I am anna edwards. Lets start with breaking news. Of howe pmi, the gauge the economies across the eurozone are doing right now, these are the preliminary numbers for august. We were expecting on manufacturing a number of 51. 3. It has come in at 50. 8. The service number, that has come in just a shade below estimates at 53. 5. The composite number, we were expecting 53. 4. That has come in at 52. 8. That is a little bit below estimates. Slightly below estimates all in all. Clearly the miss against expectations lies somewhere outside of germany. Lets check how that is impacting on the euro. We are not far right now. 1. 3268. You can see the oscillations in trade around that french data which was mixed to negative and that german data which was better on all counts. Details from our international correspondent, hans nichols. Storye been watching this all morning. Just to recap, that composite number on pmi for the eurozone has come in at 52. 8. Way theis is in a reverse of a story where we had gdp numbers late last week where you saw the German Economy contracted a little bit more than was expected. Today, the numbers are that germany is doing a little better than expected. It is still getting awfully close to that 50 number. Anything above 50 signals expansion. You look at where pmi was three or four months ago. Preukrainian crisis. It was in the mid50s. On both manufacturing and services. Use all the fourth straight month for declines for french manufacturing. Manufacturing is only about 10 of the french economy. Not as crucial for them. Overall, this is kind of the story of the last six months. Germany is limping along and the rest of the European Countries maybe with the exception of the periphery which showed strength in gdp figures last quarter, the rest of europe seems to be a little more than limping, dragging on. It is sort of softly monotonous numbers that dont leave all whole lot of cause for optimism unless you zero in on that Services Number for germany. That is in the lower to mid 50s. I guess if you were looking for a silver lining, at least these numbers are positive. The last gdp reading showed no growth in the eurozone. Perhaps some people had expectations that we were in for something weaker. We have got some growth in the euro zone economy according to these indicators. You are right. That is the half full way of looking at it. There is clearly slight expansion on these preliminary numbers. One note on the preliminary versus final. , atthe last few months least for germany, the preliminary number has been revised upward. In some cases almost a full point. That doesnt necessarily indicate a causation or a clear trend but at least it does look like sometimes the preliminary number has been coming in a little bit lower than the final number. Much, hansu very joining us there from berlin. Lets turn to company news now. Shares of ahold are down this morning. The retailer posted a fall in sales. Here with more is caroline heidi. How bad were the numbers . It seems like the percentage of the stopping and shopping going on in the u. S. Markets, fewer people are stopping and shopping at stop shop. They are stopping but they are not shopping. They are blaming easter to a large extent but they are also complaining that it is a Competitive Landscape in Price Inflation is very low. They are not able to boost the prices of their food goods at the moment. This is quite a powerhouse in europe and the United States. Homeland, it has egos. In the u. S. , it has got stop shop. A number of brands and they say, we are losing market share in the United States. Particularly in new england. Ales down 1 on a like for like basis, they missed estimates in the United States and europe. The margin is under pressure. Operating profit down 15 . Overall profitability is being hit because they are having to discount a lot. In prices. And also invest in the stores. If they are going to have all this competition, they are trying to upgrade their stores like tesco is trying to do. 320 stores have been tackled in the United States. Not much bang for the buck quite yet. Even though the dutch team did pretty well with beer and food, it did help a little bit but not enough to offset the overall deterioration. What do things look like ahead . Any light in the tunnel . The ceo saying it is not easy. He is trying to sound optimistic. Shares are still trading lower. Investors arent biting. It does say that cost of a proposition, the fact that they are investing in their product range as well, does mean trends will improve. That doesnt seem to be being bought in at the moment. Online was the silver lining. Onlineabout 90 growth and they are investing in that. In europe, they want to be in half a million homes. Republicnd the czech did relatively better but dutch, u. S. Didnt do so well. They are going to have to keep on with this restructuring process. Europe, they took a reorganization hit. It doesnt look quite rosy just yet. I lived in holland for a while. I think albert haim is responsible for my addiction to waffles. Very tasty. Caroline, thank you. He latest on ahold here is what else is on our radar. Americament for bank of could be announced as soon as possible according to people familiar with the deal. Reportedly pay about 17 billion to settle u. S. Investigations over the sale of mortgage bonds in the runup to the 2008 financial crisis. The latest minutes from the fed show policymakers came close to an agreement on how to exit on the u. S. Central bank unprecedented stimulus program. Some participants were uncomfortable with the fed plan to keep rates low for a considerable time. Many said that they may have to raise rates sooner than anticipated. Fed, many of the worlds most powerful financial players have gathered in jackson hall for the kansas city annual economic symposium. Janet yellen will give the keynote address tomorrow where she may address labor market data. Coming up, from jackson hall to europe, we are going around the world with pimcos deputy cio. We will get her insight on the global economy, Financial Markets and investment strategy. All that is coming up on the pulse after a short break. Welcome back to the pulse. Bloomberge on television and also streaming on bloomberg. Com. The fed annual Monetary Policy symposium in wyoming kicks off today. U. S. Economics editor michael anee is on site and gives us idea of what investors should expect to hear. For decades, this was an academic conference. Research papers assigned explained and discussed. Of qe and extraordinary centralbank policies changed all that. For several years, ben bernanke used the keynote speech to outline fed policies to come. We dont know what janet yellen will do. Tolysts say she is likely split the difference. Reiterate that u. S. Labor markets still need improvement without saying what the fed could or should do about it. She may also update her dashboard, the indicators she uses to judge the health of the labor market. High levels of longterm unemployment and parttime work and low levels of wage gains, permitting conditions or just transitory . Another key issue is likely to be what happens and centralbank policies around the world start to decouple . If the fed and bank of england start to raise rates