francine: it divided fed minutes shows official split on the next hike. retail sales for july. the labor market shows. and oil, on the verge of a bull market. oil minister says there is hope of a freeze so oil can stabilize. welcome to "the pulse." i'm francine lacqua.

we have a great show lined up for you today. joining us today is the global chief economist janet henry. we will be talking about the fed, the boj, negative rates, and everything in between. this is a picture of european stocks climbing. the outlook is thinkin the dollar.the for three times since the brexit though, we have touched 100. of the straight to the bloomberg first word news. france's unemployment rate fell to 9.9% in second quarter, which will help francois hollande keep his promise to drop joblessness before the next election. this is the 10th consecutive month of shipments falling from japan. they continue drop highlights

difficulty kickstarting the japanese growth. chinese home price gains have culled for the month of july. versusrose in 51 cities, 55 in june. australia's jobless rate fell from 5.8% to 5.7%. the aussi dollar gained. two u.s. swimmers were taken off of a plane in rio yesterday in an as leading to see local police about a reported armed robbery. they were removed from the flight by brazilian authorities. they were among a group of four swimmers who on sunday, said they were robbed at gunpoint by men posing as police. olympic of island's

body was arrested for scalping tickets. wider was arrested in a investigation into the illegal ticket sales. they said he was temporarily stepping down from all of his role in sport. criticism of the bank of england's qe program is growing. totesters urged them abandon the measure yesterday. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. this is bloomberg. francine: a fed divided. -- fomccialsc wer officials were split in july regarding the rate hike. my next guest thinks global weakness will continue to affect the ability to deliver a 2%

inflation. let's look him janet henry, hsbc's global chief economist. -- let's welcome janet henry, hsbc's global chief economist. first of all, what you take away from the fed minutes? there is consensus that the target will be difficult to achieve. we are really not the wisest. >> know, we are not. you have had commentary with a tryingof fed governors to keep open the possibility that they can raise rates this year. some suggesting even september. but it is still an ongoing issue. those fed governors that are increasingly confident about the sustainability of the u.s. economy and in any normal world they used to talk about, the falling unemployment rate used to make them competent about inflation. it looks like the majority of the committee just a agree. they are still concerned about global weakness and not comfortable about a sustained increase in inflation. francine: global weakness coming from where?

we have a handle on brexit for now. china is stabilizing. what are they worried about? >> there was a bit of detail on the minutes. first of all brexit, they have a knowledge they did not see the financial fallout that we had feared. -- they had it knowledge that acknowledged that they did not see the financial fallout that we had feared. they also said that some members were concerned about the global economy and they specifically cited some of the china weakness in there. you have got some diversity across the fomc, but the global story, including brexit and china, are still featured in their decision-making. francine: let me get the dot plots up. to even care about the dot plots? >> i think what we hear from janet yellen is more important. the market has stopped believing the dot plots.

so, much less relevant. also, difficulty with the dots. you have there, the voting members and the nonvoting members. this is the change of heart we have seen from hollande. some of the more hawkish members are not voting members. yellen.s are led by francine: we are expecting janet yellen to give that speech and yet, jackson has not announced anything substantial since november. >> no, it hasn't. i think last year, she spoke not to even speak. this time, i think she will not want to rule anything out. she will want to set out the way she is thinking about policy, once again reiterating in the same way, which is because of neutralal weakness, the

rate has fallen as a consequence. and they need to be prudent, as they mentioned in the minutes last night, about the speed with which they withdraw monetary accommodations. francine: how many hikes are you expecting, if any this year? any this not expecting year. we still have one next year, but we think it is very unlikely the fed will feel confident on the inflation front to raise rates this year. francine: do need to look at the economy differently? there was a very interesting article monday night from mr. williams from the fed that says because of this normal rate, we need to radically rethink even the inflation targets. would that be fair? >> i think they must be thinking about all of these aims. you even have had some hints, from other fomc members, also it knowledge and that when you have -- alsoation gos acknowledging that when you have had inflation for a couple years, you can overshoot it.

that is part of what they are thinking about and what we will be hearing more from them in the coming months and indeed, years. francine: it is unclear to me what they can to to overshoot inflation. they need to throw everything at a to get inflation at 2%. what is next? >> even the doves on the fomc are suggesting that they can afford to wait. the more hawkish members of the are taking the traditional phillips curve framework. they keep talking about resource utilization. once the implement rate falls below a certain level, you can't wait to see it in the inflation numbers. , but bear inn mind, we can wait to see it in the inflation numbers. we know what to do is inflation does go above target, we can raise rates and raise them a bit more quickly. we can't raise rates of tightening prematurely.

