francine: zero change the market -- as brexit risks ways on this week's central banks decision. the dax poll -- the uk's chancellor could spark a fiscal crisis -- remain a connect. -- the country's shares are denied entry into the benchmark indices for the third time. ♪ francine: welcome to "the pulse." live from bloomberg's european headquarters.

first thing is first. 10:00 and central european countries. we need to get your asset check. this is what european stocks are looking like. a little bit of a rally. the british pound also .ebounding slightly this is ahead of the federal reserve policy review. i want to show you some of the other indices and asset classes that we are looking at. , pounds, and that is the rebound we are seeing. you want trading near a five-year low after the msci decided to keep chinese equities out of its benchmark indices. that is the market. we'll get plenty more data checks. let's get to first word news with nejra cehic. nejra: china's domestic equities have been denied entry into msci its market indexes for a third

time. whose emerging market index is tracked by investors with $1.5 trillion assets says the company's desk says the countries -- says the countries policymakers -- it is a setback for the presidents effort to make the yuan and international currency. the uk's chancellor will warn that leaving the eu could spark a fiscal crisis. george osborne will say reduced trade and investment would leave a 30 billion pound black hole that would have the plug by increased taxes and spending cuts. progress -- progressive campaign that thejohnson says u.k. should leave the eu. eu, it islook at the a zone of the lowest growth of anywhere possible.

it is catastrophic for unemployment and many parts of the mediterranean countries. holy eu project is a machine for generating excessive your argosy and red tape -- excessive bureaucracy and red tape. nejra: hillary clinton has opened a double-digit lead over donald trump in a new poll. the survey has clinton leading among 75049% to 37% likely voters. what that half of those polled say they could never vote for trump. trump outpolled clinton when it came to combating terror. global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stores on the bloomberg at top . francine. francine: the hikes on hold for now we understand the fed futures for the chance of an upward move at 0%. june is too soon.

try july, not likely says the markets. possible says goldman sachs. shiftellen used today to chances of a rate hike. laurence mutkin is the head of rates -- -- of june 10 .f june 10 rates great to have you both here on air. laurence, let's start with you. janet yellen needs to address two things, first of all risks coming outside of the u.s. just to address that terrible u.s. jobs report. marco it is not the first time that chair yellen has referred to external pressures as one of the reasons that the fed might hesitate to act. what we have is something quite new since the job report which is the possibility that the broadly rosy picture that we have is itself ubs. francine: how many hikes are you

expecting? lorca we don't think they will -- laurence: we don't think they will be of the hike this year or next year. mostly domestic. is not thels report only indicator of the u.s. labor market which has been showing weakness. we have been hesitant for a few months in several of the indicators. the fed knows that. that is worrying. -- the question is from an inflation point of view is there any hurry for the fed? you got to see in addition, the risks of growth actually turning low enough to be a formal reception are probably on a rise. maybe 40% or 50%. we know theld say fed wants to keep a tightening bias. i am sure the fed will maintain

a tightening bias. the bias will last for two years without ever having a tightening. francine: it is a smart way not to spend money and get the job done. if the markets are worried about brexit because there has been a shift in a citations, how should central banks look at risk? if britain isknow going to imperil the global economy. occur, youoes probably want to keep your pound dried. for some like the fed, yorkie willing to give that by -- you are willing to keep that bias. if you're the ecb, the bank of japan meets this week, they might want to wait and see if they can keep their powder dry for a little longer. there is a great deal of risk out there. under certain circumstances, this is a bank must to hold fire a little bit.