next year while the ecb and bank of japan continue with qe policies. Yellen will be followed by mario draghi giving a luncheon address. Investors will be looking for insight into how bad he thinks conditions are in the eurozone and whether his bank will follow the fed in adopting some sort of qe alessi. On saturday, he rookie corona uroda will discuss the latest on the nymex on abenomics. Wall street and city economists not invited. Right. For more, lets bring in our guest, virginie maisonneuve. Great to see you today. Wetalk a little bit will look back and forward at the same time. Talk about the fed minutes from yesterday and where that leaves us looking ahead. At thee quite surprised reading of the minutes that seems to be gathering momentum, that they were a little bit more hawkish. You didnt quite see them that way. Ini thought they were quite the path of what we have seen so far. What i saw is we had an acknowledge meant that things were going better. We talked about and all of that. Disagreementpen about the slack. There was discussion around that. Of course, future signals that at some point will normalize, but we didnt have the timing on it. A continuation of the other messages. I think what is important is it sets the stage well for jackson hole. That is what it is. When you think about jacksone hole, the importance is how we communicate, how we deal with three major things. One is even recovery, really at the core of what yellen is talking about. Large part of the population who is not benefiting from this recovery. Is it because she is so focused on that dashboard of indicators around the labor market . Michael mckee was running through those indicators. Unemployment, longterm unemployment, parttime workers. Is she so focused on that that people come to the conclusion that she is more dovish than the rest of the hawks and is that perhaps where the different interpretations come from . Might be. My view is she wants sustainability. The recovery we have had so far is really a financial recovery. At least the u. S. Is ahead of the curve we have seen better economic activity. If you look at europe and some other areas, it is very slow. She wants sustainability. For that, we need a broader level of employment. It may mean that we need to think about structural changes in the economy in the light of the what we call the new neutral. I think that would be the second point. How do we address the world that is entering a new phase . Slower growth in emerging markets are still growing, but much less than before. The world is driven by consumption, by at least 60 . The consumer has gone through a pretty traumatic development in the past few years. I think that is another big question. The last one is really what we call a multi speed world. How can we address Monetary Policy in this multi speed world . Phase one was, we are all in together. Phase two, we put measures together. U. S. And u. K. He are in a very different state of the process than europe and japan. When we start to see Central Banks having to take very different paths, that is when that multispeed world starts to come into focus. Is that going to be a big topic of jackson hole . How does policy normalize at different rates in different parts of the world . I think it should be. I think clearly that has impact on currencies. There is also a Global Citizenship element. If the u. S. Was just looking at the u. S. , it might have a certain path. Linked tos very much the Global Environment and we have geopolitical risks that have stepped up. All of this means that that responsibility of being a Global Citizen should be discussed. Corporations and central bankers were much talked about. Are stillnk they cooperating as much as they have been or should be . I think they are. It is probably not in the same level of intensity that we had but i think they are. I think we are feeling that we and vulnerableid recovery. I think that corporation is an essential. We will look at that recovery when we talk to you next. We will talk about what is going on in the eurozone. Lets get some company news now. Germanys largest chip maker, Infineon Technology will buy International Rectifier for about 3 billion in cash. The purchase will be infineons a guest acquisition to date. Gives infineon more capacity to deal with rising demand for chips using Car Electronics and puts it closer to the tech hub of Silicon Valley. Maywere may face uber face additional setbacks as blocking theeihghed service. The company is fighting bans in berlin. Munich and dusseldorf are considering taking action. The administration has said that uber drivers need a cab drivers license because they are driving to earn a profit. Shares lower after an earnings report. Net profit fell 52 from a year ago. Sales fell. Aompany also cast a 220 2014 outlook. Lets get you todays post number. 15 million, that is how much it takes to create a super stealth warship. A selfmade millionaire spent a decade and millions of his own dollars designing this ghost boat. It is undetectable to radar and he hopes it will one day be used by the u. S. Navy. More on that story later on. Welcome back to the pulse live on Bloomberg Television and radio. Lets check in on the markets now. Jonathan ferro has the latest. They were green, they were bred, where are we now . Choppy. 10 minutes in, we were lower. Right now, hi. The cac 40 up by 0. 6 . Eurozone data dropping through the morning. The pmi is a mess but german data slipped from previous months but a lot better than many forecasts. You are seeing what is happening in equities. You see the dax now up by 0. 5 . This could impact the fx market as well. Eurodollar higher. 1. 3265 as we speak right now. There is the composite. A little bit of a drop off but still positive territory. I think this is where things are starting to get more interesting. A hawkish set of Federal Reserve minutes. Richard fisher sounds the alarm on this. He said the committee was coming around to his way of thinking. The minutes speak to what he was talking about. On friday is the big one. A hawkish set of Federal Reserve minutes. Fastball for janet yellen. Everybody expects her to step up to the plate, put the cap on and smack that away for a home run. Dove capitulates . Everybody i spoke to this morning says no. You very much. Lets take a closer look at what is happening in europe with virginie maisonneuve. Lets talk a little bit about the data we have had out this morning. We kicked things off with china. Overnight, we got disappointing hsbc pmi numbers. France. Ot germany, the composite eurozone number came in below estimates. This is for the month of august. We are getting early readings. Where do you think we stand . Clearly, the russian situation has created i think another element of difficulty, particularly potentially denting some business confidence. I think that is the key thing. That doesnt mean that is going to go on forever. There are talks and hopefully things will be resolved. Hoverher thing is, as we around that 50 level in pmi, we should expect given the fragility of the recovery and in example,s, france for the sluggishness of it, a slow path to recovery. We should not be surprised by the small volatility around the 50 number. For me, what is important from here and given what we have heard about the fomc and jackson hole is, do we have room for much weaker euro . If people anticipate 1. 