Markets. It is all about the fed, currency, and dollar. Dollar strengthening versus most of its peers. U. S. Treasuries repeating retreating. Stanley fisher will be speaking to us about two hours from now. That may provide clues on the timing of Interest Rate increases. Gainingsee the european. The volatility index at 12. 88. Lets get straight to bloomberg first word news with sebastian selleck. Sebastian the brazilian president has testified. She spoke about her torture and imprisonment during israels military dictatorship during brazils military dictatorship. If twol be removed thirds of Congress Finds her guilty. Apple is said to be facing a tax bill running into the billions of euros with an eu ruling as early as today. The European Commission is expected to say ireland provide them with illegal aid. Apple said it has nothing to add to previous statements rejecting previous statements. European Competition Commission is scheduled to hold a News Conference at 11 00 u. K. Time. Will bring you that here on bloomberg. German Foreign Policy , the u. K. Will have to pay into the eus budget. The missing britons aspects for lowcost emissions after the exit from eu. If someone once benefit from the European Union, they also have to conjugate to the coffers have to contribute to the coffers. [indiscernible] before the referendum, nobody talked about [indiscernible] sub just u. K. Jobseekers feeling the pressure of brexit. U. K. Jobseekers feeling the pressure of brexit. It says the average salary is down by 2. 4 from the end of july. Gene wilder has died at the age of 83. For hismembered by many lead role in willy wonka and the chocolate factory. Fills d classic classic films such as inference youngand such as frankenstein, blazing saddles. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. Francine forget september. That is the message from morgan stanley. Janet yellen says the case for increased rates have been strong. August payrolls present an obvious risk, we continue markets implies probability for a september rate hike will end at 0 not 100. James bevan. Thank you so much for joining us. What have we learned from the fed . Is clear from her remarks to gete sees more reason the u. S. The mystic economy to hike rates. James it is important to remain in the mode. I think we will have one hike this year. It will be after the u. S. President ial election. Maybe one hike next year. Hard if one looks at the scatter crosses that we will do anything much more substantial than that. Francine was she trying to repress the markets because there was a low probability of the markets being priced in . James she wanted to warn the markets that there will be a hike. However, she is a lowering expectations. Francine do you expect if we look at the end of 2017, where at the endng . James of 2017, no more than one percentage point. Francine a small hike . Point 25sis basis points this year and 25 basis points next year. Nothing more than that. Francine you think she is keeping the possibility of a september rate hike open depending on jobs . James what are the things we learned is never to give away all of your cards. A good central bank is those who said to the market i am going to be here to ensure there is an orderly market, that there is a sensible back draft of economic activity. I am not going to allow you to expect what is what happened well in advance. Francine do you think the markets are dictating to janet yellen what she is or is not doing . Markets toelling the get used to the idea of tighter policy, she is the mistreating that is in her mind. Francine what is the one thing you will be looking out for. We understand the outside risks. Despite exit sitting pretty normal. James i think the language is good to be critical. The way that ms. Yellen is interpreting the signals i think is the key consideration. Francine the dollar moving today but moving against their peers. How much is Janet Yellen James the dollar is doing a lot of tightening. We have the r b going down as a result of what is going on in china. We have the pound necessarily week because [indiscernible] therefore need to bring the money back in through the account. Europe, who would want to own the euro right now . More of a is much credible backdrop. Francine james, thank you so much for right now. He stays with us. Stay with bloomberg for more the fed in the oncoming jobs number. Today on surveillance will bring you a conversation with stanley fisher, at 6 30 a. M. In new york. This is bloomberg. Have 20. Ng up we we look at currencies, apple we have plenty. We look at currencies, apple. Google bring you that story next. The death of democracy. Brazils suspended president makes a plea two countries lawmakers. Eight months on and still of government as Prime Minister malloy Prime Minister rajoy this is bloomberg. Francine this is the pulse. Lets get to Bloomberg Business flash. Koreaian shares in south largest container line has been shifting and suspended from trading after pledging to the lowest level since 2009. That is after a News Agency Reports that a group it refused to provide loans. Koreas developing bank has said that hentgens Restructuring Plan it says it will do all he can for recovery. A Record Number of overseas investments were made of u. K. In the 2015 2016 financial year. Total projects funded by investment grows 11 . That figures making the countrys europes most popular external financiers. Away ayers has walked was rejected by the chocolate maitre chocolate maker. It sees no path toward an agreement. In june, her shes board unanimously rejected 107 per bid. Bed per share