here in london. i'm francine lacqua. we've had some news for individual countries. euro area march manufacturing pmi actually rising a touch, to 51.6. compared to a preliminary figure of 51.4. that gain really comes from germany. germany saying the manufacturing therising 50.7 instead of 50.4 we saw previously. we are getting the headlines from the pboc. we had some china gauge figures. the china economy operation is stable. what we heard yesterday from s&p, downgrading the chinese economy. given the breaking news we had a couple minutes ago, let's check in on the markets. this is a picture for european stocks at the moment. the new quarter was fresh to clients. down 3.5%. investors today really looking to key u.s. jobs data for indications of the health of the u.s. economy as stocks slumping also with oil. oil at 40.03. nejra: china's official factory gauge is unexpectedly jumped, showing improving conditions for the first time in eight months. the manufacturing purchasing managers index rose to 50.2. it suggests the government's fiscal and monetary stimulus is kicking in. meanwhile, sentiment among japan's large manufacturers have dropped to the lowest levels since mid-2013. ng a stronger yen risks erodi governing profit undermining efforts to spur recovery. the tankan index of confidence stood at six in march, declining from 12 three months ago. economists had forecast 8. italy's industry minister has submitted her resignation over an alleged conference of interest after her partner was accused of abusing her time with the government. it comes after her boyfriend was put under investigation in a probe into the illegal disposal of waste. has walked away from its proposed takeover of starwood hotels and clears away for a purchase by marriott. "various market considerations for pulling its $14 billion bid." starwood shareholders is scheduled to vote on the $13.2 billion offer next friday. global news powered by art 2400 journalist in 150 news bureaus around the world. francine? francine: thank you so much. buts job stay in the u.s., first of all i want to go through breaking news from the pboc saying that global financial markets risks are on the rise. also saying it will keep the yuan stable. they talk about a reasonable level, like it's open to interpretation. the pboc also saying that china's economy and also financial situation is stable. this is on the back of monetary policy committee meeting. it feels like a statement of justification after the s&p downgraded the rating on china yesterday. 24 hours ago. it is job stay in the u.s. economists estimate 200,000 jobs werr added last month. fed president bill dudley says the u.s. is in a pretty good place. >> it is much too soon to claim success the u.s. economy is in relatively good shape compared to most of the countries. economic expansion is its seventh year and we have made considerable progress relative to employment and inflation objectives. we designed it to control monetary policy with a large balance sheet have been shown to be effective. meanwhile, chicago strolls evans gave us a glance of his view of the rate path. >> my assessment of appropriate monetary policy is that given the economy and what we are looking lat, it would be two rate hikes this year. it is not critical when they take place. i would say one in the middle of the year, one of the end. couldn't move earlier, later i get another one in their? -- could it move earlier? if unemployment continues to fall and inflation picks up we can get that. francine: markets, on the other hand, perhaps not as optimistic incing in one hike december. let's bring in our guest. he'll stay with us for the hour. great to have you on the program as always. when you look at fed officials, for me, it was clear was janet yellen has spoken, she went into details. that was more definitive. we have various degrees of devastation. china is not especially bringing pressure to bear. but it continues to send warnings that there may be nice to be more caution. the - - there needs to be more caution. e.u. referendum coming a week and a half after the june meeting suggests the fed has to be more conservative. you can leave it till the meeting after june, why not? francine: then you have the u.s. presidential election. you do not want any surprises. it's quite unknown to put it diplomatically. >> exactly. for me, you're talking about it taking place in the third or fourth quarter. you want to the presidential election. how's fascinated to me is well the fed has managed the strong dollar story. they've taken the heat out of the story. of theng the heat out story, they have helped so many international markets. it almostyou can say eased in the last two and a half weeks. that is what draghi has done in the past. consider the big problem for markets over the last two years has been implosions to the dollar, the pressures brought to bear on china. to the downside on oil prices. soon as you started to get a fed that was more dovish, what did you see? outflows from china slowing down, oil prices stabilizing. francine: you