mark: it is job stay in the united states. fed officials talked up a midyear hike. will today's numbers keep them on course? the vienna meeting ends with a whimper. opec tries to find its footing in crude's new world. a leave vote could be the deciding factor in a june hike. chancellor osborne will warn that it threatens 400,000 jobs. welcome to "the pulse" live in

london. breaking news out of the eurozone. services and composite data. the final estimate, 53.3, slightly above the surveyed 53.1, and the prior estimate of 53.1. that means the composite, the amount of manufacturing and services has been tweaked up to 53.1 from the earlier estimate of 52.9. servicesght uptick for and the composite index the day hisr mario draghi and colleagues sat on their hands. right. let's get on to the markets today. have a look at what is happening as we approach the big one. the jobs report. the stoxx europe 600 is heading for the first weekly drop in do four. the euro little changed against

the dollar ahead of the big jobs report later. week has risen for the first week in five against the dollar. -dollarng in the euro was less than a cent. that is the weakest ecb day move something we will speak about and a second. the yield on the two-year is unchanged. the spread between the u.k. two-year is the highest in 16 years, head of the upcoming referendum. bonds surged by record after the commodity trader asked shareholders for half $1 billion to replenish its capital. their biggest one-day gain since they were sold in 2009. at the same time, it shares slumped as much as 13%, the lowest since 2003 following the announcement. the singapore listed company

which lost its ceo said its chairman and tends to go with any year. goldman sachs sees a growing risk of accelerating capital outflow from china as the yuan weekends. that capital flight could spill over into a global selloff similar to those seen in january and august. poised for a fifth weekly to klein. -- decline. david cameron denies he is scaremongering. during a special question-and-answer session, the prime minister said staying in for the is better economy and strengthens britain's position in the world. prime minister cameron: we have to negotiate our exit, negotiate our trading arrangements with the european union and negotiate 53 other trade agreements. this would take a decade. do we want a decade of uncertainty? do our business is one a decade of uncertainty? news 24 hours a

day powered by our 2400 journalists in more than 150 news bureaus around the world and you can find more stories on the bloomberg at top go. mark? mark: so, it is job stay. thebig piece of data on economic scorecard ahead of the june decision and a couple weeks. expectations for an increase of payrolls of 160,000. the unemployment rate is expected to drop to 4.9%. the big question is, will these be the numbers that make or break a moves this month.? ? fed officials have worked to realign expectations. robert kaplan was elated. >> i think we are getting to the point where it will make sense to remove some level of accommodation in the near future. whether that means, for me, it does not necessarily mean june. it means june, july. i would be advocating we take an additional step. mark: exactly what does it mean

for the fed? our next guest says the fed's type ishe worst significant, strong evidence that full employment can be reached. the word "tight" is significant. we looked at the most bullish nonfarm payroll. 250,000. the most bearish was 90,000. if we got 215, would it make june much, much more likely? what is going to make june very likely? because the expectations are a 22% increase. >> i think you probably need something higher than that. it would be a a pretty stellar report, not just in terms of both payrolls but average earnings would need to jump from the 2.5% level. unemploymenthe u6

rate, if we get a notable drop in that, all of that combined with perhaps something 250-ish. that could sway the market into thinking june. mark: is there anything that could derail it even a july rate hike? a figure so bad or is that so unlikely? >> the lowest estimate, 90k, yeah. again, with a mix of other elements being negative, i think markets wouldhe question about whether something more fundamental is happening in the labor market. we have seen a little bit of the deceleration. if we were to see something more notable that i think they would corporateonsider the earnings story which was negative in the second half of last year, we had two consecutive annual drops, even excluding the energy sector, and if that was filtering through into companies becoming more cautious about hiring, there could be something more fundamental happening. and i think that would certainly persuade the fed to perhaps hold

