We are live from bloombergs European Headquarters. I am guy johnson. Lets get to our top stories. It limits are sending out pressure on hamas to extend a ceasefire that has in a conflict that has killed nearly 600 people. Israels president spoke today about the cancellations. This is what he had to say. It is not to stop the flights, but to stop the rockets that are endangering the flights. , speaking earlier. Lets go to elliott gotkine. The faa putting a ban in place. It is a 24hour ban. Lets talk about that and put it in the context of what we are seeing in this wider conflict. Ban from the federal aviation administration, almost like an automatic ban after a rocket hit a house about mile north of the airport now, there are Airlines Flying in and out. British airways is flying. El Al International carrier is still flying. Is proposing that other airports step into the breach to replace flights that want to fly to tel aviv. It is not just the damage in terms of the number of people that cannot come to israel right now, but there is the perception when people start seeing airlines being canceled because of rocket fire, that makes them think twice about coming. Netanyahu has asked the u. S. To reconsider that ban. It is perez has said that a gift for the terrorists. The u. S. Administration will not overrule the faa. Mike bloomberg is actually flying in. We are in a situation where this is going to affect business. We were talking to an investor yesterday and he said business is carrying on as normal. Given that this is one of the first times we have seen this anden, el al still flying shares are doing well, that this is going to have a more meaningful impact on the Investor Community in israel. The first time it has happened since the first gulf war. There are concerns that it is terrorism, t impact tourism, which accounts for two thirds of national income. Some workers have been called to go to battle. Some parents have to stay at home to regard for the children because the summer camps which usually run are closed because they do not have bomb shelters. So there is an impact. Israel has been through this many times before, many worst situations. Think you speak to most people in this country and they will tell you that israel has dealt with this before and it knows how to get through these things and it will carry on in terms of economic growth. Though, anda sense i am looking at the Business Community point of view here, i think it is a Critical Link to the rest of the world. This is the First Time Since the first gulf war back in the early 1990s that this has happened. Is that a psychological game changer . In the past, the country has dealt with the situation because it has maintained access to the rest of the world. Do you think this changes the situation . It could potentially complicate matters in terms of a ceasefire because thomas has victories, soor to his feet, a large number of casualties, the kidnapping of a soldier. I stopping a large number of International Flights coming to countom israel, that does on their part as something of a victory. It may make them think israel is feeling the pinch now. We can dig our heels in and stick to our position rather than trying to negotiate and be a bit more flexible. Thank you very much indeed. Elliott gotkine joining us from israel. Of thealk about some company news that we have been tracking this morning. Deutsche shares under pressure this morning. The new york fed has reportedly faulted the bank for inaccurate and unreliable financial reports. Hans nichols joins us now from berlin. Not atsm directed here what is happening in germany, but the u. S. Operations. This is really focused on the u. S. Operations. Think of this as a bad report card that you got before christmas and it get and it became public in july. The question everyone is asking is is the underlying behavior still there or hasnt been rectified . Deutsche bank has done quite a bit to rectify some of its problems. When mark legal settlements. They have tried to work closely with regulators. Yet this letter came out. It is likely that it came from the new york feds office. It is unlikely that Deutsche Bank would actually release its own letter because you have seen their shares get absolutely hammered. It happened yesterday when the wall street journal initially reported this. Shares dropped almost 3 . That was matched this morning at the open in frankfurt. Here is what the letter said. It is blistering when you listen to the tone. The size and breadth of errors wrongly suggest that the firms entire u. S. Regulatory reporting structures requires wideranging, remedial action. That ir i was told needed remedial action, i note that meant something needed to be changed. Lex i do not know what you are talking about. Never happened to me. Honest. The interesting thing here is that what this tells me is the story surrounding the banks, the litigation stories surrounding the banks, is not going away. The relationship with the regulators is not being fixed. The story that has really dampened down shares for the last few years is not changing. Is that the right read here . You could not make some of this stuff up. Lex on the litigation, they have made strides to settle some of these. They do not know how big the hole is going to be if there is a fine on the currency manipulation. That is the big question on litigation. Have someys, you sympathy for european banks that are in the states because they have so many different regulators to deal with. In this case, they have run afoul of the new york fed. The new york fed is displeased with their u. S. Operations. Sentnuary, this letter is in december. In january, the Bank Announces a bunch of changes. One billion more euros for compliance. Better computer and training systems. The question is, was the january announcement enough . Does the regulator want to see more . If it wants to see more, does it want to see earnings and numbers and figures restated . If that is the case, this could be even worse for Deutsche Bank. Thank you very much indeed. Hans nichols will be back a little bit later. Lets turn our attention now to technology. Pple posted growth in profits bottom line doing well with the iphone once again the jewel of the crown. Elsewhere in the tech landscape, investors seem optimistic about microsoft as well. Nowful that its new ceo is making some of the necessary cost cuts to reorganize and reorientated this business. Lets talk about both companies. Airline hide joins us to talk through these giants. Lets start off with apple. Caroline hide joins us hyde joins us to talk through these giants. Some interesting products. Ive had doing not very well in western europe. In india. 