Welcome, you are watching the pulse. I am guy johnson. Francine is off today. She will be back next week. Inditexp this hour, fashions a tax loophole. We begin with our main subject of the morning. The situation in the ukraine is developing quickly. Isted president yanukovych holding a press Conference Today from russia. The u. S. Government tries to pull together International Funding to avoid a default. Lets go to kiev and our reporter there, ryan chilcote. Walk us through what has been happening in the south of the country in the crimea this morning. It is certainly seizing headlines. I am at the Ukrainian Central Bank with the Prime Minister and the head of central bank are giving a joint briefing about the state of the countrys finances. The Prime Minister left early. I did have a quick conversation with him, one on one, and they are studying the situation in the crimea. Theyre trying to figure out who these people are. What were talking about is that at five 00 this morning, another group of armed men at 5 00 this morning, another group appeared at anve in the crimea. We have two eyewitness reports that there is a group of somewhere between 50 and 100 armed men that have been there for some time. The acting president of ukraine said that russia is moving its troops within ukraine without coordination with ukraine itself. The Ukrainian Parliament has asked for an International Monitoring mission to come and look at the events on the ground in crimea. Aboutobviously talking the appearance of these armed men at the airport. Evidence thatrd these armed men at the airport are russian troops. I want to underscore that they they are not wearing any identifying features. They have not spoken with anyone. But clearly, the acting president of this country thinks that they may be from russia. Again, i spoke oneonone with the countrys Prime Minister. He was on his way to a meeting with foreign ambassadors. He said they are looking at the situation and trying to figure out who these people are. The airport is surrounded by Ukrainian Forces at the moment. Thank you for getting us up to speed. Say, the press conference is dominated by the situation in the crimea. Nevertheless, ukrainian finance is front and center. He has Just Announced that the country does have enough money to cover its liabilities for the time being. We know those reserves to be at about 15 billion. That is the number that was reported just yesterday. He is suggesting there is no shortterm default on the horizon. He also confirmed that the imf will be coming next week and that he does expect Financial Assistance from the imf third as he put it, also other international organizations. Know that the imf is ready to help. We know that ukraine has asked for 15 billion from the imf. We know that ukraine owes 13 billion over the next 12 months. The vast majority of this is due in june. In the shortterm term before the president ial election that is set to take place at the end of may, it would appear they have enough money, particularly if they get international assistance. It all depends on what happens next week in those negotiations between the Ukrainian Government and the imf. We will leave it there. Thank you very much, indeed. Ryan chilcote from the central bank in the ukraine. Will get a take on what those negotiations are likely to look like. It has been a stormy relationship. Another story investors are watching closely, euro zone inflation and unemployment figures break within the next hour. Jonathan ferro is here with more on the story. The inflation number is something everyone will be paying attention to. The top line from mario the eurozone is not japan. That may turn out to be a complement to japan the way things are going. We are well into a half decade, a lost decade. The low inflation story is not just spain, italy, greece and ireland. You are seeing it in germany as well. Todays number at 10 a. M. U. K. Time could show 0. 7 . That is lower again from december. You see the trend here. Lower inflation, disinflation. Does the ecb see inflation for 2016 . That is two years out. It might be a guessing game. If they see it well below two percent, or member, they have a mandate. You have a target for inflation of two percent. People will be asking about the Central Banks credibility. Thank you very much, indeed. Lets move on to our top corporate story. The owner of iberia says they have returned to profits. Aviation reporter rob wall joins us with the details. The numbers are in line with expectations. Is also about expectations. Tremendous run. They made some progress in the last few weeks of labor agreements with unions and highlights for iberia and perhaps investors were looking for more. Those agreements are not ratified yet and ground handler still have to agree with terms. Maybe it was premature for asic if step up for iag. Very clear turnaround, that iberia is taking hold. They will make an operating profit this year. British airways went from strength to strength. Is that sustainable . Is there a sense that that is something the ba can continue doing . Thatere was some concern as things start to get better, all the competitor start piling in. Hand, it is really good. It will drive down revenue costs. That will be key for their figures this year. Theres always a bit of concern and anxiety about growth. Welling has been doing well. It only retained part of the group last april. Theyre doing well and theres no sign that is changing. We will leave it there. We will continue to push on with the ba story. We will have more analysis of the later on. Spy scandal is putting the heat on the u. K. Electronic spying agency. Hq intercepted and stored images of 1. 8 million yahoo users taken from their arsenal webcams. David tweed has more on this story from berlin. Were these people doing anything wrong . That is exactly it, died. They were not doing anything wrong. What happened is that all these images were collected, regardless of who they were. It was bulk election. The guardian talks about a. Between 2008 and 2010. In 16month. In 2008, 1. 