manus: turmoil in turkey. resident or to one consolidates -- president erdogan consolidates power. -- keeps investors on edge or and bonds slide as goldman sachs lowers its outlook for the lira. the soft pound gives softbank the upper hand. the japanese company makes a -- 24 billionlion pound bid for uk's arm holding. ♪

manus: you are welcome to "the pulse." good morning, i am manus cranny could we have a lot to digest, not least a coup that went and came. it was quashed. it happened in turkey late on friday. we got the lira, stocks and the deal of the day which is arm on your board. .tocks in turkey, down 3.5% you are seeing this index down the most in almost three weeks. you are seeing this real risk aversion. recovered froma one of the most demolished emerging-market currency trades. the dollar lira at 2.94. what you are seeing is a shift. where will we go next? it go tolmost see

around 2.90. goldman sachs says they reckon it will weaken. you are seeing this big turnaround. the demolition that to go way that's effective place in the currency on friday dropped nearly 5%. we crawled back 50% of those moves. 43% rally, softbank buying arm holdings. premium.e, a 43% we are bang on the money. the market seems to be pressing no other contender in the wings at the moment. let's get their first word news with nejra cehic. nejra, good morning. nejra: john kerry says the u.s. is awaiting a formal extradition request. state calledetary for evidence that would stand up in court and dismiss any accusation of u.s. involvement in the uprising as irresponsible. shares in arm holdings have

soared after softbank has agreed to buy the company for 42.3 billion pounds. just connected devices in the home. it would be the biggest takeover for softbank which has become one of japan's most liquidity of companies. president obama has condemned the murder of three police officers and a shooting in baton rouge. a suspect has been killed but did not confirm the details. two weeks ago, baton rouge police killed and african-america man that set off -- african-america man that set off protests. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. manus: the turkish lira is rebounding.

it has recovered 50% of its losses. that triggered the currency's steepest -- since 2008. stocks have opened lower. our middle east managing editor joins us. we to see a. -- great to see you and we have the equity market reacting on the downside. the currency is recovering some of its initial losses. just make some sense of it from a markets perspective. >> look, i mean, this is the first time since the coup, the equity and bond markets are able to react to the news of the coup. the currency is rebounding from a very thick decline. really, what they chose is there is a negative reaction in terms of turkey on the side of the banks and airlines. recovering the most on the soft market. what it shows is maybe people do not think this is a complete

meltdown or complete disaster. what it is really bad. markets are down. manus: it is trying to gauge the scale of the reaction. the political backlash from anyone -- from erdogan. there areng to hear couple of comments coming across the bloomberg. japanese cuts turkish stocks to bearish. year,s what is at risk isn't it? >> it was crucial. data recovery of money coming to turkey this year. the question really on people's mind isn't so much is the day to day trading which is not sure there will be a reaction, but more so what does it mean for the long-term? some people are saying it is stable. the government is back in charge. the coup has failed at others

are concerned about the consolidation of power on a very hands of one the man and what that means for turkey going forward and the political risks. much. thank you very for the latest on the ground in turkey. for more let's turn to mike bell from j.p. morgan asset management and global strategist. no matter who you are, you've got to look at these huge moments of idiosyncratic risks, brexit, turkish coup. what i find remarkable this morning is the resilience of equity markets from the global perspective. mike: with both of those risks, they are very local problems it not to say they are not big problems -- problems. not to say they are not big problems. for turkey it is a very large issue, but for the global economy as a whole -- you look back, it is relatively small.

what is far more important is what is going on in the u.s. and indeed in china. there, the data has been good. manus: we saw some very strong numbers from the u.s. on friday. said, what we've got is a wirt. the probability of a hike goes to 44%. that is from 7% to 9%. that is a demonstrable change. what is your thinking in the ability of the fed to see the -- see through those small risks? they've got to look through those. mike: i think they can. brexit is the bigger issue for them. that delays the rate hike until the end of the year. i think it is possible you get the red that's the fed to hike rates once -- the fed to hike rates once in december.

