This is important because we have seen mario draghi try to sell everything, and so far a lot of people are saying it hasnt walked. Tom and that inflation data is important, linking to centralbank action. That china story happening as we speak, across the terminal. Its extraordinary; this headline, risk to china, credit worthiness increasing. Francine yeah. Eye one to keep an i on th the rating agencies. Economists have been flagging concerns. Lets get to the bloomberg first word news. Vonnie thanks. Just breaking, trouble for south africas embattled leader, jacob zuma. The nations highest court says he violated the constitution by refusing to repay taxpayer money which he used upgrading his private home. His Political Party is investigating whether he breached ethics laws. The Nuclear Security summit is getting underway in washington as north korea will be highly agenda. President obama will discuss north koreas recent nuclear tests. Whether is considering to deploy a Missile Defense system in south korea. China is opposed because it would give the u. S. Radar coverage over china. Chinese influence over north korea will be at the center of the talks. To back was encouraged new sanctions against north korea; the white house says the media will also be a time for the president to stress human rights. And on chinas territorial claims. The Brussels Airport may reopen later today for passenger flights. Officials are still evaluating repairs. The bombs destroy the airport checkin area, and once it reopens, it will be able to handle only a fraction of the normal passenger traffic. Once againtrump has started making controversial remarks on abortion. He said earlier that there would have to be some sort of punishment for women who get an abortion, if the procedure is outlawed. Later he issued to statements; one saying that the doctor and not the woman would be held responsible. Tom markets on the move, and of course we will go to china in a moment. Equities, bonds, currencies, commodities. Euro 113. 53. Saywell was really outline. With his onto the next screen, if you would. Brent crude trying to find a 39 bid. Renminbi is a stronger currency. Francine . Francine this is a picture for european stocks. Its the end of the corridor, and we arent doing so great. He was equities have done better. 1 , crude oildown below 38. Eurodollar is the biggest news we have had on the week, and we need to figure out whether Dollar Strength is over and done. Tom i want to break a rule and stay away from a simple tv chart. This is an actual five trends study off bloomberg; two standard deviations of oil with moving average. All you need to know is that we havent broken through yet. And is the rollover in oil, we are at the critical point this morning as we try to find support on brent crude. The story there is were finally at the rollover, where we will find out which way we are going. Francine yeah. Its an important chart. This is my terminal chart; a simple chart. Its looking at the smi. Benchmarkedtocks; i them to the msi world index. U is thathow yos yo stocks that were considered haven dont seem to be tempting investors back this was equities. Tom it really shows some of the currency potentials there; we dont talk about the franc right now but that is a big deal. China, right . Francine lets get to one of the top stories of the morning. Chinas Rating Outlook being cut to negative from stable. Our chief economic correspondent joins us from hong kong. I have always been told that rating agencies are important, but there are always lagging. The market seems to have seen these risks before. Enda for sure. I think the worries over chinas growing debt problem are wellknown, but at the same time, it is a timely reminder. There are two issues when it comes to debt in china, one is that total debt is around 2. 5 times the size of the economy. Its the buildup that has worried people. A lot of it hasnt been efficient. There are worries that its loans will turn bad. The other worry is that there is no signs that they are tackling the debt problem in an aggressive way; in fact, all the indications are that the government plans to spend more. The Central Government can do that, but the problems lie with the local government. Francine enda, put it in context. An hour and a half, we had chinese stocks in hong kong injuring a bull market. There seems to be a clear dichotomy with what growth is looking like versus the debt burden. Enda yeah. Look, certainly the markets have a better turn, with capital going back into this. Thatnk the wider idea is chinas economy hasnt changed much, its just that things have stabilized. There are signs that its getting worse and getting better; i think investors are looking for signs that the fixed Interest Rate all the fiscal stimulus they bumped into, i think they want signs that the economy is gaining traction but that isnt happening. I think china will still remain fragile. Tom help me here with the ground perspective. Obviously there is something going on and we arent bright enough to figure it out. Which is the biggest skeleton the closet for beijing . Which is the biggest point of tension . Debt i think the growing is probably the elephant in the corner. Its something that needs to be dealt with; it is a clear drag on growth. It will continue to drag on banks Balance Sheets. Of course, if they are not lending, thats dragging a key engine of growth. Unless the deal with the debt story, i think it will remain. Tom where is the debt . Is it full facing credit china . Is at the banking debt . Is that a debt i dont know about . Enda Government Debt is around 40 of gdp,. Which is pretty healthy. Real problem is that those banks are forced to lend soes. S bszombie francine enda, thank you so much. Is the managing director and Portfolio Manager at pimco. When you look at china thank you for coming in every day there is news in china. All the risks are now so flied out. So flagged out. Does it all at your heartstrings, or have you known that . Suspect that a bit of what we are saying is china is the biggest risk out there. Andink its pretty clear, they are clearly interrelated the currency and how much of it leaves the country, and the level of bad loans. Our degree, we all core expectation is that these loans will be worked off slowly rather than quickly, and the currency move will be gradual. Doingthink what s p are is they are getting themselves to get out clause. Tom mike, i want to link these two items together. Investment banks face deepening gloom as trade revenues plunge. Lets bring that over to china. You mentioned the currency, the renminbi. This is the best chart for the next hour; lets get out front for those of you up early in america. This is the chinese yuan. Its the strengthening renminbi presumed. T weakness, do they need to force a devaluation to jumpstart Economic Growth . I think they are forced thats generally what has caused the markets nervousness in the past. I think a smooth and slow deval would be good. A short one would hurt a lot of people. Thats the thing that worries most people; if you were to put the number one risk on most minds, its a quick devaluation of the renminbi. Its the second largest economy in the world, and they would export deflation at a time, as we saw, inflation is low everywhere. Tom when you strip the global gdp with the finance tensions are your seeing, do you need a coordinated Currency Movement when he called a devaluation . Not china alone, but china in concert with other nations . If you look at where policymakers has been moving eost g20 in shanghai, ther does appear to be either an ad hoc agreement amongst the major central bankers that