forbidden fruit. apple is facing a tax bill as the eu is set to rule -- september -- morgan stanley picks the fed will not hike next month. eye writers markets jobs number. eye fridays and jobs number. ♪ francine: welcome to the pulse life from bloomberg's european headquarters. i am francine lacqua. let's check quickly on the

markets. it is all about the fed, currency, and dollar. dollar strengthening versus most of its peers. u.s. treasuries repeating -- retreating. stanley fisher will be speaking to us about two hours from now. that may provide clues on the timing of interest rate increases. gainingsee the european . the volatility index at 12.88. let's get straight to bloomberg first word news with sebastian selleck. sebastian: the brazilian president has testified. she spoke about her torture and imprisonment during israel's military dictatorship -- during brazil's military dictatorship. if twol be removed thirds of congress finds her guilty. apple is said to be facing a tax bill running into the billions of euros with an eu ruling as

early as today. the european commission is expected to say ireland provide them with illegal aid. apple said it has nothing to add to previous statements rejecting previous statements. european competition commission is scheduled to hold a news conference at 11:00 u.k. time. will bring you that here on bloomberg. german foreign policy , the u.k. will have to pay into the eu's budget. the missing britons aspects for low-cost emissions after the exit from eu. >> if someone once benefit from the european union, they also have to conjugate to the coffers -- have to contribute to the coffers.

[indiscernible] before the referendum, nobody talked about [indiscernible] sub just u.k.. jobseekers feeling the pressure of brexit. -- u.k. jobseekers feeling the pressure of brexit. it says the average salary is down by 2.4% from the end of july. gene wilder has died at the age of 83. for hismembered by many lead role in willy wonka and the chocolate factory. fills --d classic classic films such as inference youngand -- such as frankenstein, blazing saddles. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. francine: forget september. that is the message from morgan

stanley. janet yellen says the case for increased rates have been strong. august payrolls present an obvious risk, we continue markets implies probability for a september rate hike will end at 0% not 100. -- james bevan. thank you so much for joining us. what have we learned from the fed? is clear from her remarks to gete sees more reason the u.s. the mystic economy to hike rates. james: it is important to remain in the mode. i think we will have one hike this year. it will be after the u.s. presidential election. maybe one hike next year.

hard if one looks at the scatter crosses that we will do anything much more substantial than that. francine: was she trying to repress the markets because there was a low probability of the markets being priced in? james: she wanted to warn the markets that there will be a hike. however, she is a lowering expectations. francine: do you expect if we look at the end of 2017, where at the endng? james: of 2017, no more than one percentage point. francine: a small hike? point -- 25sis basis points this year and 25 basis points next year. nothing more than that. francine: you think she is keeping the possibility of a

september rate hike open depending on jobs? james: what are the things we learned is never to give away all of your cards. a good central bank is those who said to the market i am going to be here to ensure there is an orderly market, that there is a sensible back draft of economic activity. i am not going to allow you to expect what is what happened well in advance. francine: do you think the markets are dictating to janet yellen what she is or is not doing? markets toelling the get used to the idea of tighter policy, she is the mistreating that is in her mind. francine: what is the one thing you will be looking out for. we understand the outside risks. despite exit sitting pretty normal.

james: i think the language is good to be critical. -- the way that ms. yellen is interpreting the signals i think is the key consideration. francine: the dollar moving today but moving against their peers. how much is janet yellen -- james: the dollar is doing a lot of tightening. we have the r&b going down as a result of what is going on in china. we have the pound necessarily week because [indiscernible] therefore need to bring the money back in through the account. europe, who would want to own the euro right now? more of a is much credible backdrop.

francine: james, thank you so much for right now. he stays with us. stay with bloomberg for more the fed in the oncoming jobs number. today on surveillance will bring you a conversation with stanley fisher, at 6:30 a.m. in new york. this is bloomberg. have 20.ng up we we look at currencies, apple -- we have plenty. we look at currencies, apple. google bring you that story next. the death of democracy. brazil's suspended president makes a plea two countries lawmakers. eight months on and still of government as prime minister malloy -- prime minister rajoy -- this is bloomberg. ♪

francine: this is the pulse. let's get to bloomberg business flash. koreaian: shares in south largest container line has been shifting and suspended from trading after pledging to the lowest level since 2009. that is after a news agency reports that a group -- it refused to provide loans. korea's developing bank has said that hentgen's restructuring plan -- it says it will do all he can for recovery. a record number of overseas investments were made of u.k. in