off. mark: the dollar is dropping. first week in five. what is going on? just a pause? derek: it is interesting. we have been looking at all of our rate spreads models and where fx should be. and pretty much across the board, the dollar is weak or than where it should be. in other words, just over the last 10 days, two weeks, there has been a breakdown in terms of the spread story and how that translates into dollar moves. the dollar should be considerably stronger. what's happening? difficult to know. i'm wondering perhaps his that the u.s. presidential election filter intoslow and market pricing, because of course, once brexit is behind us, assuming there is a vote to stay, the attention will very, very quickly shift to this element of risk and uncertainty

which is going to be pretty considerable for the markets until the election in november. francine: stay there. derek halpern. bank of tokyo mitsubishi. don't miss our conversation with the chicago fed reserve president charles evans live in london 10:10 a.m. do not miss this. plenty coming up today, including -- notion.n't take that opec is alive. opec will be a very important signal of the economy. mark: opec's outgoing secretary-general says the organization isn't dead. what it means for the price of oil. job stay in the u.s. a good number will bolster the case for a june hike, but u.ficials warn that the e. referendum could steal the thunder.

could the global markets catch a cold from china's capital outflows? we'll discuss the sinking yuan and the warning from goldman sachs. ♪

let's get the bloomberg business flash. has secured $63 billion from five banks for its pursuit of monsanto, according to people familiar with the matter. selected bank has

of america, goldman sachs, hsbc providemorgan to 12.5 billion dollars in short-term loans. it would create the world's biggest supplier of pharm chemicals and seed. more private equity firms are said to be interested in takata. bain capital and pag asia are evaluating bids. takata is facing billions of dollars and recall cost for potentially lethal product and appointed external committee in february to draw up a restructuring plan. with yahoo!'s management to discuss a possible merger according to the new york post, citing unidentified people familiar with the matter. they spent several hours in discussions but twitter bowed out of the bidding process soon after. the two companies declined to comment. lufhthansa may make a deal with air china when the ceo visits

beijing with angela merkel next week. he'll meet senior management from china's flagship airline but has told bloomberg talks are "complex." it is looking for partners to stem the loss of long haul passengers to middle eastern rivals. francine: the opec meeting in vienna came and went. we saw a big moves in crude today. all trade before where it left off before the meeting. the organization sticking to its policy of unrestrained output. the meeting ended with nothing more than a new secretary-general. and some soothing words. >> i am confident that the future is bright, that this organization will wo continue to adapt to changes that are sweeping the global industry and the world at large. withec wills tay engaged

the market. we will coordinate with our colleagues from various delegations. it willer -- continue to play its role, a role of responsiveness to the markets and to the needs of the global community. and i also want to say that we are very resilient. >> don't take that notion that opec is dead. opec is alive. opec will be a very important signal of the economy, of the world. mark: let's bring in bloomberg's managing editor, will kennedy. if he hear it enough, that opec is alive, do we believe it? has problems.l one thing is clear from yesterday's meeting, it was far less -- there was a sense of the renewed harmony. that reflects two things. the new minister and more importantly it is amazing what a

price value will do for their mood. we believe the strategy is working to take shale out of the markets. in thehat happens later year, though, when some of the production that has been taken out of the market comes back online? will: that is a good question. a lot of the production is canadian. caused by disruption in the niger delta. if they see his strength of demand. consumers have responded to lower oil prices. they are buying bigger cars. we are seeing strong demand in the u.s. and china. that will cause optimism that people still want to buy their oil. mark: let's look at a lovely chart, the bloomberg dollar spot index versus the price of crude oil. it is very clear how these inverted way, an but since march, you will see that both have been rising. what is going to give here? derek: again, probably this of

supply almond has been the driver over the short-term, and that has helped to see that correlation breakdown. at these levels, though, we are looking for oil to top out and t o move lower again, as the supply comes back on. also, the correlation with the dollar perhaps comes back into play. are hiking in july, the china story could start to reverberate again. the data there is going to probably start to deteriorate once again. all of that plays into the oil-dollar correlation. and we see while prices taking a move lower again. mark: what is the general view, will? will: i think people are divided. some analystssay that we could go to- 6070 from -- 60-70 from here. will producers hedge? and will shale start coming back into the market?