francine ireland provided ireland ireland provided apple with a legal aid. The decision could cost the iphone maker billions. Will spot well talk more with jones hayden. The reasoning here is it is unwanted tax. Irelands was too favorable. This has been going on for quite some time. We think the new commissioner will go hard on apple do you think the new commissioner will go hard on apple . Jones it seems that way. She has set herself up to go after these sweetheart deals. Not just ireland but other countries as well good apple is the Biggest Country that she is gone after as well. Apple is the Biggest Country that she is gone after it if you do the math, one of the tax deals that she is looking at so if you do the math on that, you could get 19 billion of the back taxes that could be due. We are heading that looks like she is going to focus on a 10 period. A 10 year we are looking at multibillion dollars of back taxes in the air. Francine run us through the timeline. It is the European Union. It usually takes time. What are we expecting from the commissioner . What happens next . Jones she will lay out her reasoning in the case. She will send it to apple and she will send it to ireland. Both apple and ireland have said they are going to appeal if the ruling goes against them. Apples ceo, tim cook says the note issue of taxes and and not tax paying enough tax, he has called a whole lot of crab crap. That will put it in the courts for years. It is hard to tell when we will get a resolution. Francine think you so much, jones hayden. Thank you so much, jones hayden. Lets get back to james bevan. When you look at apple, you like apple because it is undervalued. This could be huge because not only they have to pay up front 10 billion. Their tax arrangements in the future james the u. S. Authorities could have a long way to say about this. There are billions of dollars sitting offshore. The taxities say rules are, we tax what you tax because that is the Way Companies operate. There is a huge global issue as to what will happen if different Authorities Say we do business here, we want tax. ,tarbucks, all these players who are going to be finding a different route forward. Route,e a different that would be what . James it is hard to see why the u. S. Would agree. However, it is the case that europe was a level Playing Field within europe. The concept of the state aid bought into industries weve seen it in the banking segment when state aid led to a lot of figure wagging. I think that investors are going to be wary of marking down the asset price too far because we have some material news. Apple has a day of announcements. We are expecting a change of the watch and certainly the announcement of the apple seven. We have a cycle that will end up with revamped seven and eight within the next month. The fair value share price is 150 rather than 100. Francine is that how you would ask blame the fact that since we how you woulde explain the fact that since we have heard about the had we not if we had not expected this new announcement for september . James there is this issue of devaluation certainty versus uncertainty. What we know is the eu is going to you all was a lot more money. People will be saying at some point some of the money may be paid over. It may be distant. It is likely to end up in a compromise to deal. How does that compare with the fundamental cash flow generation. The full benefit of the cash flow that it is giving to its shareholders. Francine the sector as a whole . James i am hardly more bullish on amazon than apple. I think people who are in on telephone tax should be looking at samsung. When you look at the amount that samsung is spending on research as opposed to apple. I think samsung has every right. It is going to be a Great Company in the years ahead. There should be double benefits. Francine james, thank you so much for that. Stay with bloomberg for more on the apple story. European Competition Commissioner is scheduled to hold a News Conference in brussels at 11 a. M. U. K. Time. Well bring you that here on bloomberg. The death of democracy. Brazils suspended president makes an impassioned plea to the countrys lawmakers people talk brazil, e. M. And political risk. This is bloomberg. Francine in a session that lasted 14 hours, brazils suspended resident suspended president making a personal appeal to lawmakers. She said a removal what amount to a political death. E i came close to once when i was tortured, suffering aggressions that made me doubt humanity. When a serious and painful illness almost made my life shorter. Today i am afraid about the death of democracy. Francine lets get more with justin carrigan. Thank you so much for joining us. Is this the end of the road for her . Justin pretty much it would you heard yesterday in the small clip. She has focused her defense on personal elements. The take away from this is she did not really deduce anything new into the debate really introduce anything new into the debate. Whether she is guilty into the elegant desk guilty of the allegations. Guilty of the allegations. That could mean the end of her. Francine how are the markets likely to take this . It veryhave been taking well up to now. Andbrazilian stock market bond markets have been reacting favorably to the prospect that bruce f will be out that bruce f will be out. The markets are looking for clarity. They want an end to this process. As the nine months now. There might be a little bit of people looking again at whether the brazil story is strong. The brazil is in a very bad place. Markets like to see this income to an end. Francine