencies with jane foley in just a second. first, let's update you on the egyptair flight from paris to cairo which disappeared over the mediterranean sea. as a search mission enters its second day, greek authorities

have dismissed reports of finding debris from the jet. greg this cruise he is in paris. arexpected, a lot of things contradiction. we don't really have anything concrete. what we know is that debris found was not that of the missing plane. >> that doesn't really change much. we know the plane went down because they couldn't see it on the radar. whether they found debris doesn't change much. the debris would have been able to give clues as to what happened. we don't know what happened and that is what french government officials have in trying to stress. that is a standard line of the president and foreign minister when asked about it. all hypotheses are open, but none can be favored. francine: i guess it all depends on when we find that black box

and how difficult that will be. >> definitely. they've got to search for debris, search for the plane, and find the black box. this part of the aegean sea is not particularly deep. the air france flight from rio that went down was in waters well over 4000 meters. is a much morning closed area, so it should be an easier search been some previous crashes we've had. francine: greg, thanks so much for the update. now, let's get back onto the markets and look at what the fed's next move may be. let's welcome our guest, jane foley, head of a fix strategy at rabobank group in this is quite you look atwhen fomc minutes and the meeting in japan today. the key message was, you are

mispricing, the message from the fed to the markets, because they are ready to hike. jane: there was growth, inflation, and employment. you could argue that all three of those areas are beginning to be repaired. if the slowdown in q1 is just a areistical anomaly, we seeing predictions that q2 will bounce higher. then we have the disappointment of the last payrolls raise. , we havee june fomc another payrolls report. that will be crucial. we've had cbi this week. we all know that the feds favored measure is that pc number. there's another factor. this might be interesting in determining whether july or june could the more favored. some of the fomc members have mentioned brexit. francine: i keep on saying it would be fairly punchy to start

normalizing again three or four days before brexit. jane: that is a risk and i think it would be. the biggest legacy of grexit isn't necessarily its impact on the u.k. economy, but its impact on the eurozone, that he you. -- the eu. what will brexit do? even a close vote. that is the legacy of brexit. us a little bit of an indication of how seriously the fed might be considering this as a risk. francine: it is not just that they wanted to get the markets to reprice their expectations. if we look at expectations for growth in the u.s., some of the predictions we have from the regional fence, if we look at inflation, cpi, something like

111%, he trended higher -- like 1.1%, it trended higher. we had disappointment last month, but it is being repaired. you could put arguments together to say we are seeing the movement towards another fed rate interest hike. the interesting thing will be the dollar. if we look back to 2014 -- francine: that has strengthened already a little bit. jane: exactly. if we look back to 2014, what the fed didn't anticipate was that huge move in the dollar in 2014. this year, we've had the treasury pushing back against currency wars, against dollar strength. but if we get the dollar beginning to correct higher into june and july as the market puts interest rate hikes back on the table, that could be something

like a delay. francine: depending on how much they can stomach dollar strength. thank you so much, jane foley. we will be talking about yen next. coming up as g7 finance ministers and central bankers meet in japan. we will look at the danger that a stronger yen poses. stocks in emerging markets are down with the chances of a fan dyke increasing. -- of a fed hike increasing. and it is the world's largest luxury brand. we will bring you our exclusive interview with lvmh. ♪

francine: welcome back. let's get the bloomberg business flash with nejra cehic. foreign minister says there is total cooperation between his country and egypt parisa plane flying from to cairo managed over the mediterranean. the mystery has deepened after greek authorities dismissed therts that debris from aircraft had been found. investigators say flight 804 made a series of sudden turns before descending rapidly. 66 passengers and crew were on board. the pilot sent no distress signal. richemont shares are lower after saying it doesn't expect the

market for luxury goods to improve in the short-term and sales plunged in april. the maker of cartier jewelry repeated earnings that missed estimates. euros fell to 2.6 billion , below the analyst estimate of 2.29 billion euros. aberdeen asset management ceo's say they've resisted offers to buy the company. to sell ther tried business, but we do get a lot of people wanting to buy us, which is nice. francine: europeans? >> europeans from everywhere, around the world. asset management is a great business because the return on capital is so high. predictable,ble, so there's a lot of interest. being independent is a massive benefit to us. nejra: you can see that entire