manus: the other thing is we saw quite a rush of money in the emerging markets. this is where key -- this were turkey had been a key beneficiary. it a syncretic -- idiosyncratic, this coup of turkey. mike: little risks have always emerged in emerging markets. -- lyrical risks have always emerged in emerging markets. the brexit boat caused some political concerns in the u.k.. i think broadly across the world, we got the u.s. election coming up, people will have politics high on the radar. manus: fascinating. we are going to get the cleveland later. positioning initial for american political risk at

the moment. how does that manifest in itself , through bonds? equities? areer of these protagonists -- some people would say protectionists in their nature. michael if you look the polling, it suggests you are going to see you lookt -- mike: if the polling, it suggests you're going to see a democrat when but it will be split government. manus: what about u.s. equities. valuations are stretched, 20 times pe. mike: because we are relatively cautious on the outlook at the moment, that favors definitive markets like the u.s. --ause us being cautious other parts of the world and within the u.s., you want to favor the cheaper, value stocks.

manus: this indoor rally that we are waiting for after 13 months continues in the united states. we have much more to get through. mike, stay with me. stay with "the pulse." first up, post-brexit britain. short, shallow recession. we bring you the headlines, then softbank is hard cash. the japanese company exit 24 billion pound did forearm. good -- -- bid for our bid for arm. this is bloomberg. ♪

manus: 9:13 in london. it is 11:13 in turkey. let's give you a snapshot of how markets are doing could equities under pressure. japanese -- cutting turkey stocks from -- stocks to bearish. the cost of the cost of default insurance also rises on 10 year government bonds with the yield the biggest takeover for

softbank. it is become one of japan's most liquidity of companies. exxon mobile has made a bid for into royal offering a fixed

price of $45 a share. large the company's reserve and pop under gini. -- for papua new guinea. 8.0earches -- it offered point shares. rocket booster has landed back in cape canaveral lorna. the landing site desk cape canaveral, florida. florida.anaveral, it was carrying 5000 pounds of food, equipment for the international space station. that is your bloomberg business flash manus. manus: nejra, thank you very much. breaking news headlines coming in across the bloomberg terminal speaking. is he says that brexit is like -- is likely to reduce u.k. income.

he is talking about the variety of issues. the bank of england should wait for former evidence before policy change. a little bit of a surprise in the market last thursday. they did not go for a rate cut. the bank of england should word for evidence before policy change. sterling decline is partly related to the current deficit. he talked about wages and productivity. this case it might be an argument against a rate cut. let's have a look at some of the reactions. dollar sterling could we got the bigger trade. -- dollar sterling. we got the bigger trade. we are trading at 1.3281 at the moment. let's get reaction. we've got mike bell in the studio with us. that is fascinating.

martin was saying actually the reconsidering more rate cuts. mike: i think the evidence is clear that the hit to the u.k. economy is going to be significant. if you look at consumer confidence, and has fallen sharply. confidence, it has fallen sharply. , the minuteslear from the mpc shows that they were considering a package and what they are doing is working out exactly what type of package is going to be best suited. manus: would be the best package from a j.p. morgan asset management perspective? pound.ng lower on the everything i am reading suggests a moment of reprieve for sterling, i am looking at dollar sterling. many of the analysts are calling for this is the opportunity to sell the currency.