8 million yahoo accounts, werem accessed by gc hq. What they did was they took a photograph of an image of anyone who is having a web chat, every five minutes. They collated all of that together. The interesting thing, one of the interesting side issues of this is to look at how people use webcams, guy. One in 10 of these images that are then collected is someone showing a body part to someone else and it looks as if people are doing their own at home pornography. The program is called optic nerve, the program to collect all these images. It was also done in collaboration with the nsa. Yahoo ,eaction from david . Furious. Is absolutely they had no idea about any of this that was going on. The output out a statement. It has been in the guardian, as well. They say it is completely unacceptable, and they call for the worlds governments to adjust surveillance laws. You that yahoo Ceo Marissa Mayer says that yahoo is working to get all of its products in encrypted. This is a story that will not go away. This one has legs. It david, thank you very much indeed. Our european editor joining us from berlin. How to direct its resources. Bloomberg sat down with thompson in an exclusive interview. The issue for us is about focus. One of the reasons why we chose sasha renee dela as our new ceo is that she has a Strong Technology background is that he has a Strong Technology background. He knows how to move microsoft forward. The dela has significant challenges, as we have been hearing. His company owns proxies such as new yorks lazo tells. The us has a stake in indias only formula one racing team. The have to winner for best film 2 years a slave, it wasnt referenced, it wasnt there. Investigate. Ort of i wanted to find out about that. You can watch charlie roses special tonight. It comes on after 10 p. M. London time. Yanukovych claims he is still the ukrainian leader. We will see what the tengion means for investment ricks risks surrounding this country. Well talk about that when we come back in a moment. Good morning. You are watching the pulse. We are streaming on your tablets, your phone and now windows phones as well. We return to the situation in the ukraine. Thatcting president says russia is directly involved in the crimea conflict. Armed men have seized at airport in the regions capital. A financialector of institution is with us. It seems like a handsoff situation. What is your advice . I think that is what investors should be and are doing. Stakeholders,jor they all haveia, vested interests for the situation to not escalate and to keep territorial integrity of the ukraine. The dynamics on the ground can draw this situation into a different direction. In terms of best case and t case scenario, the crimeat case is trying to detach itself. There is no imaginary line that goes from north to south in the ukraine. Even in the crimea area, there is a huge minority there. Not only ukrainian ethnics, but the tatarar ethnicity. We are seeing some stability and a bit more understanding of the financial situation. The ukraine is an extreme version of an emerging market. Gauging the Capital Markets there is a tricky exercise. It has a certain amount of capital controls that have been will willce and there controlsy be further put in place. The local equity market is lightly traded. , the look at the eurobonds 23 ukrainian bonds have been stable. We dont know is, what will happen in the next few days. The Investigation Team will probably take a harsh line. The interim of government being a, cause a government. They have to come in and change a lot of things in a very germanic way. It will be very unpopular as a result of that. Try to gauge the stability of this country from a financial threeof view, even over a over eight 36 basis will be difficult. The ukraine does not have much to bargain with very they have a rocky relationship with the imf. That means the imf will come with a series of demands. The problem is that the current technocratic government is staffed with mostly team a shank oshenkolists with tym loyalists. We cant be hugely optimistic on their ability to make tough decisions. If i were a holder of is a very tough one. If you are a shareholder, just wait and see. We have seen the difference between what the beauty about the russian assistance is offered them in december, there were very few strings attached. All stakeholders, including bondholders, will likely be asked to participate in the pain. Eventually, the outcome of the negotiation is not heroic enough to try to you would expect privatet and some sector involvement. That is definitely going to be on the table in terms of bargaining power. It does not seem like the bondholders have a lot to bargain with here. I am just wondering under what legislation a lot of these bonds are are they under u. K. Or ukrainian law . I dont have the answer to that. It is usually a large spectrum of judiciaries that are involved in these processes. Try to avoide these restructurings as much as possible. They are costly and likely and lengthy. Lets get some company news for you now. The pharmaceutical released buyers numbers. Fourth quarter earnings fell about three percent. This follows a surprise dalliancen from the from the elians division. Division. Allianz the messaging application has grown. The application has users pay in games. Bears pulse, a tax loophole it will be discussed. Stay with us for details from our bloomberg report on the inditex. Mpany of zara, we will look ahead to the pimco deputyhe cio, andrew balls. Welcome back. You are watching the pulse. How the markets are trading. Jonathan ferro is here with more. Chinese pmi coming over the weekend. Equities are boring. The eurodollar is now trading at 1. 37. Euro zone Inflation Numbers coming out in just a half hour. If that messes, the pressure is on the ecb to do more. Right now, the euro is just edging lower. Thank you very much, indeed jonathan ferro, thank you very much. Coming up, numbers that could trigger the ecb to do more on inflation. Mario draghi is ready to do more to counter inflation. Coming up next, pimco deputy cio andrew balls. That is next on the pulse. Welcome back. You are watching the pulse. I am guy johnson. Russia to has urged respect the sovereignty of the ukraine. To give the new interim government breathing space. Russian fighter jets have been moved to patrol the countrys border. Look to russia with the choices that it makes in the next days for their confirmation of these statements. Words are words. Speculation the central bank will widen the trading band. Analystsity of surveyed by bloomberg say that China Central bank will double the yuan trading bank by the end of june. Billion facing a 2. 