francine: would central banks do something the next day? do we have to wait a couple of weeks? is qe ready? we really don't know. simon: you can probably expect a statement early on on that friday. we stand by to support markets or liquidity in the markets. then we will look and see what happens, how long they can last, not quite sure. there might be liquidity. credit sharp lines from this is a banks may be put in play. potential for rate cut, or qe. when you look more globally, japan, switzerland, as the pound limits, it takes the euro down as well. --y are not good be happy they are not going to be happy. it depends on the fallout in financial markets, whether it is

sustained. --er that, it could be a 75% a series of global events, be it the debt -- be it the devaluation in china last year. francine: the counterargument is that if you are boj, then maybe this is a right time to do something. i know people don't expect it but why would you? -- but why wouldn't you? laurence: it is worth extraordinaryat -- the bund yield like you mentioned just dipped below 0% yesterday. if we look further ahead, away from this upcoming event risk, what we are going to see is we do see the need for more ease by the bank of japan and more ease by the ecb. how soon will start? very difficult for the bank of japan after so many years of the

last decade, there is no type of using that has not been tried in japan. where they go next, probably a rate cut again. probably not tomorrow but maybe. francine: we will talk about yen next. laurence mutkin, global head of g 10. both stay with us. we will talk china. stay with bloomberg for full .overage of the rate decision it comes at 7:00 p.m. london time followed by yellen's news conference. make sure you all of the blog for coverage. tune in for our special coverage of the fed decides at 6:00 p.m. stay with the pulse. bond yields headed towards more negative territory. in many cases, even further into negative territory. how long -- how low can bonds

go? remains wobble. we will analyze the politics and the brexit campaign. oils longest losing streak in four months. we will look at what is troubling traders. ♪

francine: welcome back.

let's get to the bloomberg business flash with nejra cehic. nejra: china's asset managers are getting ready for a crackdown in a move to target shadow banking. they will need to adjust ratios. that once thed limits come into effect, units of public mutual funds will need to hold $300 million in net capital for every $1 billion under management. the final round of bidding for yahoo! is said to have seen verizon, at&t and quicken loan founder joined by three private entity groups including tbg. each of the six suitors once yahoos court business as well as intellectual poverty. most of them value yahoo! between $4 billion and $6 billion. verizon's bid is lower because it does not include property. volkswagen may merge units and sell assets as it tries to navigate its way out of the

emissions scandal. they say the company is planning to combine the component units of various grounds to cut costs. vw faces billions in fines after him deft after admitting -- after admitting reading cars. -- admitting rigging cars. that is the bloomberg business flash. francine: thank you so much. japan's yield on government bonds has dropped. i want to show you our chart of the hour japan's bond markets heading for its best first half of any year since 1995 after the central bank added negative .nterest rates five in 10 year bonds have slipped further into negative territory. yields just over 0.2%. currencies extended losses drag down by the msci's decision not

to add chinese benchmark indices. let's get more on this with itrence mutkin, bnp paribas also is simon can -- also with us is simon kennedy. thank you so much. laurence, when you look at japan -- -- white is japan, germany is a blue. you can see the german bond 10 year was off and negative territory at what does this tell us? laurence: it tells you but risk and the risks that central banks are fighting. the risks are it is still very hard to see any evidence for getting inflation back up. the same thing, although with much less in the way with full employment is in the euro area could we have these extraordinary positions which we

may be having the bank of japan and the ecb with benchmark negative interest rates. that is what you see with these charts. you see a bond yield at zero. still yielding at 45 basis pains above itbasis points would take of bonds as something you would buy to hedge your liability. urinary yield, it is bigger than ever? do you buy bonds insistbecause regulators . the other is if you can get away from caring about the level of the yield, if you look the steepness of the yield curve, is this better than cash? .arning -.5% in cash what that means is as long as central banks need to ease coming can expect these yields to stay negative. this is what we have to get used to.

francine: this is one of the things that seems very clear. central banks needs to ease the appetite for the central bank's to do more. simon: inflation, they are still a little bit higher. the central banks are try to -- arewn those yields trying to push down those yields. inflation is higher. if you take inflation into account, the yields are higher. they are trying to suppress them. they are running the risk that it is a bubble. central banks feel that fiscal policy makers are not stepping up. they are the only game in town. francine: just to keep you on your feet, where is the biggest policy mistake waiting to happen? it could not happen but is it the fed that risks the most by increasing the rates of the world is not ready for it? certainly the emerging