moves along the lines of devaluations are at best a zerosum game. I think there is a degree of policy coordination; the so credit easing from the ecb rather than Interest Rate easing. The bank of japan is stepping back. And yellen has been dovish, and pressure has abated. I think there is already an ad hoc degree of coordination. Tom this is a huge deal. Things are changing as we go to last threeose minutes really encapsulate the tensions as we go into april, 2016. We will continue this discussion with mr. Amey in our next hour. Its a perfect day to speak to amherst pierpont. The chinese see a credit turn to a negative. This is bloomberg surveillance. Stay with us. Francine im Francine Lacqua in london; tom keene is in new york. Its the end of the quarter, and we are seeing quite a week in terms of what janet yellen said. The first, lets get to the bloomberg was this. But first, lets get to the Bloomberg Business flash. Vonnie do that camerons meeting with ministers over how to prevent the closing a steel factory. They are selling the factory that employs a 6500 workers. They blame falling steel prices. The British Government is considering oil options to rule out state ownership. Chinese had the lowest annual profits in a decade. The president of the bank of china forecast what he called a new normal of lower profit growth. Emerging market investing is stepping down from daytoday management. He is passing on his responsibilities of overseeing the templeton emerging markets. The new officer will be steve and over. Attracting on investors back to emerging markets after years of declining values. Thats the latest Bloomberg Business flash. Tom a storied career. I do a wonderful panel on mr. M obius months ago. He changed how we perceive emerging markets. Vonnie and he has had a wonderful two years. Tom mark, if you are watching, you are well preserved, just like sir john was. Francine i spent two weeks with mark mobius in south korea looking at steel mills. You dont think he is 79. He still has it in him. I dont think he will go quietly. Getting back to the euro area debt, its important because its important for mario draghi, who has done quite a lot already to try and impact the specter of deflation. Lets get back to mike amey. When you look at mario draghi and what he has done over the last two months, the world we were thinking would be in better shape. Is qe not working . Isnt doing something wrong . Is he doing something wrong . He succeeded in doing is stabilizing the core inflation rate at 1 . To say hes failed would be unfair, because they have stop the rot, so to speak. What they havent done is to get to a point at which growth is materially closing the output. You have such a big output gap that the inflation rate seems pretty sticky at 1 . Francine ar you worried about negative rates . We touch on that last time. The challenge with negative Interest Rates, particularly in the euro area, is the people who get hardest are the european banks, the one who take the biggest hint on their interest margin. Theyre the people you really want to try and support. Ify youre going to hit hardest those you dont want to hit, we would not be enthusiastic about more negative Interest Rates. There are things they could do if policy needs further juice. Come theld that word that comes to mind is chronic. This is the chart francine is talking about. Here are the good times with inflation crisis. And whats interesting is the duration of disinflation, and i will call it modest deflation. This gets to the chronic sense that mario draghi has to work with. This he have the tools in his toolbox to deal with this, or are we finally at the point where fiscal and nations have to take over . I think you hit the nail on the head. We have negative Interest Rates, large amounts of qe. There is a certain point in time when one has to recognize and Central Banks are starting to make comments along these lines that Monetary Policy cannot solve all ills. Draghi has recognize the structural reforms, and support of fiscal policy. If they get both of those, maybe they can get some juice in the system. That the moment, they are the only game in town, and that is the problem. Tom its absolutely fascinating. Lik lik mike amey. Michael moore will join us in a bit. Coming up, an important conversation with Kathleen Hays in conversation with mr. Evans of chicago. Many say he is out front of chair yellen. Stay with us. Tom tomorrow is april fools day; im prepared to be taken to the cleaners by my staff. They crush me every year. What you need to know conferencing, is no one is worse than emily at telling me on april fools. Im prepared. Francine that that i was going to say. Lets wait until tomorrow. Tom lets go to the bloomberg terminal and look at the april fools joke for chair yellen. We saw that pop chart a million times. Some people say this is guitar hero. This is aerosmith, the metallica moment, you rollover in heres what you need to know. Mike amey knows this you rollover again on yellen rhetoric. Francine [laughter] is that right, mike . Is if you done look at where they were last year; last year it was all about talking of the domestic economy, and this year it is all about recognizing that they dont however close they believe the u. S. Economy is, unfortunately they have a semifixed exchange rate. Francine you could argue that with her two speeches, she is easing policy. Absolutely. What shes done is shes marked the fed to market. They for out there with the for rate hikes this year, and the market was there with one or more. And the neweting york Statement Speech has really marks the fed to market. We except the fact that the Global Outlook is more than we expected, and that uncertainty remains out there, so we will be cautious. Tom one of the great things of pimco and i will pick up on this is the Real Foundation decision for Central Banks is Financial Stability. When we see the challenge of banks china, germany, england, whatever are we at the point of where you begin to worry about Financial Stability wrapped around tepid gdp . Yeah. Also, for many years, Central Banks have been focused on creating Financial Stability, and if you look at where we have been the last two or three months, there has been a number of Central Banks led by the pboc, and to some degree the bank of japan, where they created volatility rather than suppressed it. Thats something you find when you move toward the point at which Monetary Policy becomes less effective. Were at very low Interest Rates, massive qe outstanding. We would agree that there is still some benefit from further easing, but it becomes less one way. Monetary policy will not always work in your favor. Francine we need to continue down on your eurodollar. Thanks so much. Coming up, we speak to the editor in chief. Soft power. I will be interested to see what mike makes of soft power. The world is getting more and more complicated. Were looking at the u. S. Elections, at brexit. What does that mean for soft power . Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Tom good morning, everyone. Francine lacqua in london; tom keene in new york. A lot going on this morning. China ratings adjustments, currencies on the move, the and of quarter hysteria. Right now to get you up, heres vonnie quinn. Thanks. Terrorism and the Islamic State top the agenda at the Nuclear Summit in washington, but there will be plenty of attention paid to north korea. President obama will address their nuclear tests. The u. S. Is considering whether to support the defense of south korea. The president will open talks about north korea. The white house says the president will also bring up human rights and chinas territorial claims in the South China Sea. More attention in hong kong as the city prepares for elections in september. The city is threatening to borrow the formation of an independent. The government says hong kong is an inalienable part of china, and it will take action against any movement that urges otherwise. Insurgency inthe columbia may come to an end after five decades of violence. Their secondlargest demandla group says they the release of hostages. They are Holding Similar negotiations with tha rebel group. House republicans are balking at a plan to help puerto rico with its debt. They object to what they cawley bankruptcy stall. What they call a bankruptcy stall. And more trouble for South Africans and david zuma. He highest court says finally did the constitution by spending taxpayer money to upgrade his private home. Day,l news, 24 hours a powered by 2400 journalists and 150 news bureaus around the world. Francine thank you. In germany, merkels popularity has rebounded from the height of the refugee crisis with 54 of voters saying they are happy with what she has been doing. Overall, we are talking about soft power. This is the year where we have the brexit referendum, the u. S. Election, and there is a lot of concern that it is getting more difficult to be moderate. How can you use your soft power as a means to an end . We are joined by pimcos mike and you talk about south ft power, the good things in life. Soft power is important, but the grander politician is almost trumping soft power. Absolutely. We didnce america our soft power index in the decemberjanuary issue; germany came out on top. Of missed everything that was happening in that country, obviously polls have suggested that things have not gone quite so rosy. We await the hard numbers from october and november, but we were talking about canada. Its remarkable to see whats happening in my home country, and what a new leader can do. It has been a complete turnaround. First 100 days, and then you have a documentary. Francine Justin Trudeau is liberal; hes considered a peacemaker. Hes considered someone that is, doesnt take he things and change his mind in two seconds like some u. S. Candidates. Are you concerned that the way we do politics, apart from canada, is changing . Absolutely. So many people are on trial minute by minute, whether it is across various Digital Channels that is not being resolute. The flipflopping you see, what happens at a 9 00 bulletin is been hit by spin doctors, and completely changed. I think that was clever on the part of the trudeau campaign. Tom tyler, wonderful to be with you. I see your foreign desk the tension there between the elite and soft power and imagery and a public that is totally disaffected from the elite. As you have covered, it goes country to country. How does the elite that you so much represent how do they reattach to the public . Ll, i think it has to happen in a number of ways. If we are talking corporations, again, i think it is about getting in front of people. We say time and time again its diplomacy. We see so many people thinking, well, lets close embassies, we dont need embassies. We can do twitter diplomacy. Well, that works up to a point. But whether you are a corporation or whether you are an ambassador in emerging markets, you need to be out there. You need to be present. And i think so Many Companies and countries forget that. I think we need to see a return to proper engagement. Tom a zillion percent agree with you. So we get everyone together at a cafe, we spend five pounds five pounds . [laughter] tom we have an elephant gin and tonic. Bottom line is you have to flag. He what is nato and other institutions like it donald trump says we dont need nato, and what i am hearing from you is nato has value. Well, nato has value. A number of institutions do. And absolutely, fly your flag. One of the problems of canada an extraordinary embassy in rome. Great residents, got rid of that. That the mobilized we dont need to have ambassadors residences; we can do office towers. And that is no way francine of course. But we see a lot of countries still doing that. Francine it depends, i guess, on the image you want to portray. If you want to look like, yes we are being fiscally responsible, and our nation is represented in the hilton lobby, maybe that would work. Francine [laughter] good point. When you talk about flying the flag, the problem this country is getting more globalized, yet this country is thinking of leaving, of working inward. What does that point to, if brexit happens . What happens to the rest of europe . I think there are two issues if brexit happens. When is that, as tyler mentioned, theres a credibility problem with the government, or at least the leader, because he campaigned to stay in, so clearly his message didnt get through. I thinkthe mediumterm, you have to respect the fact that its not a good message for the rest of europe if one of the major countries in the eu doesnt want to play in the trading area. Tom tyler, i will rip up the script. You are the only one that advertises monocle is so hip; where do you stand on what scotland will do if we get brexit . I dont mean geopolitics, i mean culturally. Can you imagine scotland walking away from the United Kingdom . Francine we want to know about the risk. I was going to say. I think maybe japan might buy scotland. Not snappingyre up the major distilleries. Seriously, its hard to see it completely decoupled, but i think what is interesting the way they are looking across the continent, the way they are looking across the world, i think it provides a lot of opportunity. You have to remember three decades ago. Scotland actually had, in a way, a national carrier. They had a national airline, flying into airports all over the world. I think it provides really interesting position as a brand, and we talk about why doesnt scotland have the most fantastic food and Retail Stores . Tom exactly. One quick question. Critical. Dont you agree that a scottish gbank, theke sprin younger years are better . A 10year is usually better than an overpriced twentyyear garbage . [laughter] im still caught in a habiki miki corner. I never get invited onto your set, tom. I spend more time in tokyo than i do in new york. Tom francine, nobody can keep up with tyler. Check out monocle. We will come back with him and talk about the future of his media business. Hour, there is a lot changing as we go into the Second Quarter. A lot going on; good time to speak with amherst pierpont. Stay with us. Tom good morning, everyone. From london, from new york. Francine lacqua Holding Court in london. We are talking with mike amey and tyler brule, who has changed a lot of media. I look at this 30year experiment, the independent, and they go dark. They will do a digital experience. You know the challenges. Where are we going to end up . Up with ang to end elitist traditional media and everybody else going to a nonprofitable Digital Space . It is looking that way. You reference to the independent. The paper will go completely dark. Im surprised when we talk about the opportunity that was there. I thought they would say lets close monday to saturday, but they have up with an a real opp they could have done something amazing with their sunday edition. People love the independent on sunday. I thought it was too much. I think the left a lot of money on the table. That paper was getting close to being somewhere near breakeven. If you could put out a compelling package in london, you could have bought it first thing in the morning or later in the afternoon, i think they couldve had an interesting business. I do fear that we are