that is the real unknown. we have never been through this cycle before. newes is a-- shale is a industry. derek: that is an element of our story. analysts in america are assuming that north of 50 you're going to start seeing a pick up in production activity in the u.s. mark: will we have a new secretary-general after four years of waiting. that shows that there was some sort of consensus, that backs up the view that it wasn't a rancorous meeting. will: i think that is exactly right. he's had to spend four years of his retirement as acting secretary general because they could not agree on his appointment -- his replacement. balckindo has done a job before. saudi arabia and one side and venezuela at the other. it is a country they can rally around. absolutely, the comments from the ministers after the meeting,

including the iranian minister, was it was a good meeting. we got on. mark: they are going to keep pumping until it reaches 4 million barrels of oil a day? cracks remain. saudi arabia and iran have their rivalry. ir absolutea -- iran absolutely wants to rebuild its production. there are some question about how much they can go after the rapid build in production in the first six months of the year. mark: will, thanks a lot. stay with us, derek. stay with us. up next, a brexit breakdown. david cameron says he is delighted the country is holding a referendum. fed officials suggested could steal the thunder from today's jobs number. george osborne could -- warning it could put 400,000 jobs at risk. we will talk brexit next. ♪

jobs day. expectations are a good jobs number would bolster the case for a june hike. fed officials are warning events on this side of the atlantic could steal the thunder from the jobs number. there is a lot of uncertainty. uncertainty about the results, but i think there is uncertainty as to what would happen in the

case of a leave vote or for that matter a remain vote in markets. those, yes, under circumstances, it is a factor that i would consider. >> we need to be prepared. there is going to be some short-term disruption, particularly in the currency selloff. how that might ripple through the markets. i don't know it will be enough to affect their decision but it is something we will have to look at. mark: with just under three weeks ago until the referendum, george osborne will warned that a leave vote could put 400,000 service jobs at risk, after prime minister david cameron defended his decision to hold a referendum. and against himself, against accusations of scaremongering. prime minister cameron: i'm delighted we're hoping this referendum. i will carry out the instructions of the british people. but frankly, i think the job of the prime minister is to warn about potential dangers. mark: let's get to derek halpern . will the referendum derail any

move by the fed in june? yes, i think there is a good chance. if you have got a brexit, there would be in mediate had in terms of financial market conditions. we know from the behavior of the fed from january, february, march that the kind of monetary policy decision-making process has become more global. back then, it was china. emerging markets. although i would not expect the same degree of financial market disruption, it is unclear. it is an uncertainty. and if janet yellen can sit down in ane, and go, look, day's time, there is a big event. we are ready to go. it is pretty clear that july is a done deal. g towards that. i think that is the way the rational has been. mark: the pound -- in february, its 2009 lows. where we are seeing big movement is in the volatility market.

dollar implied volatility this week. the highest level since at least six or so years. i mean, is that a given? we are going to see a pick up in volatility over the next three weeks, and even more if there is a vote for brexit? i would be amazed at the markets remain as comfortable with the idea of a remain win. and i think we have that silly debate last night, it was not really a debate. we will have a more clear debate with remain on leave. i think the prominence of the leave campaign is going to come up over the next three weeks. and i think the natural bias is that greater anxiety comes into the markets and that will result in greater volatility. mark: how does that play out with a euro? yesterday, post ecb, as i said

earlier, we had the small swing in the euro-dollar exchange rate since the march q.e., march 2015, when q.e. started. we have seen 3% swings on the euro-dollar exchange rate on ecb days. how is the euro going to fare? aerek: i think brexit is factor for the euro. it is more focused on the u.k. economy. i think longer-term there is much more serious applications for europe in terms of the fifth-largest economy in the world falling out of the e.u. -dollar ratethe euro would get paid -- get hit pretty hard. theecb did not dismiss idea of more easing. we have not even started next season, which is from 8 june. at with the inflation target