the 2015 -- 2016 financial year. total projects funded by investment grows 11%. that figures -- making the country's europe's most popular external financiers. away --ayers has walked was rejected by the chocolate maitre -- chocolate maker. it sees no path toward an agreement. in june, her she's board unanimously rejected $107 per bid. bed -- per share francine: ireland provided ireland -- ireland provided apple with a legal aid. the decision could cost the iphone maker billions. will spot -- we'll talk more with jones hayden. the reasoning here is it is

unwanted tax. ireland's was too favorable. this has been going on for quite some time. we think the new commissioner will go hard on apple -- do you think the new commissioner will go hard on apple? jones: it seems that way. she has set herself up to go after these sweetheart deals. not just ireland but other countries as well good apple is the biggest country that she is gone after -- as well. apple is the biggest country that she is gone after it if you do the math, one of the tax deals that she is looking at so if you do the math on that, you could get $19 billion of the back taxes that could be due. we are heading that looks like she is going to focus on a 10 period.-- a 10 year we are looking at multibillion dollars of back taxes in the air.

francine: run us through the timeline. it is the european union. it usually takes time. what are we expecting from the commissioner? what happens next? jones: she will lay out her reasoning in the case. she will send it to apple and she will send it to ireland. both apple and ireland have said they are going to appeal if the ruling goes against them. apple's ceo, tim cook says the note issue of taxes and -- and not tax paying enough tax, he has called a whole lot of crab -- crap. that will put it in the courts for years. it is hard to tell when we will get a resolution.

francine: think you so much, jones hayden. -- thank you so much, jones hayden. let's get back to james bevan. when you look at apple, you like apple because it is undervalued. this could be huge because not only -- they have to pay up front $10 billion. their tax arrangements in the future -- james: the u.s. authorities could have a long way to say about this. there are billions of dollars sitting offshore. -- the taxities say rules are, we tax what you tax because that is the way companies operate. there is a huge global issue as to what will happen if different authorities say we do business here, we want tax. ,tarbucks, all these players

who are going to be finding a different route forward. route,e: a different that would be what? james: it is hard to see why the u.s. would agree. however, it is the case that europe was a level playing field within europe. the concept of the state aid bought into industries -- we've seen it in the banking segment when state aid led to a lot of figure wagging. i think that investors are going to be wary of marking down the asset price too far because we have some material news. apple has a day of announcements. we are expecting a change of the watch and certainly the announcement of the apple seven. we have a cycle that will end up with revamped seven and eight within the next month.

the fair value share price is $150 rather than $100. francine: is that how you would ask blame the fact that since we how you woulde -- explain the fact that since we have heard about the -- had we not -- if we had not expected this new announcement for september? james: there is this issue of devaluation certainty versus uncertainty. what we know is the eu is going to you all was a lot more money. people will be saying at some point some of the money may be paid over. it may be distant. it is likely to end up in a compromise to deal. how does that compare with the fundamental cash flow generation. -- the full benefit of the cash

flow that it is giving to its shareholders. francine: the sector as a whole? james: i am hardly more bullish on amazon than apple. i think people who are in on telephone tax should be looking at samsung. when you look at the amount that samsung is spending on research as opposed to apple. i think samsung has every right. it is going to be a great company in the years ahead. there should be double benefits. francine: james, thank you so much for that. stay with bloomberg for more on the apple story. european competition commissioner is scheduled to hold a news conference in brussels at 11 a.m. u.k. time. we'll bring you that here on bloomberg. the death of democracy. brazil's suspended president makes an impassioned plea to the country's lawmakers people talk brazil, e.m. and political risk. this is bloomberg. ♪

francine: in a session that lasted 14 hours, brazil's suspended resident -- suspended president making a personal appeal to lawmakers. she said a removal what amount to a political -- death.e i came close to once when i was tortured, suffering aggressions that made me doubt humanity.

when a serious and painful illness almost made my life shorter. today i am afraid about the death of democracy. francine: let's get more with justin carrigan. thank you so much for joining us . is this the end of the road for her? justin: pretty much it would you heard yesterday in the small clip. she has focused her defense on personal elements. the take away from this is she did not really deduce anything new into the debate -- really introduce anything new into the debate. whether she is guilty into the elegant desk guilty of the allegations. -- guilty of the allegations. -- that could mean the end of her. francine: how are the markets likely to take this?