that has water ramifications in terms of assets -- that has broader ramifications in terms of assets for you. by the end of the year. we've also got expectations for the rate cuts coming through in the u.k.. we think they will do more qe and some form of credit easing. perhaps,or lending or even some corporate bond purchases. manus: how possible is it that? -- do you think that is in an extreme situation? 40% possibility at the moment. it is certainly not an impossibility. gilts.talk to me about

in the treasury market and equity market both rallied about 19%. the worst week for bonds. what you've got is this real flattening in the yield curve. my question to you is how 1%? thisan we see sub is at the very far end of the curve. really i demolition in terms of what is going on. that's really a demolition in terms of what is going on. -- really, a demolition in terms of what is going on. where are you in the great debate on bonds? mike: we think bond yields are going to be pretty well supported. the short end, you might see a move upwards. at the long end, the bank of england is going to ease more, probably with more qe. we think the bank of england --

we think the ecb is going to ease more. we think the bank of japan is going to ease more. that world, you got u.s. treasuries which it sounds crazy, but they look like a high-yield asset. they have a greater yield on the u.s. 10 year. we think the u.s. 10 year can go lower. we would not be sourcing duration and u.s. tenure market unless you get to 1%. market unlessr you get to 1%. manus: stay with me, mike. we got a little more to go. ,p next on the pulse, softbank hand over fist for britain's arm . we break down the 24 billion pound deal. this is bloomberg. ♪

manus: it is our big corporate story, softbank's take over of arm holdings. for more on the big acquisition, let's get straight to the phones and speak to -- the director of technology research. thank you for joining us. stock is up. bang on the money. the cap is quite low.

there are a lot of people who would like to own arm. the ones who are most talked about his until -- about is intel. all of those have gotten quite significant revelatory issues. -- significant regulatory issues. with owned by the chinese the single unit group. this is an all cash deal. it can close quite swiftly in september, october. the chance for scuffing it is quite low. manus: what i found interesting is softbank, they are committing -- they are seeking to double the employee headcount in the united kingdom over the next five years it to me, this is just five years. --me, this is playing toward

five years. it me, this is playing toward theresa may. nick: softbank does not have any semiconductors -- it would be odd from a business perspective to do this, increasing the headcount at that rate is the proper rate because it was a very fast-growing company. it is good for the u.k. to have those commitments. i don't think those would be very difficult commitments to make. those are the best things for the business and softbank's ownership. james, thank you for joining us. let's bring mike bell back into the conversation. this is the very personification of a week sterling, a brilliant asset in the united kingdom. do you think this opens the door to more m&a in the u.k.

post-brexit? mike: may is going to make that environment tricky, but some takeovers, given they don't want people coming in and taking out large it is champions, but this deal may be an exception. i think more broadly, there is push and pull on the m&a factors it the uncertainty is clearly -- factors. clearly -- ony is the other hand, week sterling makes the company's cheaper in yen terms where the foreign companies are looking at the u.k. market. it is hard to call the outlook. the uncertainty from the brexit outlook is probably likely to win out. manus: mike, thank you very much. joining us this first half of the show. no doubt about it, the one trait that is going through on the marketplace is turkish lira.

it is regaining some of the grounded lost. and toainst the dollar, 95, 56 up next, where life to brussels. .his is bloomberg -- we are live to brussels. this is bloomberg. ♪

of turkey from

friday's military coup. u.s. secretary of state for evidence that would stand up in court and dismissed any accusation of u.s. involvement in the uprising is irresponsible. shares have soared this morning of something is agreed to by the u.k. chip company. and connected devices in the home. it will be the biggest ever take over for softbank which under the chairman has become one of japan's most inquisitive companies. louisiana police say a suspect has been killed but didn't give further details. :wo weeks ago, police african-american man setting of protest that was followed by the killing of another black man by minneapolis police in the murders of five dallas officers by a gunman. countries,00 and 20 i am nejra, this is bloomberg.

