Guy welcome to the pulse. Where live we are live here diane guy johnson did the reason why guy johnson. The reason why i am sitting here and christine isnt, she is getting ready to talk to imf director. Risky assets have been rallying. That seems to be running out of road right now as you can see european equities certainly on the back foot this morning to take a look at around this morning. Take a look around, the dax down 2. 2 . The reason for that divergence is what is happening in some of the asset classes. I want to show you the banking sector. I want to show you what is happening with some of the big banks. We have seen what is happening with the panama story. The headlines that are being generated. Had a great interview out of asia with tidjane thiam. Very cautious about his commentary. What the regulators are doing. , you got ubsside down 2. 15 . Hsbc another bank that is being chucked around. The banks are being clear that there ridley tory supply story regulatory supplier story is down. The nikkei down. Brent trading lower as well. The german tenure is at zero. The german 10 year is at zero. Lets get you that. What is happening here is we are seeing disappointing data emerging out of the eurozone. We are seeing the french data. It was meant to be north of 50, it came in sub 50 at 49. Falling to 53. 1. This is the more aggregate number. You get the core europe number first and then you get all of the other numbers being pushed together. One of the reasons for that is what is happening in france. Berks first word news with nejra cehic. Nejra thousands of icelanders have taken to the streets to express their anger against the government. That is after doctrine slipped in the panama paper scandal. Panama papers scandal. A few hours earlier, the mp put forward a motion of noconfidence and called on the Prime Minister to resign. German factory orders unexpectedly fell in february and a sign that a global trade a global trade slowdown is weighing on europes largest economy. Orders adjusted to swings and 1. 2 . Ion dropped the reading which is typically volatile and a bloomberg survey. Pimco says he would lose his bonus if he quit in the Third Quarter of 2014. A court filing challenging his allegation that he was forced out. The cofounder is suing for his cut of the bonus pool. Any settlement would be donated to charity. Global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. You can find more stores on the bloomberg at top. Guy. Guy policymakers taking the spotlight speaking at frankfurt good Christine Lagarde says dish frankfurt. Frankfurt. Christine lagarde says she sees growth too low for too long. Over in hong kong, Charles Evans reiterated his commitment to tightening and a two like strategy in 2016. He spoke to bloomberg. Cooks i am looking to this year. I would not i am looking to this year. I would not be surprised if there was one in the middle of the year and one at the end of year. I think it is going to depend on the data. Im going to be openminded about it. The market not pricing anything like that. India cuts Interest Rates for the first time in six months. The lowest level since 2015 we could see a downward trajectory when it comes to rates. Lets talk about such a Bank Divergence about central Bank Divergence. The market and risk off kind of mode. Feeling nervous about what is happening. Christine lagarde making it clear that she sees the risks increasing. Is she right . Ofnu china is coming out pretty strong numbers. The relative to what it was last year. A lot of liquidity being pumped into china. Monetary policy being quite loose. The china issue is not going to go away because credit to gdp, china is rising at such a rapid pace. You are bringing forward some solitary investment. At some point they have to pay their bills. It is clear that although you are seeing an increase in construction and industrial output, even export, they are are slightly better. You have slightly decline in growth did you have a slight decline in growth. , in fxis rally we see and elsewhere in the e. M. , are we done . Today, it is extremely high. You could see a self for about two to three months. A stealth a still for about two to three months. Because Global Growth is challenged, i think the key weightede. M. Trade weakness is not done. Commodity prices plummeted. That kind of headwind is not going to be in front of you. The key question is growth. As Christine Lagarde says, what is the Balance Sheet to give mobile growth . To give Global Growth. If you dont get that kind of expert growth, you tread weaker. That is you trend weaker. That is what is going to happen. I think we are in the later stages of this. The view still is that emergingmarket currencies have jump. Ater to maybe. Talked about two the market is not anywhere close to that at this stage. The fed has twisted down toward market consistence. Hike from the fed, how does that shape the market . Bhanu the United States is the only country that has cleaned up. If you look at it overall, the has dhe publicsector leveled. There will be a point of impulse for Global Growth. It will be nowhere close to where it was in the 1990s. Most importantly, a lot of this growth is becoming more internalized, the demographics in the u. S. Is changing and becoming more serviceoriented. Services being procured onshore as opposed to offshore to the same degree of 3 in 1990s. The percent in 2016 if we are lucky. Lucky. N 2016, if we are guy want to get your take on what the governor said this morning. Bandar the way jet is going to stay with us. Director givesg her first interview of the day to francine lacqua. Well bring you that later. Why the Brexit Debate is the number one threat to the euro. We speak to the forecaster in 10 minutes time. That is coming up on the pulse. Guy youre watching the pulse. Chinasisitions this get the details now with nejra cehic. Nejra thanks guy. This chart pretty much shows what you just said. You can see the new bars. Chinas monthly outbound m a. You can