it veryhave been taking well up to now. andbrazilian stock market bond markets have been reacting favorably to the prospect that bruce f will be out -- that bruce f will be out. the markets are looking for clarity. they want an end to this process. as the nine months now. -- there might be a little bit of people looking again at whether the brazil story is strong. the brazil is in a very bad place. markets like to see this income to an end. francine: justin carrigan, our emerging markets managing editor. meon james, it is unclear to whether we are expecting the

people in charge to push structural reforms which seem to be very slow. how much of this is a fed story? >> it is a big ask to get the brazilian economy moving. -- the bester have policy compass in brazil, but i am certainly -- on a medium-term view. i would rather not pay the francine: the good currency stocks that make a lot of their money abroad. james: some of the greatest margins of the global growing sector that are available to investors. francine: in a crowded market? hans: absolutely not. -- james: absolutely not. sustainable creation of new shares of value. that is one of the few sectors that will deliver well over the next five years.

it will be more to the fight by deflation. francine: if you look at emerging markets away from brazil, how much of the fed exercising and telegraphing the markets that they are ready to hike is going to leak into the emerging markets? james: it is an interesting question, isn't it? the question that we have to put to ourselves is how much of local market that is denominated in u.s. dollars. what extent is the pain of corporate level on overseas borrowings? they were dealt a big chunk of foreign debt challenge, therefore [indiscernible] asian-pacific emerging economy. francine: james bevan, think he so much. he stays with us. up next, eight months on and still no government. as the prime minister rajoy 62

avoid a third election. we'll ask what next for spain echo this is your markets. $ tuning. investors still awaiting more comments from the federal -- wee vice chairman, hope that stanley fischer will provide clues on the timing of interest rate increases. level stocks you can see are rising for the first time in a week. this is a look at the ftse, pretty much flat. we are seeing other gains across the board. cap getting from 0.8%. the 10 year yield treasuries are retreating. they did rally in the last session. some of the benchmark stock gauges. if we have those up. .'ve got volatility stock gauges in europe advancing . s&p 500 index futures are little changed. crude hovering above $47 a barrel. copper holding to a two-month

low. we'll have extra data checks. we will talk about the fed, political risks in europe. you can see gorgeous st. paul's cathedral where it is sunny. this is bloomberg. ♪

francine: welcome to "the pulse." live from bloomberg's european headquarters i am francine lacqua. sebastian: brazil's president has testified at her impeachment trial. dilma rousseff spoke about her torture and imprisonment during brazil's military dictatorship, saying the charges she faces are politically motivated. she will be permanently removed if two thirds of congress finds her guilty. the volkswagen ceo says it will

take two to three years for the company to bear fruit. they are working on about 60 projects to overhaul the company. that is as europe's largest carmaker seeks to recover from a diesel cheating scandal. german foreign policy spokesperson to angela merkel says the u.k. will have to pay into the eu's budget if they want single market advantages. benefitmeone wants to from the european union within the market structures, he also has to contribute to the cost of that. paying into the process. britain before the referendum, nobody talks about that kind of thing.

u.k. jobseekers are starting to feel the impact of brexit. the average advertised salary is down 2.4% in the year from july. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. thank you so much sebastian. short-termomething but keep an eye on that. we are also getting u.k. mortgage approval ratings, hitting an 18 month low. the approval rate for july, the month right after brexit fell to 60,000, 912. slumpinggage approvals to an 18 year low in july following the brexit vote. that it isar to me because some of the mortgages were not allowed or if people

just held off asking for mortgages. loans did get even cheaper this month when the boe cut its benchmark rate. this is the picture for the pound. we are showing you pound-euro. we will get plenty more on brexit in a couple of minutes but first, spanish lawmakers hold a confidence debate attempting to end a political dead mark -- deadlock with a have had no official government. us on set is antonio bevan still with us. us is ben's stills. then we are finally going to get a government in spain this week. antonio: i think it is very joy gets that ra

through this vote. he is a handful of votes short but those who have signed up to back him are pretty adamant they are going to vote against him both tomorrow and in the follow-up vote on friday. probably what we see today is the start of the phase of wrangling with a try to cut some kind of deal to avert this third election. the chance of getting a government in this week are pretty slim. francine: why is it so hard to reach a compromise? ben: for me it comes down to corruption. the spanish system has been accounto hold the pp to for a wrath of can option -- corruption allegations against them. the traditional part is toxic arrivals so in policy turns, a socialist could do a deal with the pp tomorrow and continue