pulse.": stay with "the there is plenty coming up, including the yen bridging the dollar. japan exports see their biggest the client since 2009. we look at the headache facing the world's third largest economy. to britainessage from germany's prime minister. hear the message from mainstream republicans, live from new york. this is bloomberg. ♪

francine: this is "the pulse." let's get straight to the bloomberg business flash. nejra: leslie has reportedly slowest sales growth -- nestle has reportedly slowest sales growth since 2009. the world's biggest food company has struggled to raise prices in the face of deflation spreading across europe. cisco will eliminate 5500 positions, 7% of its workforce. the ceo says it is moving away from traditional hardware. savings will be invested in your businesses that cisco expects to fuel sales growth, such as cloud computing. and chuck robbins will be on 2:30.berg at a surge online advertising

helped the chinese social networking company beat analyst estimates. that was enough to beat alibaba on market value. lenovo posted first-quarter profits that exceeded estimates, but that came on the back of cost cuts and asset sales. the ceo expects the smartphone business to turn a corner the shiftiscal year with a toward higher end devices and ramping up of marketing in the u.s. and china. exports fell 14% on the year, the most since 2009. this has made japanese exports less attractive to international biters >> the yen is strengthened about 20% since the start of 2016.

that makes exports much more attractive on the global market. some of this is global demand come -- declining. i think we see across the board which is to china, japan's largest trading partner. we saw 20 -- 12% year-over-year. we saw 11% to u.s. and more than 6% to the you. a lot of the decline in exports ships, steel.s, a lot of industries are seeing this. francine: we have the doj. it comes on the afternoon we have the fed. how vulnerable are they to that hikes? what can they do to keep vienna below 100?

>> that's the big question. there is still so much rusher in expectation on what the doj can do. great expectation, especially after last month. moved around the edges. there is a lot of expect patient. there is a lot of looking to what the government can deliver in terms of more simulation. this report doesn't tell us a lot. it's part of a string of reports showing week is in the economy. gdp showed very slight growth are in there is a lot of pressure. francine: thank you so much. let's get more from doug henry. the structural

reforms. clear problem a with inflation. this goes back worldwide. -eight focus on stimulate and wage growth? >> that may be part of the solution. i think it's quite interesting. everybody is focusing on how would weekly export numbers were. then is very troubling to weakness in the global demand that is holding down exports everywhere. what japan really needs to do is halt private demand. consumption has been ok. it will be better if wage growth were stronger. a weaker yen can help company profitability. they could pay their workers a little bit more. this is part of what the unique -- weaker yen was trying to achieve. structural reforms.

they continue to disappoint on that front are in it it's really to see what the government can do with fiscal policy and not just infrastructure. it deals with somebody demographic issues and some of the wage related issues. toncine: this shows a limit monetary policy. if you come over to the bloomberg terminal, this is unemployment. it keeps going lower. it's a demographic problem. this hasn't really done anything. most places worthy of unemployment,s in there is a decrease in productivity coming through. is japan the poster child for what goes on when you reach the

limit of monetary policy? absolutely it is. that feeds into the whole local debate. we think about what happened act in march when janet yellen became dovish. of seeingtly in fear what happened in japan and see the europe might go the same way. you can't take the risk to quickly. francine: should they go into helicopter money? a very broad umbrella term and everybody has a different definition as to what it means. should the central bank create money and awaited the government would spend more and offer expect haitians about the future outlook for growth and get companies willing to invest a lot more which is where we cannot seen it come through? i think japan will be the first that goes down that route in some form. the bank of japan meeting will

include some of these stocks and bonds. that might be a gesture toward that. francine: thank you so much. we will talk emerging markets and exit and currencies next. united states swimmers are ordered off a plane with a did pete -- dispute with local police in rio. this is bom francine: four olympic swimmers

are treading water. the claimed they were victims of armed robbery and police are questioning the allegations. i know that you have been watching these medalist very closely. there was in order to seize the passports of the swimmers. one is back in the u.s. the others have not been confirmed and two others were prevented from flying. could this turn into a political situation between the united states in brazil? >> yes. this has a great potential of becoming something that will attract a lot of attention from international media, both in the u.s. and brazil and elsewhere. it's a delicate situation.

brazilian authorities are basically saying they need the athletes to stay in rio and continue the investigation. that was onehletes of the gold medalist has already left for the u.s.. brazilian and american authorities will have to together. they will have to come up with an explanation or this situation. francine: what has brazil been doing to crack down on crime during the games? this is one of the biggest concerns of the brazilian authorities, both from the department in the national organization of the games. 80,000has ordered to be spreadpolice all over rio to make sure that the games will be is safe as possible.