could argue it is just kicking the problem down the road, but given what you have just said and what we heard from janet yellen, she's worried about dollar strengthened financial stability and china, do we care about the u.s. jobs report? >> less than we might have done four days ago. it gives us a skew going into this report. francine: wage growth that we want to hear. >> yeah, absolutely. the old fashion thing is people still look at the absolute number. put it this way. , 2,t is stronger than 4 someone between 200 and 210, will bull market taken into account? a little bit. if it is weaker than that, the market will take notice. limited reaction to a strong number. a very strong reaction to a weak number. francine: we have talk more about japan, china, brexit. stay with "the pulse." the ecb prepares to buy corporate bonds. we will look at the companies whose borrowing costs are zero. corporate sentiment in japan slows to appear your -- a three year low. and china kick starts its old engine as manufacturing picks up but is the broader e.m. rally do omed to fail? ♪ we do not want to be in this situation. i've said for the last many years that one reason to keep our eye on the 2% inflation objection is to -- objective is to make sure we get up to 2%. if you find yourself at the lower level and then the economy stalls, japan has been in that situation for 20 years. and you do not want to repeat that. , they have had their own challenges and they have begun to fall into debt. they have done all this asset purchasing. they've had low inflation. you have got to look at this and say, i do not want to be there. francine: that is the chicago fed president charles evans. draghi probably does not want to be there. but today sees the start of the expanding bond purchasing program. our bloomberg corporate finance reporter is here. tie, first of all, tell us about overall the european credit markets. katie: really this is been a matter of relief or credit markets this year. ropy start inof the beginning of the year with much concern around commodities. this has not been the kind of market where you can issue bonds. for some corporate's that may well still be the case but draghi's message has meant that borrowing costs have fallen substantially. this is an environment where many companies can come and they can issue -- they can practically borrow for free. it is a good time if you want to be raising debt. francine: these borrowing costs are likely to fall further. even when mario draghi has not start buying i t. katie: at the moment we know that it is investment grade programs, nonbanks. we hope that when we do get the full details, that should boost the markets further. d buying begins, that should boost the market further. it'll be interesting to see how interesting -- how easy it is for the ecb to get hold of these bonds. francine: is it difficult to quantify how much more issuance we will have? kaitie: the high yield market issuance has picked up, but it is not totally correlated. the crediting down spectrum, reaching into lower rated securities. we hope that will be felt. it is hard to know what the european economy not being terribly strong where the companies will see this opportunity and issue bonds. francine: for me, we talk about q.e. and whether the stimulus work. the critics say it has not worked. does it actually filter to the real economy at some point? it must. >> to a degree. the pmi numbers were in positive territory. you could argue it's certainly better than it was. far it hwereere is that so has been slow to filter through. i argue if you look at monetary politics settings within europe, you can argue in a lot of other places, but the main aim has been to drive asset prices higher. did it work? absolutely. look at where bonds are across the board. the problem, and i think it is a big problem the ecb faces, is the one thing that has not happened they would have probably predicted would have happened would have bee na weaker currency. in fact, they have ended up with a currency now that after -- francine: thank you, madam yellen. not helping at all. >> we've had three separate policy moves. months onwe are 15 from the point we first introduced q.e., the currency was stronger. it continues to strengthen. francine: when you look at what mario draghi has done so far, the sheer size of q.e., as big as italian gdp. we tend to forget actu ally what that means. do we have any sense of the companies that would benefit the most? katie: i think it would be investment grade companies. we will have to see whether they'll start with the highest rated. at the moment, we cannot know. francine: euro what does he d need to do to get the -- what does he need to do to get the euro down? >> this is where we were 12 years ago when the exact same question about what you do about it? nothing is the answer. francine: like japan. >> the only differences we can be that surprised japan intervened? no. would you be shocked if the ecb had a mandate to intervene? yes. francine: it's not a great feeling, like japan. we will talk