manus: thank you very much, let's give your snapshot again some the biggest movers in the turkish market. 100 is down at the 3902, it is a fairly fast market. expect a risk premium on turkish assets to increase they just released an e-mail statement. you're beginning to see the markets begin to interpret exactly what has happened. into turkey the first seven months of this. taking back last year, of course it was near $5 billion or $6 billion. let's go back to nejra, who is trying to put some perspective on this. europe is already up pretty well in a relative sense to this cascade. nejra: you have covered turkey

comprehensively this hour. but we have seen globally is really equity market showing some resilience. we saw it in asia and in europe as well. if we look at the stoxx 600 it is up 3/10 of 1%. not massive gains but we are seeing risk. if i look at the stoxx 600 and industry groups performing the best on the bloomberg it is technology stocks leading those gains up 3.6%. guess what? the biggest gainer among them is arm, this has jumped the most ever and hit its highest point ever today since 1998. a really big surge in the stock after the news that softbank has agreed to acquire it for $32 billion and a 43% premium to friday's close. interview isa tv all happened very quickly. we have seen the reaction happened very quickly.

one thing i want to note that is quite interesting is that short interest in arm holdings is close to a six year high. whether these gains will last is another question. we are seeing a big move higher on the stock today. i wanted to look at sterling, we have had some comments of the bank of england saying that the weakness may not be as severe as previous recessions in the u.k.. he also said that to the bank of england should wait for further evidence before a policy change. we are seeing sterling extend its gains. as further evidence of general risk appetite we are seeing gold declining today. a lot of this has to do with the data on friday that we got out of the u.s., really meeting with the markets have changed their probability for a fed rate increase by the end of this year. last time will and 44%

probability of a fed rate hike. that prospect of higher rates is bad for gold. -- and may surged more than $5,900 an ounce. there are 1328 spot $79 an ounce on gold. manus: u.s. secretary of state john kerry is due to give a joint news conference with the european foreign-policy chief. shortly, their gathering for the eu for ministers meeting. how much will the events in the with the eu foreign ministers, their meeting today. ryan chilcote on the ground for us. ryan: it is critical. if heard some tough talk from the eu over the last couple of

days, a real shift in their position from one of support to one that say we support you but let's make sure you don't over do it in terms of going after the political opposition. that rhetoric is at this point only rhetoric. it dependent because of the migration. we have seen them come through turkey to greece followed by 10 fold over the spring compared to the time. the year before. the eu really needs to keep turkey on its side to stem the flow. do and eu needs to membership talks with that if you were to see the eu suggest that either of those

aren't going to happen that is when the rhetoric would turn into policy and that would really show some teeth. we haven't seen that yet from the eu. manus: unusually, we have john kerry there as well. politicshere global comes in. turkey has accused the u.s. of to find that for me but some parameters around it. clericso goes back to a in the united states of america. ryan: that's right. john kerry over the weekend and luxembourg just before he came and said that if turkey was to provide evidence that could stand up in the court of law that the individual you are talking about who lives in pennsylvania should be extradited and was somehow involved in the talks, then the entertain move and

the idea of some kind of extradition to allow them to leave the united states. don't forget, if it is migration for the europeans it is security for the united states. turkey is a hugely important member of nato for the united states. world's -- one of the world's largest countries with a muslim majority with a democratically elected government. i think if we have seen the european so far respond to their concerns about the crackdown going to far in turkey, if we have seen them be somewhat circumspect and just keep it rhetorical, who will probably get the same from kerry when he sits down for that conference. manus: thank you for a much on the ground for us at the prime minister's gathering. the meeting inn brussels, returned our next guest.

mark, thank you for joining us. we are waiting to hear from john kerry. talking aboutyan the u.s. getting security it is about the refugees. from what you are seeing from the judiciary, he talked about the gift from god. what you make of that? mark: it does look like a bit of a gift from god. they found those judges in a few hours. he is using it as an opportunity to consolidate his power and to move one step further towards having a presidential system in turkey. some people have been comparing the coup to the firings in germany that allowed adolf hitler to consolidate his power. the same time, i think it will

be difficult for turkish allies to be more than warm about moderation. manus: the turkish allies don't have any choice. europe almost has to take whatever it is given from turkey to save it from the refugee crisis. relationshipkey-eu is one that is more balanced than you may think. the political blessing of the european union. it doesn't matter to him what european leaders say. he's very keen to get a visa free deal with the european union later. cardsay they played their is putting themselves at his mercy. he has been dictating the terms of trade. you a similar thing going on. one of the first things he did was say he might withdraw a crucial airbase in the fight against isis. kerry will be very careful in