1.6% in 2018 despite the stimulus incorporated into the forecast -- mark: is that the big disappointment? derek: and the crude oil price was higher but the inflation rate was the same. it does beg the question, what needs to be done to lift inflation if after all they have done, it has and done that. that, i think, rightly leaves the ecb thinking that perhaps they might have to do more. a taper of q.e. is the obvious next step. they will never go from 80 billion of q.e. in march 2017 to zero in april. i think there will be a timetable set up. and that will be another easing move. mark: always good to see you. thanks for joining us today. xt, could we see a repeat of the january route in china? goldman sachs says yes. the bank warning that capital over intoould spill another selloff. we will talk china and the weakening yuan. that is next on "the pulse."

stay with us. ♪

mark: welcome to the pulse, live from european headquarters in london. we are getting some pmi data out of the u.k. on services. we have seen an increase to 53.5 from april's 52.5, which was the lowest in at least three years since the series began. the confidence index of manufacturing and services has 59.1, so53 from services rising, the composite

index rising as well as the service is part of the economy has been the stall wart, the reason why the u.k. economy has grown for 12 straight quarters as manufacturing remains in the doldrums, but it pick up in the service part of the economy. we had seat a slowdown which pushed the pmi number to the lowest in three years but still above 50, the line signaling and acceleration and contraction. sterling, little change, euro at 77 pence. -- nejra: the stoxx 600 is up 4/10 of a percent ahead of the all important jobs data out of the u.s. energy producers are leading the gains and across the board, we are seeing a little bit of

demand for risk assets and ahead of this job data, so take a look at the bloomberg commodity index. this tracks returns, not spot prices, but it has risen to a seven-month high. have brent crude above $50 a barrel. indexoomberg commodity showing a general upward trend for commodities today. the commodity currencies are the best performing. look at the aussie dollar and new zealand dollar rallying against the greenback today. bloomberg dollar index pretty much unchanged ahead of the jobs data. my final chart shows that the yield premium that treasuries pay over u.k. guilt is surging. , thee two-year yields spread is the widest in 16 years. on the 10 year it is the widest in a decade.

what this really highlights, because we have u.s. jobs, the fed rate decision, and the referendum on the eu happening in the u.k., this really highlights the two different views of the economies of the u.s. and u.k.. investors gearing up for a rate rise. mark: let's talk china. that is a growing risk capital outflows may accelerate as the yuan weekends, causing a broad selloff similar to that in january. let's check out this chart of the hour, the yuan is poised for its fifth week in decline. it is close to the five-year lows we saw in january. our next guest focuses on china's political economy and its engagement with -- it is arthur kroeber.

is there a risk we could return to the volatility we experienced in january and august of china's currency continues to weaken? arthur: there is a little bit of risk that i would not want to overstate it. the key thing is the u.s. dollar. if we see stability in the u.s. dollar i think authorities in timeng have an easy managing a gradual depreciation of their currency. the big risk is if you have a big spike in the dollar as a result or in anticipation of the next fed right -- fed hike. that mean a one-off devaluation, another one off devaluation like we saw in august is unlikely? arthur: no, i think that is a must certainly not going to occur. i think the people's bank of china realize they made a

mistake in august when they made that one time adjustment and they seem pretty committed now to making gradual, incremental changes in a very careful manner because i think they are quite inre of the potential impact global markets that their moves can have. mark: what is your assessment of the chinese economy right now? many may say the data is .ackluster, stabilized at best how do you use the economy when you look at the data and what is happening on the ground? arthur: i think there are two big features. one is that the government clearly in the first quarter of this year intervened with some credit and infrastructure stimulus with an eye to stabilizing growth. my view is that they are probably going to keep up some form of stimulus for the next several quarters because they are heading into a political ofnsition toward the end

next year and will want to be riding a strong economy into those political events. you basically have a two track economy where industry is sluggish but services and consumer spending still show pretty solid growth. the chinese consumer right now is the main thing that is holding up the economy. mark: debt to gdp remains a concern. could it cause a financial crisis? .rthur: not in the short-term the key thing and the debt level which is a medium to long-term concern, the key thing is that the funding of the banking system is still pretty solid so it does not rely much on extra no borrowing. when you look at the domestic funding, it mainly comes from bank deposits rather than bank commercial paper or bank or wing. the dutch bank borrowing. -- bank borrowing. if you extrapolate the current

