Bloomberg in london. A mood meet the food chain giving out burritos. Ikea takes to the city. Of the furniture giant opens a store in the heart of hamburg. Find out why hans nichols is looking for future on a push bike. Up lets get the good top story. Manuel valls has presented his resignation of the government. This follows a disagreement over policy between him and the economy minister. Speed. S up to we have this resignation. We are waiting for a new government to be announced in the next 24 hours. Exactly. As soon as tomorrow. His team will change. Minister economy criticized the economic policies of the government. This weekend during a gathering of leftwing politicians in france. Was to blameolicy for unemployment which has killed a booming economy in france. Economicecause of the policy. Taxes i16 billion euros. The Education Minister said the austerity policies in the past 10 years including germany were to blame. The big surprise is that instead of just getting rid of the president got rid of the entire team. We should know by tomorrow who will be part of this new team. This raises some Big Questions about the French Economy. Againsts austerity fiscal stimulus. These are similar conversations we have had all of these years of the euro zone economic crisis. Or does this leave the French Economy . That signals that the president wants to maintain his Economic Policy. On offered a stability program. Has beenh economy stagnant. There has been 0 growth. He is abandoning his deficit targets. The deficit of france will be higher than 4 . Maintain his line. Trouble as want any part of his government. This is a time when his popularity is at a record low. His popularity was at 17 . That is the lowest of any french president since world war ii. Thank you very much. She is in from paris. Hans nichols joins us now from berlin. He has more. What does this mean for the rest of europe . We would expect that merkel would welcome this coming down those. She is not changed her austerity position one bit. This is more of a german and italian story as much as it is a french story. What is germanys reaction going to be . Are breaking their stability compacts. We will see with italy comes into. We saw over the weekend in jackson hole that mario draghi is hinting for more fiscal stimulus. That puts a lot of pressure on angela merkel. There has been a lot of pressure on her. She has stuck with her austerity line. She is speaking this morning in spain. Spain has undertaken some Structural Reforms and is now benefiting economically from it. By dismissing in these ministers and having his government dismissed, it makes the president of france a little bit easier to work with. You can have your own government criticizing the german chancellor that harshly. There will be difficulties testen him and cancel chancellor merkel. Because of what is happened the economic growth. Of course, on top of all this we have tensions around the ukraine and russia ongoing. Russias foreign minister has been speaking in moscow. He says the russia plans to spend send another aid convoy to ukraine. We spoke to someone who said this will escalate tensions. There is little evidence in the market that investors see this as a further escalation. Its up to speed on what is being said. He made several comments. He said russia was a only country that was really interested in getting to the bottom of the downing of the malaysian airliner. We will sue the danish Prime Minister says the Prime Minister says later. They will send a second aid convoy. It ended without officials from the red cross. They called it an invasion. It was illegal transiting across borders. A clearviously escalation. The questions to tie it back to sort of the European Growth question, does this make it easier or change merkels my to start spending more . There was. 2 negative contraction in the economy. Economy is barely limping along. It is not necessarily going to pull the rest of europe out. There will be a lot of pressure on burkle to do something to increase the mess to demand and spending on things that means running a deficit. There will be a lot of pressure. Anna . Thank you. We will bring up to speed on with the top corporate stories. The purchase gives the swiss drugmaker access to the first treatment and unit states for a fatal lung disease. We caught up with a coo to find out how this fits in with the broader strategy. Example ofa perfect our strategy at rush. It fits all the trichet and look for. As a strategic fit from the standpoint of addressing a real medical need with significant efficacy for this particular medicine. It is a portfolio fit because we have a portfolio on the market. Is also a Development Pipeline issue. It is a commercial fit. Because of our strengths in the United States and outside the world. 74 a share for the californiabased company intermune. We asked about the valuation. We have had a good conversation with them. We feel very confident in a full and fair price that we put on the table. It will be attractive to the shareholders of intermune. We are very excited about welcoming those employees into roche. Deal we arethe joined from paris. What will this acquisition add to their portfolio . U. S. He get to drug in the which is probably going to receive approval from the fda toward the end of this year. Analyst think that could have a billion dollar annual sale after a few years. As a drug for a lung disease. Riche is known for cancer drugs. They already have a sales force in the u. S. That sells respiratory products. This is a very promising drug. If they dont need to hire a sales force for it. They can run it through their existing salesforce. This is the kind of thing that roche has said they want to go out and find. Bloombergr news reported thatoche was pursuing a