interview tonight at 10:00 a.m. u.k. time and throughout -- 10:00 p.m. u.k. time and throughout the weekend on bloomberg tv. goldman sachs holds its annual meeting. tough markets hurt revenue across the business with first quarter investing and lending revenue down on the same period in 2015. that helped drive overall revenue below consensus. that is the bloomberg business flash. francine: g7 finance ministers and central bankers are gathering in japan as they send mixed signals on how to boost a flagging recovery. the meeting takes place on the backdrop of increasing pressures to avoid weakening the yen. the u.s. has warned that currency intervention won't boost global growth. yvonne man is live with us for the very latest. tensions at the g7 as usual and once again they are talking about one of the main risks

being brexit for the next six months. onne: that certainly is the topic creeping into conversations here. sources say that could be the ultimate risk on the horizon, particularly when it comes to market impact as well as u.k. growth in general. those issues have been singled out in some of these discussions. the u.s. really sending out and adding much more pressure on fx policy in general. what they were saying, they did say that given a time when there is such slow global growth, any movement from a country on its currency would send the signal that it is trying to boost competitiveness and this would not help little growth. we kicked off the g7 with a local tradition in japan, the

bashing of the stockade barrels. some have made the metaphor, does this mean japan could be seeing a bashing of economic policies? some say it is highly unlikely. the topic of yen intervention not high on the agenda. we did talk to governor kuroda. he avoided that issue altogether. policy,alk about boj saying negative rates continue to show positive signs in the economy and they will take action if they see factors including exchange rates pose a risk. -- k francine: thank you so much for the update. let's get more with jane foley. i guess the problem is that for a long time, we talk about currency wars, but then it is difficult to point at someone if everyone is doing it. jane: if you look back over the had a lotears, japan

of success in 2013, 2014, with a weak yen. we've also got to point out that during the years when japan and the eurozone were successful ars, it in currency w was largely on the back of the dollar going up. the eurozone did very well. it was the dollar, the more passive player, that was taking the brunt. yellen say to the senate, they didn't anticipate the dollar would be that strong. i think the pushback we have from the u.s. treasury is being looked at -- why should we take the brunt of the currency wars? you've done well out of it. we haven't. we don't want that to happen again. francine: at the same time, you could argue that come february,

march, when we saw a very dovish fed, janet was also playing currency wars. francine: jane: you could also go back to 2009. we don't want anyone else to do it now. you could. i think we've got to a point where most people recognize that it is a zero-sum game for the global economy. it isn't something we should be doing. maybe it is why the ecb or draghi indicated that rates are not going down much further and they are looking at fiscal policy to promote domestic credit growth. i think this g7 meeting may give us a clear indication whether currency wars are considered to be a bad thing. francine: also i guess the more you do it in your neighbors do it, it is diminishing returns. we will talk about yen in just a minute. overall, do you think they will have to intervene? need inflation and it can't

go through higher yen. jane: if we look at g7 communications, they have tended to say that market should set currencies and not central banks. ifwould be very frowned upon we consider what the u.s. treasury has done this year, changed its trading act" japan, china, on a list. we know that the u.s. treasury would the deeply unhappy if japan were to intervene. japan has been given back a little credibility now because the dollar has been rising, allowing dollar-yen to go up. no doubt the japanese can say, negative interest rate are working. the yen is weakening. this is because the dollar has been going up. similarly, the ecb, happy days. euro-dollar is going down, allowing them a little stimulus. the u.s. treasury do have to

manage this. francine: jane, thank you so much for now. jane foley, head of fx strategy at radel bank. up next, more on the yen. traders think the currencies tumble could be short-lived. ♪

francine welcome back.

top of the agenda, g7 meeting, is how to revitalize global growth. growth,ars of sluggish perhaps an appropriate topic. i want to sell you something which illustrates -- show you something which illustrates negative interest rate. savings are still rising faster than loans in japan. april saw deposit sexy borrowing by 217 trillion -- saw deposits trillionrrowing by 217 yen. jane foley, we are talking a little bit about yen strength and i guess yen gets a little relief from fed policy, as does mario draghi. when you look at the fundamentals underlying abenomics, is it to zeus soon to call it a failure? jane: you can look at japan for 25 years and say where are the successes. this is a big problem that carries on. there's been lots of

disappointments with abenomics. it is about slow growth in much of the developed world. term,k for japan, nearer i think a lot of the questions will find their answers in china. japan's largest trading partner and for the yen, i think china is going to be crucially important. the dollar has gotten a little stronger recently. mechanically, we get a left. a sign of relief maps to the authorities. i think we also need to be looking at the levels of the andinbi relative to the yen the levels of the renminbi overall. not only that, we've got to be considering confidence in china, global growth, and the fact that the yen is a safe haven currency. francine: what happens to renminbi. we've convinced ourselves they won't devalue. soon perhaps we were too