economic reforms however with allegations against them, socialists are refusing to get into bed with them. you have these two divisions and because of that it is a potential lineup. francine: how is the economy holding up with this political delay? ben: it is doing pretty well, to be honest. we keep hearing fear mongering from politicians who are trying to kind of jockey their arrivals saying, this is all threatening the recovery but so far the economy has been taking along nicely, growing more quickly than a lot of the big european economies. there are probably some major investment positions being held up but so far the economy is growing at a two and a half percent to 3% annual pace. francine: ben sills, thank you

so much. joining us from the dread. let's continue the conversation with antonio barroso and james bevan. when you look at spanish politics, this was quite unfair seen just maybe 12 to 18 months maybe 12ite unforeseen to 18 months ago. is it up to the markets to put more pressure so we get a deal? antonio: i think there is very little that people can do. spain is going through an unprecedented period of political change. political leaders are scared. they think the next government will be a weak one, that you can have an election any moment. they do not want to pay the cost. there is very little incentive to move and certainly a little bit of market pressure probably will help. francine: we have had political

upheaval for as long as i can remember. i think we have had about 15 governments in the last few years. that can only be bad. antonio: in the short term, for sure. important thing is the opportunity cost of not having a government. they are in the good times, everything is fine. what happens when the current trends reverse? that is a key question. francine: spain took a bailout and they are much stronger than italy who did not to give a lot. prescription for the political system in spain where the economy is not that bad? james: it is not, but there is an undercurrent of dissatisfaction, and particular the role that germany has. requirement saves a lot of its revenues.

is directly contrary to the requirements for a fast-growing economy with much more expenditure. , i doack of cohesion think it remains a fundamental source of tension. tom: if that is the case, it could be true for any european country and given that spain is doing better than the rest, what is the political landscape going to be after the french election and the italian vote of confidence? one,io: a very fragmented and the key question is the german election. we do not see a lot of institutions building political bases for the european integration, mostly because the problem used the in spain is a problem that is occurring across many different countries. as long as you have this political fragmentation the

rights of political parties will be very difficult to further your leaders. francine: what is the endgame, the rise of populist parties? antonio: i think a lot of prominence and depending on each country it will be context specific. excellent in the mainstream agenda and pulling the center, we are seeing in france where we have nicolas sarkozy running a very thin right agenda. they will try to pull the center to the extreme. francine: but will he or murray le pen when? -- marine le pen when? james: if we had a more protectionist agenda, we have donald trump saying that is what he wants to do to the united states, that is going to be bad news for the economy and the market. francine: except the markets

aren't realized because they are central bank acting. james: central banks can only do so much. at the end of the day the fundamental problems that we germany,the economy in the high savings rate because we have difficult future liabilities. we need to put this money aside. the economy wants the money spent and there is a natural problem of two different standards. francine: should we worry about the french election? we had news saying the current finance minister might leave to focus on a possible presidential campaign. i cannot figure out whether that worryingaging news or news because they lose someone good at the helm of the economy. antonio: there is not much left to do. i think it is good news in the sense that you have another candidate that is a little bit of fresh air to french politics

in that sense. our view is that marine le pen might make it into a second round but will not win because at the end of the day, any candidate that runs against her, voters will coalesce around that candidate. in that scenario, he will win and marine le pen does not have the present -- the chance to be the next president. francine: thank you, antonio barroso and james bevan stays with us. next, brexit blowout. how the referendum turned currency hedges toxic. plus, taking a bite out of apple. the world's biggest company could be on the hook for as much as $19 billion to the eu over an irish tax deal.

fed in focus, what is the interest rates? ♪

francine: markets flattish this morning. let's head to the bloomberg for your asset check. mark: we are rebounding from yesterday's drop, dominated by the lock of volume. we were below the 30 day average

because the u.k. was closed for a holiday. stocks are higher today. the biggest gainer is lafarge holston. hsbc grazing the biggest cement maker. lafarge holston raised the price target. emerging markets recovery, self-help likely to fuel further re-racing. estimates for 1.3 5 billion swiss francs of surplus cash generation next year to 2018 first share buybacks or special dividends. it implies a 13% upside. shares are up 2.7% today. -- is up today.