different deal. What happened to the deal with the Japanese Company . Isit seems what happened they made an overture to that Japanese Company and the management signaled they were not interested. He you can come back with a better offer or look elsewhere. They decided to look elsewhere. When we talk to executives, there is so much m a going on in the industry they are always looking at multiple options. They decided to go with intermune instead. Thank you for joining us. We will take a sort rate short break. We will see you in a few minutes. Welcome back. Lets check in with what is happening on the currency markets. London is closed for a bank holiday. The equity markets are closed. Lets look at what is happening in the rest of europe. Its do that through the eurodollar. It is bouncing a little bit. Compared to where it was a little bit earlier on. First d for the fourth month. Risks are surrounding ukraine and russia. That is being went up by investors this morning in euro dollars. Lets get back to our top story. Theel valls has presented resignation of the government. This follows a disagreement with the economy minister. Analysis isow with wolfgang. Thank you so much for coming in. We have a fine that within the government about whether the future for Economic Policy and france should be austerity or it should be fiscal stimulus. How does this play out . It is going to have known for being out so can outspoken. This should go well. Austerity remains the policy. When not going to see a significant deviation because of the french cabinet. You dont think depending on the prominent leftwingers which is a shift in france . Is in line with anglo merkel and that is a way that is when difference will go from here . Way will be more flexibility within the existing rules. We stillem area is dont have a commission in place until november. Despite the fact we might have more governments like in paris and roma pushing for some relaxation of the fiscal rules, we have a strong advocate in brussels for that. If you take the view between now and then in terms of dealing with the crisis in europe. What is a sleeve france in terms of meeting austerity targets and targets on budget deficits . More cuts. Like we have seen the past, more cuts. There is no more room for maneuvering. This is the same case in italy. There will be a new round of cuts to make the target. We cannot sell more taxes to his own party. Controlling his own party is key. The position is in total disarray. Why nobody is interested in going to an election in france. The only party that will gain is the national. Seen,e the drama we have we will not see an election in france. Elected on a reformer agenda. He was saying that he feels the reality of italian politics has gotten the way of that reform agenda. Had he evaluate his success so far . It is a mixed picture. He is focused in the First Six Months on constitutional and institutional reforms. As is very difficult to do because of the way that italian politics works. Crunch time is now. He will have to focus more on the economy. The economy is back in recession. Of course. There is potential danger between renzi and his own economy minister. There is a potential need for a new budget and a new round of cuts for 16 billion euros. Toughs going to be a very sell to the italian parliament. He said he pushing for reform. It is a mixed picture. He is not focused on the economy. His plan for the economy is still unknown. Merkel is in spain talking to the spanish Prime Minister today. Theyre going to be talking to the spanish economy. In as a . At that comparative Success Story for the eurozone right now . Yes it is. Personal relationships with the same clinical party affiliation. They went for a walk yesterday. That is a lot of time to kill. Six kilometers. To defend theants is off, sheform could use the example of spain. Even if the situation is not that great. One of the things likely to be talking about his nominations to the European Commission. We are expecting on saturday, next weekend, we will see further movement on that. How significant is that about who gets which job . Big thing forly a the large companies. Of behind the door dealings. Especially for countries like spain, which is perched pushed hard with austerity, they will be a recognition of the role of spain played as a model for reforms. That is an important play. They should be very mindful of the data coming out of germany. Index is dropping for the fourth month. Risks arising around the German Economy because of russia and ukraine. You can i think merkel will be up for being more relaxed about sanctions. It will be easier to sell this to the german public. If it comes down to that, that would be the choice. It might be a choice between these two different things. , it might not be a straightforward as i just outlined. Politically, because he sold by the chancellor to the german public. Thank you very much for joining us. Break, we will stay on the surprise french government resignation. We will speak with a form former advisor to the french government. He is also the former advisor to the french finance minister. Thank you very much for joining us. What will the government look like . We will hear over the next 4 14 hours who is in it. In terms of political line, i dont expect a big change. Ministers will be forced to choose between one side of the other. I suspect most are going to line up with the president and the Prime Minister. Do you think the austerity policy that the french government wants to push through is still on the table . We wont see a more physical stimulus concept . I dont think so. I agree with the fact that france has austerity policy. Taxes are very high. It some of the highest in the very world. That is not austerity. Minister wantsme to implement