trends another few years forward, then i think the financial system does begin to isk a bit fragile, but it probably about two to three years away before we have to start worrying. mark: how well are they managing the expansion of the shadow banking? arthur: i would say reasonably well. i think the regulators first of all have studied pretty carefully the problems that arose in the u.s. particularly before the 2008 crisis. they are aware of the risks. on the other hand, they want some shadow financing activity as a vehicle for financial innovation and getting credit into new places so they are walking a fine line, but i think on the whole the risks are being kept under control. mark: essentially, china's leadership has to allow itself to lose control to some extent if it wants its economic reform

process to succeed. is that happening? will it allow that to happen? arthur: this is i think the big problem and i do not see this as a huge issue for the next year or two. on the longer time horizon, china has to have an economy that is more based on private entrepreneurship, consumer spending, and so forth, and much more markets are required unless intervention by the state. the government has said rhetorically but they support that and they want to have a more market-driven economy, that their actions over the last year or two entity to show a desire to have a high degree of state role forion, a big state enterprises, and heavy-handed government management of the market. for china to sustain high-speed growth through the next day

kate, the government is going to have to step back. aftery question is that next year, they will feel a little more confident and able to do that. not step backdo are we looking at a japanese-style lost decade of growth? arthur: i think there are two possible outcomes if they fail to execute on any of the reforms that are crucial for medium to long-term growth, one of two things could happen. the debt situation could get out of control and you would have a financial crisis. i think the more likely scenario is because the government has abundant resources and liquidity they would be able to forestall a crisis that would probably fall into a high debt, low growth trap similar to what japan experienced in the 1990's. i think that is the biggest single risk in the chinese economy. mark: arthur kroeber, thank you

for joining us. japan's double flip-flop after kuroda's about-face on negative rates. we are live with our guest from fits rating. ♪

mark: let's get the bloomberg first word news. nejra: the euro area is lackluster growth is said to

continue as the economy calls for a strong first quarter performance. it's gauge of new business growth fell to a 16 month low in may. the survey suggests the 19 nation economy will grow .3% this quarter, down from .5%. surged -- thend poisedes for the biggest one-day gain since they were sold. 13%, the is as much as most since the announcement. they also said the chairman and founder plans to go within a year. see an sachs accelerating risk of capital outflows from china as the yuan and a could open a

global selloff similar to those seen in january and august. the yuan is poised for a fifth weekly decline. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. time thisthe second year, japan's policy makers have performed a you term -- be you turn on the key economic strategy. this week's delay in a sales tax the faith undermining in debt. how disappointing from a debt perspective was it that the tail postponed?x race was including the

expectation that the consumption tax would increase as previously scheduled in april 2017, so the delay affects our medium-term fiscal expectations. to rerun theed protections and see how things balance out. there will be an impact on growth as well as the fiscal's that i think our other point here is the second delay now to the second increase in the consumption task surely puts more of a question mark over the government's fiscal consolidation. mark: do you think it is committed to fiscal consolidation? they have this primary balance surplus goal for the fiscal year starting april 2020. is it credible? andrew: it was already a little difficult how it would be achieved and with the delay to the consumption tax increase it is harder to see that. we think japan is about to

percentage points away from a private -- a primary deficit. contrary to some of the alarmist commentary we here on japan, the fiscal sustainability is not that high. we were expecting a consumption tax increase to deliver about , and it is a question over whether the government is committed. mark: how much damage with the tax hike have done to the economy? isrew: one of the puzzles the persistent weakness of consumption since the taxes increased in april 2014, which is greater than we had expected. we were expecting the japanese 0.7% this year. we had to revise the forecasts but the key weakness for the rating is this to -- is the high

government debt. mark: gdp is over 200%. some suggest the bank of japan could or should by the government's debt and write it off. is that completely improbable? andrew: it is an interesting theoretical suggestion but some of these theoretical suggestions have become practical in the past years. i think we need to wrap a wet towel around our heads and figure out what the implications are. in the circumstances where the that,f japan was doing they would suggest that economic and financial conditions in japan were deteriorating more than currently expected, certainly not something we think is necessary for debt to be sustainable. presumably that would suggest the circumstances had worsened.