justin carrigan, our emerging markets managing editor. Meon james, it is unclear to whether we are expecting the people in charge to push Structural Reforms which seem to be very slow. How much of this is a fed story . It is a big ask to get the brazilian economy moving. The bester have policy compass in brazil, but i am certainly on a mediumterm view. I would rather not pay the francine the good currency stocks that make a lot of their money abroad. James some of the greatest margins of the global growing sector that are available to investors. Francine in a crowded market . Hans absolutely not. James absolutely not. Sustainable creation of new shares of value. That is one of the few sectors that will deliver well over the next five years. It will be more to the fight by deflation. Francine if you look at emerging markets away from brazil, how much of the fed exercising and telegraphing the markets that they are ready to hike is going to leak into the emerging markets . James it is an interesting question, isnt it . The question that we have to put to ourselves is how much of local market that is denominated in u. S. Dollars. What extent is the pain of corporate level on overseas borrowings . They were dealt a big chunk of foreign debt challenge, therefore [indiscernible] asianpacific emerging economy. Francine james bevan, think he so much. He stays with us. Up next, eight months on and still no government. As the Prime Minister rajoy 62 avoid a third election. Well ask what next for spain echo this is your markets. tuning. Investors still awaiting more comments from the federal wee vice chairman, hope that Stanley Fischer will provide clues on the timing of Interest Rate increases. Level stocks you can see are rising for the first time in a week. This is a look at the ftse, pretty much flat. We are seeing other gains across the board. Cap getting from 0. 8 . The 10 year yield treasuries are retreating. They did rally in the last session. Some of the benchmark stock gauges. If we have those up. ve got volatility stock gauges in europe advancing. S p 500 Index Futures are little changed. Crude hovering above 47 a barrel. Copper holding to a twomonth low. Well have extra data checks. We will talk about the fed, political risks in europe. You can see gorgeous st. Pauls cathedral where it is sunny. This is bloomberg. Francine welcome to the pulse. Live from bloombergs European Headquarters i am Francine Lacqua. Sebastian brazils president has testified at her impeachment trial. Dilma rousseff spoke about her torture and imprisonment during brazils military dictatorship, saying the charges she faces are politically motivated. She will be permanently removed if two thirds of Congress Finds her guilty. The volkswagen ceo says it will take two to three years for the company to bear fruit. They are working on about 60 projects to overhaul the company. That is as europes largest carmaker seeks to recover from a diesel cheating scandal. German Foreign Policy spokesperson to Angela Merkel says the u. K. Will have to pay into the eus budget if they want Single Market advantages. Benefitmeone wants to from the European Union within the market structures, he also has to contribute to the cost of that. Paying into the process. Britain before the referendum, nobody talks about that kind of thing. U. K. Jobseekers are starting to feel the impact of brexit. The average advertised salary is down 2. 4 in the year from july. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. Thank you so much sebastian. Shorttermomething but keep an eye on that. We are also getting u. K. Mortgage approval ratings, hitting an 18 month low. The approval rate for july, the month right after brexit fell to 60,000, 912. Slumpinggage approvals to an 18 year low in july following the brexit vote. That it isar to me because some of the mortgages were not allowed or if people just held off asking for mortgages. Loans did get even cheaper this month when the boe cut its benchmark rate. This is the picture for the pound. We are showing you poundeuro. We will get plenty more on brexit in a couple of minutes but first, spanish lawmakers hold a confidence debate attempting to end a political dead mark deadlock with a have had no official government. Us on set is antonio bevan still with us. Us is bens stills. Then we are finally going to get a government in spain this week. Antonio i think it is very joy gets that ra through this vote. He is a handful of votes short but those who have signed up to back him are pretty adamant they are going to vote against him both tomorrow and in the followup vote on friday. Probably what we see today is the start of the phase of wrangling with a try to cut some kind of deal to avert this third election. The chance of getting a government in this week are pretty slim. Francine why is it so hard to reach a compromise . Ben for me it comes down to corruption. The spanish system has been accounto hold the pp to for a wrath of can option corruption allegations against them. The traditional part is toxic arrivals so in policy turns, a socialist could do a deal with the pp tomorrow and continue Economic Reforms however with allegations against them, socialists are refusing to get into bed with them. You have these two divisions and because of that it is a potential lineup. Francine how is the Economy Holding up with this political delay . Ben it is doing pretty well, to be honest. We keep hearing fear mongering from politicians who are trying to kind of jockey their arrivals saying, this is all threatening the recovery but so far the economy has been taking along nicely, growing