30 two already down from 139. That is beneficial for europe. I think if we had a further gap between the two currencies, that would be quite helpful. I also would like to see more structural reforms. Particularly in france and other countries. We want to make sure we continue on that path. Thank you. It is time to get you todays hotshots. We kick things off with a different approach to a two wheeled sport. These bikers spend most of their writing airborne. Turbulence is one thing. Have you ever seen a plane do loops, barrel rolls and other maneuvers such as this . One brave pilot defies physics. Finally, a president ial dousing. U. S. President george w. Bush accepted the ice bucket challenge as his wife crept behind him with a bucket of ice water. The challenge calls for participants to videotape themselves dumping ice water over their head. It has raised nearly 23 million in donations to the als situation. Who would you nominate . Some good ones. We will be back after a couple of minutes. Welcome back to the pulse live from bloombergs European Headquarters in london. I am anna edwards. We have just got manufacturing and Services Activity for the entire euro zone data. The purchasing Managers Index slowed in august to 52. 8. The slowdown indicates the region remains vulnerable to weak inflation and rising tensions with russia. Europe has to biggest economies reported manufacturing data. French manufacturing contracted to its lowest level in more than a year. Germanys pmi also fell but lower than analysts expected. Germany may be able to withstand the russian import ban better than other European Countries. Chinese manufacturing fell more than analysts estimated in august. The preliminary reading came in at 50. 3 which trailed economist forecasts. A it is confirmed, it will be threemonth low. We are getting some numbers on u. K. Retail sales. In 0. 1 ail sales coming growth. The estimate was for an increase of 0. 4 . That number does seem to have undershot estimate considerably. Lets talk to virginie maisonneuve. Petey cio at pimco. About the needg for structure will change in the eurozone. We heard from Joseph Stiglitz yesterday. He was also banging that drum, saying that Monetary Policy is no substitute for fiscal policy and structural changes. We have seen some, havent we . What do we need to see more activity on . I was referring to france. Few years, with a weak political leadership, it is really denting the potential to tap into the entrepreneurial spirit. We have to make difficult structural reforms. Otherwise, the country is going to continue to drag relative to the rest of europe. I think generally throughout europe, weaker euro is going to help. Probably more qe you think the euro is going weaker still . Because of the divergent path between the fed and the ecb. Exactly. Clearly as we discussed earlier, yellen also has that Global Citizenship responsibility. Notwill be careful about moving too drastically too quickly. In mind,ith that path the expectations of a weaker euro are going to remain. Clearly, it is august. The are still above 50 on the pmi, which is positive. We have had the russian event which will create a small dent in business confidence. Interesting that we get these numbers on pmi for the eurozone above 50, showing some growth. Now in the midst of this sanctions environment with russia. In the Second Quarter, we saw no growth. You can make a case that things seemed to improve since the Second Quarter. Is that too much glass halffull for you . There are different factors. It takes time for sanctions to have an impact. What confidence is about is expectation. I think that is what we have to monitor very closely. We are not in a bad situation, but we are in a vulnerable or fragile situation. We have to make sure that as investors we test our conviction in the stocks. And we keep on checking out the state of air pockets. When the markets are surprised by geopolitics or by other events, understanding that what we call the new neutral at pimco, low growth, low rates, low inflation, it is going to underpin the case of equities over the medium term. You should take advantage of those air pockets to position yourself but you must be very careful of valuation. Highs on not far from these indices yet you are still bullish on equities. Between is a difference i think you are saying that you can find companies that have underpinning and Earnings Growth , but the markets overall are fairly valued. I think that is the difference between buying an index and buying an active stock picker. The other important thing is the efferent role of china. Germany is linked to china and as we have seen, the pmi of china again above 50 is coming back a little bit. There, the shortterm stimulus plan that we have had at this stage of the economy where leverage is much higher and the ability to do something really limited, we is more see that the impact on a much more shorterterm you see the credit data coming this week that was really negative. Saying theyof china had to more than doubled the money they set aside for bad loans. That credit picture looking gloomy. The government in china is going to have to not just use these targeted measures , they are going to have to go for something broader in terms of stimulus . I think what they are doing is playing they are trying to use much more flexible tools because the overall scope is more limited. They are longterm goals of anticorruption that is still very much on the front, and antipollution clearly with climate change. Which istion aspect really an antisocial characteristic. People are upset about it yet providing enough growth that Popular Support remains. And it is 7. 4 , 7. 5 . Is that the baselevel they have to achieve . That is their view. Clearly, with numbers in china, who knows if it is going to be 7 . They need a minimum to support that social engagement. Stay with us. Virginie maisonneuve, more from her in a moment. Lets switch gear a little bit. The french love their cheese. It is true. They are not the only ones. Is the most Popular French cheese in the United States and russia. Until the ban came in. What will be the impact of the russian embargo on this cheese . Caroline connan finds out. Fresh milk from local farms capped at 30 degrees celsius. A crust forms. Matured is drained and for up to 12 weeks. To make this, french brie. Here, one of the last two companies to make the cheese the traditional way, nearly every part of the process is done by hand. Mechanize the process but that would change our recipe. We would end up with a different kind of cheese. The cheese we send to the u. S. Is made with the same process except the milk is pasteurized. But the quality is the same. They employ 65 people. It has resisted the threat of industrialized rivals but now there is a new problem. Russias embargo on some european foods. The impact of the russian embargo could mean could be more violent than expected. Rices of milk have collapsed. We fear this may last until the end of the year or longer. Nearly 40 of the projection here is exploited exported. Russia was one of the