in assuming that. that comes in ap one when the dollar was weakening. wherego back to a period the dollar is strengthening, that is good for dollar-yen, for european authorities, but it isn't happy news for the e chinese authorities. strengthens, their currency is dragged higher. it is better news perhaps for the japanese and europeans, but they're going to get to a point where if they want their exchange rate to hold steady, they have to allow the renminbi to devalue more against the u.s. dollar. francine: i guess it all depends on dollar strength. jane: it very much depends on dollar strength. if it holds steady, we get the countdown. in chinese growth, they are allowing debt to accumulate too francine: quickly. we know that can't go on

forever. francine: jane, thank you for coming in. up next, we talk emerging markets. they are down more than 7% in the past month as markets price in the chance of another fahrenheit. we look at political uncertainty surrounding turkey. ♪

francine: welcome to "the pulse" live from bloomberg's european headquarters in london. let's get straight to the bloomberg first word news with nejra cehic. nejra: france's foreign minister says there's total cooperation between his country and egypt after a plane flying to cairo vanished over the mediterranean. the mystery has deepened after greek authorities dismissed reports that debris from the airport had been found. investigators say flight 804 made a series of sudden turns

before descending rapidly. 66 passengers and crew were on board. the pilots send no distress signal. aircraft washe approximately 10 to 15 miles inside egyptian airspace and add in all to do of 37,000 feet executed a turn 90 degrees left, then a turn of 360 degrees to the right, dropping from 37,000 to 15,000 feet, and then the picture we had was lost at about 10,000 feet. nejra: new york fed president bill dudley says the federal reserve is moving closer to raising interest rates. his remarks echoed sentiment in the minutes of the fomc april meeting published this week. >> june is definitely a live meeting. what we do depends on how the economy is going to evolve. looking at market expectations,

it looks like june is roughly one in three. through the july meeting, looks like about 60%. nejra: double iron capital and blackrock say it is time for bond traders to start pricing back in the federal reserve. blackrock says fomc officials are likely to wait until july to gauge the outcome and implications of britain's eu referendum on june 23. the u.k. economy has slowed and may require additional stimulus if it doesn't rebound quickly in the event of britain opting to stay. that is according to bank of member.s mpc he says both rate cuts and more quantitative easing should be on the table. he also said so-called helicopter money isn't consistent with the central bank's mandate. deutsche bank has halted bonus embodiment -- bonus payments to

a group of employees while the review a transaction that may have involved conflict of interest. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . francine: thanks so much, nejra cehic. european stocks are higher this morning as crude and commodity prices recovered. the fed will normalize. let's head to the bloomberg with mark barton. mark: luxury goods companies are in the fray again. the grim news continues. richemont forecasted a difficult first half after sales plunged 18% in april. it reported full-year earnings that missed estimates, dealing a further blow to the industry. the company has been struggling with a strong swiss franc. it is cutting almost 100 jobs in its swiss watchmaking

operations. richemont is also affected by a slowdown in tourism in europe. paris terror attacks in november, a trend that some may extend after the bombings in brussels in march. richemont is bottom of the pile, down by 32%. burberry, 26% lower. the other three are rising, christian dior, lvmh, hermes. you started with the fed, francine, so i can't get away with it. it is having an impact on the currency market, talk that the fed could raise interest rate in june. it is boosting the dollar against the yen for the third consecutive week, telling us what sort of winning run the yen has enjoyed. this is dollar-yen in the last 15 days.

it has risen by 3.5%. we had governor kuroda reiterating he's ready to add stimulus. the yield premium offered by two-year treasury notes over equivalent japanese securities surging this week to the highest since the financial crisis. will's a 28% chance fed raise rates in june according to our interest rate probability function. that is up from 4% at the start of the week. the being weak started with dana, with the fed minutes -- of the big week started with data, with the fed minutes. jeffrey lacher saying the case behind them would likely be strong as the dollar rises. this is the msci emerging markets index, heading for its longest run of weekly declines since august, on a five-week