more quickly than a lot of the big european economies. There are probably some major investment positions being held up but so far the economy is growing at a two and a half percent to 3 annual pace. Francine ben sills, thank you so much. Joining us from the dread. Lets continue the conversation with Antonio Barroso and james bevan. When you look at spanish politics, this was quite unfair seen just maybe 12 to 18 months maybe 12ite unforeseen to 18 months ago. Is it up to the markets to put more pressure so we get a deal . Antonio i think there is very little that people can do. Spain is going through an unprecedented period of political change. Political leaders are scared. They think the next government will be a weak one, that you can have an election any moment. They do not want to pay the cost. There is very little incentive to move and certainly a little bit of market pressure probably will help. Francine we have had political upheaval for as long as i can remember. I think we have had about 15 governments in the last few years. That can only be bad. Antonio in the short term, for sure. Important thing is the opportunity cost of not having a government. They are in the good times, everything is fine. What happens when the Current Trends reverse . That is a key question. Francine spain took a bailout and they are much stronger than italy who did not to give a lot. Prescription for the political system in spain where the economy is not that bad . James it is not, but there is an undercurrent of dissatisfaction, and particular the role that germany has. Requirement saves a lot of its revenues. Is directly contrary to the requirements for a fastgrowing economy with much more expenditure. , i doack of cohesion think it remains a fundamental source of tension. Tom if that is the case, it could be true for any european country and given that spain is doing better than the rest, what is the Political Landscape going to be after the French Election and the italian vote of confidence . One,io a very fragmented and the key question is the german election. We do not see a lot of institutions Building Political bases for the european integration, mostly because the problem used the in spain is a problem that is occurring across many different countries. As long as you have this political fragmentation the rights of Political Parties will be very difficult to further your leaders. Francine what is the endgame, the rise of populist parties . Antonio i think a lot of prominence and depending on each country it will be context specific. Excellent in the mainstream agenda and pulling the center, we are seeing in france where we have Nicolas Sarkozy running a very thin right agenda. They will try to pull the center to the extreme. Francine but will he or murray le pen when . Marine le pen when . James if we had a more protectionist agenda, we have donald trump saying that is what he wants to do to the united states, that is going to be bad news for the economy and the market. Francine except the markets arent realized because they are central bank acting. James Central Banks can only do so much. At the end of the day the fundamental problems that we germany,the economy in the high savings rate because we have difficult future liabilities. We need to put this money aside. The economy wants the money spent and there is a natural problem of two different standards. Francine should we worry about the French Election . We had news saying the current finance minister might leave to focus on a possible president ial campaign. I cannot figure out whether that worryingaging news or news because they lose someone good at the helm of the economy. Antonio there is not much left to do. I think it is good news in the sense that you have another candidate that is a little bit of fresh air to french politics in that sense. Our view is that Marine Le Pen might make it into a second round but will not win because at the end of the day, any candidate that runs against her, voters will coalesce around that candidate. In that scenario, he will win and Marine Le Pen does not have the present the chance to be the next president. Francine thank you, Antonio Barroso and james bevan stays with us. Next, brexit blowout. How the referendum turned currency hedges toxic. Plus, taking a bite out of apple. The worlds Biggest Company could be on the hook for as much as 19 billion to the eu over an irish tax deal. Fed in focus, what is the Interest Rates . Francine markets flattish this morning. Lets head to the bloomberg for your asset check. Mark we are rebounding from yesterdays drop, dominated by the lock of volume. We were below the 30 day average because the u. K. Was closed for a holiday. Stocks are higher today. The biggest gainer is lafarge holston. Hsbc grazing the biggest cement maker. Lafarge holston raised the price target. Emerging markets recovery, selfhelp likely to fuel further reracing. Estimates for 1. 3 5 billion swiss francs of surplus cash Generation Next year to 2018 first share buybacks or special dividends. It implies a 13 upside. Shares are up 2. 7 today. Is up today. Barclays says they have built a strong strategic position from a product and regional perspective in the last decade and says it is wellpositioned. The company is coming out of its heavy expansion phase. Disclosures improved. The price target is up 21 to 58 euros. We are at 44 euros today. I wanted to show you what is happening to the u. K. Bond market ahead of the results of the latest reverse auction which will be released just before 3 00 p. M. London time. The bank of england paid a premium for all the long dated bonds it bought in the operation and your off 1. 