markets [indiscernible] the fed has a juggling act. does must just did the mystic economy was pointing in one direction. the fed has a tough job. francine: is at the fed? or the ecb? laurence: no one wants to start from here. where the policy mistake was made, perhaps it was in 2000. question that the markets care about. why risk is so low is because markets are is beginning to doubt -- are beginning to doubt anything the central banks can do. problem. really big maybe it is not a question of avoiding making mistakes. maybe the answer is that every lever they push doesn't work. francine: deutsche bank is

saying this is a mistake and because they don't have anything to work on, they should stop, because it therefore it would push policymakers into action. push politicians into action. is there any truth? simon: you tried but it is a pretty big risk. if you look the fed, it is the only bank that is raised and not get pulled back. they raise and then they cut back on the options and then not done so. options. they had not done so. they raise rates and hope to something would happen. [indiscernible] laurence: the fact that you hear so much talk on helicopter money . the fact that you the suggestion that fiscal policy should be funded by money printing. deficite japanese

hasn't gone up to 2.5 times gdp nearly. of course this is already been tried -- this has already been tried as well. the worries that these statements are expressing is a worry that monetary policy has gone all the way to negative. quantitative easing has been tried everywhere and doesn't seem to working. fiscal expansion has been going on in japan and in the u.s. and u.k.. it seems to be doing something. markets right now with these low risk premier for bonds are expressing a really pessimistic view. i guess what it means is if we get some sort of cyclical rebound on some of the data, then markets have room to be price for less. francine: laurence and simon, thank you so much. us.ence stays with we will talk more about yen and

maybe helicopter money next. as bond yields the below zero, what tools does mario draghi have left at his disposal? ♪

francine: welcome back. european stocks diverging while rebounding a touch. the pound rebounding before we

hear a lot more from janet yellen could we hope maybe a little bit of a glimpse when she hikes next. yen also retreating it we are back with laurence mutkin pit we were talking about central bank divergence. mutkin.nce we were talking about central bank divergence. what does this tell us? laurence: when yields are superlow, solo that you cannot buy them. how do you decide we should be? this is something we have learned from japan, for the last 15 years when yen yields were very low. now we realize how high they were. how the japanese investor, how do you make money out of the yen curve? atncine: you basically look -- you have the duration there.

laurence: it up to carry the roll down. -- it helps you carry the roll down. you can see the total return can be 2.7 around the 10 year area. 2.6, 1.6 percent compared to the roll down that you get on the curve in japan, these are still a big numbers. when we think about how to invest, what we need to do is look at the carry on the yield. francine: what are you two favorite plays in this type of environment? laurence: in this type of environment right now, i regret to say but with boone yields zero, this is the time to buy thirty-year germany. nobody wants to happen. well. it in japan as as the 10 year want to zero, the yield curve collapsed by 40 basis points. there is such a preference for a positive rather than a negative yield.

that is in europe, i would say thirty-year bonds are still there. --ncine: on to get your take helicopter money in some form has kind of been done. japanese have not been getting it second drawer. inyou have any way of moving -- the only way of moving yen's intervention? laurence: helicopter money seems to be tightening up as a definition. can someone please print money and make it work somehow? to make it work, it still relies on the economic actors in the economy wanting it to work. you would've thought by now that fiscal stimulus or quantitative easing or superlow inches rates would have done something -- a superlow interest rates would have done something to transform the economic outlook. -- peopleit works

should come up with a new brand for using. francine: laurence mutkin from b.n.p. paribas. ♪

francine: welcome back to "the pulse." i am francine lacqua. we are just getting some breaking news from the u.k., unemployment important because it will probably be seized upon to talk about the bremain or brexit camp. basic wage growth, it accelerated to 2.3%. economists we have spoken to had estimated a 2% increase so we are seeing a little bit of wage growth. as far as the unemployment rate,

it fell to 5%. we had estimated a figure from five -- of 5.1%. from april we did see a couple other economic data pointing to the fact that the brexit concern surrounding this economy had an impact. we are certainly not saying it in terms of wage growth were unemployment as far as the figures today show us, so that is the very latest. you can see pound versus euro at 0.79. china's domestic equities have been denied entry into the msci for a third time. the country's policy makers need to make more improvement to accessibility to its market.

