>> hawkish comments from the fed. janet yellen drives market as the dollar closes on its best month since september 2014. not the end of the road. vw reports a profit beat more than the 2016 sales declined as stock falls. the short on china. as the bearish specs yuan slumps. a money meant -- a one minute slump increases for the volatility. volatility. further ♪

polls --come to the welcome to "the pulse." i am mark barton. a quick check on the mark -- on the market. monday here in the u k, the .25%, still down by on track for a weekly gain. the third monthly gain as well. that is the most since march 2015. index isberg spot marginally higher today. this month it has risen the most since september the 14, up by up by- september 2014, 3.6%. gold losing streak coming to an end. .t is a nine day losing streak

longest streak in 14 months. still the biggest drop since november. the yield on the german tenure is up by a basis point today. we are awaiting the big cpi unemployment data out of the eurozone. in -- eurozone and hopefully 59 minutes. -- in hopefully 59 minutes. nejra: germany -- german unemployment decreased -- the number of people out of work fell by 11,000 to 2.69 5 million in may. the survey in the bloomberg was for a decline. volkswagen shares are down as the carmaker says it has seen a revenue down by as much as 5%. the company reported a 3.4% rise in the first quarter operating profit.

it is the first time the carmaker has not set aside billions of euros in provisions. roseese industrial output north of .3 point -- 134% -- .34%. meanwhile, spending fell a year ago, less than the 1.3% forecast. the data comes as investments -- as investors wait on a slightly delayed increase on the nation's sales tax. equities are once again in the cross hairs. one of the largest hong kong trader funds tracking domestic chinese stocks has a surge to its highest level in a year, that is according to data compiled by market and bloomberg.

last time bearish specs were so high -- china's bull market turned into a $5 trillion raffle. 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 . mark. mark: the prospects of a fed rate hike as early as june continues to dominate trading today. janet yellen tipped the ultimate increase over 50% with comments that improvements in the us economy would warrant raising interest rates. her comments were the latest over the last month. suggesting an imminent move if the data allowed. next guest,uce my gilles moes. let's look at my favorite -- our favorite world interest rate

probability function for the united states. two weeks ago, that was 4%. now ift be a surprise the fed did not hike in either june or july? gilles: not really a surprise. yet to go to september -- you have to go to september. the fed hiking in june which is completely at odds with where the market was a few weeks ago. my take is we know what they want to do, would they want to hike. after that, it is a matter of what is the most convenient? , to is the most convenient wait until november? it comes after the eu referendum. mark: july comes after the referendum. move --yet to make this

you have to make this move. they could move as early as june. we know what they want to do. what they have already managed to do is make sure when they do, the market now knows about this we had this issue that the markets probably overreacted or maybe the fed was not so clear in communication that if the fed had lost option now to, it would've cost and market upset to hike. now that we have this configuration, it is really their choice. they can do this without .reating chaos in the market mark: what numbers on friday would completely derail june? the expectations is for an increase of one agencies 2000 which was the same as prior

months. is there a number? is a very likely number that could derail june? gilles: i am not so sure. .t may not be the number itself in might be more about the unemployment rate. the kind of activity data we get, because lately the fed has moved a lot away from this raten -- if the employment unexpectedly or to rise, the market expects a small drop. that might be an issue. .2k: the average earnings. -- you need that ticking higher. onles: yellen was earnest friday. she gave herself a lot of room to maneuver. the data on wages was wobbly at least, hard to read.

is the i would frame it decision on the timing, yes, may have been risen by the data we it is a matter of convenience. their minds seem to be much clearer. moes, merrill lynch . stay with the pulse. plenty coming today. can vw start moving forward since the emissions scandal in september? without -- profits world beating pace of economic growth. that is the words of the -- of india's finance minister. we'll bring in our exclusive interview. a big week for mario draghi.

we will look ahead to today's inflation and unemployment numbers from across the euro area. stay with us. ♪

mark: let's get the bloomberg business flash with nejra cehic. nejra: takata has ruled out bankruptcy. that is according to a person of knowledge.