Fastest Growing with french exports tripling over the last four years. About 100,000 pieces like that. It was very easy. In total, they could lose more than one Million Euros of annual revenue. Unless he can find a new buyer, a soft be last with taste and smell. Brie shouldsure ever come in a 10. We will expand on that conversation with virginie maisonneuve. Lets talk about geopolitics. That was a good way of illustrating the Business Impact of the sanctions, in this case russian sanctions on Dairy Products out of europe. Do you buy into the optimistic view of things around ukraine and russia . At least they have been talking. To unleash another round of optimism in equity markets. Clearly, one has to stay optimistic. My view is that the longerterm implication, we must as investors think about what they could be. What they could be is an isolation of russia. Maybe russia turning more towards asia as we have seen with the pipeline discussions with china. What are the implications of that . That actually is very good for china. That also probably has some impact from the middle east, given russias influence on the middle east. I think we must understand what that means. The same way you dont buy insurance on your house because you forecast 90 it is going to burn, you need to think about those things. Even if it is not the base case. Hopefully there will be a resolution. There seem to be so many different factors, including popularity at home, including facesaving exercise, and a. Istory since the wto i think the west probably is not keenly aware of how that has influenced russia and its leader. So you are making Investment Decisions based around where we are going to see negative impact from these sanctions. Are you pinpointing certain German Companies and saying, we are not going to increase our exposure of those because we want to see how the sanctions environment plays out . What i would do is something slightly different. If there are stocks that are suffering with emotions in the market, you would overshoot. What i would do with my teams is look at those stocks and say, is there another shooting is there an overshooting . Based on this versus what the companys involvement in russia or other countries is, is this a buying opportunity . It is the other side of consensus. Where it is oversold because of the motion rather than rationality. Exactly. If it is a company that we like longterm, using those air pockets to potentially add to them. What about the middle east . The iraq situation certainly seems to have deteriorated over the last 24 hours from a political headline coming through. Do you think that markets are ignoring this too much . Do you think this could turn into a much bigger issue, much bigger commitment from western governments . Do you think that is something market will become increasingly aware of . I think that is possible. We have to think about the factors. One set of factors is to say that obama at this stage in the political cycle is really reluctant to actually move physically and the u. K. Has made that point. No boots on the ground. That is one aspect which i think gives some level of confidence to the market. There is another aspect which is what i call a resurgence of tribalism in the Global Market or the global village. You can get adia, very strong impact from events that might have been in the past less visible to the global community. I think we have to try to understand how those events today compare they can shape politics, cant they . They do. We must really think differently in terms of how we assess that risk because of social media. We have seen it in nigeria for example. Again, trying to understand the details. One way to think about it is you want to make sure you have enough oil exposure or energy exposure. If we had the kind of volatility we had 10 or 15 years ago, the impact of the oil price would have been much higher. With the shale gas now in the u. S. , it has been milder. Cushioned of it, havent they . Exactly. More thinking about how when you structure your portfolio, you can hedge yourself by having Strong Companies that might be in the sector that could benefit. Thank you very much, Virginia Madsen of, deputy cio at pimco. Coming up, german chipmaker infineon exits biggest deal ever. We have details of the merger. Plus, meet the ghost boat. A warship that is undetectable by radar but is not developed by the military. Find out who is behind it. Here is a snapshot of the Financial Markets. They were up, they were down, now they are up a little bit. Euro stoxx trading up about 0. 5 . The ftse 100 up by 0. 25 . Welcome back to the pulse live from bloombergs london headquarters. Infineon is making a move towards the u. S. Buyanys chipmaker will International Rectifier in cash as the company bets on a smart device filled future. Hans nichols joins us from berlin. What does infineon get out of this deal . A Silicon Valley address . That is one part. The ceo of infineon was very clear that they want to be closer to california and have a foothold there. They basically get lowpower chips. I know youd never leave the heat on but in the event that you did and wanted to control that with your smart phone, the computers that run that system in your house will now be powered or likely be powered by lowpower chips. All these semiconductors is going to be a huge growth industry. They are going to be regulating energy to the energyefficient themselves. Here is what the ceo said about the move. He said, it is important for us to be in the u. S. And close to california. International rectifier does that. That is according to the ceo. Since he came to the company, he has been on the hunt for an acquisition. He got one. 40 per share, a 51 premium. You can imagine, the stock is up this morning. Indeed. I was once far too generous with the heating. My wallet has not quite recovered. Any job cuts planned as a result of this . Lots of consolidation taking place. Unfortunately, yes. They were very clear about this. Infineon has said there are going to be synergies, redundancies. They already have the capacity in their southern german factories, both size and scopewise to manufacture some of the products they make in Silicon Valley. It looks like there will be job cuts. We dont have a number yet. Manufacturing will be shifting to southern germany. You very hans nichols reporting from berlin. Lets stick with tech. Hewlettpackard posted a gain in thirdquarter sales as a got a boost from improving personal computer sales. Caroline hyde is here with more. The revamp that Ceo Meg Whitman what in place, is it paying off . It could be good luck. They have really benefited from the pc market being not quite as bad as expected. Microsoft, intel, all these old guards. Hp itself one of Silicon Valleys oldest companies, they have benefited from reinvestment from businesses, largely from the United States, in pc. Interesting that businesses are making that choice. Said, will this be the replacement cycle where businesses move away from pc s . That theinteresting Consumer Base arent following suit. Businesses, largely hp has microsoft to thank for all of this. Microsoft software isnt supported by computers anymore. It is something these businesses have to