barclays says they have built a strong strategic position from a product and regional perspective in the last decade and says it is well-positioned. the company is coming out of its heavy expansion phase. disclosures improved. the price target is up 21% to 58 euros. we are at 44 euros today. i wanted to show you what is happening to the u.k. bond market ahead of the results of the latest reverse auction which will be released just before 3:00 p.m. london time. the bank of england paid a premium for all the long dated bonds it bought in the operation and your off 1.5 times the amount sought -- drew off 1.5 times the amount sought. there is concern about the prices being paid, that the beer we might not find enough -- the mighte might not -- boe

not find enough people to unload its debt over the next six months but since they announced their bond buying program, yields on two years and 10 years have reached record lows. francine: the sterling crash in the wake of the brexit vote has sent -- turned some currency votes toxic. hedging toely use manage currency risks. liam vaughn is joining us. there was a great story on bloomberg.com. what products are we talking about. -- liam: variations of forward futures and options, and in the good times or during normal conditions these could be theful rather than riding

waves of foreign-exchange moves. we had some degree of uncertainty if you were a company that exports imports widely. a number of these were hidden triggers that if currency moves by a sufficient amount they could blow up and companies could end up in a situation where they have to buy 10 times more currency than they initially thought they needed. they claim they were not explained the risks of these. francine: this feels like ppi. -- how big of an issue could this be for bigger companies? liam: the idea of an unsophisticated buyer being sold a product it did not need and it withblowup, we saw the financial crisis and more recently with interest rates. it is very early in the process,

brexit is very recent, and there will be a process were companies will try to restructure these products. in terms of getting into defaults, i think we are a few months away from that at the moment. in terms of the size of the market, you are talking about a culture of all u.k. businesses have similar products. francine: how do you view brexit at the moment? the market demand was the lowest in 18 months and the wages may go down because of what happened. is it way too early to understand the implications of brexit? james: i think it is an added stress or strain on an economy that faces very difficult times in any case because really since the late 1970's, we shifted the structural function of the u.k. economy away from manufacturing.

the world became very dependent on finance and construction. and services, and those are segments of the economy which have great difficulty in growing. a capacity to compete globally is still undermined by ferocious competition of deflationary pressures overseas. the average wage inflation in china is still only around four pounds an hour. that is very competitive in the context of the living wage in the u.k. against that background, it is going to be really hard in terms of internationally trading goods and services. francine: if you look at the following pound, and when i ask this question about the uk's biggest export, it is finance and we have the passporting issue. these products that went toxic, how much more rewarding could that be on the u.k. bank? james: this time around, a lot

of the mis-selling seems to be done by foreign-exchange brokerages, and there are dozens of these. but not fsa registered the same onerous regulations as the bank. it seems to have left a gap in the market for more slightly regulated foreign-exchange firms. terms of the banks themselves, i do think there will be an impact but maybe not as severe as it has been in the past, but there will be other firms that will be affected if this close up. francine: liam vaughn and james bevan, thank you for your time. up next, said in focus. what is the outlook -- said in focus -- fed and focus. what is the outlook?

we speak to stanley fischer. ♪

francine: this is "the pulse." i am francine lacqua in london. sebastian: apple is said to be facing a potential tax will -- bill running into them billions of euros. the european commission is expected to say ireland provided

them with illegal aid in turn for creating jobs. vowed to fight any dust against this ruling. they are scheduled to hold a news conference in brussels and we will bring you that here on bloomberg. u.k. mortgage approvals slumped to a low following the brexit vote, pointing to a slowdown in the borrowing surge. quickening inflation is said to erode the earning power of british households. volkswagen's ceo says it will take two to three years for his revamping of the company to bear fruit. he has about 60 projects to overhaul the company. that is as they seek to recover from the diesel emissions

cheating scandal. german foreign policy spokesperson and ally to angela merkel says the u.k. will have to pay into the eu market if it wants single market advantage. >> if someone wants to benefit from the european union within the market structures he also has to contribute to the cost of that operation. for example, as norway does. norway is paying in. britain before the referendum, nobody talked about that fact. sebastian: francine. francine: thank you so much. this is your market. the trading day in the u.s. caps off in about two and a half hours and a lot of focus will be on what stanley fischer speaks about. that is coming up 90 minutes from now.

the u.s. dollar strengthening, treasuries retreating. it is all about what stanley fischer tells us that might provide clues on the timing of interest rate increases. global equities rise for the first time in a week. mrs. bloomberg. -- this is bloomberg.

focus, thehe fed in dollar rallies as u.s. treasury's retreat. , we will speak to him and the next hour. bill running tax into billions of euros as the eu is expected to rule ireland granted it illegal aid. the stock markets jump as dilma impeachmentls her