they say the company is instead seeking buyers to take a controlling stake and carry it through its process. -- findingstood that a suitor by the third quarter. jaguar land rover is helping to put cars with motors and the fast lane. thanks to the luxury brands sales. it -- it is cautiously optimistic about global growth. a new model drive's sails in the u.s. the airbag scandal may affect about 100,000 of its cars. it is put aside almost wanted to million dollars for repairs. the new york post is reporting that deutsche bank has emerged in a probe. the paper says no bank has been accused of any wrongdoing but investigators are narrowing their focus after requesting documents and communication from .ll of the 22 primary dealers

deutsche bank is not disclosed it is under investigation. that is the bloomberg business flash. mark. mark: one of the largest hong --g tracking funds tracking has surged fivefold this month, that is according to data compiled by markets and bloomberg. let's get to hong kong with our moody.rket, sam a jump?s behind this sam: it is a currency play as much as anything. the chinese currency has been weakening. further weakening is expected. in the u.s., you have talks about rate hikes coming -- rate hike coming. that is going to strengthen the dollar which will exacerbate the situation with the chinese currency. when that happens, you see a lot of people trying to flee chinese

assets. it peaks their interest so there to get in on it. mark: last time short interest was this high, we saw a brash in china's stocks. that means we should be worried? sam: a lot has changed since last year. the shanghai composite is down 40% from this time last year. the chinese stocks are still seeing -- are still seen as overly valued. there is a sense that the learned a lottors of lessons from last august and from january. there is more confidence that if there was a decline, it would be more managed. mark: we saw this dramatic 10% drop in china's stocks -- stock futures.

what happened? sam: we are still looking into it, but the more we hear people are saying it is a fast zinger. we are doing into it and hopefully we will have more coverage. mark: sam mamudi, let's get more from gilles moec. the dollar you want is a clear trend.espite -- the spike up -- january is when we had all of that volatility. we have been creeping up to ,hose january record levels since the evaluation in august. can china manage when the fed could hike rates? gilles: they have managed to keep their economy afloat. that is more than what we could say at the beginning of the year.

in january,nged is february, you have those -- on top of massive uncertainty on where the chinese economy was going. what they have done in between is the sense of chinese demand would take a collapse. world, iest of the want to look at what it means for me, when we had was a lack of demand from china. the possibility that they would aggressively manage their currency down. what we have now is creeping depreciation. at the same time, an economy that is doing ok, that is not falling off a cliff that was expected in january and february. things have improved. the problem we have with china is that when i look at the china gdp, it looks ok.

when a look at the number of data, it looks ok. when i look at -- it doesn't look ok. that remains the big issue that we have for the remainder of the aar which is that in spite of big monetary policy push, we have a continuation of the contraction. that is bad news for the eurozone, and the u.s. these guys now own 10% of the world trade. it is a massive shockwave which -- it is stabilizing. it is negative but stabilizing. mark: we talked about the fed. time for a further loosening of policy? the yen fallen this month for the first month. that is something. it would not be a surprise,

because everyone is calling out for it. gilles: we were expecting it in april, we were disappointed. we continue to expect more from them in june. unfortunately, i think in the case of the big of japan, you can argue whether or not monetary policy alone is not so. we know there is this idea that fiscal policy is not going to be as tight as it was supposed to be. got a the reasons you've conversation on japan which is much less heated, the concession about the west is because in a way what the country has been beenving is -- has improving is it is more courageous. stimulus, they are too back to two different plates. bats at twotwo

different plates. mark: to come to europe in the next section becomes impervious. gilles: -- i would argue that one of the clearest facts of qe a hiddent has made pushl push without qe -- it without qe, no government in europe would have engaged at this level of fiscal policy. , there ared strange maneuver in europe. there is at least one country that has [indiscernible] germany which has capacity. it has been a relaxing policy. it is stopped imposing on the rest of the euro area the kind

