francine: europe is a solution, not the problem. charts out aande future without britain. the pmi service shows services countering the slump has driven -- has brexit affected the european number? a signal for sarkozy. he wants to return as president. he has a months to overtake the front runner. -- he has three months to overtake the front runner. ♪ francine: welcome to "the pulse." live from bloomberg european headquarter right here in

london. we are getting some breaking news. we will put up the euro for you. touched 51.8. we were expecting a 52 figure. it is just starting to feel like we are trying to figure out what brexit means. we are trying to see whether the surveys show any brexit spillover peers services pmi a little better than expected overall. the composite at 53.3. we had france and germany -- germany a little worse than expected at a higher figure than france. you see where i'm going with this. august, a funny month because of weather-related issues. we do have a great line of show for you. at 9:30 a.m., we speak to michael fuchs. will be asking about pmi figures . let's quickly check on markets. crew to slipping the low $47 a

barrel. dollar retreating somewhat. again, if you look at what markets are looking for this week, traders still looking for the prospect of u.s. interest rate hike this year. it is friday we get that janet yellen speech from jackson hole. if she decides to give us any indication, that remains to be seen. -- bloomberg dollar index leading gains in emerging markets. i want to show you the new zealand currency strengthening after the central bank said its pace of interest rate cuts in the nation will be fragile. let's get to the first word news with nejra cehic. nejra: negotiations between via and monsanto are expected to be advancing toward a deal. the companies have made progress on issues, including the purchase price and termination fee. they said the company's ceos have had a series of tests and could reach an agreement in the next fortnight.

.hey declined to comment donald trump called for the appointment of a special prosecutor to investigate hillary clinton's e-mail crimes, stemming from her tenure as secretary of state. as well as what he called the pay to play action of the clinton foundation. >> the amounts involved, the favor is done and the significant number of times it was done require an expedited investigation by a special prosecutor, immediately. nejra: meanwhile, hillary clinton's presidential campaign says donald trumps puzzle to overall the federal tax system would benefit "high debt investors like himself." "trumps to run up taxpayers

debt, not the other way around." >> line -- has become the top owner of honda, mitsubishi and more than 100 tokyo listed firms. taken together with the stock, the holdings show the growing power of state investors in the nation's market. ryan lochte is losing all of his endorsements after he admitted to making up a story. itedo usa and japanese mac -- japanese mattress maker say there ending their partnership with him. speedo will donate part of his pay to an organization that works with poor children in brazil. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am nejra cehic. francine. francine: it has been two months

since the u.k. voted to leave the european union. it is still unclear. holiday season come to an end, the euro areas two biggest economies discussing the future of your. brexit, is far from the end of the union. >> many thought after brexit, europe was over. it is not true. we respect the ridges people's choice. i want to write a future chapter. this is why security, the fight for, defense, intelligence, better integration of the better -- of the international defense industry, are all absolute priorities on which we will discuss. economy, it is true that brexit created uncertainty. it is true that there was a slowdown in growth. we have to remove uncertainties and give up further impetus.

that is why the younger planned for us has to be prolonged and expanded and we have to multiply investments, private and public and appropriate funding for the digital, new technologies, because it is essential. i'm not forgetting the energy transition. make --ve agreed to this includes the upcoming meeting in bratislava. we honor great britain's decision. we would like to make clear that the other 27 states -- i am happy that we can also come again for a visit in order to inform ourselves, but also to make clear there is a big diversity and also a common ground in which this european union can set high on. francine: let's introduce our guest. hasek armstrong, part -- patrick armstrong. and johnny metha.