5 times the amount sought drew off 1. 5 times the amount sought. There is concern about the prices being paid, that the beer we might not find enough the mighte might not boe not find enough people to unload its debt over the next six months but since they announced their bond buying program, yields on two years and 10 years have reached record lows. Francine the sterling crash in the wake of the brexit vote has sent turned some currency votes toxic. Hedging toely use manage currency risks. Liam vaughn is joining us. There was a great story on bloomberg. Com. What products are we talking about. Liam variations of forward futures and options, and in the good times or during normal conditions these could be theful rather than riding waves of foreignexchange moves. We had some degree of uncertainty if you were a company that exports imports widely. A number of these were hidden triggers that if currency moves by a sufficient amount they could blow up and companies could end up in a situation where they have to buy 10 times more currency than they initially thought they needed. They claim they were not explained the risks of these. Francine this feels like ppi. How big of an issue could this be for Bigger Companies . Liam the idea of an unsophisticated buyer being sold a product it did not need and it withblowup, we saw the financial crisis and more recently with Interest Rates. It is very early in the process, brexit is very recent, and there will be a process were companies will try to restructure these products. In terms of getting into defaults, i think we are a few months away from that at the moment. In terms of the size of the market, you are talking about a culture of all u. K. Businesses have similar products. Francine how do you view brexit at the moment . The market demand was the lowest in 18 months and the wages may go down because of what happened. Is it way too early to understand the implications of brexit . James i think it is an added stress or strain on an economy that faces very difficult times in any case because really since the late 1970s, we shifted the structural function of the u. K. Economy away from manufacturing. The world became very dependent on finance and construction. And services, and those are segments of the economy which have great difficulty in growing. A capacity to compete globally is still undermined by ferocious competition of deflationary pressures overseas. The average Wage Inflation in china is still only around four pounds an hour. That is very competitive in the context of the living wage in the u. K. Against that background, it is going to be really hard in terms of internationally trading goods and services. Francine if you look at the following pound, and when i ask this question about the uks biggest export, it is finance and we have the passporting issue. These products that went toxic, how much more rewarding could that be on the u. K. Bank . James this time around, a lot of the misselling seems to be done by foreignexchange brokerages, and there are dozens of these. But not fsa registered the same onerous regulations as the bank. It seems to have left a gap in the market for more slightly regulated foreignexchange firms. Terms of the banks themselves, i do think there will be an impact but maybe not as severe as it has been in the past, but there will be other firms that will be affected if this close up. Francine liam vaughn and james bevan, thank you for your time. Up next, said in focus. What is the outlook said in focus fed and focus. What is the outlook . We speak to Stanley Fischer. Francine this is the pulse. I am Francine Lacqua in london. Sebastian apple is said to be facing a potential tax will bill running into them billions of euros. The European Commission is expected to say ireland provided them with illegal aid in turn for creating jobs. Vowed to fight any dust against this ruling. They are scheduled to hold a News Conference in brussels and we will bring you that here on bloomberg. U. K. Mortgage approvals slumped to a low following the brexit vote, pointing to a slowdown in the borrowing surge. Quickening inflation is said to erode the earning power of british households. Volkswagens ceo says it will take two to three years for his revamping of the company to bear fruit. He has about 60 projects to overhaul the company. That is as they seek to recover from the diesel emissions cheating scandal. German Foreign Policy spokesperson and ally to Angela Merkel says the u. K. Will have to pay into the eu market if it wants Single Market advantage. If someone wants to benefit from the European Union within the market structures he also has to contribute to the cost of that operation. For example, as norway does. Norway is paying in. Britain before the referendum, nobody talked about that fact. Sebastian francine. Francine thank you so much. This is your market. The trading day in the u. S. Caps off in about two and a half hours and a lot of focus will be on what Stanley Fischer speaks about. That is coming up 90 minutes from now. The u. S. Dollar strengthening, treasuries retreating. It is all about what Stanley Fischer tells us that might provide clues on the timing of Interest Rate increases. Global equities rise for the first time in a week. Mrs. Bloomberg. This is bloomberg. Focus, thehe fed in dollar rallies as u. S. Treasurys retreat. , we will speak to him and the next hour. Bill running tax into billions of euros as the eu is expected to rule ireland granted it illegal aid. The stock markets jump as dilma impeachmentls her