50 increase in china. Not enough to offset the western european decline, but making inroads into emerging markets. Tim cook said he was surprised at the uptick in china helping the iphone broker a deal with china mobile. But the iphone is the standout product. Them tech giants. 37 billion in sales. That is more than jordan, bahrain brings in in a year in terms of economic output. This is a juggernaut. And it continues to do well. Shares up 18 so far this year. Many were invested that tim cook would turn this around and that iphones would fly off the shelf the off the shelf. Second and della, satya nadella, lets talk about things talk about him. He changes things and move the business forward. Investors feel that he has a long way to go to fully satisfy them. It is a huge company. 18,000 jobs going, 12,000 in nokia. The company,ty of it is not much. Clearly, this is a huge the money that became too large. They are having to shrink it down and reorientate it. That is why the shares rose after hours. Even though profit missed analyst estimates, fell some 7 , but they show that the Cloud Business dominates in terms of sales. Well, the products that businesses are getting so that you and i do not have to be good do not have to be glued to our computer at work anymore. You can access are working homeents while we sit at via the cloud. That is the way that businesses are reorientated. Of course, they wound down windows xp. An awful lot of businesses are having to reinvest for the pcs that are in the office. Intel shows that the pc market is dropping a little bit. , his focus on cutting costs, promising to do that more , and focusing on doubling down on the cloud computing. Thank you very much indeed. What else is on our radar this wednesday morning . Daimler has posted an increase in profits as deliveries for the mercedesbenz sclass doubled the the chief executive is trying to position mercedes to retake the lead from bmw and audi. More on this story from hans nichols a little bit later. Bank of england releases its minutes later this hour. Investors are looking for any signs at the central bank is ready to raise interest rates. The u. S. And the u. K. Have you seen accelerated job growth, which could mean a race spiked by 2015. Owner mark carney also speaks later today in glasgow. And the downing of flight mh17 a planeaine has brought tracking app into the limelight. They have seen a 50 fold traffic increase as more people study mobile flight paths. Coming up, we are going to put the spotlight on sanctions. As russia braces for more penalties, we will size up the impact on the countrys energy giants. Welcome back. Good morning. You are watching the pulse. Expand theagreed to list of russian individuals who will face penalties. For now, leaders have stopped short of more forceful sanctions that would hit sectors fully, including the energy industry. We are joined by Charles Roberts to discuss all of this. Is thergy sector elephant in the room because of the fact that russia has a huge relationship with the European Union and is very cautious about this. We have seen companies being affected. Ft is being affected, but gazprom is not yet. Do you see a situation in which this relationship becomes more strained and what are the implications . The longer the conflict goes on, the risk is that more Companies Get taken into these sanctions, which the u. S. Began last week by saying you cannot issue new debt. That will restrict rosnefts ability to borrow and grow. Does that include gazprom . This is what nobody is talking about at the moment. Yes prompt has a monopoly on exporting russian gas into western europe. That may change soon, but nevertheless, it is the company that holds the keys to this energy relationship. The sanctions are directing people closer to putin. Gazprom, europe needs the energy. There are alternatives. N, if sanctions get used later ash eased later this year, you could see russia supply gas to europe. Energy to europe becomes an alternative. Maybe not in germany, but more of the hydroelectric, wind power. Today, europe has not got an easy option. It looks like that would be a last resort. Do you think that there is a way in which the sanctions will be applied . Rosner, the fact that they are not able to issue debt, becoming harder and harder for the financial story to be seen as positive in russia. It would not be hard for the americans to make it significantly harder be do you think that is the reason we are going to go down there for . If you cannot directly target these companies, you indirectly target them. Putinsan growth hurt popularity. The difficulty for the sanctions effort is that it is working, to some extent, on the companies. Of there conscious sanctions that are happening and are concerned. At the lower level, the average russian is very pleased with putin. The Unemployment Rate is near record lows. Good wages growth. Sounds like a great economy. Domestic demand is actually quite bullish. Some sectors have not been touched by sanctions. The retail sector, for example, the i. T. Sector. These companies are actually doing pretty well in this environment. June isst data for telling us we might be too conservative at 1. 5 growth for this year. If you get those kind of numbers, that is going to spur some sort of enthusiasm for changing that. The moment could be seen as a negative because it poses a potential risk. It is relative to consensus. We are looking for around. 