about that next. up, that sinking feeling. corporate sentiment in japan slides to a three-year low. that conversation is next. ♪ live pictures from berlin. manufacturing data, pmi started than expected in germany. the dax, though, has that sinking feeling. we are expected a job support from the u.s. let's get straight to the bloomberg's newsflash. bang has walked away from its proposed takeover of starwood hotels. it clears the way for a purchase by mary at which has been in the works since november. various market considerations. shareholders are expected to vote on marriott's offer it. -- next friday. offerhsh in shares values home retail at 1.4 billion pounds, a premium of 74% for the company's closing price on january 4, the day before the approach became public. the deal was cleared when a south african retailer abandoned its pursuit of home retail last month. shares of both home retail and sainsbury's are trading lower. three at half years after forecasting at 8.5% drop in profit. the company says it is boosting spending on new products outside his consumer electronics business. earlier, panasonic set operating income will probably declined to 75 billion eyn. yen. elon musk has unveiled the new model 3. they have already been 115,000 orders for the car and 24 hours. it will cost 35,000 dollars and delivery is set to roll out next year. the model 3 is part of the company's master plan. a need to move into high volume production. that is your bloomberg business flash. francine: optimism amongst businesses is waning in japan as the yen strength is. index fell to a three-year low today. missing economist estimates of 8. simon derrick is still with us from bank of new york mellon. when you look at japan, it is heartbreaking because they are trying her best. corona is experimenting. -- the kuroda is experimenting. it is just not working. simon: if anything, it has backfired. you can go back -- francine: backfired because people take it as a desperate move to go into negative territory? e behindhey see bm to b the curve since last november. if you look at when the yen started to strengthen and when did the nneka ikkei become under pressure? it was mid-november last year. you knew something was going to be happening. you knew there was downward pressure on commodity prices. the boj said, no, we are not going to do anything. right at that point, you start to see the yen strengthening, then you get to mid-january. those comments at davos from mr. kuroda, we are going to do something. everyone takes heart, the yen weakens. in a complex fashion and the market -- they nap. which itself is absolutely astonishing. -10 basisgone from points rate cut, and one of the biggest q.e. programs ever and your currency strengthens. francine: given how markets reacted, do you, can you even defend? simon: one of the thing we started to get into is the policy. the g-20 meeting. you head overt criticism coming out from mark carney in the days before that meeting. you had a g-20 statement which was directly aimed at japan, as that became clear in the comments. monetaryjapan of using policy to mutilate its currency, pot callinglike the the kettle black. odare was pressure on mr. kur not to do anything. here we are in the situation whereby the pigeon is coming home to roost. a lot of metaphors going on here. but here is the key problem. he need to do something about the yen. he's got no support for doing anything more on monetary policy. francine: so, where do you see dollars-yen? can abe do something? that sales tax increase seems crazy. simon: it is massively crazy but we are still talking about something that is -- it's great to say, no, we are not going to do something. in 12 months time but we need to do something now. that is one of the key issues. here is the other thing. if you look at the performance of the dollar-yen over 40 years, we had times we got these moves down from 120 to 110. there must always end up going to 100. talk aboute will china next. some breaking news out of the chinese ministry of finance, talking about that downgrade by hep yesterday, saying it was t downgrade overestimate difficulties facing china needs to be evaluated. they are fighting back. ♪ show me movies with explosions. show me more like this. show me "previously watched." what's recommended for me. x1 makes it easy to find what blows you away. call or go onliand switch to x1. only with xfinity. great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. francine: welcome to "the pulse" live here in london. i'm francine lacqua. just getting breaking news. u.k. march manufacturing pmi below to 51, but a touch expectations. economists were expecting 51.2. the pmi above 50, rising to 51. i do not know if we have an impact on the pound. little bit may be. let me check the level. we have seen quite a lot of depreciation on the back of brexit concern. let's get straight to the bloomberg first word news. nejra: thanks. china's official factory gauge has unexpected we showing improving conditions for the first time in eight months. the purchasing managers