heading to a place where you will have 1 or 2 who can afford and support premium media outlets, and then it will be a lot of rubbish sloshing around the bottom. Tom you lead on dealing with an elite audience. Editor in chief to that with the economist for years. Where is the courage to address a smart audience . Is that going to evaporate with the profitability challenges . I do think so. I can only speak for what we do, and the channels we ply. I dont know if youve got this on your desk, but we have a very thick issue out, the secondbiggest we have ever done, certainly from a page count and profitability point of view. There is money on paper, 100 . Im not convinced this will just go and chase cliques. Francine will there be money on paper in five years . Do you read paper . I do. Full disclosure. Im still a paper guy. Years, youo five will still read magazines . Absolutely. If you were sitting on a highspeed train, the train between the lawn and milan and rome, there is an enormous value. We talk about this as being print advertising, but this is also outdoor advertising. There is an outside. Am walking down, a350 or t there isee tha enormous value on the back cover that doesnt happen on the screen. Tom hold up your magazine again. Folks, this is a hat trick of shameless plugs by tyler brule. [laughter] tom over the top shameless plug. Why cant the major media houses copy what you are doing. They seem afraid to lose the lowest common denominator if they go for the elite. Thats one part of it. But as you know, you walk into so many boardrooms of major media companies, and you have that red sports car syndrome. Media owners, nonexecs who are whatever it doesnt matter. They what to think that they are part of the cool kids. They want to show that they are tweeting every second of the day. They want to see that they are drinking from the fountain of youth. I dont wantking, to be associated with print or television or radio; that will make me look old. And i think that is one of the big challenges of the companies. You have a lot of people who are not on the right side of innovation who are making the wrong choices. We are in a position look at the united states. We have seen a complete turnaround. More independent bookstores opening up in the last year than the last decade. At the same time, we have also seen in the u. K. Waterstone going back to profitability. I think we have reached a point we are settling down. If you want to read a tablet, you read a tablet. But it will be unilateral. Tom are tim cook and apple your supporters . They want to go for an elite aesthetic can they help or are they your enemy . I think they can help us on distribution. We have a radio station. Lots of people do like to listen live, but 70 of our traffic is downloaded. Of course, they create a platform for people, and they have access to our programming through them. Are they the biggest advertisers . No. But they are there from time to time when they have a new product. I would say that summer between neutral some are between neutral, but im not flying around with tim. Id like to. Francine maybe you will does it cross over to your world . We always look at media and publishing companies, the benchmark of people spending. As we moved to technology, does it help you understand where the information content out of digital is obviously much quicker in higher. There are certainly advantages to that, and if you look at our thinkss, 30 years ago, i about what we publish these days and how much digital is relative to analog. It has been transformed. The way we interact with our clients has changed, and it is much more over a blog rather than the longer, paperbased species we used to put out. Tom very good. Thank you so much; thanks for fighting the good fight. Look for monocle radio; love it. Coming up on Bloomberg Radio, our Kathleen Hays, incredibly important conversation with charles evans, the Federal Reserve bank of chicago president. Bloomberg surveillance. Francine im Francine Lacqua in london; tom keene is in new york. Its the end of the quarter and we have a lot of news on china. Lets get to the bloomberg flash. S vonnie thank you. Argentina is one step closer to returning to the International Credit market. Their senate has approved a bill that would and 15 years of holdout creditors. Prevent thewould government from paying some bondholders. Its a comeback for bill gross; his unrestrained bond fund is having its best quarter. Its almost 2 this year. They dominated the bond market for decades before forcing him out of pimco. Job cuts are on the way at the Worlds Largest money manager. Blackrock will eliminate 400 and the biggest round of layoffs ever. It represents about 3 of its 30,000 employees, according to people familia familiar with the matter. Thats our latest Bloomberg Business flash. Francine thank you so much. Vonnie quinn with the latest news you need to know. Michael moore joins us to talk more about job layoffs, not only for blackrock. Great to have you here. , we talk about banks day in day out. How much are the black rock job losses a surprise . The more they grow, the more they have been hiring. Is this because things are turning badly or is it too much stock . Part of it is a lot of growth over a long period, and part of it is these markets 400 relative to what we see, that the typical wednesday. Thats a typical wednesday. But it certainly shows a little uy side hasift; the b been the place to go for a lot of that. We saw a lot of departures in that direction over the last few years. And the last couple years, we have had tough years for hedge funds. You have seen the occasional person going back. I think there is also some black rockspecific dynamics going on, in that they grew so fast. Tom michael moore, the reality is everybody wants to be mike amey. Everybody is talking to pimco. Pimco invented it. Well. Doing it as i dont buy it for a minute. Everybody is leaving the theater and they all want to get the same taxicab; that wont work. No. Youve you are seeing seen perhaps the saturation of that. A lot of the top traders made that move when you saw some of the changes to the wall street trading business. But most of that move has kind of played out, so now its been a tough environment. Tom are they still going to buy bloomberg terminals . I am sure. We have a very healthy connection to bloomberg terminals, they are all staying put. Francine [laughter] on a serious point, are you concerned about transmission mechanisms . Liquidity . That has an impact on the real economy. Manager, what you will worry abou in the mediumterm is low Interest Rate and low asset returns. The leverage will go up a lot, and the returns have to come down. When you are managing your business, that is what worries us in the mediumterm. Future low asset returns. Tom mike amey, thank you so much. Michael moore, you have your hands full. You are going into the Second Quarter. This has been fabulou. What a great hour to get you set up for the Second Quarter. We will do that again across all of surveillance, television and radio. It is a perfect time to speak to him he amherst pierpont. Well talk about the absolute focus, which is china, china, china. Really looking forward to that, to get you ready. Futures negative. Stay with us; another hour of bloomberg surveillance. Tom yields drive lower. Market suggests between the tugofwar between janet yellen l marketevi vigilantes. S p goes to negative. April fours day is upon us. The 2015 predictions. This is bloomberg surveillance. The end of the first quarter. I am tom keene in new york. Francine lacqua and london. The news flow is extraordinary. Francine we have downgrades