5 . It is very similar to brazil or africa. The advantage is that russian equities are very cheap relative to south africa. Their economy may well put in a similar performance this year. How do you see the story developing . I am talking from a corporate point of view here. I read stories every morning that the oligarchs are getting frustrated with the policies being applied by putin. The companies are seen as being at risk. Why are they nervous . Looking at the kind of story you are painting for me. Why are they nervous . Because they cannot be sure where we are going to go on the horizon. Governmentukrainian capturing new accounts yesterday. There were fights in donetsk. So i can imagine a scenario where the ukraine is back under the control of kiev. In which case, tensions should ease. Each week that passes by is another week when the americans seem to add another level. Right now, i am hearing eft arees like rosn struggling to attract financing even in european markets, which have been open to them. Yield, not expensive. Now some people are saying theyre nervous about lending to these companies in any way. Both have a lot of financing on board. They have a big cash pile, some 20 billion. They do not need foreign financing for a while. For now, european and u. S. Sanctions are so limited. The bank and then lend money to rosneft. Seenis a russia that has so many crises, the collapse of the soviet union, the collapse of 1998 do you know which one this is . 1998, clearly an opportunity. But many people lost out. Entrepreneurial guys did well. 1998 seemed to be a game over moment for russia and it was not. The economy is 10 times larger than it was then. 2008, another and the rebound was decent. Is something of the western media overstating concerns. The oligarchs have been through much worse than this. We will leave it there. Charles robinson joining us. We are back in a couple of minutes. Time for a quick update on the market. It is a spirited attempt by the equity markets. Volatility not as high as we have seen yesterday. A little bit of a drop in volatility. Equities just bouncing ever so slightly. The conversation that we have just had here talking about the oligarchs in russia having gone through a much worse time than this. Remains to be seen what europe actually does. Looking at the currency, the ruble just beginning this is dollar falling and ruble rising. The beginning of a little bit of a turnaround. A couple of different factors that play in terms of the ruble trade. Russiantand that companies are getting ready to pay over the next 10 days. What that has done, you might see the trajectory of the ruble begin to change. You have a bit of a move on dollarruble. Equities, overall, are coming under a little bit of a reprieve since the start of the trading day. You are waiting for the confidence data to come out from the whole of europe. Undoubtedly, there is only one story. It is the minutes from the bank of england. Will this be mark carneys continued tenor of unanimity . There seems to be a general consensus that we will get through this month with no level of dissent. Carney speaking a little bit later in glasgow. So stay tuned for that with the minutes with guy johnson, up next. Good morning. Welcome back. We are live from European Headquarters in london. The minutes from the rate decision. No change. Nobody put their hand up to say they need a rate cut. Thatank of england says some members say that the risk of a rates rise has been a prelude to the hands going up. There are votes that people expect are coming in the near future. Touch ds yet a ipped a touch. Some analysis now. Joining us is the chief u. K. Economist. Pretty much as much as predicted. What do you make of the statement . Changeslooking at vote and not words at the moment. We have inconsistent messages in recent much months and we are not focusing on that. Do you think they are the words of the most likely candidate to put his hand up . In february, he thought that the rate increase should come in the First Quarter of next year and he has put his cards on the table already. Where are yours . They were in q1. I am looking forward to q4. The risk is later than that. Yeah. Ok. The problem is before the Treasury Committee and he was dovish on wage inflation. The numbers will get weaker. What number should we be looking at to decide . The eta is very strong. We saw some earlier this week. It points to a recovery that is broadening in the industrial sector. We are seeing investing taking place. This is good news. Data is the outlier. What should we be looking at . It was distorted on the downside because the pay increases to take increases of the tax cut last year. They could go negative. We need to watch out for that. That will catch a few headlines. We should look at labor cost and the inflation. Datant up in the latest because of full where. Sayeed to see what they about the inflation trend. How much slack is there in the economy . Get youris the gap to arms around . What is your sense of the level of slack in the economy . Is ahead . As if it the upper gap is strong. Forecast, they simply the gdp is 4 . It is not taking she gets. If potential growth is lower scenario thatany you could see . I think it will. It is more of a gut feeling. We will not see a change in productivity. Even if we get modest inflation up, wee inflation going will see higher inflation pressure. It has a Significant Impact on it. Have all it take to Significant Impact pennsylvania economy down from the rate we could be tracking at . Can i believe him . Lets see what the bank says. Would have materially increased rates. There will be an impact that will be gradual. It is incredibly low. Yes. Compared to where we have been. It is not the issue with these levels. We have rate hikes and changes. There is a ratio on what is happening. It depends on the data. He is right. If the Inflation Numbers only move up gently, it will be gradual. It is building at less than 25 basis points. Where is it in the cycle . Maybe 4 . Price has three and a bit gain at the moment. That is right. Is that a new normal and a riskfree rate is lower. That is possible. The more compelling analysis is the margin with the bankrate and lending rate. It is higher than the crisis and you will have higher lending rates. The transmission mechanism is going to work more aggressively. You get a r