has a very bad reputation when it comes to security. , any were major concerns criminality could spread during the games. something that's very bad for the image of the city. we have two cases that were very dramatic. members of the rowing team from australia were robbed while we were close to the olympic park. that's not good at all for the image of the city. it's a big concern for brazilian authorities. francine: thank you so much. he has been following the case very closely. is there something broader in the police corruption investigation? it's too soon. we will keep an eye on it.

brazil has political problems. it has the issues. thehe fed hikes and emerged -- emerging work its aren't ready for it, will they be back in mode. >> it's very interesting. international investors no longer believe central banks can push up inflation. they believe that they can push of financial markets. we have seen this rally coming through. that is even more dovish. the bank of america will do something. even though everyone knows you and testing emerged the -- emerging markets, there is a risk associate with that country and some that is political. rate cuts in ag few emerging markets in the coming, especially those in

asia. if we get to a stage where an unexpected rate rise from the thad, if it happens when think thats weak, i would come as a major shock to the emerging economies. they would not have a strong u.s. economy that is giving them a new source of demand growth. francine: the temper tantrum was a while ago. are they in better shape than they were two years ago? >> they have been helped to some degree by low oil prices. consuming emerging markets, that his health to stem some of their balances. they are a bit more prepared. it should not come as much of a shock. let's not to meet that it is the

central bank policy that is helping to support these emerging economies. francine: when we come up, we look at germany and how that plays out ecb. this is bloomberg. ♪

francine: welcome to "the pulse" live from bloomberg's european headquarters in london. let's get the pound for you. retail sales better than expected. we were expecting 0.3% for the month of july. this is after the brexit vote, the first hard data after the unemployment and inflation figures. 0.3% we wereof the expecting. month on month including fuel, one point 4%. we were expecting 0.1%.

you can see pound, the reaction there, as soon as the numbers broke. janet, we saw it from inflation, from employment. it seems the u.k. is stronger than we thought. janet: that is true. i would make a point about retail sales in the u.k. any u.k. economist will tell you, the one they hate forecasting is retail sales. francine: why is it so unpredictable? janet: i think july, remember, summer arrived in july. the weather was a lot better. francine: this is the real breaking news. we had summer. janet: we had the sales figures last week or the week before and it showed a pickup in barbecue sales. the food element i'm sure was quite strong, and maybe the clothing figures as well. people needed some summer

clothes, having not had such a pretty summer. is there more momentum in the economy then people feared in the wake of the brexit vote? we have now seen a run of u.k. , and admittedly early days so far, yeah. francine: you seem to be right. when i look at the breakdown, there are more sales of clothing and footwear linked to the hot weather. we've gone through some of the data. let's talk about brexit at large. we will discuss retail numbers in a moment. we had some important comments from germany's deputy foreman minister. he said germany's relationship with the u.k., the u.k. won't be able to pick and choose what it wants. we are joined by our brexit editor and janet henry, who you were just hearing from.

tony, what was the exact message from germany, and what was the minister trying to convey? >> for one thing, he's trying to dispel the notion that there's a special deal on offer for the u.k. by the eu or by germany. what he meant is that the british case is so unique that there really is no template for it and there will have to be, as he put it, some kind of tailor-made solution that may be unlike anything that has been done before with countries like norway. that was his main point, i think. this point on at the red lines germany in the eu have laid down in terms of what the u.k. needs to agree to to get access to the common market. francine: how impatient is the

german government on the brexit issue? you interviewed angela merkel many times. is her public persona different to the one she is in private on brexit? >> no. merkel has been very circumspect. she's not trying to drum britain out of the eu. at the same time, there are rules to be followed as we just talked about. that is something merkel will not -- can't find any wiggle room on. but there is a school of thought among people like the foreign ministry in germany where michael roth is that we now need to focus on the remaining eu 27 and make that eu better, and brexit, we will deal with it as it happens. francine: tony, thank you so much. i always enjoy your brexit litan.

simon puts out a brexit bulletin every day. go and check it out on our website. we are in the same position we were two or three weeks ago. it seems very difficult for the u.k. to negotiate the passporting, the financial stuff, or access to the single market without giving of immigration. >> if immigration was one of the big things in the debate, it continues. we don't know what the british will seek. the hope of the eu and investors is that post summer, we will start to see some coloring in of what the british are seeking. then we can go from there. article 50 doesn't look to be invoked before the start of next year's talk. it could be later. that will test the patience of a lot of people. francine: janet, what is better