sense of whatme a you worry about the most. we are seeing the battlegrounds drawn up. can the union survive? union, that isan what the meeting is happening about right now. make sure it is viable, talking about the economic outlook and how they are going to create economic growth and also security issues. it is a symbolic meeting. really stressing that it is a viable union and they really are going to create some growth. francine: to create some banking union. assessstill trying to the fallout from exit and how that compacts the eurozone. is there one leader we should be looking up to and spur growth? they are going to be looking at how angela merkel holds the meeting. this is more of a symbolic meeting. if they wanted to really target the euro skepticism going around

the union, member states, they should dissect what happened in the brexit, leaving aside the remain campaign was not a strong campaign. what are the issues? francine: what is it? inequality? johnny: there is job growth and the freedom of labor. there is a lot of opposition. whether they can find a solution or adopt a new mechanism, or at least embrace the concept in full faith that the thing needs some sort of reform, i think they really need to cross that bridge and look why they want to reform the union. i think it is about symbolism. three leaders instituting to the rest of the group that we are sticking together, despite what happened. francine: patrick, what you make of the pmi figures? patrick: it is exactly what we expected, it is asked -- it is consistent with 1.5% growth.

it is not the brick with velocity that we need. jobs are still needing to be created. francine: if europe goes higher, what does that mean for european growth? --rick: the fed this week we've got draghi in a couple of weeks. it is much more what the ecb is going to do, rather than the fed . i don't think the fed is going to say anything meaningful. everybody knows that september is unlikely. december is maybe in play, where the ecb, how long they extend quantitative easing, that is the real driver. francine: are we looking at a stronger euro given urinalysis? -- given your analysis? johnny: the dollar index will be stronger in six months. there are a few interesting timetable events. you've got jackson hole and then you got september and december. if we fast-forward through those

and passed the u.s. election, i would say on the medium-term, the dollar will probably be stronger than the euro. francine: patrick, managing partner and chief and johnny metha, chief investment officer. both stay with us. stay with the pulse. the lord -- the world's largest with $1.3nd -- trillion, plus two months after the referendum, angela merkel says brexit is the uk's loss. fuchs.alk to michael could france be set for a rerun? could sarkozy throw his hat in the ring again? this is bloomberg. ♪

francine: this is "the pulse." . am francine lacqua let's get to the bloomberg business flash with nejra cehic. nejra: persimmon has recorded a robust first half. profits were up 29% on a 12% rise in revenue. the company said while the brexit vote created more economic uncertainty, cuts have been solid. >> people are very keen to buy. lenders are keen to lend. people understand that the affordability is there.

if you want the government -- it -- oftenoften achieved cheaper to buy than it is to rent. the market is very strong. we are not seeing any particular change in behavior. francine: blackrock -- nejra: blackrock is betting on markets. citing an improvement in fundamentals and stability in the dollar could last month it raised its outlook for emerging markets. blackrock sees more room for inflow to the end sei emerging markets. -- to the msci emerging markets. easing concerns on the pace of the fed's rate hike could credit suisse -- hike. credit suisse ceo -- harrods associates have increased its , sincein more than 10%

taken over last summer, tim has encourage businesses to take away -- to shift away -- the company has lost 45% of its market value this year. retired nba star, kobe bryant, is swapping basketball for wall street, announcing a wonder million dollar fund to invest in mediatech -- media, tech and data. the fund was founded in 2013 but is going public now that bryant has left the nba. that is the bloomberg business flash. francine: the calm for the speech. this friday at the jackson hole symposium in wyoming. investors are waiting while -- that is after the vice chair, stanley fischer, says the u.s. economy is close to meeting the economy's goals.

guys, thank you so much missing around. john a, if you look at the fed can or cannot say, are you expecting her to reassure the markets that they can withstand a downward turn 12 months from now? easing fromcting now until december? johnny: for them to telegraph any further what they may or may not do is already in the market that there is a probability there could be a rate rise in december. we're looking at one rate rise this year, if any. the previous. lots approach that the market was trained to use to price is only one part of the equation. if you go back to the way ben bernanke east of -- used to run the fed, he put reliance on tools. i never understood it all. it sound like talking the market into thinking what they wanted it to think. i'm not sure the janet yellen has gone on the road of

tools.ng can vacation francine: you have hawkish members. it impacts the dollar. hold on, they do not have a voting. it is dovish members we have to listen to. i don't know who to believe. have had very inconsistent messages in the last 12 months. going into every meeting, there is uncertainty which is very different than yellen said she was going to make things. she wanted to have transparency. it is bad. i don't think she wanted. i think she has been a victim to it this victim of circumstance. she has been impacted by brexit, slowdown in china. they were minded to hike in may and june and then a week jobs .umber and brexit it is difficult to see how they are going to hike in december. they want to stress this is a live meeting. they are worried that a week