losing run. developing nation currencies falling for a third week as well. investors detouring from risk-taking as the possibilities of a fed rate hike coming to the fray. that is the msci emerging market index. really quickly, term premium. not since 1962 have treasury dealers demanded less compensation to own a long u.s. government bond rather than a shorter government bond. right now they are not demanding anything at all. a federal reserve bank of new measure falling to a negative 0.38% on tuesday. many bond professionals view a level below 0% as a signaling that debt is theoretically overvalued. this is a result of all these central banks pushing interest

toes negative and a flight assets in the united states. both short-term treasuries and long-term treasuries. that is why you are seeing this. hasn't happened since 1962. francine: thank you. let's talk e.m. emerging markets under pressure. today they are a little better off. the msci e.m. index is down in the past month. our next guest says a weak dollar only postpones the pain for emerging markets. he is bhanu baweja. it has been quite a week for commodity related currencies. it has been quite a week for emerging stocks. we've been flagging that the fed will normalize. bhanu: to be fair, as recently as march was when yellen signaled a big change in the fed reactionary function.

now for fed officials to say june is a live meeting -- of course they would say june is a live meeting. but for them to sound more hawkish i think is wrong footing the market. earlier this year, there were three factors that led to emerging markets doing as well as they did. the first was massive credit stimulus from china. what we have learned is that all that credit stimulus, and mind ue, it has 2009-esq not led to growth. your capital output ratio continues to go up. you need more credit to produce lower output. that is what the market worries, that pmi are not up massively, released,ort orders and that is the key point. fed is an additional consideration. francine: so whatever happens will either play to dollar

strength or dollar weakness. let's say china can't stomach it, so they will have to put policies in place. whatever happens, emerging markets will be i guess worse off until they do structural reform? bhanu: or they get lucky with global trade improving, which i think a low probability event. that is where we find that emerging markets are going the other way. if you look at what is happening in china, there's a significant reliance on credit stimulus despite the fact that credit to gdp was already at about 215 present. before long, you could be at 300% of gdp. let's spend a couple seconds on china. this is the biggest risk, right, facing us, that this amount of debt becomes ugly. of thee the chances

bubble bursting? bhanu: i think the way to think about china is not like thailand 1997. there isn't going to be an explosion. it is locally financed. the key is what your return on assets is likely to be. china's growth is likely to drop. return on assets is going to drop even further. risk of a crisis comes from the fact that your liabilities are coming under strain along with your assets. japan and china are slightly different in that china's liabilities have increased significantly more. the risk of mismanagement is much higher in china. that may not be an issue today. return on assets is an issue. i think the credit tightening in the chinese financial system, which is a very high

probability, probably is a year or two away. cannonball that will come to emerging markets. francine: so the fed, we are not going to see these massive outflows we've been talking about, the temper tantrum that brings us back to september 2013. was mayaper tantrum 2013. y does feel like a long time back. take her tantrum was 150 basis points. that is very unlikely now. i think that emerging markets will be able to stomach higher rates better than they will suffer when the u.s. rates go down to 1%. i think better u.s. economy is much better for emerging markets even if it means higher u.s. rates. said moving doesn't help turkey, south africa, indonesia, but it does help other parts of em

one way really have to worry about is what if the fed is unable to hike because growth is so weak. in thinking about the fan and the cost of capital, we forget about the revenues and earnings. francine: what if it is a policy mistake? i know we are seeing inflation, wages, not bad at say there's something ugly out there. china, brexit, something else. i know it is 25 basis points. it could be even smaller than that. the people in the frontline on the emerging markets and commodity producers that have been borrowing money in dollars. bhanu: it would be a double whammy for emerging markets if growth is extremely weak and the fed nonetheless hikes. they've been careful not to do that. the communication from yellen has been taught to do that. we are to be careful to make a mistake in the other direction.

if we went to the other end of the spectrum, there's no doubt you will see curves inverting in the developed world, stephen engle in the emerging markets world. in the emerging markets world. we hope not to see that. as i said, the fundamental issue is actually not the fed. the fed doesn't help if rates go up. the fundamental issue is growth, leverage. that is an issue that we had never dealt with even through the rally this year. francine: i've heard that a lot, that we may be too obsessed with the fed's next move. thank you, bhanu baweja. next, we have an exclusive interview with the lvmh group. he tells us why he's opening the doors to the public. ♪

francine: lvmh is the world's biggest luxury brand. in $39 billioned in sales. it is france's fourth biggest company. the fashion empire is run by the ceo. his eldest son is 38 years old. he heads up two of the brands. behind the launch of the lvmh open days, which begins today.