for the economy, that article 50 gets triggered sooner or later? are we ignoring brexit at the moment? janet: i think we might be. even in the last few days, we had the better labor market data, retail sales, financial markets. but at the moment, there's been no clear communication of a plan , which is a problem. especially in a world where investment is so weak. i think what we're going to see in the u.k. is that when you've got high uncertainty, and we don't know any timing, and he knew relationship, it is going to weigh on investment spending. one of the things you might argue is that if they say we are not going to trigger article 50 for another year, it will feel like things are a little better, but it may mean the uncertainty is extended. i think it is more a case of, do we get the damage more quickly

or is it more spread out? really, the long-term economic impact depends on the nature of the relationship and the level of confidence they manage to hold up. francine: when do we know? it would be pushed back to 2019 because they don't have ministers or lawyers in place. there's an eu summit coming up. when do we start having an idea of what the next step is? >> i guess when the british show their hands. there is a summit the british won't be invited to. the other 27 will be trying to get a position. reports were that britain might look for a canada plus model, the free trade agreement that canada has drawn up, and something for ourselves. francine: could we do that? is it fair to say that we don't know? >> it always depends on the red

lines. it is what britain is willing to give and what the eu is willing to give. it is going to be a challenge, if you want to close the borders. that means no access to the single market. they will have to renegotiate. story of europe, one of compromise. at the moment, there's a bit of a divorce the other day. when the divorce happens, you can't get the dog you won't get the house, you won't see the kids on the weekend, and a few months on, there's more pragmatism. francine: janet, pound, what does it do from here? janet: i still think sterling is heading the work. expecting full-blown recession, but something close

to stagnation over the next few quarters. we expect the bank of england to ease policy further. we are looking for another rate cut and still think there is a strong likelihood they may do more on the qe front. on that backdrop, it is one in which sterling should continue to head lower. francine: has qe worked? there was that hiccup, a technical hiccup i guess because they couldn't buy the longer maturity bonds. two days ago it was successful. does that mean it is plain sailing for could they have more problems? it is technical, nothing significant. it is not a huge increase in qe. it is relatively small. is it going to make a material difference to the outlook for the real economy? probably not. as carney was keen to point out,

it was part of a package of measures and now we have to wait for the fiscal policy announcement. doing the qe is making a little space for a bit more on the fiscal side. francine: thank you so much. janet henry and simon kennedy, who oversees our brexit coverage. let's get to the bloomberg first word news with nejra cehic. nejra: france unemployment has dropped to its lowest level in four years. that will help president francois hollande fulfill a promise to cut joblessness the for the next election. japan's july exports dropped, the biggest decline since 2009, and the 10th consecutive month of shipments falling. this highlights the difficulty of kickstarting japanese growth. chinese home price gains have cooled for july. prices rose in 49 cities versus 55 in june as local governments

impose residential property curbs to tackle soaring real estate values. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. francine: thank you. plenty coming up, including, could donald trump's tone see defections by mainstream republicans? then, looking for details from draghi. today's account of the july ecb meeting. we are also live in frankfurt. and, divergence inside the fed. joseph stiglitz about his new book. that is all coming up on "surveillance." this is bloomberg. ♪

francine: let's head to the bloomberg terminal with nejra cehic for your asset check. nejra: stoxx 600 up for the first time in five days. we are up about 0.6% after four days with no games, the longest streak of such since june. it seems like this is the fed effect. those minutes showed the policymakers were divided over the timing of the next rate increase. markets have interpreted it as fairly dovish. we are seeing a weaker dollar. that is helping commodity producers.

leading theoducers gains, up 2.2%. financials, up 1.1%. in terms of individual stocks, nn group has risen the most in two years today. we are up 8.4% for this dutch insurer. this is after it reported improved capital positions, speaking about the solvency to ratio. moving on to dollar-yen, it has broken through 100, or it did break through 100 for the third time since brexit. driven by this partly that weaker dollar that i was talking about. every time the yen has broken through 100 since june 23, it has fallen back from that. is it going to be third time the charm? there is a function on bloomberg where you can look at the

profitability -- the probability of where yen is going to go. the higher probability the yen is going to go to 95 by year-end. if we take a look at oil, i can tell you that brent is on the verge of a bull market. brent in white. you can see where i circled the red, that is where it entered the bear market. commodities being helped by the weaker dollar. saudi's energy minister saying informal talks may lead to actions by opec to stabilize the market. francine: nejra cehic with your asset check. donald trump's campaign shakeup, a new plan to run directly against the washington establishment could force more defections by mainstream republicans. for more, economics editor michael mckee joins us from new york. thank you for joining us.