u.s. dollar creates problems in japan and eurozone. i don't think she wants to come up actually dovish. it won't get the clear clue this is going to happen. francine: the real data they are looking at his wage growth. johnny: they are looking at a whole stream of data. francine: but they are good. johnny: it has been the best house on a backstreet for a long time -- on a bad street for a long time. they are going to rely on that, but data dependency is essentially the order of the day for them. they are going to continue to watch the data for as long as they need to. i think they could probably not raise rates for another nine months, but it essentially what they do not want to do is compress the market to such an extent they have to explode the rate rise curve was deeply in 24 months time. francine: what is more

dangerous, patrick, waiting for nine months and then having to raise rates quickly? or not doing anything? this --if he did have patrick: i don't think we are going to get to that. inflation pressures are good to be very slow to build. nonexistent around the world. even if they do have the economy run hard, i don't think you're good to see inflation running away from them. francine: patrick and johnny, thank you so much. both stay with us. the world's largest fund has been coming out in the open. we will bring you a new analysis where their 1.3 -- $1.3 billion is invested. ♪

francine: this is "the pulse." the world's largest ancient fun has been coming out into the open. hasn's 1.3 billion -- revealed its investment for the first time. refund is the top honor of honda motor, mitsubishi and at least 119 other tokyo listed companies. as you can see in the chart of the hour, it is the second biggest holder of 140 stocks. it's basically chose you the size and scope of the fund.

let's get more with patrick armstrong. i want to show you another chart that we made up. this shows yen, dollar yen volatility. the white line is one month. the blue line is three-month. are breaking into some sound and fury with japanese banks. they meet on september 20 and 21st. we get the decision for us here in europe. this is terrifying. the bank of japan wants to know what the fed is doing. probably not vice versa. what happens? >> i think it is terrifying if you're trying to gain the data on a short-term basis. if you take a step back and use charts like this or any other chart volatility, basically trade on extremes, where --

whether it is extreme -- sossion or elevation, what that would lead me to do is look at the individual equity markets and asset classes, judge them on a value basis. then you can sleep at night. francine: can the boj sleep at night? if you are governor kuroda, it will be ok. the markets just don't believe it. patrick: the markets reacted every time you done something. he says he's got more leaders to pull -- more levers to pull. i think the 100 line in the sand is something they don't like the strength extending beyond that. if you see dovish yellen, that is going to force the hand of the boj to extend what they're doing and to move into more asset classes. francine: yen touched below 100.

does that mean you expecting the boj to become more aggressive? patrick: they will be more inclined to do something if yellen comes out or dovish on friday. we will be listening. if she is setting a dovish tone, that is good to square them into listening measures of their own. if she comes up hawkish, they may be content. you do need the divergence. johnny, structural reforms? johnny: it is a work in progress. i'm not sure. with japan? a long long time. there've been trying to reform their markets many times. it is a zigzag market. it is not really held the bull trend extensively over 20 or 30 years like we have had in western markets. it is going up, back down again. it is disappointed investors constantly. i'm not convinced they would

change the policy based on what they hear on friday. they have probably already made their mind up barring anything substantially changing. francine: meaning they will do a lot more? kuroda has priced twice this year. johnny: i was comfortable with the last package he put out. the market is greedy for something gargantuan. the policy would be to stimulate -- to use the measures they've got. whether it is going to be enough to satisfy the markets -- having some conflict in the evaluations , regardless of the asset classes. these things are going to be cyclical and they are going to disappoint one day and surprise another. level,bought an elevated that is when you may be able to stress. francine: johnny, thank you so much. patrick armstrong, they both stay with us.