index rose to 50.2, ahead of an estimate of 49.4. it suggests the monetary stimulus is kicking in. sentiment among japan's large manufacturers has dropped to the lowest level since may 2013. as a stronger yen risks eroding company profits undermining efforts to spur recovery. the tankan index stood at six, declining from 12 three months ago. economists had forecast 8. economy will shed workers and gain efficiency with today's arrival of a higher minimum wage. that is the forecast of most economists. david cameron's government is pushing up the base level of pay the 6.70 to 7.20, an hour, biggest increase in eight year. s. more stories on the bloomberg app francine: markets are down this morning are let's head straight to the bloomberg with caroline hyde. caroline: a sea of red across the board. and one day alone we are on doing all the gains we saw in march. stoxxe up 1.1% on the 600. now we are off by 1.3 percent. every industry group is dropping. the worst is energy. it it because oil is down, is because japanese business sentiment dropped? or is it because jobs data is out later today? we are seeing a down day eradicating all of march's gain. one outlier -- german metals maker, steel maker. could it be an m&a target? jumping at the moment. , up 6.24%. watch out for that particular stock. getting a push hard because metals are rallying, related to that chinese manufacturing data. look at copper up. look at aluminum in the green. you can type into bloomberg lmca d so3, that is the index for copper. you can look up aluminum. as chinese manufacturing starts to grow some growth. gains, 50 is above the mark to show we are seeing an expansion in the manufacturing, the pmi, the government dated. the private one showing marked gains. chineseyour manufacturing gauge, the chinese government one. check out that leap up higher. will we see stocks tick higher? at the moment the msci is shrugging off the manufacturing data. we are ticking down worse. the worst day on the msci asia-pacific since february 11, in seven weeks. the manufacturing data is not enough to instill gains across the board. francine: thank you so much. we have gotten breaking news over the last hour and a half on china. the pboc, and really the ministry of finance -- they're not going to far is saying they thought the s&p downgrade was unfair but they are saying the fundamentals are strong. so, it is little bit of a give back. there has always been a little bit of backlash from lowe's mostnies, most -- from companies, most countries. let's get more from china. gauge figures we had earlier. all the turmoil we saw in general. hong kong.o -- from and simon derrick from bank of new york mellon. when you look at china, right, you look at what we heard from manufacturing better than expected. i you confident this is not going to get ugly? -- are you confident? >> the restocking activities can continue for a couple of months now, because every year, if you look at the march data, since 2007, every year the march data is substantially higher than the ich test beh affected by the lunar new year. within today's release we see the leading components of the the new order index in the inventory and export new order index, showing quite good improvement. so, i would say, given that there could be more infrastructure spending coming, the property market is coming back to life in a small way. so, i would say the restocking activities can go for a fee more months and that could push the pmi index higher from here. francine: do you agree? we heard from the minister of finance. they think the downgrade, referring to what happened yesterday with the s&p, overestimates the difficulties facing china. they say that rating agencies need to fully evaluate china. when we had that s&p headline yesterday, for me, it was not unusual. they are talking about debt. we have been warning that is a debt problem in china a long time. it depends on how authorities deal with it. >> yeah. p.r.nk the -- the machine is working pretty hard. yesterday when the news came on, there is not anything new. it is talking about the debt load of the chinese government and the ability to repay some of probably is deteriorating going into 2016 and 2017. as a result, it is lowering outlook on the chinese credit rating. but having said that, keep in mind that chinese government has very little foreign debt. agency put aing negative outlook on chinese government credit rating probably isn't going to change the borrowing costs for the chinese government. one other facet to this which we sometimes forget is the fact that, ok, the fed may or may not have, but probably did give you a helping the to pboc by delaying right height. they would have gotten something back and return, which would be, promise not to devalue? remain stable? simon: i think what they got back was markets -- what's there -- important to remember, for all the conversations the markets seem to have about the possibility of a devaluation, $100was spending 80, 90, billion among stopping currency weakening. let's b4e fair. if you want a