reinvest. Pc shipments falling off a cliff in the Second Quarter. For the first time in three years, in 12 quarters, we have a slight increase in sales over at hp. It isnt enough to stop the deterioration in other areas. We have seen a 12 boost to the notebooks, the desktops that they sell. Eastern europe, ukraine, sales elsewhere, not that much strength in the printing area of hp nor in the services area. This is the software, the service. Very little growth if any. This is the main problem for meg whitman. What moves will she make from here . I think it is about new products, new development and still reducing jobs overall. Area, they ares trying to make forays into that. Trying to get young, trying to get sexier as well. This is your most powerful computer, the financial models that these run, the creative complex designs, these computers get incredibly hot. Data centers around the world have this problem. It is more expensive to cool down your machinery than it is to buy the machinery. They come up with a way of cooling computers using water to try to reduce that expense. That is a novel area, a 4 billion market they say. They are also using rita ora and azalea to sell more products, more tablets, more laptops by saying, look, you can. Se our music stream they are hooked up with universal music. They are trying to get sexier. Caroline, thank you. Cala a rhyme with that detail on hp. We will take a short break here on the pulse. Welcome back to the pulse. For those listening on bloomberg radio, the first word is up next. For our viewers, a second hour of the pulse is coming up. Nobel laureate james murray will be joining us for his first interview of the day. He is on the council of economic advisers to the Scottish Government developing an economic plan for an independent scotland. I will talk to him about what that might look like. That is the key question in all of this. Continue our conversation about what the fed said last night and what janet yellen and her other central banking colleagues are likely to say at jackson hole at that symposium. We will take a short break here on the pulse. 9 56 here in london. Just a reminder, you can follow me on twitter. Growth ins manufacturing slowed in august. A sales squeeze. A dutch retailer loses ground and feels the pain of a weaker dollar. Financial heavyweights head west. Gathering in jackson hole. Good morning, everybody. Good morning to our viewers in europe. Welcome to those just waking up in the United States. This is the pulse. Live from london. Also coming up on the program, the invisible warship. We will take you inside the ghost boat. Lets begin with our top stories. Eurozone manufacturing and Services Activity slowed in august. The recovery in europe remains full marble twoweek vul nerable to weak inflation. Walk us through the numbers. A total eurozone composite. That went down. We see a percentage slowdown. Expectations were becoming a little bit higher. It is really the expectations where we see the most damaging data in terms of what is happening european wide. This is a more accurate reading of what is happening in the economy than gdp. Gdp showed flat close to zero, negative growth. Especially troubling was the downturn in germany. Down 0. 2 . Today, a little bit more strength in german manufacturing. The question is can the German Economy continue to pull the rest of the euro zone economy and lead it to strength . We are seeing a little bit of strength on the periphery of the eurozone. To be slowing. S we did not see a huge reaction to eurodollar. We will be looking to see how slow growth has ground here in europe. 1. 32 . Around. It is interesting looking at germany and its role. When we were looking at the Second Quarter growth numbers, germany seems to be the place that people mull were most worried about. Today it is germany that seems to have surprised on the upside and other parts of the eurozone have disappointed. Upside, ong on the the positive, Service Numbers are coming in pretty good. Numbers are north of 50 . On the german side, the manufacturing number is in the 52 range. There is still healthy manufacturing going on. Things are north of 50 . Trend is down. There is no disputing that. Even when we adjust for the difference between the preliminary and final number. The trend is down. No one wants to see trends going south. Everyone is looking for evidence of the russian sanction environment. Hans nichols, thank you very much. Now, to jackson hole, wyoming. Central bankers and Top Economists from around the world will gather to discuss the outlook for the economy and Monetary Policy. Jonathan ferro is here with a preview. It is fascinating. And theholes history role it has taken. It seems to have gone from being a place where u. S. Central has be would gather and come a real global event. Ben bernanke made it into something it was not before. It is a bit different this time. The meeting itself is reevaluating the Labor Dynamics and will give you clues on what janet yellen might do. We have to put this together with the Federal Reserve minutes yesterday. The big take away there is a hawkish sentiment. , thenta comes in better we might raise rates. Why are we putting a line in the statement . It does not tell me you are driven by the data at all. When Richard Fisher says the fed is coming away around to his way of thinking, the committee may becoming a touch more hawkish. When you have these big, burning flames of hawkishness, everybody expects janet yellen to douse them with water on friday. It would be a surprise if she did something different. We should not be surprised if she plays dove to their rock . Hawk . Mario draghi is also speaking this week. The big issues in the eurozone are also very interesting. Pimco deputy cio at talking about average and Monetary Policy. Divergent Monetary Policy. Mario draghi is talking about a low inflation environment. We are talking about a two speed europe. Now we have a one speed europe and it is going this way and everybody is on the train. Data may beodays shifting some peoples opinion on that. Me byeally can took surprise yesterday was the debate among economists is on the table again and that debate is whether people should leave the eurozone. ,ecause growth is so sluggish unemployment is so high, what choice do they have . Breaking up the eurozone would be a very costly thing to do. Yes, it would. Scotland leaving the u. K. Is an interesting idea in itself. The cost, yes, but benefits down the road . Pmi. 8 on eurozone everybodys looking for evidence of russian sanctions. Maybe it is too early. Give it another week. By next week we will be feeling more gloomy. Shares are holding. More is caroline hyde. About were the numbers . How bad were the numbers . Trying to remain resolutely glass halffull, but investors are getting glass halfempty. A challengingng competitive environment. They have sales deteriorating. They have operating profit down 15. 5 . This is a company we need to care about because it is not only big in the netherlands, but they have stores in belgium and are big in the United States. Sales come from their brands in the u. S. The u. S. Aint looking so pretty. They are investing an awful lot, but are still managing to lose a ose marketre l share. In new england, has feuding cousins as its heart at its heart. Theysay that even though have been improving the customer experience, they have invested in 320 stores, sales are down 1. 