the fed is expected to keep its benchmark lending rate on hold today but the accompanying statement and comments from janet yellen will be scrutinized for clues on the likely hiking of the next increase. expectations have been dampened by a week u.s. employment data. hillary clinton has opened a double-digit lead over her rival donald trump. the survey has her leading him 49% to 37%. more than half of those polled say they could never vote for trump but he outpolled clinton when i came to combating terror at home and abroad. hackers tied to the government of russia gained access to

from the democratic party about donald trump. 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: markets trading a little bit higher this morning. let's head to the bloomberg with mark barton. groupevery industry rising today, up by 1.2%. decline equates to 600 -- brexit concerns have dissipated marginally today. the big event today on the macro level is the federal open market committee meeting, and we will get the result a little later of that eating.

look at the world interest rate probability function on the bloomberg. you can see zero percentage probability of the fed doing anything today. 15%, december, 48%. it is only next february that you have a greater than 50% chance. mohammed el-erian says the fed will paint a mixed picture of the economy. the fed may acknowledge that volatility has been relatively some food. in updating the dot plot the average projection of fed officials keep open the possibility of two rate hikes this year but fewer hikes thereafter than had previously been signaled. those are just a few of the points mohamed el-erian made.

the msci has decided not to let china into its benchmark indices. we saw an initial decline of 1.1% of the shanghai composite but it is likely that state back to buying has boosted the index. policymakers need to make additional improvements to accessibility of the shared market. a disappointment for those in china who were expecting to be accepted into msci. crude oil down for the fifth day, the longest losing streak since february. wti down 6%. inventory rose 1.2 million barrels last month. later today we get the eia inventory data, stockpiles likely declined by 2.3 3 million barrels last week.

it is up by 80% from a 12 year low in february. francine: mark barton with your asset check. u.k. chancellor george osborne well-worn that leaving the eu -- will warn that leaving the eu could spark an economic crisis. remain supporters are battling to turn around a referendum six of theich has opinion polls giving a lead to the exit campaign. we welcome matthew good when and graham sharp -- and william hill . graham, let me start out with you because the bookies and polls now have the brexit slightly ahead. graham: bookmakers are asking

people how they think things will pan out but i think the two are interrelated. sometimes people are influenced by what the polling says so they are related. francine: how would you explain this game from last week? it looks like a done deal when we were odds of one to seven. now it is right down to eight to 15 so for 15 you can win a profit of eight. it is the closest it has been since we open books. francine: is it safety in numbers? >> the truth as we are not entirely sure what is going on but we know over the last eight opinion polls -- 11 opinion polls, eight put us ahead.

there is no question the race is tight. one possible theory is that this is all random noise, but even if the polls are wrong we have seen a change in the psychology of the campaign and that will really help the leave campaign. francine: psychology because people ask themselves questions about sovereignty rather than the economy? what are the main changes you have seen? matthew: my interpretation is really about immigration. took a strategic decision to really focus on that issue. we know from the research the strongest drive of the brexit vote is public concern over immigration. over the next seven days i will be watching just how the camps navigate that issue, whether they keep talking about turkey and serbia and albania because

that is a resident message. francine: what i am fascinated by, you speak to a lot of people anecdotally and they do not know what they are voting on, and i think that is true for bankers, true for the person on the street elsewhere in the country, but you have bets for everything on whether david cameron can remain in power and whether there will be a general election. graeme: the david cameron issue is quite an interesting one because at the start of the year he was 10-1 to stand down. hisi think people believe future is directly related to the outcome of the eu referendum . heple will think the damage has caused his own party is such that he will be forced possibly to stand down much earlier than he wanted to. you can see the correlation with one alex ferguson announced he was going to retire.