more than 50 of the group's workshop sites across europe opened to the public. caroline connan sat down for an interview on the origin of the idea, the future of the company, and the luxury industry. >> i remember it was a time where i was a little frustrated by the image of the group. i remember the group being more considered as a financial group, almost like the firm. there was something a little bit with distance when you spoke of the lvmh group. it was so far from reality that i had the idea of creating this open day. we lacked transparency, to be honest, and creating this event of complete openness, free and open to the public, not necessarily to our clients, was something that appeared right at the time. caroline: 120,000 visitors at

the last edition. how many do you expect this time? >> my goal is 150,000, but it is symbolic. my goal is that people have a great experience, that they discover what is usually hidden, and our artisans continue to showcase what they do with great pride in energy. caroline: is this also maybe the image as opposed to your father in terms of personality that you are trying to instill in the lvmh group? don't know. clearly we have different personalities. he's of another generation. generation is a little closer to social networks, to having group discussions, and is very much in the tradition of my way of working to brainstorm and have open discussion. i'm not saying he's not open to discussion. he very much is and he's aware

of everything going on, but it is maybe different ways of doing business, but very complementary as well. beoline: we are here at rlucci, this beautiful boot maker in paris. you became managing director in 2011, the same year as the first edition. in terms of sales, where are we had right now? roughly 30 it was million euros. now it is at 150 million euros. the growth has been substantial. our ambition is to continue growing. the network, evolution, and growth is stabilizing. the ready-to-wear has been a big success. we're going to refine our silhouette. our designer is leaving and we are hiring a new one.

francine: -- caroline: how are you recruiting him? what do you want him to do with the brand? >> it is a very historical brand, maybe a little too formal. maybe a little less detailed and some kind of casualness that i feel we might be lacking. caroline: is it profitable? your father said in 2013 that he wanted to make it+++

late on the profitability issue. we are not far from our strategic plan objective, but a little late on that profitability issue. caroline: the bespoke, is that something that is going to be growing as part of the brand? >> wearing a sock as a shoe is something that is incredible. i was lucky to have the experience of ava spoke. shoes. it is difficult to describe. it is perfection. caroline: is that really expensive if i want to get a bespoke shoe? >> it is. on average, 7000 euros for a pair of shoes. caroline: is it not easy to be the son -- is there many major differences between you and your father? are you a good fit for the younger generation and the future of the group? >> i don't know. i hope i am. i know we get along very well. different generations, but the dialogue is extremely constructive. we are not only father and son, but also business partners, and we debate a lot. we speak about business a lot. luckily we don't speak only about business. but it is a nice relationship.

working with your family is very pleasant. being the sun in a family such as mine is a great responsibility. it has already weighed on your responsibilities in the past few years. are you ready to take on more? >> we will see. my father is in very good health and will work for the next 25 to 30 years. arnault: antoine explaining a little bit about the family business. up next, don't fight the fed. blackrock say it is time for bond traders to start pricing in central-bank action. ♪

>> francine: we are just getting an update from that egyptair plane then vanished 48 hours ago. we understand from the egyptian state broadcaster, citing their own sources within the egypt military, that it found the egyptair wreckage. yesterday there was confusion and denial that the wreckage was found. we will listen to that foreign minister from greece. we now understand through the channel, the egyptian state

channel, that they may have found some of the wreckage. this hasn't been confirmed, but we will bring you the latest. the army saying that this was found 290 kilometers north of alexandria. states according to the broadcaster. in the meantime, let's get more on some of the corporate news we are watching with nejra cehic. nejra: goldman sachs holds its annual general meeting today in the wake of a difficult start to the year. tough markets hurt revenue across the business with first quarter revenue down 95% on the same period in 2015. that helped drive overall revenue below consensus. richemont shares are lower after saying it doesn't expect the market for luxury goods to improve in the short term after sales plunged in april. the maker of cartier jewelry reported full-year earnings that missed analyst estimates.

that is the bloomberg business flash. francine: thank you so much. coming up next is "surveillance" with tom keene. we understand from egypt state tv that they may have found part of the egyptair wreckage. ♪

talks of as the fed june rate hike, stocks rally and the dollar retreats. blackrock says arise will not happen until july. g-7 leaders meet in japan. yen strength sharpens the debate about stimulus versus alterity and japan faces off against germany. the search for the egypt airplane enters a second day. records maysays the have been found. this is bloomberg "surveillance tom