8 . Over in the netherlands, despite the world cup that help to boost up a little bit, still the netherlands channel is not improving. Any light at the end of the tunnel for this retailer . Online is up 20 almost in terms of sales. They are showing strength there. The chief executive is trying to sound optimistic. We think this new development in the product base will result in improving sales trends. To beors do not seem convinced. Analysts are pretty dismal. They were anticipating this downward trend in terms of profitability, in terms of sales for the Second Quarter. Perhaps no surprise. What they need is you back in the netherlands buying up all of those caramel biscuits. Hopefully that would turn it around. Even i could not make any kind of impact on the global sales. Rs but i like your confidence in me. [laughter] than a monthless before scotland votes on its independence. The debate currently continues to be a talking point. That is coming up next. Welcome to the pulse. Live from london. Lets check in on the currency markets, shall we . This is where the euro is trading in the dollar against the dollar. Ground lost considerable on the single currency since then. Aat will probably be conversation over at jackson hole. The cop is a pmi moved lower composite pmi numbers moved lower. Staying on currencies, in a moment, the debate over whether scotland should keep the pound continues to run. More than half of english voters approve scotlands plan to keep the sterling if it votes to break away from the u. K. It is less than a month before scotland heads to the polls. A nobelspeak to prizewinning economist from cambridge university. Our first interview of the day. Thank you very much for joining us. I wonder if you could help us join the dots on a few things. When we look at the eurozone were we have seen Monetary Union without fiscal union and the limited success according to take do you think that we from that a confusion that we need to have Monetary Union and fiscal union in tandem at all . Imes or is there a way to make it work were scotland can be fiscally independent and yet keep the same currency as the rest of the u. K. . The euro has not been a great , particularly for the mediterranean countries. There are cases where you really want a separate currency. Scotland and the rest of the u. K. Would be the sort of case where you would be better off sticking to a common currency. I think everybody would be better off with that. t want to see the two economies, part in any sort of apart inconomies come any sort of way. They are linked and are much more valuable together. For the time being. I know that you have set out the case suggesting that the rest of the uks should allow scotland or be happy for scotland to keep the pound because it would be a cost advantage for the u. K. To introduce another currency at a layer of cost. Adds a layer of cost. The potential cost down the road of a lack of fiscal integration . What might the rest of the u. K. Be on the lookout for the hook for if we go down the eurozone policy road . Monetary policy, but no fiscal union . It seems very strange to see scotland like this. It is true, there are some risks. The discussion mr. Clay exaggerated. The size of the possible risks it doesnt seem to be very significant. But scotland will be continuing to use the sterling, even if it isnt a sterling union. Is just a better organized way of doing things. It will continue to share the bank of england. Is that the plan b . Is the plan be to do a Hong Kong Style currency . Currency, use the pound, but a way that you can tag the to the u. K. ,d but not formally be part of the union. This is a question of what i would expect to happen. Suppose that there were difficulties within the negotiation. There is nothing to stop scotland continuing to use sterling. Many countries have done the kind of thing. Are difficult questions about the assets and liabilities of the u. K. Sharing between the two parts. Overall calculations suggest this is a perfectly viable and satisfactory appearance. That moves the total liability you are talking about from the rest of the u. K. And i dont think there is any reason for scotland to be terribly worried about that. Recently, a leading businessman, the founder of the wood group, he has recently been causing quite a stir talking about how he thinks the yes campaign have overstated oil reserves in the north by 45 or 60 in his view. Do you think that should be the focus of the economic argument around independence . Yes, i heard that report and i am not in a position to be able to go back and check who has got the right estimates. That the amount of available reserves keeps rising relative to what was expected. That is probably what will happen in the future. Are you surprised to the extent that the pound has become at the extent to which the pound has become the dominant topic of conversation . I think i am surprised. I thought the westminster parties would have been quite happy to accept a sterling union. It is an excellent arrangement. But there we are. Pointproving to be the where they decided they would create some difficulty. We will see how it plays out on september 18. Thank you very much for joining us. We will be back in two minutes. Welcome back to the pulse. Now to the ongoing conflict between israel and gaza. So far, the heavy fighting appears to be having a limited impact on israels financial sector. Could that change . Joining us now is the Senior Analyst at f sorenson at excellence. The humanitarian toll has been significant, but if we focus this conversation on the economic toll, do you estimate that this is going to have an impact in the future on the economy of israel . So far, the war is having a very limited impact on the economy overall. Gdp. 0. 5 or 1 of retail, restaurants, people are going out less to we. To eat. Endsing the conflict within a few weeks, the impact overall is not going to be very significant. What is the best case umption about the invest in the Investment Community . Is it that the fighting will end soon . We hope that it will. But no one knows for sure. This conflict has developed in ways that are unexpected. We did not think it was going to be so long. We thought it would end weeks ago, actually. Everyone has been surprised. Everyone is hoping that it will end soon. Conflict develops or escalates into a war of attrition that takes weeks and orks and months, then maybe surely the impact on the economy is going to accumulate. Tourism and retail are going to be hit more and more. That is going to have an increasingly negative impact on the economy. Without knowing exactly when the conflict ends, it is hard to say exactly. If it ends now or fairly quickly, there is no big harm done. Yes, indeed. They fired rockets at israels gas platforms. Could that be a game changer if that does become part of their strategy . Yes. If the natural gas platform is hit or destroyed, that is a game changer in terms of the economy and economics overall. Jack up the price of energy in israel very dramatically. It is going to have an impact on the cost of energy and on the balance of payments. Then that will be a different story. Then the Economic Impact will be magnified a few times over what we have now. Lease, go on. Please, go on. Do you think the central bank is going to cut rates again . An increasing chance that they will do that. The official inflation number is very low and because they will always try to stimulate the the monetary tools they have. I hope that they wont. I think that is a bad move. I think there is an increasing chance we will see an additional cut. Thank you so much for joining us. We will take a short break. Coming up on the program, we will get another view on jackson hole. The gathering of central bankers in wyoming. Welcome back to the pulse. Live from london. Annaage edwards i am edwards. We just got the purchasing Managers Index it slowed in august. 