all of a sudden he lost his grip because they were looking beyond him. i personally do not see how cameron can survive whatever the outcome is, and boris johnson is waiting in the wing as a favorite to succeed him. francine: what is my bet if i want to bet there is a general election in the next six months? graeme: legally the general election cannot happen until 2020. it is quite a significant set of circumstances that has to happen before you can call it earlier. that is the market we are looking at, but we still have odds on whether it will be in 2020, and the conservatives are 11-10 favorite to win over a majority. if david cameron gets anything less than 57% he is out of power or boris johnson will let it stay for another six

months, what is happening after the referendum if rex it wins? >> there is no guarantee boris johnson will succeed david cameron. if britain votes for brexit david cameron's authority will be greatly diminished and i agree he would very much likely have to resign. however, senior year skeptics are collectively making noise they would quite like david cameron to remain while those negotiations over a new trade agreement again, and so that potentially when alter the timetable slightly. we would intentionally have david cameron until the end of the year as the conservative party prepares for a leadership election, and the skeptics like boris johnson, they will be jostling for position to replace cameron. there is no guarantee he will go immediately although i agree that is the likely assumption.

francine: what is the percentage, is there a percentage where you think david cameron will be safe, a question of bremain? matthew: i think if you believe the media reports he is being advised in needs at least a 10 point lead to put this question to bed for a generation. if bremain squeaks by a couple of points, he will still be under great amount of fire. i would expect anything below a 55% would be difficult. francine: the last referendum was in 1975 so we do not have anything to compare with, but what surprised you the most? at the polls are changing this fast or is it to be expected? graeme: there are connections to the scottish referendum so it is sooner in the way it has evolved. at one point everyone assumes the status quote will prevail

and then a couple of polls go a different way and you get a bandwagon, and it creates a sense of mystery. all of a sudden people are coming back on the other side. one thing i know is it is good for business. francine: can you give us figures? graeme: we are expecting some 20 million pounds will be gambled. the interesting thing is that 72.61% of all of the individual bets we have taken have been for brexit but 66.9% of all of the money we have taken is for remain. the volume of bets are for brexit that the majority of the money is for remain. francine: what are the chances if the u.k. stays together? matthew: it is difficult to see at this point. if england votes to leave the ireland andon and scotland vote to stay, that

would definitely call for a second referendum in iraq -- in scotland. the smp do not currently have majority public support for a second referendum so they would need to consents -- convince more scots of the case for a referendum in order for that to happen. there is bit of growing evidence that scots are becoming satisfied -- dissatisfied with the smp, so i would expect that constitutional element to have to play second fiddle to the more pressing question, what does this new trade arrangement with the eu look like? francine: what are the odds of a scottish referendum? 13-8 that are only england vote leave scotland votes remain and that could trigger the next scottish referendum. we will wait and see. , we were 6-4ooked that there will be another

referendum by 2020 on scottish independence. francine: what is the darkest or the most random bet that we can put on when it comes to brexit? me becauseu have got i cannot think about it. everybody is focused on the turnout. and it could move any day, so there you go. matthew goodwin, associate fellow at chatham house and graham sharp, media relations at william hill. fomc meeting hit desiccant at a move next month? -- fedussed the fed hint at a move next month -- meeting and at a move next month?

♪

francine: welcome back. the fomc meets today for the first time since the disappointing jobs data last month. let's bring in our bloomberg economics editor michael mckee. external risks and u.s. jobs. michael: fed officials had said

for a long time the brexit vote might keep them from raising rates if they do not want to contribute to any market hysteria so they get a break because they are data dependent. that as an excuse for not acting without having to delve into what is going on in the markets or in the u.k. at the moment. the real question for everyone watching from wall street will be why do they say they are not moving? is it because they think the economy in the u.s. is really slowing down or do they think it was maybe a one-off, but they just want to get more data and be more sure about what is going on? the statement and janet yellen news conference will be very important in answering the question if not now, when. francine: do you think she will had on -- tackle brexit or dance around the issue? michael: she probably wants to