we will talk about an accord, whether -- have some sort of accorded that involves china. up next, european leaders try to forge ahead without britain. we speak to a merkel ally. ♪

francine: welcome to "the pulse." live from london, i am francine lacqua. let's get to the bloomberg first word is. nejra: negotiations between bayer and monsanto appear to be advancing. they have made progress on issues including the purchase price and determination fee. the ceos have had a series of constructive meetings and could reach an agreement in the next fortnight. representatives declined to comment. the euro area economy maintained

composite pmi data rose for a second month, marking the best reading in seven. donald trump has called for the appointment of a special prosecutor to investigate what he called hillary clinton's e-mail crimes. speaking at a campaign rally, he focused on her use of a primate -- private e-mail server and the pay to play actions of the clinton foundation. mr. trump: the amounts involved, the favors done, and the significant amount of times it require an expedited investigation by a special prosecutor immediately, immediately. meanwhile, hillary clinton's presidential campaign says donald trump's proposal to wouldul the system

benefit those like himself. it would mean taxpayers pay him to run up debt. investors and japan are having to deal with a new whale, the -- trillion pension fund has taken together with the stock buying at the bank of japan, the holdings show the growing power of state investors in the nation's market. ryan lochte losing all of his endorsements after admitting making up a story while being robbed at the olympics. they say they are ending their partnership with the embattled u.s. swimmer. speedo will donate a $50,000 to ann of his pay organization that helps brazilian children. global news 24 hours a day, powered by our 2600 journalists

and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. two months ago to the day, british voters decided to leave the eu. yesterday there was a meeting off the coast of italy to discuss life after brexit. for more on what that future might look like, we are joined by michael fuchs. dr. fuchs, think you so much for joining us. give me a sense of what you make of brexit. we spoke in the immediate aftermath of the vote. is it going to take a lot more time to negotiate than we thought? all, we havet of not had the chance to negotiate because negotiations will take place only after the u.k., may comesy -- madame up with a clear vote and the articles 50 will be triggered.

i have a feeling even though she is not willing to do it in a short period of time, it on a longer basis in order to prepare the negotiations. they made it clear there will be no formal and informal negotiations prior to the triggered article 50. we have to wait until the u.k. is coming up with something. euro pressinghe for progress? do they want theresa may to trickle -- trigger article 50 sooner? michael: it would be reasonable to do it but i have the feeling that some of the british government people are now looking into the situation a little more clearer and start to really think it over, what it is going to be if article 50 is going to be triggered. it is not going to be an easy game. in is in and out is out. one thing is clear, you cannot be a member of a club -- if you

are a member of a club you have certain benefits but if you are out, you will not have the benefits anymore. that is a little bit difficult for some people to understand. i understand -- i think the u.k. will start to rethink the entire situation. i wish they would not trigger article 50 at all but i do not think so because they have said clearly, brexit is brexit. agreementwhat kind of will u.k. end up with? we talk about switzerland and norway, but some people here in the u k have refuted that. possibility the u.k. retains access to the single market while curbing immigration? michael: i do not think so, because we have made it very , the foremost important points, free movement of goods and workers, right of establishment, and free movement

of capital. you can have that only if you are a member of the club. unfortunately, the u.k. has voted for brexit so there will be definite changes. i will give you one example which will be a big change. i really think this is going to be's something -- be something which is not negotiable, the banking passport. they have to stay in the eu and not england. some banks have to move their headquarters from london to maybe frankfurt or dublin. eu.untry of the this is the banking passport. francine: do you think these banks will move to frankfurt or berlin instead of dublin? michael: we are very happy to receive them of course. hand, this is

really bad for the u.k. which is obvious. we do not need to discuss it because it is unfortunate if the banks are leaving the london market. the bank market will suffer. francine: what is the mood like in germany? do people talk about brexit? the pmi is still the highest in europe that it is at 53.4 in august. michael: there was some garbling in the line. can you repeat? francine: i was just asking what the mood was like in germany overall? we had some pmi figures that are pretty strong but were weaker than expected. when you go around germany, do they worry about a higher euro or brexit? all, thefirst of german industry is very strong at the moment. fortunately we have a growth rate close to 2%. the germans are not so much

afraid about the situation but on the other hand, nobody is happy with brexit because we need a strong europe versus all the situations we have in the world. i think everybody has to understand only europe which is standing together can be strong. the u.k. is a very prominent part of that and i'm very sorry and sad that brexit is coming, but we cannot avoid it. question, we last understand that folks lagan maybe applying -- volkswagen may be applying for government aid because of the suppliers dispute between them and their suppliers. what do you make of that? it seems to be antimarket. michael: i am not very happy with the situation and the volkswagen people have to come to way of negotiating properly with their suppliers. it cannot be subsidized by nobody in germany.