for china. All of the turmoil actually explains with all of the angst that investors had about the debt in china. Janet yellen gave her definitive answer on easing, it seems, and that is impacting currency. Tom global wall street in real turmoil. Now to get you up to speed on the first work news, here is vonnie quinn. Vonnie good morning. The Security Summit is getting underway in washington. North korea will be high on the agenda. The leaders of japan and south korea will discuss the recent nuclear test. Chinas influence over north subject ofbe the conversation between president obama and president xi jinping. The white house says the meeting will be a chance for the on human to press xi rights and territorial claims on waters far off of its coast. The Brussels Airport may be open later for passenger flights. They are evaluating temporary repairs made after the terrorist attacks destroyed the check in area. The Brussels Airport will only be able to handle a fraction of the normal passenger traffic. More trouble for jacob zuma. The nations highest court says that he violated the repaytution i refusing to taxpayer money and upgrading his private home. They are investigating if you if he breached ethics laws. Day yesterday the republican president ial frontrunner said they would have to be punishment for women who get an abortion if the procedure is outlawed. Later, trump issued 2 statements. One saying that it was the doctor and not the woman that would be held responsible. Global news, 24hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. I am vonnie quinn. Tom do you think this weekend will be more bizarre than last weekend . Vonnie i do. Tom that is where we are. ,n radio, we talked to chuck and he was shaking his head. The other candidates are keeping up with mr. Trump in terms. F the bizarreness the futures, negative four. Oil we are watching carefully. 37. 94. Onto the next screen. The u. S. Twoyear grinding down. Showing that the last hour. We will get to the renminbi in a moment. What do you have this moment . Francine i like that. Nonbizarre european stocks. That is probably an april fulls. To bring you the price of oil below 38. We have draghi five bonds tomorrow. Janet yellen, we had her news this week. Tom their days. Lets go to the bloomberg. I want to go through this. Copper rolls over. This is a rollover in oil. The answer is that there is no news. With this good run in oil, we have not broken through the various supports yet. The headline is that we are there when you look at the trend in study. We will look at the next few days. What are you featuring on the bloomberg this morning . Francine i was looking at the end of the quarter. This is the white line, this was stark market the swiss stock market. It is not so good. You can see where it is splitting off around february 15. The lowest valuations in more than he year, that is the swiss market. Global shares do not seem to be tempting investors back to swiss equities. Tom china was in the news standard went to a negative rate outlook for hong kong. In china. Ll you have really pushed on the debt dynamics of china. How big is their debt time . Is it japanlike . Enda the pace of debt buildup in china looks alarming to foreign observers. When you consider the total debt 2. 5 times the size of the economy, and a lot of that has gone to inefficient parts of the economy. Companies that are not making much of a profit. The fear is, as it drags on, the banks Balance Sheets prevent them from lending more, and it will drag on the economy. A real challenge for china. It is not clear they can pull that off. This is a problem, right . It is trust the authorities that they will keep a handle on this, or dont. You trust decide if the chinese authorities and regulators . There is skepticism around china. The credibility around chinas authority took a dent after the stockmarket slump. The real critical question now is how they can say they will hit a growth target of 6. 5 to 7 . Even while talking about the need to cut back on borrowing and leverage. The old stimulus playbook. People are not convinced. That they will not have to pull on the debt lever is to unleash a flood of spending to ensure they get six point 5 growth target and along the way it the hard, painful reforms go to one side. That is where the skepticism comes out, that china can pull off this balancing act. Havewe will continue to news on china through the day, night, into the evening. Robert sinche is with us. The end of the quarter, he is growing a beard until janet yellen gets hawkish. He will look like one of the guys in harry potter. We still reverberating off of what jerry yellen said. What chair yellen said. Robert it was a pretty stunning day. You can look at a glass halffull or halfempty. Yellen took all of the water out of the class. You always go back to real and nominal gdp. Stanley has been great on this. Tapping gdp. That is the overall on china. That is what we are talking about. Robert absolutely. You had real growth in china running at full percent a few years back. You had nominal gdp growth of around 15 . That has now been cut in half and is running more like seven and 5 . That makes it more difficult to fund the economy and to fund the debt repayments. That is part of what we are seeing in the downgrades. Francine given what we have , isd from chair yellen Dollar Strength over and done . Think so. Dont we are a little surprised with how much the dollar has come off. Thee look at some of valuation work that we do, it still suggest the euro dollar should be trading in the 107 109 range. We think there is upside to the dollar. We have had some dollar bulls, long positions being squeezed comments. Yellen we will continue to see divergence and relative monetary policies. We think the dollar will go higher through the year. Tom bring back the single best chart from yesterday. Moving the fouryear averages of real and nominal gdp chart. The bottom line is that we squeeze down into a place where we have never been. We have been there after the napoleonic wars, but nowhere in recent times have we had the chronic dampening. What is the fix, not only for janet yellen, but for the public . Think the fixot is easy. A lot of it is demographic in nature. We have had a slowdown in the labor force. A lot of that is the aging baby boomers. You have Labor Force Growth that has slowed down to probably. 5 a year at best. Productivity growth has not been robust. We think potential gdp growth is 1. 75 range. If the potential is 1. 5 to lashley yearshe is easing Monetary Policy. The fed has done what they can do. We need to generate faster potential growth. That can come on the Business Investment in Capital Spending side. Francine that will come in five years to 10 years . Growth is stuck in a rut and Central Banks have no power to deal with the growth. Robert this is not a Monetary Policy issue anymore. Crisis wasy addressed by Monetary Policy. The potential growth crisis that have cannot be addressed by Monetary Policy. That is more is cool policy. All of those things that are not being done. Robert sinche with us. We will look at global wall street and the overall economy to get you ready for the Second Quarter. That will be featured on Bloomberg Radio with Kathleen Hays. In conversation with the man who has been way out front with tepid gdp. Bloomberg surveillance. Francine i am Francine Lacqua in london. Duringne is in new york the conversation focusing on business and finance. Here is vonnie quinn. Vonnie in hong kong, retail sales will buy the most and 17years. Slumping 21 . The problem is fewer Chinese Tourists visiting during the Lunar New Year holiday. Aswas