devaluation, that would have been a perfect opportunity and they didn't. the pboc has come in and kept its currency stable. that is his default position. it did so again this time round. u.s. got out of this was the avoidance of something that would've disturbed wider markets which would have been disorderly. china being forced into a situation whereby the outflows became so great they either had to let go are had to time some of the capital controls, neither of which are wanted to do. so, by making a more cautious, more cautious policy stands, and help[ing china out. there have been calls by the pboc to work more closely with the fed. by doing that, everybody was a winner. although, maybe one or two countries might disagree, like japan or the europeans. francine: what you make of those initial comments on the fed and pboc? do you think that, the fed clearly is making the pboc's job more easier by delaying that rate hike. do you think it is coordinated? >> yeah, i think the fed is helping by making the u.s. dollar weaker. so, it takes away the depreciation pressure on the chinese yuan and t gives the commodity sector a lift, because the yuan has been strengthening quite a bit since the april fed meeting. going forward, if you look out into other trading partners of china, the u.s. dollar is depreciated. probably the japanese interest rate is going to go even more negative from here. depreciationt some pressure on the japanese yen. other trading partner seem to be more than happy to have a weaker currency than a stronger currency. for the time being, the depreciation pressure on the chinese yuan is does a painting -- dissipating. francine: what about equities? yesterday it was in the bull market. you are one of the few was to predict the turmoil we had last summer. it is unclear whether this is russian roulette. we should not care about what happens too much with chinese equities or whether it is linked to the real economy. >> yeah. i think for april we probably are going to see strong lending again. probably the new lending would trillion renminbi for the months of march. that's a historical figure. even though i think for the longer term, it puts that -- a debt load on the chinese economy and it is a negative. in the short term, credit expansion tends to be a good leading indicator of where the economy is heading and where the stock market is heading. with economic numbers improving, with strong lending numbers coming out, it is probably going to stretch the rebound further from here. forcine: thank you so much joining us today. i was talking about the bull market. it is the chinese stocks listed in hong kong that enter the bull market yesterday. hao hong there. simon derrick stays with us. i have a great chart from india. there you go. be prepared. you always are. markets surge with her best month since 2009, emerging markets. is a rally in e.m. really doomed? that conversation is up next. ♪ is "the pulse." place kick to the chart of the hour. nejra: remember how recently emerging markets were described as the trade of a decade? there are ominous signs the rally might be about to hit a wall, starting with stocks. the search we saw last month. lower trading volume and we aker company profits. the rebound across stocks, bonds and currencies is it ought with falling exports and contracting manufacturing. the forces behind the rally, but dovish fed, instability and china's economy and rising oil prices. showsng of oil, my chart the correlation between emerging-market currencies and the oil price. this correlation has reached 0.66, near the highest since 2012, a reading of 1 means the lockstep.n the level of exposure could make currencies vulnerable to any renewed weakness in the oil price. this next chart really interesting. look it up on the bloomberg. u.s. c2y index. bond yieldyear bentz. the gap between the two year dad 10-year treasuries has narrowed to the smallest since 2007. inflation starts rising, we could see a reversal in emerging markets. francine: inflation. that is what we are waiting for. when is it going to come? how do we price risk with these kinds of charts? simon: exactly. we are in a brave new world. when inflation comes. that is a fascinating conversation in it of itself. we have had asset price inflation for a long time. it has not made its way out into the real world. i think the answer is, there a point, i suspect, when people will start to look at what central banks are doing and going, what if you got left? we are talking about -- ludicrouset to extremes of helicopter money. hard assets is going to be key. that kind of inflation. francine: whatever happens, buy gold. that might well be to given what central banks are doing right now. but we're a reasonable way from that right now. i think that, for me, still, to forget extraordinary -- the extraordinary situation in europe and japan. the key is we have got a fed very cautiously. that is the key for all the charts we have seen. price against emerging markets, you can actually argue both our affection of the fed. i think that is the