of tightening that we had two or three years ago. the fiscal policy -- monetary doing thisapan is has been doing it for 10 to 15 years. when i think europe has learned from japan is that monetary policy becomes important, if the banking sector is not overly assorted out. even if you're had been doing this later than the u.s., gradually we have had this focus from the ecb, from the european commission to force the banking sector to recover. [indiscernible] it is finally positive. it is slow, complicated. everything is going in the same direction. we have a fiscal push, monitor a

polish -- monetary push. mark: we'll talk more about europe in the second. merrill lynch up next. we did eurozone inflation, unemployment data. just over 30 minutes time. what does draghi need to see today? we look ahead to the ecb decision. ♪

mark: let's talk europe with

today's away from the rate decision on the continent central-bank. from mario draghi, we did some data. .- we get some key data i want to show you my chart of the hour. the ecb says core inflation is an indicator of where inflation tends to settle. that means it should be targeting core consumer price growth in just under 2%. as you can see from this chart, it hasn't been at the level since early 2009. deeply rising fuel prices were making up for the shortfall until late 2014 let's talk more, gilles moec. that is core inflation. this is headline inflation. the green dotted line is the elusive 2% level. where at -.2 -- we are at minus two -- -.2.

forecast horizon ends at 2014. what is happening right now is at least we know all inflation is not necessarily dead. the consensus was everywhere you looked, inflation is super low. we cannot really re-create or change the target. the good news is that inflation is coming back in the u.s. is already above 2%. core pce, their measures about 1.5%. in the u.s., inflation is back. we have to move away from this idea is -- a move away from this idea that inflation is dead

forever. we have a magnitude of slack that goes well beyond what we have in the u.s. we had two recessions and 10 years. they had only one. -- in 10 years. they had only one. second, we have institutional issues. what is interesting is a year -- thee focus was unappointed rate is too far liberating. at least germany should lead the train. we have inflation germany bringing the average with it. it is not happening, because wage formation in germany is not working the way it should. of employment, we have unions becoming less ambitious in their demands in the current

wage grounds. if you cannot get the country to the extreme point of the recovery, normalizing inflation is going to take several more years. mark: gilles moec, chief european economist, merrill lynch. stay with us.

welcome to the polls live from bloombergs european headquarters. let's get the bloomberg first word news. nejra: german unemployment declined more than economist estimates pushing the jobless rate the lowest yet since reunification. by people out of work fell 11,000 to 2.6 5 million in may. the median estimate for -- was for a decline of 5000. chinese stock index futures

afterd by the daily limit snapping back in less than 60 seconds. recovered almost all of the losses in the same minute. the futures exchange is investigating the tumble and it is the second son swing to rattle traders this month. chinese equities are in the crosshairs of short-sellers. tracking domestic chinese stock has surged five hole to its highest level in a year. bets were so bears high, such pessimistic proved proper. japanese industrial output rose .3% in april, better than an estimated decline. year on year it fell three and a half percent, but not as bad as the 5% forecast.

household spending fell. -- data comes as investors on a likely delayed to increasing the nation's sales tax. global news 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. you can find all the stories on bloomberg at top . volkswagen's profit has risen. with our the details european auto team leader chris reiter. the vw topline looks solid that the shares are following.

what is going on. the volkswagen brand was particularly week. profits fell 86%. .03% so itmargin is is barely eking out a profit. underneath, it is their biggest brand so they need the volkswagen brand to do better. profits in china fell quite a bit as well. underneath the top number it looks pretty weak at volkswagen. mark: what does it mean going forward? are they out of this crisis or not? chris: they are far from out of the crisis. the numbers show they still have a far way to get. they have got resilience in the group but they still have a ways to go out of the crisis. 16.2 billion euros they set talks, theyey have

have to get to the investigation report so they are not quite out of the woods. mark: thank you for joining us today. let's talk more about volkswagen and the rest of the industry. our -- natalieis sauber is our guest. the ceo said today's results were respectable. is that an accurate summary of what you of heard? natalie: i think so. i think his exact words were this has been a great year all things considered. there is more to come from folks lagging. as results are not as great expected. it will take some time before volkswagen is able to fully recover from this, but they are making a lot of good headway. mark: the brand itself, as chris was saying, that is not exactly