more probusiness policies. Will see anynk we roles given to the left of the party. . Will there be a left voice . That is hard to say. I think you wanted to align himself with the leader of the socialists. Ftwing at the end of the day what is important is the majority of the national assembly. The majority was narrow. Socalled rebels from the socialist party. Pass a budget in june. I believe there is going to be a big choice for those socialist. You dont want to face the dissolution of parliament. They are probably going to lose that. Is the socialist party surviving this . Do we see any meaningful breakaway factions . Does the president managed to hold together . I think the end of the day the resident will manage to keep his majority. It will be harder. We have the perspective of having no choice except to stick together. Lose a general election for sure. Tell me more about that. Why would triggering an election now be a bad idea . You are referring to the opinion polls that supports that the leaders that the various parties have. How that is playing in here. Right now he has two choices. Either he goes through the ask to joine can the government. I think that is unlikely. You have a general coalition like you have in germany. Hiss clearly losing leftwing people in his majority. Or he can basically balance and who havether people very different opinions. This is the problem with the socialist party. The majority wants to govern like social democrats. You have a vocal minority who are more in line with the extreme left and the greens and the commonest party. Problem always been the with the socialist party in france. It will force the party to choose. They are going to benefit. They will benefit most from this crisis and the socialist party and the fact that on the right wing, you dont have a credible alternative. There is a crisis of the right wing as well. This is going to probably benefit from this turmoil. The policies dont really look like austerity to you. Whatever form priorities do you think the government should have here in terms of the French Economy for the rest of this year . Is therly, the problem prospect that was announced by the government needs to be kept. That is why basically the giving tax breaks to businesses. In exchange for a pledge to create 400,000 jobs. They plan to reduce the deficit and reduce public spending. The key discussion points between the socialists. Some people in the socialist party believe they should decrease public spending. Higheste one of the levels in the world already. Some of the more reasonable ones see the reality of how it is. What all thedo countries around france have done. , that isain, germany the direction we should lead. Thank you very much for joining us. We have some breaking news coming out of spain. The spanish Prime Minister is speaking. He has a press conference if angela merkel, the german chancellor. You can see him speaking there. He has already been saying that spain is seen the fruit of its reforms. He said that this morning. Spain. N the north of that is where he is hosting a twoday visit from the german chancellor. The economy is a topic of conversation. The creation of the new European Commission is also topical. Also be talking about sanctions with ukraine. That is the Prime Minister of spain saying that the economy is creating net jobs once again. We believe that there for a moment and come back to the top headlines. Ukraine announced an increase in military spending before peace talks with Vladimir Putin tomorrow. A 3ne president has billion increase in defense spending. Vladimir putin will meet with trade talks in minsk. Have gained control of tripolis airport. Weeks of fighting triggered an accident with foreigners. Libby is Defunct Parliament will resume sessions. That could set the stage for a leadership vacuum. Hamas leaders have declared that they are not close to giving up in the violent conflict with israel in the gaza strip. Warned thatanyahu any target connected with hamas or other militant groups in the area would be considered a target and should be evacuated. Lets check in on the markets right now. Jonathan ferro has the details. It is a quiet day given that there is no london in play. Draghi makes a big headline. The suggestion the more stimulus could be coming from the European Central bank. Lets call this the post draghi half. Rally across all of your. Then you have the question about france. The french government resigns. Reform and austerity, that will lead to borrowing cuts. France has done none of the aboves and they have record low borrowing costs. The ecb could do more. Where is the market discipline . Incentive for france to reform . They have done nothing. Re is pressure on them politically to do more, they just havent. Story is about domestic politics. It speaks to a broader eurozone political issue. This is the issue of germany against france. The french have not done enough yet. They are talking about doing more reforms. The economy is on the verge of recession. Will they reform . Record low yields in the french bond market, where is the incentive . Surveillance will be here in 25 minutes time. Is tomg by in new york keene it to tell us what is coming up on the show. It is good to see you. Janet yellen said in jackson hole that the workforce shows significance underuse right now. Is that by accident . The labor market debate was there. We saw that with the headlines over the weekend. That has shifted. Europe, it is in a dovetail of labor economics with what the actual markets are doing. Those record low yields in italy and nguyen negative yields in germany. We will speak with jim glassman. He is one of the great labor economists. It is a great time to catch up with them. We will speak with dr. Glassman every job stay. It is