a year to forget chinas largest banks. The biggest a controlled lenders posted their lowest annual profits in a decade. They have cut dividends due to an increase in bad loans. The president of the bank of china forecasted a new normal of lower profit growth. Argentina is one step closer to returning to the International Credit market. A bill has been approved to end a 15 year dispute on the countrys defaults. That is the latest Bloomberg Business flash. Francine this is what were watching for the rest of the week. Aesident obama kicks off Nuclear Security summit in washington, including a sideline eating with president xi jen king. Sideline meeting with president xi jinping. Down for all sit conversation with our own Kathleen Hays. Evans will sit down for a conversation with our own Kathleen Hays. Tom there is a Nuclear Security summit, that is the formal designation. Far more importantly than the photos taken will be the back. Our National Security correspondent for Bloomberg News. It is great to have you on. Lets cut to the chase. What is the backstory between mr. Xi meeting with mr. Obama . Happens only what the sidelines, before or after, that really matters. Anytime you have the leaders of the worlds two biggest economies meeting, it is news. Aboutre expected to talk north korea, the effectiveness of the sanctions put on north korea. You could have issues like deployment in the South China Sea come up. Andwe have seen with china the u. S. , they have forged an effective working relationship. About the g7alk and g20, but when china and the u. S. Agree, there is a g2 that brings the world along. Lond m sure that mr. That mr. Hollande will be talking about terrorism. Is it possible they will want to hear from mr. Obama about our for candidates . Bill you have 50 World Leaders coming in. The president ial race is not on the official, but everyone will be talking that donald trump, hillary clinton, and bernie sanders. Everyone has seen that this is a great opportunity to get a little bit of backstory on the president ial race. Inncine a lot of the focus europe, because of the attacks in brussels and the fact that we understand that some of the attacks were looking at nuclear plants, there is fears that the Islamic State attacks may have been a nuclear. Will that be at the forefront of the summit . Bill sure. This will discuss how countries can better track, secure, and store Radioactive Material. They have a special section to talk about terrorism. Some a lot of leaders perspectives, that is probably the most important part. We know isis and other terror groups would love to get their hands on Radioactive Material. We are not talking about nuclear bombs, we are talking about Radioactive Material used interview bombs. Used in dirty bombs. Tom the seriousness of Nuclear Policy worldwide. With the bank of america. Youve always been and a set looking at the flows. Is radioactive money moving out of china . Robert i think there is capital flow out of china, but a lot of the big capital outflows that we saw were Chinese Companies paying down their foreign debt with the expectation that the currency was going to weaken. Companies have been borrowing offshore, particularly in u. S. Dollars, wanted to pay that down and move the borrowing back to china. Tom i do not want to get you in trouble, but im honored to ask you this. There is a huge mystery about this Chinese Company buying up american hotels. With all of your years of following china, do we know whos Balance Sheet it is, or what is on the Balance Sheet . Robert not really. Little seen efforts a over a decade ago that the Chinese Government came in and use reserves to shore up the Banking System. A lot of this is intermingled funds. This isnt surprising. We saw the same thing for japan when Growth Prospects slowed. We saw an outflow of capital from japan into the united states. This is a fairly normal part of the global adjustment process. We will continue to see the funds coming out of china looking for better returns elsewhere. Francine chinese stocks entering a bull market in hong kong. Do we need to Pay Attention . Andlook a growth in china the stock market is a little bit of russian roulette at times. Robert we did not pay too much attention to the Chinese Market when it sold off to radically, so we wont pay that much attention when it rebounds. It is more of a sentiment indicator that the death of the market is not too great. The rebound is consistent to what we have seen globally, another round of monetary accommodation from Central Banks finding its way into riskier asset markets, because the Central Banks are buying Government Debt and the money has to go somewhere. Francine thank you. Tomorrow on bloomberg surveillance we look toward the jobs day. We have a very exciting guest, the citigroup chief economist at 11 00 in london. Good morning. Francine lacqua in london. I am tom keene. The Second Quarter is upon us. What that means is the college and school derby where you figure out where the off spring is going to school. To anot describe this global audience, how stupid this is. The New York Times nails it with the parity that is too close for comfort. Yes, not a single student we could not live without, said a stanford administrator that requested anonymity. In the stack of applications reviewed, i did not see any goldmedal lists on the summer or winter games. While there was a 17yearold who perform surgery, it wasnt open heart, transplant, or anything like that. Shell thrive at yale. A great career at hamilton and brown. It has gotten out of control . Has gotten a little insane. Like many things, it is not oriented toward the students building their lives. It is oriented toward college admissions. What do i need to do to get into the school i want to attend . At my grandfather was harvard in 1920 six. Is there any correlation between academic and Job Performance at bank of america . Lili greenberg once said, we dont mind people with mbas, but we want people with degrees. Francine, heres the second quote. We are going to do the second quote . Ok. I will put it out on social. It is absolutely superb. Francine i have a fiveyearold taking exams. This is the reality in the u. K. Tom it is the stupidest time of year for parents across all of america. Tomorrow on Bloomberg Radio, no gross will join us from janus capital. We will show you that worldwide across radio and television because it is jobs day. That is not an april fools joke. Oh, hi micky dolenz of the monkees here, getting ready to host the flower power cruise. announcer were taking the love generation to the high seas and reliving the 60s. Well celebrate that unbelievable era with the music that made it so special. Therell be over 40 Live Performances featuring eric burdon the animals, micky dolenz, the monkees lead singer and cruise host, the 5th dimension, the lovin spoonful, rare earth, spencer davis, three dog night, and many more imagine enjoying all that great music on the fabulous celebrity summit, leaving Fort Lauderdale and making ports of call in jamaica and the bahamas. Youll be back in the days of bellbottoms, peace signs, and so much more, with special theme parties and 20 funfilled celebrity interactive events. Cabins are filling up fast, so come on, relive the era you remember so well. The flower power cruise, february 27th, 2017. Let your freak flag fly. Dont miss the grooviest trip at sea. Francine i am Francine Lacqua in london. Tom keene is in new york. Vonnie terrorism and the Islamic State. They topped the agenda at the Nuclear Summit in washington. Obama will discuss north Koreas Nuclear tests with the leaders of japan and south korea. The u. S. Is