i will make a press release in a very short time to make it very clear, this cannot be subsidized in any way because it is negotiation between two or three companies and it has nothing to do with our labor market. volkswagen will have to solve the problem and i think they have an attitude versus their suppliers edges a little bit too tough, so they have to solve their problem alone without any aid of the government. francine: michael fuchs, thank you so much. always a pleasure to speak to you and get great insight into the german economy and the sentiment on the ground. one of the deputy leaders of angela merkel joining us on the phone. plenty coming up, including deja vu, the newest candidate and the residential election looks a lot like an old one. we are in paris with the challenges ahead for nicolas sarkozy. trump calls for a special

prosecution to investigate hillary clinton. the dollar halts its two-day advance as investors brace for janet yellen's jackson hole speech. this is bloomberg. ♪

francine: markets higher this morning. let's head to the bloomberg for your asset check. nejra: the big question is whether the rally will hold until the end of trading because

we sell the stoxx 600 gain yesterday only to end the day a little changed. percent on7/10 of a europe's equity benchmark. if i take you to the imap on bloomberg to see how industry groups are performing, we are seeing green across the board and it is materials leading the gain, up 1% including metals and mining. yesterday it was miners that dragged down the benchmark but today they are the best. lagging our telecom and energy stocks even though they are both in the green. given the losses we are seeing in wti and brent, wti holding barrel, extending declines after the biggest lost in three weeks. dragged down by possible increases in shipments from iraq and nigeria.

this is how the crude price is shaping up. i just want to show you treasury volatility because of course, a lot of anticipation ahead of janet yellen's speech in jackson hole on august 26. treasury 10 year notes are moving in their tightest monthly trading range since 2006. this of course is the bank of america merrill lynch move index and you can see that dropping down. i have tracked it over the past year and we are seeing the 10 year treasury yield move slightly higher at the range has been very tight, with the futures pricing showing the odds of a rate increase a little better than equal. francine: former punch president -- former french president nicolas sarkozy says he will run to reclaim his title. he is trailing his republican rival in popularity. for more, caroline joins us from

paris. how surprise he is it that sarkozy wants to run for president? caroline: everyone was expecting a comeback of sarkozy. the uncertainty was about the timing and it does seem like pretty good timing given that the campaign of his main rival has somehow lost a little bit of steam over the summer, and the left wing remains very divided. you have a former economy minister, the possibility of the current economy minister, and increasing popularity of the prime minister. remember in 2012 when he lost the elections against holland, nicolas sarkozy said he retired from politics but he has since made a comeback. last year he took over the presidency of his right wing party, changed the name of the party. now he has to win the primaries and there is still a long way to

go. 55% insidel got only his own camp against 73% popularity for his opponent. francine: what is their strategy? is he just going to focus on the economy? caroline: of course not. it is a book program and the book was killed a secret over the past few months. tot he is proposing is reduce the unemployment benefits by 20% after 12 months and another 20% after 18 months in order to encourage people to go back and try and find a job. a very strong measure he is proposing is to reduce the income tax by 10% as soon as next summer, a very appealing measure for many of the french voters. finally he has got a very hard line on terrorism. jailmply wants to put in these people who are listed as radicalized. this is a very strong line.