debt isst of japan's holders, howtic much of a positive is that fact? andrew: it is the main thing that allows japan to carry this exceptionally high debt load. one of the numbers that is less often cited is that japanese nonfinancial sector has less than 700% of gdp so the ability to carry debt is very high, debt tolerance is very high, but these things can change quickly. mark: let's talk about the broader region. the big focus is the u.s. jobs report which could lead to a fed rate increase. what is the in fact -- impact of that? itself ise fed move not going to trigger any rate

reactions but i think the external funding condition and potentially domestic rates in asian sovereigns are going to be more challenging. the region is likely to be importing monetary tightening from the u.s.. mark: we just chatted to our man in berlin from the brookings institute about china. my question is can it avoid a disruptive slowdown? andrew: we expect china to grow about 6.3% this year and next. forecasting what we think will happen or what we think policymakers want to happen? i suppose more the latter and i think the reality is that authorities are strongly committed to the six and a half percent growth target that was recently articulated at the march national people's congress. it was sort of casting more

doubt on the sustainability of china's growth model and the feasibility, i suppose of that growth target. we are getting mixed messages from the authorities which adds to our concerns. leverage asing source of systemic vulnerability? andrew: very much from our point of view, and we have already taken a negative action on china's ratings. it is something that we continue to watch. i think it ties in with the pressure on the rmb and foreign reserves which we expect to resume later in the year as the fed raises rates. i think the pressure on the rmb comes back to the narrowing spread between china and the u.s. higher u.s. rates is adding pressure for more capital outflow.

is, since the air is bubbling up in the next terminal finances, the pressure for keeping rates low domestically is contributing to this pressure for capital outflow. externalrement for stability is in, does contradiction. kuhn --d your call andrew cal kuhn. in the united states and we are going to go live to new york for what we are expecting from the all-important eta. -- data. ♪

mark: just got some breaking news from charles evans, the federal reserve president from chicago who will be speaking in the next half hour. he says the uncertainty related to the u.k. referendum may be unwelcome for the u.s. the fed meets only in a matter referendum,re the and he says u.s. data has been more positive since the march

meeting. he says the fed may be able to judge the outlook better after june. he is a nonvoting member this year, but let's talk to michael mckee who is in new york. we have a big day with the jobs report. let's talk briefly about those evans comments suggesting he might have a better viewpoint after june. how does that play into what some of the other fed policymakers have been saying? michael: a tracks reasonably well. there is a concern what the brexit vote might mean for the global economy and they are going to watch the polls very closely. if it looks like a close vote they might hold off even if the u.s. economy and their feeling justifies going ahead. it is possible the fed may want to wait. testifyllen is going to to congress two days before the brexit vote to lay it out. mark: today's jobs data will

give us further ammo to assess whether june or july is likely. what are they telling us? michael: it is another reason charles evans might want to wait a month because this number is going to be distorted. we had a verizon strike, 35,000 workers off the job so they were out of the payrolls and it will be an unusually low number. the fed is going to have to do some mental adjustment. it will affect hours worked and average hourly pay. we will have a different number to read in terms of what it means for the fed. we will have to put some workers back in and figure it out. mark: michael mckee in new york on jobs day. stay with bloomberg, plenty coming up today including the numbers in the u.s.

george osborne talks brexit. jamie dimon will be speaking. next, tomnce" is keene and anna edwards will be kicking off the conversation with charles evans. ♪

tom: this morning, the may report on the american labor economy. in this hour, we searched for rage growth in america. the brexit debate heats up the prime minister. he will attempt to get to monday. a conversation with charles evans of chicago. good morning, this is bloomberg "surveillance," tom keene in new .ork, caroline hyde in london so much going on. what would you look for in the brexit