considering whether to deploy a Missile Defense system in south korea. They will also talk about north korea with president xi region being. President xi jinping. The president will also bring up human rights and chinas claims in the South China Sea. And medication can be taken by women who are 10 weeks pregnant at home and senator vitter doctors often for abortions. Several states have made it tougher for women to get medical abortions. Republicans are balking at an early draft of the plan to help puerto rico with its debt. Include bankruptcystyle in voluntary restructuring. More intentions and hong kong as they prepare for elections and set timber. To bar thereatening formation of a Political Party advocating independence. They say that hong kong is an inalienable part of china, and will take action against any movement that urges otherwise. An inquiry on how british opinion polls got it so wrong, says there is not much companies can do to improve results. They fell to forecast the victory by David Cameron in the conservative party. Failed to forecast the victory by David Cameron and the conservative party. Global news, 24hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. I am vonnie quinn. Tom thank you. It is a recalibration off of estimates made in 2015. Everyone is smarter after three months. I love your phrase, tugofwar. It is the Financial Stability or financial instability. Dont have Financial Stability, and we are not likely to for several quarters. This is a change from six quarters ago. The last four quarters will continue to fall. Measurements for debt markets, whether it is the oil in the engine or longer term papers. Where are you focused within the debt market . The highyield markets are where we are the most focused. It has the potential to go lower. The one thing that we have not worried about, and i hope we dont have to, is a big emerging market sovereign collapse. Starting todollar weekend. If that comes back, i would be far more worried. Francine do your point, it is the emerging market debt that is worrying. I guess it is companies that are concerned when the fed starts normalizing. How can you be so sure that we wont see a recession . Ajay im looking at the global currency market. In terms of recovering labor markets. In terms of real financial wealth. In terms of low inflation and low commodity prices. Im not talking about the Global Economy starting to go to the upside, but i do think that recession seems unlikely for the next months. Francine tom . Tom i look at what were , as a nominalay gdp play. Stanley and pimco has gone 2. 0 on real growth globally. Are you that clashes . Ajay last year Global Growth was a little over 3 . We think it will be around that number, which is disappointing. Robert i think what is important is the composition of growth. We look a Commodity Markets and the demand for commodities. The last time i looked there were five or six Major Companies aat increased production on yearoveryear basis. 25 that declined. The composition of growth is production,m investment, hard goods, and shifting to Consumer Services and Consumer Spending. That keeps gdp growth going, but it doesnt give us a demand for commodities that we normally associate with Global Growth of 3 or more. Francine in your global report you talk about macro risks. You say that there is a lot of downward pressure. You think china is not an immediate pressure, that you are concerned about the brexit . Ajay the polls are too close to call. Referendum was a smaller deal. There was still a time when the market started to worry very sharply. We havent gotten to that stage, but i think we will in early june when people realize that is a realistic chance of that the United Kingdom could leave the european union. A serious risk from the u. K. Is being priced in and playing in on the currency markets. It talk about the commodity rally on shaky ground. Is this because plans that were taken off her coming back online, or because growth will be more subdued . Ajay the single most important thing the commodity bulls are pointing to is the demand for china for commodities. Was largelyt financial speculation, not physical demand. The demand dynamics. Heres a quote from barclays report on the table for. Investors will be confronted with a conflict between ofgerterm implications expensive asset prices in a low growth environment and a tactical impairment to save market down drafts while Central Banks remain supportive. The heart of the matter is that Central Banks are still supported. How do you envision that changing . Ajay i dont. Theyre starting less and less to prop up, but Central Banks are making it difficult for investors to stay in cash or fixed income. Youre worried you sure away from equities markets, and every time an event doesnt play out, you are forced back into the equities markets. That will continue. Francine we were talking about the fed market to market, like chair yellen with the yield curve. Will they stay anchored . This point, the forecast is to hike for 2016 in june and december. June is one week before the brexit. Given how cautious the fed seems to me, i would argue that they will not go then. About the divert and strayed it doesnt work anymore . Tilts on thee fed dovish side anytime they get a chance, that would dampen any move toward divergence in a stronger dollar. I think there will be some divergence within the fed. I think stan fisher as vice chair is more oriented with normalizing Interest Rates. There could be a couple of interesting fed meetings coming up. It looks like there is a core that wants to get on with normalization. I think the they may have been taken back by yellens comments this week. Tom the divergence between John Williams and James Bullard is stunning. Ive never seen it. Ajay James Bullard had changing views, that is also spending. Tom thank you so much. Report, the tug of war. He will continue with us on Bloomberg Radio. The bankrles evans of of chicago in conversation with Kathleen Hays. Mostut question, the important interview of the day. Stay with us on bloomberg surveillance. Francine i am Francine Lacqua in london. Tom keene is in new york. Vonnie quinn has our Bloomberg Business flash. Eliminateack plans to 400. Layoffsest round of ever, representing 3 of the 13,000 employees here that is according to people familiar with the matter. Larryfrank said the fink said it may put pressure on companies to cut back jobs. The race in the top 11 of the group. Growth dominated the bond market, in pimco 2014. Isrging market investment down from day to day management. Overseeing market groups. The new Investment Officer will be so berg. They will have a back to emerging markets after years of declining values. That is the Bloomberg Business far. Ofncine he is really one the names that you associate with emerging markets. The other one. We have seen peaks and troughs in emerging markets. When you look at emerging markets, they are linked to commodities. A small but robust commodity rally. Can they continue . We have a dovish fed and weakness in the u. S. Dollar, but it is not certain the rally will continue. Robert the one that is standing out now is oil. , or back above 40 a barrel. Oildollar has weakened, but prices are working lowered. The fundamentals are starting to show through in the oil market. They may show through in some of the other markets. Growth, aave global lot of that growth is in the Consumer Sector in the services sector. Production around the world is actually quite week. That is what drives the demand for commodities. Francine when you look at china, the china construction sector seems to be mired in overcapacity. That is not