his choice of words. manus: it is an interesting window, isn't it? these are immediate days after a the reaction. this is his window to really remotelything that upsets him domestically. he can literally go through the whole of society. andan get it all done dusted before europe really objects to him. mark: i think that is right. turkey is a big country, 80 million people. there is a limit to how much say other people can have over internal affairs. the bigger risk is the divided country, a bit over half of the country are big supporters of the president. there are people unhappy about his role. we saw them come out a couple of years ago. i think the biggest danger is hisually about overdoing domestic consolidation and

creating some kind of counterrevolution. manus: let's switch gears and talk about another atrocious france. and nice in one can only wait to see what they come out with next. the shifting dynamics of terrorism has france politically and socially very near the edge. they have been attacked, and attacked, and attacked. mark: absolutely. each time the political response has changed. after the first attack, the country really came together and there was a feeling of national solidarity. that was less evident in november last year. this time, people to come out and attack hollande. not just the national front, but people in other parties it is predictable. or that it was a product of the weakness of his response.

it can remain as president. mark: he has been unpopular for a long time. manus: it is that it takes a new depth of death to help your political career first of popularity -- forgive me, it has been on the back of a tragic event. we are seeing less of that this time because we are getting closer to the presidential elections and people are attacking. to the second round and where they should be. it could be hollande. people underestimate him but he is somebody was more in him the many people think. manus: let's talk about another character, boris

johnson. he arrived for this first official meeting with his european counterparts as foreign secretary. it will be interesting, the european union has already said they had a constructive meeting with him. what do you make of his appointment to foreign secretary? give me your interpretation. mark: the most benign interpretation is that theresa may wanted to make the people leading the charge for brexit to own the difficult task of negotiating it. manus: you think that is benign? mark: may be slightly, the impossible program offered to the public. how do you secure economic prosperity once you have the freedom of movement. yet these three brexiteers in the movement. davis, theyn, david will have to deliver this platform and own whatever

uncomfortable trade-offs come later on. blood,the hand dipped in that might've been a daily mail-ism. i can't quite remember. there is a wonderful photograph of them. thank you so much for being with us. that is the director of the european council of foreign relations. up next on the pulse we will talk turkey with the coup over. what is next? ♪

manus: welcome back, it is "the pulse." let's check the turkish markets. in the 1997 coup, is of the markets drop quite precipitously. three secular coups since the 1960's. in 1997, a drop at 14 said -- 14%. two year bonds are ratcheting higher. up i nearly -- over 50 basis points. it is the lira you want to keep an eye on. it has its worst moment. that is back to levels we haven't seen since 2013. dollar lira at the bottom of your screen was this significant break, the biggest jump since

2008 on the currency in terms of a drop. that is coming back near 50% of its losses. golden ferret saying you will have 310 to the dollar. let's bring in michael harris. michael, thank you very much for coming in. you would say that the most critical issue is whether the president and the government go for early elections? >> yes. woman talk about fears of consolidation of power, this would be the opportunity to strike. they will look at the polls very aggressively to see if there is p bounds.u two opposition parties are a close to the temperature threshold. they are very weak, because the government in one case is attacking them lifting immunities. the other, they're supporting the existing leader who is deeply unpopular within the party not allowing the leadership challenge.

in a sense, there is a possibility -- this is a negative scenario -- you end up with a single party majority with only two parties in parliament. that could lead to the constitutional super majority but he can write the constitution as he sees fit. that would be a demonstrable negative. how with that translate? give me some benchmarks. i quoted the last three coups, dropping by 15%. where with a political risk manifest itself most presciently? michael: this was a failed coup. in 1997, they called it an in the they spoke government fell. the previous ones were military interventions. but 1980 -- it was a long time. not that there should be a freefall in the market. you have an adjustment because they've had negative news over the weekend which is clear.