the question is whether nicolas sarkozy will go on the right of the right wing in order to who are some national voters, or whether he will be able to bring some of the voters from the center who might be tempted to go back to the left. francine: thank you so much. let's get more with patrick mehta.ng, cio and johnny i do not know what you made, what angela merkel's ally was saying. he suggested that germany was fine because of brexit and we have developments with nicolas sarkozy saying he might become more right wing. nothing in the economy or politics that feels good at the moment, is that fair? patrick: i think we are used to that in europe. francine: how dangerous is that? patrick: that is the status grow and then you are seeing political risks in america with trump, the reward of more

extreme views and popular us views, quick fix things that cause more problems. francine: what does it mean for central banks? there is so much dispute and how much further they can go in and at thention area sign time they seem to be the only grown up in the room. u.k. banks have to answer whether they keep their passporting rights post april 2016, two years afterward -- johnny: as far as banking is concerned generally, i think the model has been under siege for quite a while. i think business has been patchy at best. there have been a couple of surprises but over the past five years it has been a pretty poor way to generate revenues. david they're going to try to go retail. -- maybe they are going to try to go retail. francine: what about central

banks? governments do not pick up anything, will central banks be pushed to do more? johnny: central banks are probably going to continue as they are. i do not think this is going to speed that up and it is probably going to slow it down because you have got now sarkozy that seems to be more right wing than i expected him to be. i think you will get such a policy divergence that there will be more paralysis than anything else. francine: are we arriving at the limits of what monetary policy can do? patrick: we must be getting very close in japan. the only thing left is helicopter money. we are approaching the limits. whether we are at the limit is the question, and it would be nice if you got some fiscal stimulus to be combined with the monetary stimulus, and i think that is the clear way to engineer us out of this stagnation. francine: do you believe that

helicopter money will work? i had a hedge fund coming in saying it was a completely fiction from journalists. i took offense at that. patrick: i think if it starts anywhere it will be japan. i do not think it will happen, but theoretically, it is sound if you can get money directly into the hands of consumers and encouraged them to spend those on goods manufactured by japanese companies, it could work. the practicality with negative if japan cans, issue bonds for 30 years with no cost to them and if they put that in the hand of consumers, that is good for inflation and consumption. francine: thank you so much, patrick armstrong and johnny mehta. the not so united states of america, trump once a special prosecutor to investigate

hillary clinton. bill says he will quit the board if his wife wins. this is bloomberg. ♪

pulse." ithis is "the am francine lacqua in london. nejra: blackrock is betting on emerging markets. they have upgraded developing nations stocks to overweight from neutral, citing an

improvement in fundamentals and stability in the dollar. last month they raised their outlook for emerging market bonds and see more room for inflows with the msci set to rise for a third straight month thanks to a rebound in commodity prices. has oneuisse ceo investor that keeps betting bigger on his turnaround. increased -- he has restructured businesses to shift away from securities trading and focus on wealth management but they have lost about 45% of their market value this year. mba star kobe bryant is swapping basketball for wall street, announcing a $100 million fund called bryant siebel and will be combat edged i jeff siebel. -- co-managed by jeff siebel.

that is the bloomberg business flash. francine: the clintons have been forced to defend their foundation after donald trump called for the charity to be closed down due to a potential conflict of interest. we have more from washington. clintonr president bill said the clinton foundation will undergo significant changes if hillary clinton becomes president to avoid any appearance of conflict of interest. the foundation would no longer accept money from foreign countries and corporate donations, and bill clinton would step down from the board. called on them to shut down their foundation, calling it the most corrupt political organization in history. the clintons have defended their foundation saying it does great work across the globe and will continue to do so even after hillary clinton becomes

president. trump's campaign also appeared to back step their plan, saying it is to be determined. they will outline their plan later this week. francine: we will have plenty more on politics throughout the day. this is your check on the markets, oil extending its retreat from a seven-week high on supply concerns. the dollar weakening as traders are trying to weigh prospects for a u.s. rate hike. european shares rising as data shows economic activity in france picked up this month. undern see crude at $47, $47. stay with us, tom keene will be joining me from new york and we start the conversation of currencies with bnp paribas. janet yellen will

give us clues on friday when she talks at jackson hole. we look at microeconomics and currencies with "surveillance." ♪

francine: europe is the solution, not the problem. they stand united in the face of brexit as the chart a future without britain. shrugging off brexit, the euro area economy maintained its momentum throughout august. a manufacturing slump as germany disappoints. sequel first sarkozy, he says he wants to return as president and has three weeks to overtake his opponent to lead his party. thisis