leave a space wide enough to drive a lori through it as you would put it over there because should the u.k. vote to stay in the european union, the markets settle down, and the fed does not have any connection to that. she probably will say something about it is up to you people to decide and we will react to how that affects the u.s. economy. .rancine: thank you so much michael will lead all of our radio coverage and he is in london next week. bloomberg for full coverage of the fomc meeting. the rate decision comes at 7:00 p.m. tonight. make sure you follow the top live blog for real-time coverage if you are a bloomberg user and tune into our special coverage of the fed decides starting at 6:00 p.m. today,n for a fifth day its longest losing streak in

four months after the crude stock oil expanded. ofning me is the new anchor bloomberg markets middle east. we do not have the all-important u.s. data. >> we are looking ahead to all of these events and at the beginning of the week, and you have a chart on that as well, it set the tone in terms of the amount of oil rigs coming back online, and the first real turnaround, we get a bit more guidance from the iaea and opec as well. as you go into 2017 a bit of an equilibrium between supply and demand. according to as bloomberg median estimate see stockpiles falling 2.2 million barrels last week. putting additional pressure on the price of oil. a quick note from goldman sachs, they say price discovery remains fragile and there could be

upside surprises from outside venezuela and nigeria within the opec group. they see a surplus recovery in the beginning of 2017. the $50 and $60 range is a very critical one and it is interesting to see how the oil rigs will develop and the next months. francine: it is about shale gas. we had disruption in nigeria. we have more demand in india. what about the market share coming from iran? yousef: coming out of south korea, imports from iran at the highest level in five years, up 132% from a year ago. guess who it came at the expense of? saudi arabia. a real dog fight in the markets. the iaea is seeing iran's pursuit and ambitions.

earlier in the week we heard from the iranian oil ministry and they said the new structure for their contract was reaching the end game so they will be able to push forward on the agreements with some of the oil companies. francine: great to have you here. thank you for the roundup on the oil price. oil ratinges crude count. let's get more on the top news stories that we have to follow with a bloomberg business flash. nejra: china's asset managers are preparing for a regulatory crackdown as part of a move to target shadow banking. mutual funds will need to adjust leverage ratios before investing in nonstandardized products. -- the final round of bidding for yahoo! is said to

have seen verizon, at&t, and quicken loans founder dan gilbert joined by three others. they want yahoos core internet business. most of them value yahoo! at between $4 billion in $6 billion but verizon bid is lower because it does not include patents and property. volkswagen may sell assets as it tries to navigate its way out of the emissions scandal. planning tois combine the components of different brands and boost efficiency. they face aliens of dollars in fines -- they face millions of dollars in fines. vw may make an announcement as early as tomorrow. that is the bloomberg business flash. francine: as we speak we are seeing live pictures from

westminster where billionaire philip green is being question about that collapse of bhs. let's have a listen. >> at what point did it become clear to you that it was not going to be the excess that you had hoped? discussionafter the when it came into arcadia and we injected into the space, started to inject some of the arcadia brands the trade inside the space looked like that could possibly be a changing format for the business, and help bring more people through the doors. we had successfully done that in other departments stores. possibly that could be a start of something fresh with a much later stage. and the wayd food the food market was developing, i have had many conversations

with different supermarket that they are all sort of running off with their own expansion. to see if we could maybe take one of those retailers in. is the first or secondary price? -- in hindsight hindsight, unfortunately the underlying portfolio even before we bought it had some very poor property deals done over the signednd it had leases that were 40 or 50 years. they were too expensive in the ea and actually if you look at, if i gallop forward if i could, this is what happens when they get the cba. francine: that was philip green, this for the last hours as he

answers questions about the collapse of bhs. stay with bloomberg, " surveillance" is up next. we talk currencies, yields, and fed. ♪ get ready for the rio olympic games

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the fed: zero chance will hike as brexit risk ways on the central bank decision. warns a votecellor to leave the u.k. -- the eu could spark a financial crisis. the msci rebuffs china and their shares are denied access to the benchmark indices for a third time. i am francine lacqua in london with tom keene in new york.