great to have him in today after jackson hole. He was a jackson hole and well talk to peter henry. He is one of the most interesting academics in america. He is at the Nyu Stern School of business. He was a jackson hole. We will get his on the ground assessment of what yellen and draghi said. We will talk to peter henry about the value of an mba. I know that is a big debate in london as well. Tom, thank you. Veryeene will be back fully employed during surveillance. Island food chain is offering something unusual. Depending how much you invest in the fouryear loan, you will not only get interest but free food whenever you visit one of the stores. We went to see if these are a tasty investment. This is a simple concept. You loan money to us over a fouryear. And in turn we pay you an 8 rate of interest. This is a 500 pound minimum investment. Then we throw in some food as well. Everybody who invests gets a couple of freeman vouchers free meal vouchers. There is over 80 of those people so far. That entitles them to a free mail once a week for the duration of the bond. That could be up to four years. We have been going for seven years. Our first restaurant was on upper street. We have made our share of mistakes. A became a lot stronger as team and sharpened our Site Selection strategy. We now have seven restaurants. The brito bond will help fund the next three. Brito bond will help fund the next three. I grew up in chicago. Second home to the largest population of mexicans in the United States. You cant grew up in chicago and not like mexican food. Youre setting yourself up for starvation. Means more than why does anybody want to live in a big city in the world . It is about the vibrancy. We strongly advise everybody who is considering an investment to speak with their Financial Advisors before hand. We think at the end of the day what we are offering is an attractive investment opportunity. That is for everybody to decide for themselves. Idea. T is a nice at least you have had some free lunches. The worlds top wake boarding pros have in germany for the red bull rising event. They battle it out for the highest and longest jumps of the competition. Over in italy, dirtbike daredevils pulled off some impressive tricks in the suzuki challenge. With theirthe crowd record times. The latest celebrity to pick up the ice bucket challenge was this guy. He braved 13 buckets of freezing water. He managed to give the crowd a good soaking as well. He then passed on the challenge to a number of other Airline Executives around europe. We will see if they pick up the challenge. Ikea takes to the city. The furniture giant opens a store in hamburg. Lookinghols is furniture home on a push bike. That is coming up next. Welcome back, live from london. Youre looking at live pictures of anglo merkel speaking in spain at a joint press conference with spains Prime Minister. There she is. She is speaking theyre having a match with the Prime Minister of spain. Havend the Prime Minister agreed that the area needs more coordination. Him forto praise presiding over spains economic revival. Join us for more is michael osullivan. Zurich. Us from thank you very much for joining us, michael. We have got anglo merkel speaking in spain. The focus is on a what european leaders can do to try and turn around the economic recovery in the euro zone. What do you think they should focus on . You heard from mario draghi from jackson hole. Thinghink the interesting in drug use speech was he signaled that the way is open for european governments to add more physical stimulus. That is a departure from her him. For him. Some people may not be pleased with that. I think merkel will be trying to button down some of the optimism that governments in spain and italy in particular can begin to spend money as opposed to continue with this kind of policy of austerity. I think the french government is in trouble in the economy. Episodesng to see many and chapters in france with the evolution of the socialist party. Definitiveave a leader appear on the right. I would think they would love to spend more money. You would hope they would spend it intelligently. I dont think that is going to happen soon. There is going to be a more intense debate within the socialist party. We spoke to some commentators this morning who suggested that the debates going on in paris in the midst of the socialist party ofut whether the future france allies in austerity or physical stimulus. There are a number of people who say that this will not have a Significant Impact on the direction the france twos to take from here. Do you think it will have an impact . I think the risk at the moment is you dont really guess a desk and a decisive government. You will probably have a new government announced tomorrow. They may be nervous in terms of looking beyond the presidency to the future. To your question, i think the question would be no. Looking at the progress that spain has made takes us back to yours are so when the market was on collections. What is so striking now is the continued rally in the bond markets and the core of europe. There is an awful lot of progress that has been made. I think expectations will grow and demand will grow for them to do something additional in the coming months. I think they will wait for the review from the banks. They will wait for it to kick off and get those loans drawn down. It may be toward the end of this year or the beginning of next year before they look to do something more dramatic. You said in your notes recently that you had a backtoschool feeling. It did you tell me what the terms next term will be like . It will be key. I think for all of the geopolitical events we have had in the middle east and ukraine, volatility is surprisingly very low. I think the key to this lies