key story for the remainder of this year. rallym.'s, the e.m. coming to a close? no. i think that money from the u.s. is going to go somewhere. it historically always go towards e.m. francine: as long as janet yellen does not raise rates. i got this chart made. it took me a long time. this basically benchmarks the -- compared to the currency. the rupueeee. it could be used in almost any emerging market. simon: the story within that is you start to make a point about currency performers and equity market performers. if you like they are opposites. currency strength comes to stock market weakness and vice versa. that has been one of the fundamental issues for so many nations. it is not just emerging markets. thek at where worst-performing major markets have been over the course of the last few months. going back to japan and switzerland and eruope. it is a currency game -- going back to japan and switzerland and europe. francine: you have to stick around. tesla next. lon musk says it will change the world. a closer look at the model 3 next. ♪ francine: let's get straight to the bloomberg business flash. nejra: thanks. nbang has walked away from a proposed takeover of starwood hotels. clearing the way for a purchase by marriott. cited various market conditions for pulling its bid. starwood shareholders are scheduled to vote on marriott's offer next friday. rd saidtail group's boa it would recommend sainsbury's takeover plan to shareholders. it values home retail at 1.4 billion pounds and represents a premium of 74% to the company's closing price on january 4, the day before the approach became public. shares in home retail and sainsbury are trading lower. apple has reshuffled the supply chain ahead of the release of its new iphone 7. it swept out asram and added phillips. the move is a boon to the production company while it search for a new buyer. and that is your bloomberg business flash. francine: elon musk has unveiled the model 3, the more affordable literatu -- electric sedan will cost $35,000. joining us with details, ryan chilcote and simon derrick weighing in on the conversation. because everybody wants to try this car. how much of a game changer is this? elon musk says it is. do we believe in? ryan: first he has to come out with a car. today the unveiled it. which isrders, extraordinary. people lining up outside of stores around the world. some of these lines, 200 people just a place an order, just to reserve a tesla car, you have to pay $1000. elon musk said today that he is hoping, he is confident that that the car will be out next year. there is no care and tea. they have had problems before. if he does pull this off, a mass market car, yeah, the model three could be the model to f the electric car industry -- could be the model t. francine: this is brand awareness. this would be hava great model. are they in a strong position? ryan: brandwise, it is the car to own if you want to look progressive. viennan a tesla in last week. i cannot say who it belonged to. francine: come on. it was simon derrick. ryan: it has to be a good car. there is some question about how good the car is. you have to make a lot of them. yeah, there are some question marks about that. francine: have you gone electric? simon: i love the idea of electric. series,e watched the e- the motor racing which is fascinating to watch. halfway to the race, they have to change cars because they have run out of charge. that is where the main problem is. ryan: you can get a battery with extra life. that is one of the options. $35,000 is a bit of a trick. 215 miles at least. simon: how long does it take to recharge? the: i don't know answer. it goes from 0-60 in six seconds. simon: that is only going to get me halfway up the motor -- in the u.k. francine: how many cars is it? ryan: mass market. cars ahas done 50,000 out year. that is the quantum leap they need to make. lotcompetition, there's a of competition. electric cars brand in the united states five years ago there were four. by the end of next year that will be 60. but the main competition is the chevy bolt. the same price. it has got all of g.m. behind it. that is elon musk's biggest problem. simon: they say technology with a dead end. is it about hydrogen and those kinds of engines? ryan: right now he has got the government on his side with the $7500 off, which takes a price. francine: i am staying on air. these guys are going to test drive. will the central bank mean jobs. that is on "surveillance." ♪ francine: how long can the fed stay doveish? investors await a march jobs report that casts light on the rate cost. china's official factory shows improvement for the first time in eight months, similar to the old engines of growth. and merging markets have the best month since 2009, but is the rally doomed to fail? some signs say yes. this is "surveillance." i'm francine lacqua in london. if you want jobs, tom, i know it's important, but actually, it may be a little bit less important than janet yellen's talks about all these

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