-- >> the bank of japan stands ready to use. kuroda says he will not hesitate to unleash further stimulus if needed. south african selloff. the gupta family exits the businesses in the country. is the power slipping? we discussed that with colin coleman. -- we discuss that with colin coleman. ♪ >> welcome to the pulse.
i am mark barton. check out what is happening to the markets. we got the stoxx 600 falling. investors digesting those comments from janet yellen in jackson hole on friday. the bloomberg dollar spot index is at its highest level since august. the fed rate hike gets pushed up after the jackson hole event. let's look at the price of the 2-year note. no movement today. 84 basis points. the yield did rise by 10 basis points last week. on friday, he hit the highest since june 2. old moving once again, most since july 25, falling for a seventh consecutive day. longest stretch since may the 30th. highest rate hike. that is not helping the precious metal. let's get bloomberg business flash with sebastien selleck. >> at the bank of japan may
target -- to close in the ground. [indiscernible] might startbank buying bonds of local governments and public corporations to fund such projects after its september meeting. that will stop short of federal spending. a spokesperson from the boj declined to comment. -- after the value of its investment -- quarter. -- investment tumbled last quarter. that is according to bloomberg news correct relations it on friday, the funds fell 21% at of end of june it -- end june. mark april said's desk says -- says uk's vote to leave the european union -- also reiterated angela merkel's message that britain cannot expect to cherry pick.
german finance minister says the british do not know how to deal with the outcome of the vote. angela merkel made a pitch to win back voters. see -- and an attempt to broaden her party's base. just over a year before the next federal election, merkel fielded questions on a television on relations with turkey, sinks is against russia and brexit. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am sebastien selleck. mark. by the -- thehike rate hike by the fed could be back on the table. michael mckee reports from jackson hole. michael: wall street got some of what it wanted from this conference.
while she did not put a timetable on it, yellen did suggest economic data has improved enough that the case for an increase in the federal funds rate has strengthened. that led investors to raise the odds of a rate move in september, or definitely by september -- by december. other fed officials back to that view. >> we are being data-driven but also patient and cautious. demand is weak around the world. other central banks are cutting rates. we are below our inflation target and growth is 1.25% in the first half of this year. michael: there is no preset course for rates and the ability to know where rates will go. that raises the question of what a central bank or does to fight a recession when rates are so low. that is the topic of this conference. the former fed staffer who is at carnegie mellon can dish carnegie mellon university
is an intriguing idea. >> making a case for an encumbering nominal interest central banks have the capacity to move interest rates below zero to a greater extent. michael: that is for the longer-term print monday morning the focus moves back to yellen and the data. friday's jobs report looming larger than ever, now appearing for a rate increase. michael mckee, bloomberg, jackson hole. mark: let's bring in brendan .rown brendan, thank you for joining us on this bank holiday. this is our wonderful work function. for the u.s., the probability of a hike has risen for september the 42%. , december. is that warranted after jackson hole?
brendan: that is wanton from the comments they came out -- that is warranted from the comments that came out. the fed is focused on market data and the fact that the inflation rate seems to be going toward the target. mark: friday's jobs report is the big one? is september very much alive? brendan: i think it is. the case against a september rise, the september last thing yellen was to do -- on the other hand we have seen before that if we step back from raising rates suggesting there is lack of confidence, the can bring the stock market down. in many ways if we get a strong report on friday, they will go ahead with the rate hike. mark: that means one more this year? two more this year? the majority leading -- leaning toward to.