looking pretty, is it? is it going to revive its fortunes and margins? brand as chris said , porsche is doing well because it has not been affected by the emissions scandal. the brand itself is in a little bit of trouble. what before we get up to the strategic june update is going to tell us, there are still some hurdles to overcome. striking a deal with u.s. 21.orities by june is that achievable? is that a sort of dark cloud on the horizon? natalie: i think it is definitely achievable and it 22ds to happen before june because that is when a lot of initiatives are going to come in plan. of slows been a lot

uptake in terms of new models and sales revenue but folks --ging is adamant of turning volkswagen is adamant of turning the market around with hybrids and electric vehicles. what america is going to be a crucial market. mark: what else are they going to want to get out on that day, policy initiative through 2025? there are eight key initiatives. electrification, they have just put aside 10 billion for new giga factory developments. batteries are one of the most expensive products and volkswagen does not want to be as dependent on asian manufacturers as others. digitalization is another key aspect. there are a lot of partnerships coming forward.

, a mappingtaxi app technology. a lot of manufacturing strategies, cleaning up a lot of their current plans especially in germany with a lot of industry 4.0 initiatives. mark: the scandal will hang for the next couple of years but volkswagen is doing good to counter it, is that a good summary? definitely. they are doing a lot of good initiatives. crisis itn oem is in is about management and how can we restore customer faith. mark: how long does it take? are we close to seeing a restoration of customer faith or does it take longer? natalie: i think it depends over the next couple of months how volkswagen is going to offer its customers incentives for buybacks. mark: worldwide deliveries in

the first quarter were up .8%. many might be surprised at that. natalie: the actually beat but toyota has production many factoring issues at their side so they were not able to deliver it, and gm as well. sales via my on the backlash of those. -- that'llie salvor he salvor. -- natalie sauber. suzuki motors' news conference is taking place, briefing the media on field test reports earlier this month. monthaid earlier this they used an improper method to test the fuel efficiency and 2.1 affected.rs were

they admitted they used unapproved testing methods on 26 of its models. 12 models tested improperly to other carmakers and the fuel economy testing misconduct it says was unintentional. india's fiverom low -- by low. minister'sfinance decision to turn down the most valuable company. ♪

mark: welcome back. let's check out the markets. nejrais no jura television. down 2/10 of 1% after a five-day winning streak. despite the thin day trading with the u.k. market closed we did see the stoxx 600 hit a high. today we are seeing most industry groups down with carmakers leading the losses. a bit of weakness and european equity markets. i want to take a look at the dollar. this is all about the expectations about the fed after janet yellen spoke.

expectations of rate rises have jumped. i want to track the bloomberg index from 2010. it is up for its seventh gain in may. you can see it track all the way back to 2010. of may, the dollar gained against every major currency except the pound because we have seen a bit of sterling recovery with those poles shifting on the possibility of brexit. losses,ter nine days of its longest using streak in a year, look at the reason. the relative strength index approached 30, perhaps a signal it was oversold, and we have seen gold pick back up. , ahead of the opec meeting, some disruptions to nigerian production, at its lowest since

1994. wti up today, rent is a little off. oil sets for its longest run of monthly gains in five years. financest week, india's minister ratified the decision that apple may meet -- must meet local laws. interview, wee spoke to the minister about his decision. changed, this is a pre-existing policy that already exists for the last several years and the policy has been if you have single brand stores you must have some local sourcing. the rationale behind this has lookshat every person who in themarket must invest

creation of employment opportunities in india. in the case of a stray product here or there, it may seem a little odd but there is a sound rationale that when you are 16king to invest and capture of the world's population, , thens a very big market help us in creating some job opportunities in those countries as far as manufacturing. , andationale of the policy in less, that policy continues to exist. >> will you change it, yes or no? >> no, i cannot make that comment on television. apple represented to us, we will examine the matter because in cases there is a very high technology involvement, want to

become an exception and we are always open to look in these areas. the original policy, considering the constraints of the economy and the need for employment creation, it is a very sound rationale. mark: the finance minister outlined his rationale that a backdrop of uncertainty will not stop india from global -- growing. >> if you look at the performance of the government over the last two years, i think we took over at a stage where almostt of the world has started disregarding india. we were off their radar. the government started virtually on a clean slate with an image that india entered into a phase of policy paralysis, but there was a decisive majority in the election and decision-making has become easier.