in the expansion of the Balance Sheets of the big Central Banks. I think the key market mover for the next three or four months and abe the continued gradual disengagement from the federal deserve with tapering. Any change in messaging that they are going to send to us in terms of the very sensitive first rate hike which should come in 2015. When we dont know. I would stress technology. This is one where key sectors. We have a strong earning season. This is for the best Corporate Cash trends we have seen. You are picking up on the Technology Seen as we start this next term. Tell us about where you see the opportunities in big eta or the. Nternet of things there are three groups of companies. The Portal Companies are a throwback to 1999. People can access the internet through these companies. Ony will try to keep you their websites and content for as long as possible. The second are the picks and shovels. These are the companies that make the infrastructure around a big data. Sap in the u. K. Is an example. A they make a lot of the software to analyze. I think automation is neglected. It can have a really big impact inthe p l and in the cost line for many Big Industrial sectors. The use of the internet to further automate processes and intelligent way, i think that will have a big economic and of it. Thank you very much, michael. He is joining us from switzerland. The stock markets have been outperforming the u. S. The tables of turned in the most recent. They are now underperforming. This is most notably in the u. K. And germany through the third quarter. Joining us is a stock reporter. What changed from the first half of the year . Centralbank policy stayed the same. Most were expecting the fed to change its language in terms of stimulus. It has been more in line with doing more and helping the economy. The ukraine and russia situation has come front and center. Thisld say that now with ecb coming up in september and jackson hole right behind us, this should be back to what Central Banks will do. Merkel saying that the German Economy faces uncertainty on ukraine . This was because of the ukraine uncertainty that there was this weakness in the german story. , is thate and russia part of the risk for investors that we look ahead to . Risk that theya look too. I think investors will be paying close attention to Company Earnings and whether the companys with the highest exposure to ukraine and russia will see an impact in the sanctions that have been announced and if the German Economy starts to show signs of being hurt by ukraine or russia, if they start doing well that will incentivize rao druggie to do more instead of seminars. Tell me more about volatility. Where do we see the most volatility it when we look at europe . Europe is showing more signs of volatility than the u. S. We are in the sixyear of a bull market. Volatility is too low. That makes investors more nervous. They worry that the market is complacent. They do not feel comfortable being like everybody else. Even though wee, are having a. Of unusual quiet in terms of market volatility, the Central Banks are doing impressive things right. It is calm. You can see that for quite some time. In want to be short equities that kind of environment. U. K. Ande about the germany. How have they been doing . Germany has had an underperforming market. Now i think equities look interesting to investors. Would you look at the data, German Companies are trading at the cheapest in europe since 2005. You can start to see that that saw aeconomy lot of money. That may start to rotate. Ukraine is more tricky. I think the boe is out there giving contradictory information. The market is pricing that in. They said they wanted more volatility. The strong pound a strong. Thank you very much for joining us from bloomberg news. We will take a short break here on the pulse. We are in london. Lets get a check on the currency markets right now. This is where the euro is trading. It is actually been below 132 in this session. The iphone is a little underwhelming. The us is how Business Leaders are feeling about the state of things. Hans nichols joins us. Merkel has been speaking in spain in terms of what to watch. That is an ongoing focus for us. Especially to see if she reacts to see what is happening in france. She had an interesting comment. Needs tod that europe be more coordinated. Is a coordinating in additional spending to help boost some of these economies, including germany which had negative growth. There talking about ukraine. They will be meeting in minsk tomorrow. Is can there be a substantial peace talks and there is much fighting on the ground. Tempered merkel tempered expectations. She said do not expect a lot. We will see what comes out of france and whether or not germany is comfortable. They will be lifting a 3 budget cap. Thank you very much in berlin. Speed, bring you up to she is declined to comment on the french government collapse. President t that the proposed a bold reforms. She wishes him success with the reform agenda. That will do it for the pulse echo. Is live from new york next with tom keene. We will see you tomorrow. This is bloomberg surveillance. Druggie and yell and confront inflation. Jackson hole was not a walk in the park. The fulltime job may be a thing of the past. We will speak to a foremost labor economist. The devil wears amazon. Why we buy where we buy. Bricks and mortar must adapt. Good morning everyone. Were live from World Headquarters in new york. It is monday. I am tom keene. I. Rlet fu is joining me here adam johnson is vacationing. This is brendan greeley. German Business Confidence declined for a fourth month. Maysaid they meet need more stimulus. More money into the economy. , talk has been plenty so far 10 00, we will get data on new home sales