-- leaning toward two. one is their preferred option. is it one or two for 2016? brendan: i don't think they have any more clue than anyone else. it depends on the data. at this point, i think one rather than to. mark: what can we take away from jackson hole besides that? yellen speech talked about the federal reserve's toolkit. she says the toolkit is appropriate for now. it opened the door for a wider discussion about raising the inflation rate, maintaining the federal reserve balance sheet. what did you make of that side of the debate and what it means for policy going forward? ifndan: it sounds as professor yellen is not keen on raising the inflation target or any other new instruments which is encouraging for people who are worried about stimulus in the long run.
this is the conference that politicians should be having. what we should be hearing from the alternatives in the republicans and democrats. what will the fed do when we get to the next recession and there is a crash? it is not going to be decided i the people in jackson hole. campaign, fedon and fed policy is not coming up at all. mark: it does it worry you that the fed has less am you -- less ammo if a crisis nears in the future? brendan: the toolkit used in the cycle has produced -- it is not been the right ammo. the best prospects for when we do get to the next recession in crash is a complete overhaul and road.not go the same mark: what overhaul are you looking at? brendan: we get to a
market determined interest rate and we take the balance sheet down. .e love the market to maintain when we talk about normalization of u.s. monetary policy, the place to start for normalization is to strip the balance sheet, bring the monetary base back to a normal proportion of income and allow images rates to be market determined. -- allow interest rates to be market determined. mark: brendan, your thing with us. -- brendan, you are staying with us. stay with the pulse. plenty coming up. , says brendan brown. the goop the family sells off its debts the goop to family sells off its businesses in
--samsung electronics interest from the digital buyers component unit. >> we have a good relationship with samsung, both as a supplier and a partner. i happen to have a good relationship. we share membership on the board of eggs or. i have made no comment on the samsung deal at all. the opportunity is an opportunity that has been looked at by a variety of people. -- it addsinterest strategic value to us. 22% decline in profit with net income down to $3 billion. china's big three energy companies have suffered this year.
-- its first loss. it says the global oil glut continuing and oil prices staying low. broken turbines on three planes with rolls-royce engines. an investigation into the engine of the boeing plane. the airline canceled more than a dozen dream cap -- dreamliner flights since last week. said he the chairman sees a rebound for the company as early as next year. the comments came after a report of the first decline since the 2011 -- terrorist attacks in europe continued to weigh on the italian luxury -- arco hirohito corroded says he will not have to take the booth -- mark: kuroda says there is ample room for negative interest
rates. his comment on the back of yellen's -- back of yellen sing the case for tightening in the u.s. sent japanese shares higher and the yen lower. let's bring in more -- let's bring in brendan brown. reaffirming his views that more could be in the offering if needed. what is going to be on the table? brendan: what is most likely to be on the table is stepping up the amount of bond buying. i don't see that a further journey into negative interest rates is going to be very plausible given what happened last time in giving the lack of political polarity. mark: we have interviewed a number of analysts. some say the boj might start buying bonds of local
governments. -- trains, hospitals, power plants and sewers could does this stop short of direct financing of fiscal spending, is this the next leg of the journey? analyst we have surveyed think it is possible. brendan: the boj has been buying new issues of japanese government bonds directly from the banks. governmentthe expenditure is being financed directly by the boj and forces a lot more government spending coming down the pipeline. fiscal expansion is following from this monetary environment. what i would have to say is with the monetary policy is not able in the long run to keep down these long-term interest rates we have seen.
long-term interest rates came in bank of japane was in there buying bonds everyday. even in this environment, bond market is more powerful and can go against what the boj -- and i find mark: what is the bond market telling us? brendan: it is in the trance of the monetary policy. the fact that it has made such a move is indicating some concerns that the extent of the fiscal easing taking place now is something to be worried about. we make it another debt downgrade. .hese are issues to look at mark: this talk of helicopter money that kuroda said is not going to happen, but he said it before that something was not going to happen. is helicopter money out of the question? brendan: i think helicopter money is happening. the big issue in japan is for inflation which is what the bank
of japan is trying to bring back. the acceleration of japanese growth which is unlikely even with the fiscal stimulus. the other way you're going to get higher inflation is at some point if you get a sharp decline in the yen and needed capital flight out of japan. mark: how is that possible? brendan: one thing is holding it back is japanese investors -- there are no rushes to go into those asset markets. if we get any pullback in global markets, and higher u.s. yields, then there is a potential for a sudden lurch to hunt for the japanese yen. mark: how do you get this economy consistently growing? brendan: that depends on economic reforms. venturenew culture of capital and dig regulation -- and deregulation.