52. 8. The eurozone remains relatively weak. Manufacturing data was reported earlier. French manufacturing contracted for a fourth month to its lowest level in more than he year. L,rmanys pmi smell fel but slower than expected. Chinese manufacturing fell more than analysts estimated in august. Trailed the median forecast. It could be a threemonth low. Lets check in on how all of that is playing out on the markets. Jonathan ferro has more. China is something to think about. German data. The powerhouse of europe. Will they fall into recession even after gdp contracted . The dated today gives us a little bit of a breather. Are off theyields record lows we have seen. 10year yield. We were not even as low as it is now at the financial crisis. Eurodollar at 1. 32. German data here is the miss on the european cop as it composite. 1. 6579. D, 0. 4 . Ing the bank ofat england put their hands up for a rate hike. They are the hawks. The dollar side of the trade gets really interesting. The hawkish set of Federal Reserve minutes, how hawkish were they really . Ratesaid they might cut up quicker than you anticipate. We should not be tying ourselves to the considerable line price. Thatur takeaway was that was a hawkish set of minutes, everybodyt any expects janet yellen to step up to the plate tomorrow and be heard dovish self and back away any concerns about an early rate hike. Draghis speech could take the headlines. Thank you very much. Surveillance comes up and 25 minutes. Tom, what is coming up on your show . Reevaluating labor Market Dynamics . With any jackson hole, they are overcome by events. I agree with john that we need to emphasize the comments of other central bankers, including mr. Mario draghi. I would not be surprised if he doesnt overshadow what we hear from chair yellen. Will speak with the hostess of the soiree, the president of the kansas city fed. That conversation will come along in our 7 00 our. 7 00 hour. We will speak to an extremely acute mind on the linkage of equities, bonds, currencies, and commodities and folding that into his worries about rising inflation. Also, on retail. We will talk to the guy who nnaided in edwards abb needed to walk into saks fifth avenue and have an exclusive dress to buy. Exclusively on bloomberg surveillance. That is very nice. I look forward to the conversation. Who were you wearing today . I cant actually remember. S bowm wearing an herme tie today. Very nice. What if youre livelier numbers. Very nice. Livelier numbers. Very nice. [laughter] Michael Mckee is in jackson hole. This is essentially an academic conference. The advent of quantitative easing and extraordinary centralbank policies changed that. Used the keynote speech to outline fed policies to come. We dont know what janet yellen will do, but she is likely to split the difference. U. S. Labor market still mean improvement. Also update your dashboard. The indicator she uses to judge the american economy. Another key issue at this conference is likely to be what happens when centralbank policies around the world start to decouple . If the fed and the bank of england raise rates next year, well the eurozone continues with qe policies. Mario draghi will give a luncheon address here. Howstors will be looking at bad he thinks things are in the bankone and whether his will adopt some sort of qe policies. The Japanese Central bank head will discuss the latest. This year, it is mostly academics in attendance. Wall street and city economists not invited. Michael mckee, bloomberg, jackson hole. Very nice. Tom, thanks for coming in. What is going to be the focus for you . The divergent centralbank policies were seeing painted around the world at the moment . I think they are less divergent than we think. U. S. Are facing the same problem. Unemployment fell. They are trying to push back the curtain and come up with their own measure of slack, as mark carney has done. Itdont know how they define , we dont know how it actually works. They will tell us when they believe slack has moved up. I think we will get a similar story from there. If you believe the labor market in the United States has changed, we will have a , whichbord of indicators allows the fed to keep holding rates lower. A lot of focus on yellens dashboard. The labor market, the longterm unemployed, the parttime worker , all of that data is going to be given some airing, you think . Yes, the difficulty they have is looking at the parttime indicator. The jolt indicator has been vertical since the start of the year. Very strong hiring intention. The dashboard is all bleak. The need to look at Labor Dynamics and say there is more slack in the economy from the dynamics of the labor market and therefore we can ignore the signals. The Unemployment Rate is useful for guiding Monetary Policy when it is that 10 , not when it is at 5. 5 . That is the problem the fed has and the same problem mark carney had earlier this year. You have difficulties when the unemployment threshold you talk about is met. You can see how those two or not to divergent. Are not too divergent. The eurozone and the bank of japan are in different positions. What do you expect to get from mario draghi at this kind of an event . We have just seen the underwhelming numbers on the pmi for august. Mario draghi is really reliant on a hawkish fed to push on the u. S. Dollar, two pulled on the euro to stop deflationary pressures. 1. 32. Are down at 9, we werere at 1. 3 having conversations about what on earth is going to bring the euro lower . A 1. 32. Re done if you look at the forecasts for inflation going forward, they must be implying a 1. 28. We still have german resistance to any form of qe. They are trying to boost the assetbacked security market. We may hear a little bit more about that. How buying Corporate Bonds will reel in the Banking System for the euro and mean that the monetary transmission mechanism is restored. The big please to the united the unitedlea to states will be to get on with tightening. That will be a very similar message from the japanese. Changes in the actual environment around europe. Effectively, we have had a weak dollar since 2007. That was tolerated for a while. The idea now is that the u. S. Is slowly recovering and it is time for a stronger dollar and time for everybody to free ride for a while. Mario draghi will tell you that rates will stay low and the policy will be accommodative and he is guaranteeing that there will be no rates increase to push down the value of the euro. What plans will be targeted longterm operations . Is that all tinkering at the edges then . Do you think that could help to boost lending in the real economy . If it was more like the bank of england lending scheme. Banks. Ly see periphery make sure thato the euro transmission mechanism is coherent. European banks cannot lend right now because they are visiting raising capital and head of the asset review. If there is no demand from investors and no supply from banks, you can put all these things on the table, but no one is going to eat. Thank you very much for joining us. Lets get to todays pulse number. 