going anywhere. Robert they were a big user of iron ore, copper, and base metals. That is part of the shift of growth in china from infrastructure and Government Investment more to Consumer Spending. The Consumer Spending is strongly oriented toward services. Isre the demand is growing moving away from commodities towards labor markets. We are seeing the labor markets to relatively well. Rts i want to show 2 cha showing tension. This is a great chart to end the quarter. This is chinese appreciation. What the market desperately wants is the yellow circle to a weaker renminbi. It is not happening as china manages its currency, given debt and all that. Trades. A chart of world what matters is long. There is lethargy in the 80s. This is half a century of trade growth. Underlying backstory, isnt it . Robert it is. I would harp on the divergence of the type of growth we are getting. Orientation, is in goods. Domestic growth is more dominated by services. If youre getting growth from investments and production of goods, they can get transported internationally, generating trade. Product,are domestic produced and consumed domestically. Growth and services does not contribute to world tom is it a miss measurement ine productivity, or is it actuality services are not part of trade . Robert that is the real thing. Think about housing services, Retail Services tom the new digital age. Robert exactly. They are domestic oriented. They do contribute to the demand for labor, and we seeing good labor statistics around the world. They do not contribute to the demand for commodities and the growth in global trade. Francine what will it take for wage growth to be a level with which central bankers and policy makers will be happy . Robert that is an interesting question that goes back to toms focus on nominal gdp. There is a focus on nominal wage growth. With headline inflation close to zero around the world, two point 5 nominal wage growth translates into close to 2 real wage growth. There is nothing wrong with 2 real wage growth. We are used to a higher gdp. We are thinking nominal wages have to go through. 5 . Have to go 3. 5 . I do not think we will get that. Francine the problem is that people feel less rich. Then they go to the polls and they vote against moderates. Inert even when i was school that is called money illusion. There are people that would rather have a 6 nominal wage increase with 6 in nation and to have a 2 nominal wage increase than 1 inflation. It makes no sense empirically. Those nominal numbers really matter. That is what people focus on on a daytoday basis. That is where the global disappointment is coming in and the cycle. Were not getting the nominal Growth Numbers that people are accustomed to make them feel better. Francine thank you. A couple ofin minutes. Tomorrow, it is jobs day. We will look at it with the citigroup chief economist. He called for recessionary growth. 6 00 in new york, 11 00 a. M. In london. York, indeed london, indeed global wall street. Wondering where they will be at sea on june 30. Where they will be and see on 30 yard what an end to the quarter it has been. Francine the u. S. Is doing better. A real conundrum about dollar direction. We have covered that today and will continue to do so. Speaking of the dollar euro, looking for a 116. Another firm, i believe is Deutsche Bank, a stronger euro. Brazilian real, three point 60. It needs to be watched. Francine . Francine coming up it is bloomberg with david westin, stephanie ruhle, and jonathan ferro. Jonathan the equity, particularly in europe. The most since 2003. The bank stocks are down 20 . For me it is an fx story. Not only chinese currency, but the dollar. The worst quarter for the dollar since 2011. As we look at the payroll, what is in store . Big stories on bloomberg. Francine this goes back to what we were trying to discuss. Whether the dollar rally is done. Tom it is. We should point out that by this time next quarter, we will be looking at the debris from the brexit. Showing how we get along from the end of june into the third quarter. It is a wonderful time to speak with Robert Sinche on global wall street. Harper and our team at Bloomberg News is really looking at the future of global wall street. Here is someone to talk about that, going back to greenberg. The ballet, where does this end in 48 months . Robert i think that the sentiment in the industry has been are we there yet . We are not. We continue to see the strains coming about from negative Interest Rates. Ironically, this is coming at a time when mobile savings are very large. You would think the investment of global savings with the to a robust industry. It tells us that while the beerlying industry may still there in terms of investing assets for clients, the rapid ability the profitability that came with the Financial Engineering of the 2000 is what is being peeled away. That is showing the underlying business has to adjust. Business, byrlying whatever you want to call it, mergers, acquisitions, combinations, whatever the term, it particularly seems impossible in europe. The challenges. The human vision a more canadianlike industry . A moreou envision canadianlike industry . European Banking System has been slower to adjust then the u. S. Banking system whether that is out of the financial crisis, the fed being downssive, the write taken in the u. S. The orientation in europe is less reliant on the private sector to adjust quickly. I think it will be a long, drawnout process. I dont think were there yet. Francine why is that . To were quicker and the u. S. Get things moving and on track. Is it because of the financial crisis . It started in the u. S. , or is it because europe has been on the backend, we have just been slow . Really i think coulter the labor markets are more rapid to adjust in the u. S. Than other markets. I think the u. S. Financial firms have been much quicker to make adjustments, in businesses, exiting businesses, scaling back on employees. We have seen this in industry after industry that u. S. Companies tend to be very quick in making adjustments and things tend to move more slowly in labor markets across europe particularly in the eurozone. Not so much in the u. K. , more in the eurozone self. Tom i dont mean to pick on Deutsche Bank, but the uproar about february. The last 10 days or so, this is not Deutsche Bank per se, but the whole industry. No bides the point of become so great that institutions like the ecb or the fed have to provide stability . We dont know, do we . Robert we dont. In the case of the ecb they may. E contributing to instability negative Interest Rates is a strange concept. Pay people to hold your money doesnt make sense. What we are seeing is a reevaluation of whether negative Interest Rates are accomplishing what they want it to accomplish. Well. Une 30, as we will continue with mr. Sinche on radio. Bloomberg is next. They will continue the discussion. Francine, thank you. It is jobs they tomorrow. Gary shilling will join us on disinflation, and bill gross on janus capital. Bank stocks plunge in europe. This is ahead for the biggest quarterly drop since 2011. Eurozone inflation remains negative for the second month. The European Central bank repairs to ramp up and another reality check for china. Cutting the Credit Ratings to negative unstable. From stable. Jonathan i warm welcome to bloomberg. David were looking forward to the jobs. Were looking back on this extraordinary quarter. Jonathan what a quarter it has been. The janet yellen rally. Lets give you an update on the markets. It is right across most of the indexes. In europe, we see the losses. 4 10 of 1 . The taxes up the dax is