mark: are we going to see it? brendan: it is feasible in the future once the economics has been recognized. if we have a future prime minister two years down the road perhaps who is more inclined. mark: interesting. brandon, -- brendan, think you for joining us. up next, mario draghi let's the numbers do the talking head of this week's ecb -- next week's ecb meeting. -- the ecb may need to dive deeper into its operational brain. this is bloomberg. ♪
mark: the central bank focus in europe now. -- a summer of silence from mario draghi. he skipped the jackson hole retreat. a whole host of data out of his week that speaks for itself. let's speak with brendan brown. in the euro area is holding up, inflation this week should show a pickup from point to -- a pickup from point to the .3. would you say the euro zone economy is holding up point brexit -- post-brexit? brendan: i would say there are two pieces of data that were a bit worrying.
one is the french economy reported no growth at all. the second piece of data was the ifo institute had a significant fall in its latest index. that is the most important indicator for germany. i would say on balance, and bit of disappointment. mark: where does that leave the ecb? brendan: the most likely outcome is we are going to come up with a new forecast that will justify some extension of the bond buying program. mark: can we get that announcement this month? under the weight? -- or do they wait? brendan: it could be in september. the timing will depend on the markets. it is probable that will be september. mark: are you confident the ecb can hit its target in a couple of years time? 2% target? brendan: the target like i was
saying earlier for japan will depend on european growth picking up. that is when we get inflation. or it is going to come through a to higherncy leading inflation. i think in the european environment, it is likely to come through the second channel. mark: here in the u k, investors will be keeping a close eye on the pmi manufacturing number on thursday which could's day below 50 -- which could stay below 50 but might show a slight improvement post-brexit. -- the real bad news to come? brendan: i am in the camp that is weathering brexit and the manufacturing sector is -- from the cheaper pound. i think overall on the retail
side, the amount of tourist demand, which doesn't include tourists coming to oxford street but the whole world shopping online in the u.k. thatneral, there is a view brexit is going to be quite a long process and britain will get a fairly reasonable deal. mark: the economy grew 6% in the second quarter which shows there was some resilience. where does that leave us in the current quarter? the economists we surveyed expect a small contraction of 1%. brendan: i am not in the game of forecasting quarter by quarter but i think there will be some recession in the u.k. mark: does that mean we need less than from the boe?
brendan: the measures announced in august were essentially sterling devaluation packets, qe and cutting interest rates designed to get sterling down or stop it from rising. he it willore moves, be because sterling is rebounding. mark: which it has done. 128, middle ofom august. do you think it will stay around these levels? some forecasting it down to 120. brendan: the key variable is going to be the dollar. the most likely scenario is the dollar gains ground on this monetary background with the election risks introducing some volatility from overhead. mark: brendan, thank you for joining us. african jacob
u.k. vote to leave the european union has created instability if lead to build problems the processes mishandled. the party reiterated angela merkel's message. minister said the british do not know how to deal with the outcome of the vote. a --ials are investigating an explosion. them detonated those to the laboratory. no casualties reported. local news, 20 fires today a day, powered by 2600 journalists. >> trouble brewing between prime minister. ignoring a police summons with reports he could be charged with espionage.
as a wealthy indian family close to president jacob zuma plans to sell its south african businesses. for more on this, managing partner at goldman sachs. this scandal saw go to whatever you want to call it, it is it going to unfold? >> is early to say whether he will be charged or not but clearly this week's events will be important. the mood back home in south africa is rightly concerned. you are talking about a minister of finance who has done an outstanding job since he came into office in december of last year. south africa's market has .utperformed others dollar equities and so on until this latest news of broke. you are talking about a person with impeccable credentials. royalty in the liberation
movement. from the point of view of the public, it is of great concern to see one arm of the state attacking me finance minister in an issue which is seen to be theer frivolous in terms of charges. we will leave that to the lawyers and the court to decide. that is one of the good things about south africa, we have robust institutions. one of the political agendas driving this attack on the minister, why would you not let him do his work and keep that to going? >> what is the price tag? how much further do we see stocks, bonds, the rand declining. >> the rand is already down. back of this news, the
rand has gone back to 1440. i do not believe the rand will stay at 1440 if the minister is arrested or charged. the band will buckle further. i would think there is more thing end the even ability we are in a stalemate because the politics of attacking the finance minister back on is potentially a watershed within the afc and terms of balance of power. thisy be that we stay with for a while. >> where does that watershed take things? are you implying the rumors -- >> it will either mean the anc will call and a earlier conference and the elect's amount of cinema picks a successor, or it may go the it may losed momentum and four in the party.