15 million. That is a much it takes to create a super stealth warship. Radar andtectable by he hopes it will be used by the u. S. We will have more coming up later in the hour. Hewlettpackard is making a comeback after 12 quarters of falling sales. The tech giant is showing growth. Find out why after the break. Welcome back to the pulse. Lets talk tech. Hewlettpackard has posted a gain. It got a boost from improving personal computer sales. Caroline hyde is here with more. Been revamping this business. Has that been paying off or is there a broader trend to be aware of . At last, we have a gain in sales. 1. 3 increase for the quarter. First time in 12 quarters that we have had any sort of increase. Probably helped to a large extent by the fact that we are seeing a revamping of the company, that they are trying to breathe new life into product. A less bad picture for pcs. , pc salesond quarter were falling, but not nearly as badly as was to be expected. They fell by about 2 . That has upped intel, microsoft, and it is also helping hp. Microsoft xp no longer runs on all the computers. Have more positive views on the economy of the United States. There is more confidence to invest. They are not investing in so much mobile technology. The thinkers around the topic that we are not contained to her desk. Country. Ng around the i try to do it on the move. Not what the start up guys do. 12 growth in that particular area of the business. What about the printing area . What about the Software Area . Hardly any growth. It is not all rosy. Where can meg whitman take the business . Chairwomanlso because the chairman has to take time off for health reasons. He has managed to steer this managed to she has steer this juggernaut back to profitable outlook. Interesting new patents. A lot of interesting r d. Data centers get very hot. They spend the time and money on cooling the computers rather than on the computers themselves. It is all about the new products. Using water. Thank you very much. Lets stay with company news. A record settlement for bank of america could be announced as soon as today. That is according to two people familiar with the deal. Billion toay 14 settle investigations with the u. S. Government. Airline ggest budget beat estimates. Retailer ahold fell short of analyst estimates. It lost share in the u. S. , where it generates more than half of its sales. It is planning to step up investment. Coming up on the program, a warship that is undetectable by radar. We will show you the millionaire entrepreneur behind it and his team of former navy seals. That is next. Imagination that is invisible to radar. It could be right around the corner. That isne a ship invisible to radar. It could be right around the corner. The ceo. I am the creator of the ghost boat. Ghoste up with the name because the boat is intended to have no radar signature at all. In thegest challenge u. S. Navy today is how to you get to operate . Today, we cant do it. Dayshost can loiter for 30 on fuel on board and leave without anybody knowing it is there. Philosophy has been that we will put up the risk money for r d. That allows us more flexibility later on. We cannot wait for the government to say we want this. You need to be developing and taking itthis to the government. That is where we are right now. This looks this way purely to reflect radar. Everybody thinks it looks like it is out of star wars, star trek. It is very functional. It is very easy to drive. Joystick. Steering you push on the throttle to move the joystick. When you command the boat to turn, the computers know exactly what they should be doing to turn the boat. You have surrounded the entire underwater structuring. Can get about six or seven feet of clearance between the command module on the top of the wave. Withoutut through waves feeling them. Focused onprimarily the defense segments, internationally and domestically. This prevents great up presents great opportunity. It can be employed in commercial product lines. Here on the pulse. All your ghost boat needs. Lets check in on the currency markets. This is where the euros trading against the dollar. Euro is trading against the dollar. Some of it is looking a little bit weaker than last month. That was certainly the case. The chinese pmi is also disappointing. Lets look at what is ahead for the day. What were watching. Jonathan ferro is here. Jackson hole kicks off. Having a conversation with tom from the National Australia bank. Mario draghi needs to say to the u. S. , please help us. This is the best gift for the euro zone economy. Mario draghi has an agenda at the moment. He wants france to do more reforms. France is ditching their budget deficit markets and everybody is calling on them to reform. Surprised if he had a bit of coarse language when he was over in the United States as well. Outside of mario draghi, you have to look at fed chair janet yellen, as well. There are two more meetings left to make noise by the dissenters. Janet yellen and the vice chair Stanley Fischer wilsey. Will see. The guys with votes are going to win next year. I would love to see janet yellen show up with her dashboard. This speaks very much to her concerns in the labor market. That is the focus. Reevaluating labor Market Dynamics. Thank you very much, john. We will leave it there. We are looking ahead to jackson hole. Subject ofe a conversation on bloomberg surveillance. Keep it right here on Bloomberg Television. Bloomberg surveillance is up next with tom keene and the team. I will see you again tomorrow. This is bloomberg surveillance. Today is the day as bank of america is punished hardest by regulators. Plus the previous nine, you do the math. The white house announces that an attempt was made to rescue hostages in syria. James foley and others were not rescued. Inflation will move higher. Just look at your monthly rent. Good morning, everyone. This is bloomberg surveillance. We are live from our World Headquarters in new york. It is thursday, august 21. I am tom keene. Joining me scarlet fu and adam johnson. Lets get right to our morning brief. Here is adam. Out thatnd manufacturing data in the euro area, france, germany, weak. China. Way, also week in retail sales rose more than forecast. U. K. Sales consistently has been the one bright spot in europe. There is a little bit of adjustment there, but many saying yeah, but but you are right come on a relative basis, not bad. That is why they have been talking back and forth about the possibility of raising rates, even so t