donald has changed his campaign staff. why? >> nobody really knows what is going on with donald trump or his campaign but analysts agree that it appears to be an effort to refocus donald trump on being donald trump, the pugilistic, angry, insulting candidate who used those traits to get ahead in the republican primaries. he doesn't seem to have, in the last couple months, embraced the idea of becoming a more mainstream presidential candidate. he's fallen way behind in the polls. he's hired stephen bannon, the chairman of the far right wing news and conspiracy site breitbart news. and kelly and conway, a longtime republican pollster who specializes in women's issues is his new campaign manager. the problem for trump is he's way behind in just about every category, particularly women.

at least he apparently is going to feel more comfortable with those leading his campaign. francine: 12 republican officials think? >> they are watching this with a mixture of wonder and horror. the wonder is that trump is making this kind of change with less than 90 days to go in the campaign, going to a strategy that doesn't seem focused on winning a broad mandate. the harbor is that he may be doing damage to a lot of republicans down ballot because they may be forced to defend a lot of comments he may make if he goes back to the style he seems to like the best. that may hurt them at the polls. there's an interesting theory going around about this whole thing. then in comes from breitbart news. roger ailes, the deposed head of fox news, is also advising him. there's a feeling that may be trump is looking beyond the

election, figures he's going to lose, going to make his name and start some sort of media property. francine: amazing. i'm fascinated. i could talk and try to figure out trump for days if not months. what is the appetite for donald trump and the presidential race like in the states? is it going up when he says something outrageous or are people not interested anymore? >> it has been a true was in in politics that people don't pay attention until after september 1. in this case, the low country is transfixed. but the more donald talks, the worst his prospects get. polling sites put his chances of winning at about 10%. he's an average of 7% behind in the polls. what he's doing isn't working and now he's doubling down on it. it is a fascinating effort. francine: michael, thank you so much.

michael mckee, our economic and political editor in new york. mario draghi was short on details after the july meeting on what brexit means for the european economy. we are live in frankfurt. this is bloomberg. ♪

francine: later today, we get a report of the ecb's monetary policy meeting. let's speak to paul gordon, our

western europe central-bank coverage. thank you for joining us. what are you looking for in the minutes? suggestingne report the last ecb policy meeting was like an end of term feeling. mario draghi came out and said, yes there were concerns in the economy, notably brexit, but too early to worry about that. go off and enjoy your summer. what we want to find out is whether that is a true characterization of the debate policymakers had. how worried were they that the brexit vote would derail european recovery? these are not full minutes. this is an account of the meeting. it is unclear whether we will get that insight. that is what people want to know. also, bad loans in italy and intransigent governments not putting through reforms. francine: thank you so much,

paul gordon. ,inal thoughts from janet henry been, mario draghi has doing a little more, but is he keeping an arsenal in case he needs to do full power if we have a recession in europe? janet: i think he knows he has to do more. the issues he was quizzed on and the july meeting were brexit, and he said it was too soon to tell what the impact would be, but the fed probably pleased that it hasn't had a bigger impact on financial markets. the other issue he was pressed on is the whole scarcity value of bonds. how far can they go with the current qe program given the parameters they've imposed around themselves? we would look for a bit more discussion in the minutes. in september, they've got to publish their new growth and inflation forecasts.

both will probably have to be downwards. in september, they will have to extend qe. typically they extend qe another six months every six months. to be credible, they have to say what they are going to do. do you worry about deflation? it depends on what inflation shows us, but do you worry that we are becoming more like japan? janet:+++

of persistent shortfalls. we often talk about inflation or deflation as though anything between is fine. a persistent shortfall, persistently low inflation, also has damaging economic implications. it certainly is playing into the lack of investment. companies aren't confident about their outlooks. francine: what is the prescription for not becoming japan? japan is terrible, but people live quite well in japan. this is the kind of catch-22. janet: the standard of living is quite high. if you look at it on a per head basis, gdp has held up reasonably well. also, japan has a low unemployment rate and it is a very much in his country. -- homogeneous country. in the eurozone, you've got countries with historically low unemployment, some with high unemployment, and they need to get 2% inflation. they need some countries to have much higher inflation to avoid other countries being in out right deflation. francine: janet, thank you so much. janet henry, hsbc's global chief economist.

"surveillance" is next. tom keene will be joining me from new york. we spoke to joseph stiglitz. we will be talking about the new normal. we will be talking about that you beat in politics. this is bloomberg. ♪

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. 'itrestn i, w c u'e e dry.ynebuss. oding uc pwiwiro fi hthatpsyori francine: a divided fed minutes show officials on the time aummd rallies as data shows resale sales unexpectedly jumping after the vote. we speak to nobel prize-winning economist joseph it's -- joseph stiglitz. tom keene is in new york. for the third time since the brexit, the yen is below 100, it briefly flirted below