as i say, this is fairy early stage to direct and xoma has party.fective in the the spirit of mandela within the anc and the high morality within may well carry the day for the modernizers and the reformers in the anc but it may be those traditionalists who are upfront more on capturing state resources for a smaller leap within the power structure of the anc may prevail. obviously what we are trying to do in business in south africa is to reinforce the modernization, the structure reforms, we have been very active. >> hello those discussions are received? >> as i say, since december when the minister was appointed, a
have really as a business community and what the finance minister. we have spoken to the president on several occasions and babe president has come out in support of deputy -- minister gordon. the government should not be in this unseemly spat, fighting. so, the general and buy on meant of the economic discussions we have been having has been extremely well received in the public and by the government at large. that seems to be extremely supportive but it does not necessarily mean those talks are as the attack on minister gordon represents
potentially a different direction to the direction that some of the growth and the government want to see south africa take. so you have a standoff of the agencies. political >> the girl instability is a key concern right now. me possibilities of downgrades. all you even entering such an option? >> way faced a situation in march and april are everybody thought it would be downgraded. we scored a victory on the pitch of the rating agencies with the main agency coming out in support of keeping the rating in place. a business grade rating. lucy have the next six months place up. it is safe to say if minister gordon, who has impeccable credentials, was removed, it would probably result in south africa being downgraded.
>> is the sort of the levels of the weekend, the pound market, the stock market, the levels you have given if gordon is replaced, does that include the eventuality of a credit rating downgrade? do you have to add in the possibility of a printing downgrade? do we see even further the selloff of south african assets? holding position. i am not here to predict whether the rand go. but i would say if the situation does blow up, the minister is let go, you will see the rand significantly collapse from that point. i would say to the extent that south africa does not shoot itself in the fed and well lose, it may well strengthen. so this is one of those uncertain moments. the uncertainty is unfortunate in the sent in south africa, up
until last week when the labor story broke, was outperforming all acids. as one of the asset classes in the emergency -- in merging markets. it was doing well. >> today calling in, but they are looking at south africa's a place to invest. >> am not empty business to advise but this is a situation you andtched carefully we certainly in the south african business community are doing everything we can to strengthen the hand of structural reform. thickly, impacts on south africa and the emerging markets? >> clearly, out of the emerging markets to the extent the fed hikes rates and the market is pricing in but i would think south africa's one of those places the cousin deep anywhere you can get in and out of assets clay, people tend to like to
>> losing ground today. let's get to sebastian. >> stocks generally low. this is the function that tells you everything you need to know. biggest losses coming from the carmakers pulling that sector down as we look at strike action in the u.s. looking at comments from fed chair janet yellen. hawkish remarks. that goldman sachs is boosting the odds of a september rate
hike. up now to 30%. pimco not as impressed that the market with goldman sachs. a look. rate hike up to 42%, that is what the white line is telling you on this chart. tracking the two-year note. april-day rally. breaking that streak with the longest since the middle of july. as we see investors looking at the prospect of a rate hike in the u.s. sooner. riskyening demand for assets. stocks and currencies, both coming off today. your function on bloomberg, a strong seller therefore in merging market currencies. south korean as well.