over the last two years have consistently moved in one direction and a series of steps taken opening up markets, easing having a more nondiscriminatory system of resource allocation, taking entries into businesses easier, making exits out of business easier. i think we have crossed all of those barriers one after the other. mark: up next, draghi's decision, the data ahead of the ecb policy. ♪

nejra: volkswagen shares are lower after its namesake brand crumbled 86%. vw brand dropped to 72 million euros from 540 million euros last year. that gave them an operating margin for short of their midterm goal of 6%. the challenge from the emissions scandal. stock index futures plunged by the daily limit before snapping back in less than 60 seconds. contracts on the csi index 10:42d as much as 20%

local time before regaining the losses within the same minute. it is the second sudden swing to rattle traders this month. chinese equities are in the crosshairs of short-sellers. domestic chinese stock has surged fivefold. the last time bearish bets were so high, such pessimist improved well-founded as china's market turned into a $12 million route. rose.se output year on year it fell three and a half percent but not as bad as the 5% drop forecast. household spending fell less than 1.3% forecast. investors await an announcement

from the prime minister on a likely delay to increasing the nation's sales-tax. lawmakers calling for a postponement. reporting thatst deutsche bank is emerging at the center of a probe. no bank has been accused of wrongdoing that investors are narrowing their focused after requesting -- rochus after requesting information from all of the primary banks. that is the bloomberg business flash. mark: we get to big data from the eurozone that could indicate the ecb's next move. unemployment and inflation of feet into mario draghi's decision on rates due on thursday. let's get to paul gordon. inflation, german

unemployment both beat estimates . is there reason for optimism at the ecb? paul: there is some reason. those numbers are one hint. euro area confidence numbers came in better as expected as well. yes, theould say stimulus is starting to have more of an impact that there are some fundamental concerns. although energy prices have not manyince january, people believe that is going to continue to extend. we will recoup the lost inflation and other areas. energy prices helping the ecb hit its 2% inflation goal in the past but that is not happening. industrial goods not likely to contribute much at all so you need services inflation.

the chance of that happening is pretty weak. a long way to go. mark: the next ecb meeting is on thursday. we are not expecting any stimulus, so what is the message likely to be? paul: it is an intriguing one for the ecb given there is not going to be much to announce in the way of news. maybe we will hear more about the corporate bond purchase program and optimistic talk about an ongoing long-term banking program, but mediocre credit numbers published today and credit to households slowed. i think you will see a lot of mario draghi telling governments they need to get their act together. rather lackluster in their reforms. message, get your because monetary

policy cannot do it alone and cannot do it forever. mark: paul gordon, thank you very much. have a look at what is happening to the asset classes i have chosen today. stocks are a little bit lower in europe but still the stoxx 600 is on track for the fourth weekly gain, the most since march. it is on track for its third straight monthly gain, the most since march 2015. the bloomberg dollar spot index, it has risen seven consecutive mays. sell in may and go away certainly does not apply for the dollar index which is down yesterday. since risen by the most 3.6 percent14, up and in three months of decline as we await the june fed meeting.

the odds of a rate increase have risen from roughly 4% two weeks ago to around 30% today. in the commodities market, gold is rising today after nine consecutive days of decline. that is the longest losing streak in 14 months. gold is set for the big monthly drop since november and has fallen by 7% this month. three look at the main lower you'd stocks are today but there on their way for the biggest increase since march. surveillance is up next. inoline hyde takes over london and tom keyed in new york and, speaking with jpmorgan's david stubbs. that is it from the pulse. surveillance is next. i will see you later at 3:00

p.m. ♪

june back endsm: and with it, a june meeting and brexit within austerity. the dollar stronger, gold weaker. yellen andrology trying to drag the market to their collective trying toand draghi drag the market to their collective areas. caroline hyde from london.