see that spike in february, more than 60 billion. Topped 97als that billion this year alone. Already the record. Meanwhile, the white line is tracking the yuan exchange rate. The yuan versus the dollar. After the worst start to the 2000 11two decades, low this january. The currency as client a little bit against the dollar this year. The longerterm outlook is bearish. A blue books strategists thats loomberg strategists says by yearend. Youve got citigroup forecasting a 7 slide through 2017. This means for Chinese Companies to put money into u. S. Market investment. As growth slows in china, there are also benefits to oversee expansion. There is a potential cost of delaying rather than dealmaking. China companies do seem to be getting the message. You get China National chemical call and tsingtao higher. China isnology but suspending chinas spending spree poses a threat to authorities. This is a surge in outbound m a due to the trajectory of the yuan. Have seen the yuan strengthened against the dollar, we have seen it weaken versus a basket of currency. Some are saying weaker yuan against the dollar as well. Guy. Guy nara, thank you very much. Chinese companies are being rational. The growth project three the growth trajectory materialize, you need another engine of growth if youre running a business. Bhanu that is the key reason why Chinese Companies are headed to indonesia. One could question the reason. China is looking for growth outside because it is difficult to grow organically. What i dont think this is is a sign for all Chinese Companies to run for the hills. There is a negative theres a they have weakened the currency. China has a massive growth problem but i dont think it is a near term play at all good china has enough preserves to meet its liability demands. Down andiven by paying unwind the trade as opposed to companies or Retail Investors running for the hills looking to buy gold or dollar cash. That was not the reason why its so a decline. Thats why it saw a decline. That should not make us feel warm and fuzzy about chinese growth. It means it is not the right channel to play chinas growth. Guy if i was looking for a channel which we are going to see these problems materializing, i think certain crises you see other assets. Which is this . Bhanu this is not 1997 with the currency to constrain. 1997 where the currency took the strain. I think in this situation, financials in e. M. Are likely to trade with strain. What we have ahead of us is a vicious cycle between the financials and the sovereign. Fiscal problema in the emerging markets. Guy that is peripheral euro. Europe. Bhanu a much bigger problem in emerging markets. 2014, 2015, a decline in the, decline in commodities. What were building towards if Christine Lagarde is right, is the fiscal issue in e. M. Because of the conflict that is going to affect the sovereign debt. Two a two to three it to threeyear issue. Guy the reasons were fairly clear, a it wasnt existential threat it was an existential threat. Whether or not the whole thing with full apart. Can we compare what europe did to what china will do echo how do the 2 will do . How do the two compare and contrast . Nice naived be to suggest it would not have a global impact. Unlike the dollar and euro, mobile companies are not the. Ced in the remember if you have a crisis in china, that is not going to choke of the desk going to took the libel choke the Global Financial system. That is what was going to happen in the u. S. Had the fed not stepped in. That is unlikely to happen as a result of china. It will impact your earnings, it may not impact your cost of equity as much. Guy we will come back. Up next, the budget debate will wipe out the euros largest quarterly advances. We will speak to him next. Guy 21 minutes past the hour. He is the Bloomberg Business flash with nejra cehic. Nejra allergan trade shares plunged in trading after the u. S. Gorman of treasury announced u. S. Department of s run from allergan new jersey but has a legal domicile in dublin. Last year it agreed to merge with pfizer and a 150 billion deal. Walt disney chief operating officer tom staff is stepping down. Was widely seen as the air to whoset ceo bob iger contract runs until june of 2018. Shells shares fell. The company missed its sales estimates. It shipped fewer than 15,000 vehicles last quarter. Tesla says because that was mainly because of part shortages. Adding too Much Technology to the suv. The company reaffirmed plans to deliver 80,000 to 90,000 vehicles later this year. Guy thank you indeed. The brick to debate is euros biggest threat the Brexit Debate is euros bigs threat. Lets get to munich and speak to the banks economist. Thank you for taking the time. Walk us through the trade. Where do you see the levels . Where do you see the single currency going . Guest i did not hear you. Guy talk us through we see the single currency going given the political headwinds we see facing the brexit. Guest there is a lot of Political Risk priced into the euro. The markets are pretty calm. In our view, this should change by june. With the brexit in the end, which is pretty like it could happen with a 5050 chance. The whole european project could be questioned again and we could come into a situation which is 2011 where the European Union was questioned by the market. Guy in many ways that is a bigger threat, the british leaving and the effect that would have on the pound. But that is a much bigger story. Guest i did not hear perfectly. As you mentioned, it is a much wider topic when you look at the pound. The pound is pretty clear to almost every economist that the brexit would be a shortterm disaster and longterm damage to area,t comes to the euro it is not that obvious what would happen. You have to look at the political side and the dynamics in the European Union. You have to look at the refugee crisis, terrorist attacks and all of this stuff. Markets are a bit cautious. We think this will come for sure within the next month. Guy i am going to try and speak clearly. What level are we predicting eurodollar . , where we are right now. Where are we when the u. K. Votes . Will guest when the u. K. Votes to leave . Will head to 1. 