both dropping by the most in two weeks. the south korean won no sliding against all but 16 major bids. >> let's get to brazil. trial.hmond final phase. sinceatures running high last thursday. the president accusations. will defender separately for someone from congress today. carol lina, city university. thank you for joining us. it is to donate final stand? >> the impeachment looks like it is highly likely it will go through. unfortunately, a sad day for democracy because there's a sense of a young, fragile democracy having an impeachment with fernando92 karl rove. this is a process where the impeachment is seen as highly
controversial and slightly flawed because the crime permitted for the impeachment is not exactly that has been accused. she has been accused of something bad to many governors and brazil as well as former presidents have done as well. the reason is this is not just like a parliamentary democracy will you change a minister, a prime minister who is on this goes much deeper because what you have is a sharp shift from the previous government centerleft to a government pushing forward many policies that have not then voted by the people, including the proposal of freezing public spending for the next 20 years which could bring brazil down to the level of investment of 20 percent and consequences for health and education.
>> a causation which is happened over the last nine or 10 months of being and poland by some of these more austere measures which have the potential that the acting president is hoping to implement. >> that is exactly right. many people against the impeachment are critical. very much about sustaining democracy and arguing the vote of the people needs to be takected and we need to her out in the 18 or have her back in after a new election. this is something world leaders have talked about, bernie sanders has mentioned this in the u.s. as well. are saying that they voted for is not what is being put forth. >> there are some saying the give himnt of her and legitimacy to fix the economy. maybe that's not the case?
>> that is exactly right. there was supposed from financial markets in the beginning thinking perhaps because of economic matters he would be someone who would help the country. and that we have seen in the last eight months is this is not happen. he was extremely unpopular. this is three months in popular. the first day, he dismantled the minister. many of them are accused of corruption. there was also something around someone phone tapped talking about how they needed to take someone out because of the car wash investigations. we must remember the last government was the first one who is actually managed to deal with corruption within the brazilian politics which is not something from the left but throughout many of the parties.
so there is a sense the impeachment as about halting the carwash investigation. this is the ramik -- this is very bulimic. -- polemic. resolution meant with the traditional politics and we can make links with bonus happening in the u.s., the way in which there is a shift toward more-right kind of leaders. populists. >> is there a near-term easy solution to come back disillusionment from the system? >> this is a good question because the short-term, whichever scenario we look at, we know there is going to be tension on either side bed on the other hand, there is a sense this is going to get much worse
because of the very anti-, inple measures being placed an extreme form of austerity. we must remember as it was not europe. so it is a country that is developing a end it needs that particularly in health and education. a certain level of accessibility and success. there is a sense of political crisis will deepen and you can actually have a pay off into a government.d stable >> thank you. it will be an astonishing few days. next, freeze deal at the informal opec meeting next month. stay with us. this is a bloomberg.
cheap oil, biggest refinery to 2% decline in profit with net income down billion dollars. china's big energy companies have suffered this year. last year, and announced first-ever half-year loss. global glut continuing come up prices staying low. broken turbines on 37 87's planes. the move comes after the airline canceled more than a dozen green minor flights since last week. the airline said the parts in the turbine damaged when they snapped off. >> the oil down. reduction freeze for next week's algiers meeting. the chart of the hour. >> a well, stronger dollar weighing in on the commodities
in collusion but reality is focusing on the supply side of toelopment in terms of what expect for the upcoming informal talks in algiers. and has to do with iran. when an attorney and you and minister and he thinks stability is on the horizon. outreality is this, check this chart on your bloomberg. the reality check chart. iranian hope action 3.5 5 million barrels they according to bloomberg estimates. the latest data points there. the highest level since the 11:00 a.m. take a look at the top right. -- thert of 2016 comment 16 comment by 5% increase. that will not agree to a free some as they reach the place sanction level of. the barclays playing into this as well as latest research.
they said yes, iran is the key in this puzzle. sending mixed signals. see the market discounting the outcome of the stocks in the coming weeks because of compliance issues likely to materialize. even if you do agree on anything, you stuff to make sure people are abiding by the numbers they said forth. interesting developments. >> thank you. bloomberg markets, middle east. that is almost it for this hour. here are some of the highlights. angela merkel speaks out at the election rally. new government wednesday. eurozone, inflation. on thursday, chinese manufacturing. of course, we wind up the weight with nonfarm payroll out of the united states. that is the big piece of data after jackson hole.