it wasn't that long ago that the turkish prime minister had a shock resignation. people started to understand anyone that has been close to turkey should've understood that turkey lacks political equilibrium. it has for quite some time. he is the most powerful gun the country doesn't have legal authority in his position to be the most powerful gun the country. that has created all of this tension. fell clutch a medically when the resignation happened a couple months ago. everyone woke up to the idea that something is wrong in turkey. the coup just confirms that. the risk is not the people have been in turkey suddenly panic and flee, in the last couple of weeks with this nice risk after the fed payrolls. manus: the fed the shift back into em markets. the strongest in a number of years. leader inurkey was a that because it was always a

risk proxy. there is central bank that was aggressively cutting on the back of the global backdrop. manus: willie central bank cut again tomorrow? is that to mccubbins metairie to stability -- is that something complementary to stability in your opinion? michael: the focus was much more on stemming in a sort of crisis in keeping under control. manus: did investor sound fearful? michael: it reflected fears about how this could go wrong. their answers were quite -- it is not government policy yet. there was indication that is not the way they want to move. manus: who strongest on the call? michael: the deputy prime minister was leading the call and was quite convincing. he said the right things, he

didn't misstep and he was very reassuring. a good performance on that basis. we know that edrogan is going to be the one deciding. it is premature to make your decision because they will be looking at the polls. manus: michael, thank you very much. let's get your bloomberg fit -- business flash. jra: shares in arms holding fore sort and softbank buys 23 billion pounds. it is a slice of almost every computing gadget on the planet. it is the biggest ever take over for softbank which has become one of japan's most accretive companies. a report was rejected that it may be inflating sales by booking revenue before some client our invoice. the stock is trading lower following that.

they may baltimore to $70.5 billion in sales before some clients receive their first invoice. the company will publish second-quarter results tomorrow. exxon mobil has made a superior bid offering a fixed price of $45 a share. that is higher than a rival offer by oil search for the company's large natural gas reserves in papua new guinea. searches, $2.2 shares.bid offered 8.05 that is the bloomberg business flash. manus: thank you very much, let's switch years. the republican national convention kicks off today in cleveland, ohio. it comes after the presidential hopefuls donald trump announced his running mate at the weekend. he said that with his vp choice, indiana governor mike pence.

they called for extreme vetting of people coming into the united states. their territories and terrorist states that we will not allow people to come into our country. we rethink called extreme vetting. they will be extreme vetting, we will have extreme vetting. we will know where they came from, and who they are. manus: we will know who you are, where you came from. margaret joins us from cleveland, margaret, what is trump actually proposing here? margaret: good morning. it is the question, it sounds like a reality tv show. it is probably some kind of new foreign policy proposal. what he didn't say is whether this now replaces his earlier pledge to ban muslim immigration from certain places or two hal it until further

notice. obviously, it needs a lot of fleshing out. these are questions the democrats will continue to raise as the republicans get underway with their own convention. manus: what can be expected today in cleveland? there was a good deal going on outside the center in terms of the shootings. inside, it is four days of feast politic is in it? the opening day of this convention. so much to make this area peaceful and smoothly running to make america safe again is the thing the republicans have chosen. inside we see donald trump's wife as well as several other republicans and supporters speak up outside there will be a lot of attention to whether police can keep the peace. manus: thank you very much, we look forward to your reports from the republican convention. that is margaret joining us from ohio. come, youro

bloomberg surveillance up next. guy johnson is here in london, as ever tom keene is joining him from new york. there was picked to the former nato supreme allied commander. ♪ .]

>> this monday, turkey considers democracy after a failed military coup. president erdogan must invent a new turkey. in direction this morning, a global risk on trade. cleveland, it greets the grand old party. in new york, monday, july 18. picked the short straw in london,