05 in eurodollar. The britons would want to leave, we could have the parity very shortly. Guy we are going to leave it there and thank you very much indeed. Joining us out of munich. Obviously these levels are pretty interesting given where we could go with this. Why there is a debate surrounding what is happening with the eurozone takes is directly with what is happening with greece and will the imf back up the euro plan to keep those loans going . We are going to find out very shortly. Christine lagarde giving us her first interview of the day out in frankfurt. Francine lacqua is going to be conducting that interview coming up shortly. Tom . Guy welcome back. You are watching the pulse. Ere live from london. Lets get you caught up on what you need to know with nejra cehic. Nejra thanks, guys. Thousands of icelanders have taken to the streets to express their anger against government. A scandal suggested that the Prime Minister benefited from offshore accounts and tax havens. A few hours earlier, opposition m. P. s with a motion of noconfidence and called on the Prime Minister to resign. A global trade slowdown is weighing on europes largest economy. Inflation dropped 1. 2 from the prior month. The reading compared with a median estimate of an increase of. 3 in a bloomberg survey. Pimco said bill gross was warned and he acknowledged he would lose his bonus if we quit the fund before the Fourth Quarter of 2014. There was a court filing challenging his algailingses that he was forced out. He is suing for his cut of the bonus pool, around 200 million and said any settlement or award he will receive will be donated to charity. Global news 24 hours a day powered by journalists in more than 150 news bureaus around the world. Guy . Guy thank you very much indeed, nejra. A quick look at whats happening ith the markets. Mark i want to start with pugepovepl shares down. The most since september last year. The french car maker predicting the spending on new models and technology will weigh on profits in the coming years. Amid investments to introduce 26 new cars and eight commercial vehicles. It is forecast the profit will average 4 of sales between 2016 and 2018, below the 5 margin last year. These are the three big bulk car makers in europe in 2016. I normalized it as 100. Youll see all three trading lower but renault is the best performer, down a mere 12 this year. Peugeot 15 lower and volkswagen down almost 20 . We were just talking to the bank about the euro car. They said the your oos performance last quarter wont last because over the prospects of the upcoming u. K. Referendum on e. U. Membership. Interesting call from the bank which has been the most euro forecaster in the last quarter. They said the euro will slide to 109 and then 104 by tend of the year based on the assumption that britain will remain in the e. U. Fourth year of stimulus for the b. O. J. That is an anniversary that started yesterday. We have the government today speaking, mr. Kuroda. He said he will keep marketing 4 x markets. He reiterated the potential for further stimulus which leads to this chart, the b. O. J. Stimulus. It rippled through markets beyond the japanese bond market. This highlights just that. That was the first back in 2013. That was the second at the end of 2014. And thats the third bazooka, not only did it push yields in japanese bonds into negative territory but it pushed yields on the treasury market down as well. Barclays monk those. Among those. It will prevent the e. C. B. From tightening rights. We have the r. B. I. We have the r. B. A. Today. Australia keeping rates on hold today at a record 2 . India cut rates to 6. 5 today. The lowest in six months. This is a chart showing the benchmark going back to 2010. It is looking for more room to ease, guy, as it watches monsoon rain. India lowering Interest Rates today. Guy mark, thank you very much indeed. Perfectly positioned. Our guest is still with us. Going to cut again . By how much . He would like to. He is a man who is committed to his inflation target of 4 by 2018. Again, as mark was saying, it depends on whether the crisis can stay quite low. The economy is very weak. The currency had strengthened export volume is up. I think part of the signaling that we are comfortable with modest currency depreciation and we want Inflation Expectations to come in from here. India has more food in the c. P. A. Basket than any other economy in the world. Whats happening really depends on whats happening with the foods. Monsoons are likely to be better this year. I think there is a little more room for and we are short the rupee as a result of that. Guy the process moving at a slow pace. He is having to focus more on the rural farmers. Is there a compensation process that works because of whats happening with structural reform . It is difficult to make that argument to be honest. In indias case, the governor has made that point consistently. You need government reform in order to bring inflation down. I dont think he is compensating for it. He is getting lucky for the the fact that oil prices. These are the two variables that he has been given an opportunity. I dont think he is compensating. I agree with him. If the government was to reform and spend construct ily, it will bring inflation down. Therefore inflation will come down over the medium term. If the government is not able to do that, it is more limited. I dont think they will compensate for it. I think the reform iny and is absolutely crucial. There are so many people invested in the indian equity market. India is at serious risk of squandering its demographic prime and we have not seen the reform we would like to see from the government and at this point the only real snow town has been the r. B. I. And their focus on inflation and what is attractin