2 lawsuit in germany. It was used to decide priority of calls and mobile networks. The rulings are a blow to the munichbased holding company. Gets the final pieces of his data puzzle before next weeks policy meeting. Here is jon ferro. We will call it the data dilemma. This is not an exhaustive list of what we will be looking at, but it is some of the key pieces. We have had pathetic levels of growth across the eurozone. In maine fore economies have deliver growth since the start of 2011. Eli is not painting a lovely picture. Pmi is not painting a lovely picture. Unemployment, lower completion low inflation, check out germany. Inflation of around 1 . Just. 7 . At where does the ecb see inflation out as far as 2016 . Inflation below their target of 2 , people are going to raise the credibility question. Draghi spoke yesterday. Listening to him and all of the other ecb speakers out there. They do not seem worried. They do not. One line from mario. Ofdo not have evidence people postponing their expenditure plans. He said animation inflation remaining low is a risk in itself. The ecb will deny deflation to avoid. Risks to deny any avoid creating such behavior. Whatever the ecb thinks, if we get a lower number today,. 7 could be low enough. I will not guess as to what they can do. Jonathan ferro, thank you. Joining us, andrew balls. Book for a your moment. What are you expecting . 7 , no reason to have much of a different view. Data may becomes a little bit below that. Greases below 7 this morning. Below 7 this morning. Drawdy expectation that will have to do a little bit more. The bid is on for some of these bonds. You have negative cycles, more positive cycles. If it were yield if a yield is off, it helps to draw investors in. Positive viewty in terms of the eurozone outlook. The deflation risk that your colleague was speaking about is important. Are the ecb, you will be happy to be talking about macroeconomics rather than crisis measures. Time, we know it is not the same as japan. Having inflation week and trending down in the core countries, not just the peripheral countries, it is a challenge for the central bank. If we get a. 6 read today, is that the smoking gun that mario draghi has been looking for . There is what she would do, what they should do absently politics. Draghi need surprises in terms of data in order to force through moves or withstand german no votes in terms of how they organize. The margin, if it is a lower reading, they could do something. In the short term, i am not expecting too much. A lot of would have talked about his rearranging the deck chairs. Question,ry important not for next week, but over the next several months. For us, that is the big question for the next six months. Runour job is to front that. Tell me what you are buying and what you expect to be bought. Theres a pretty good chance they will do asset purchases. Buying loans from banks, have talked about for a very long time. Not easy to do, but it is possible. Get assets that you think the outlook is good without ecb action. Italy, spain, liquid, the short end of the curve, we like the income that you can generate. That is fine without further ecb action. Italy, spain, less liquid, but attractive. The other thing to do is look at the banks and bank capital. Look for parts of the it is pretty tight. A lot of this is priced in. If you go with the lower parts of the capital structure, bank capital, there is Good Opportunity core and peripheral countries. Was the leftfield idea you think drawdy could do . They can arrange the deck chairs. More effective, trying to weaken the euro currency. In the near term, that would be the leftfield surprise. I am not expecting it. Hink my view will be slower progress towards credit easing. He will need to see not just cores data, but for the as well as the peripheral countries, we need to do asset purchases to avoid inflation expectations. Lets talk about the u. K. There is a lot of noise around it. Lets pick out one voice. There is a in the market. That is likely to keep the selloff a little bit under wraps. We are going to see lower yields over a longer period time. It will be gradual and we will not get up to precrisis levels. What is your outlook . How do you interpret the noise at the moment . We call it the new normal. It is a different kind of cycle. Financial conditions are different to read 2008. There is a lot of bank of england talk. They have accepted the forward rates and have given up on the Forward Guidance period. Now is towant to do try to say, we are not going to march all the way up to 4. 5 as in the old normal. The neutral rate to be much lower. If you start with low levels of you can adapt to lower levels of interest rates. To thing you can march up to a theer rate is possible, but baseline is that they would want to go slower. See how it goes. Chatter,of all of this excepting the forward rate, it is trying to guide down expectations of where they might stop. They do not want a big rise in guilt yields. Think looks ok. The market is pricing in a high buyback in march of next year. Our biasengland would be if they go later based upon our macro views. They have views that they are willing to as far as the fed goes. To know how are investors reacting to all of the noise that surrounds her firm right now . It has been pretty quiet. We have a competitive environment. It is about generating returns for clients. We have a strong investment process. I think clients have a good understanding of our investment process. We have a very strong bench. Great portfolio manager. I am sad to see him go. I was runnerup in europe. We have a strong bench of people. Phone calls about the stability of the Management Team and its ability to deliver re