Transcripts For BLOOMBERG Bloomberg Surveillance 20160523

Tom keene is in new york. We have this possible merger, then we have the brexit news, and the market. Tom we will focus on commodities in the pacific. Francine, i totally agree this one month mark off to brexit is front and center. Francine it is. A lot of people have decided, saying, why we are even voting for this . It means a whole conservative the government. Now lets get straight to the first word with shery ahn. A summary and has joined the hunt for the missing plane in the mediterranean, trying to find the egyptair jets voice and data recorder. A french tv channel reports that the pilot spoke to air Traffic Control about smoke in the cabin just before the plane disappeared off the radar screen. One ofnt obama has ended the last symbols of wartime animosity between vietnam and the u. S. In hanoi today, he lifted the embargo on the sale of weapons to vietnam, hoping to strengthen commercial insecurity ties. The u. S. Has confirmed that a u. S. Drone strike killed a leader of the taliban. President obama called the killing an important milestone in the effort to bring peace and prosperity to afghanistan. Is considered the most significant assassination in the forces war since u. S. Killed Osama Bin Laden in 2011. Iraq has launched an offensive to retake the city of falluja from the Islamic State. The Prime Minister says the aching arces are appro moment of great victory. Fallujah is 40 miles west of baghdad. The Islamic State has controlled it for about two years. In the u. K. , the treasury warns there will be a yearlong recession if the country votes to leave the european union. The treasury lays out two scenarios in case of a brexit. Under the severe shock outcome, gdp would be 6 lower than otherwise, and Holding Prices would fall 10 . The referendum on the eu was to 23rd. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. Im shery ahn. Tom thank you. Lets look at the data. Equities, bonds, currencies, commodities. Commodities front and center, up fractionally, yields churning. Continue to dollar strength. In commodities, some real weakness. Oil giving it up after a strong, tenday period. Euro stronger. There is singapore iron ore. That is a big move, 5. 5 . An important chart over the weekend, of all the tankers off the shores of singapore. Francine that is an important figure, because overall we are seeing quite a lot of pressure on these Industrial Metals declining. European stocks were down but are now up at touch. Huge, but at least they arent falling. Bayer, whoshow you made this unsolicited offer to buy monsanto. This is a big deal because of the valuation. People are concerned they are overpaying. Tom citigroup publish this morning out of london, suggesting that there could be a higher bid in order, 13. 5x. Back over to commodities, let me do this quickly to get to our important guest. Off we go with the rollover. Here is the stasis in commodities. This recent rollover in singapore gets everyones attention. The yen rallying after a slide into a threeweek low, pushing it i know you know what this is. Ichimaku, from monday. You studied it. It is used to predict currency direction. Its called the cloud you can see something happen in january and here. Tom all disclosure, i studied this years ago. Im not a fan. This is huge among Technical Analysis of asia. They just love this. Francine i started this morning for about three hours. But on a technical level, it makes sense. A lot of charts we look on tom where else can you get whatever its called cloud studies than from Francine Lacqua . Outstanding. Francine at 5 00 a. M. Tom there you go. Francine tom. Tom our guest host, we are thrilled he is with us. I know francine wants to jump in. What the imf is doing in greece the commodity roll over, which goes into your overarching theory of secular global stagnation, certainly a weak america. What does commodities signal . You have talked about the commodities having gone down a couple minutes ago. Two things. If you can do a chart with the Global Economic growth, and you do that with the Dollar Exchange rate, you would find all that you want to know about commodities. If you can forecast a dollar, global growth, you are done in terms of staying where commodities are. The problem is that the dollar has been appreciating massively since we 14. You had oil prices come down, commodities coming down. The dollar weaken . If the fed increases Interest Rates anytime soon which i doubt, and if the rates go up, once again the dollar goes up and the commodities get hit. This has been a huge deal we thank the team at hsbc. Im sorry, thats a classic rollover. Stronger u. S. Dollar, weaker aussie dollar. Would you suggest that with the commodity roll over that we get aussie back to 2008 crisis levels . I think the Australian Dollar will weaken. I have been looking at it closely. I was in australia visiting two years ago when i had to pay 1. 06. More recently, we went down a lot, and up again to . 76, but it is backing off. In the case of the Australian Dollar, you are looking not just a commodities that i what happens to china. China is important. What the reserve bank of australia is doing is important as well. They will have a change of governors, and a change of policy that will affect it. I say the Australian Dollar going below . 70 again. Francine sri, you say its unlikely that the fed will start to normalize. So why are the pains telling us that they may start hiking rates in june . The reason they do it, francine, is because they do not want investors to become enormously oriented toward speculation, to go and assume that the fed is not going to hike, so you in turn push of the equity markets even further. To push down bond yields further. You go on a risk spree. That is what they are trying to avoid, and you have had various members of the fed talk to you about one or even two increases this year, as John Williams said recently. The problem is you also have to be the chairwoman, and we shall aw what she did with everyone was expecting a hawkish presence. She essentially said there was nothing going to happen, and caution again prevailed in her interview with other fed former chairmen in new york six weeks ago. So i think that is where you are coming from. You have a few people who dont value to speculate too much. On the other hand you have the chairwoman, who is very cautious and dovish in terms of pushing the markets down. But the bottom line is the fed is stuck. They cant increase. If they increase even once, i think the market will correct. I remember conversation with tom lay last year, saying that if they hiked in december, there was going to be a calamity, and that is what happened. Francine the problems we have an talking about you wonder when the markets will start taking it in stride. Thats the conversation we will have. Umar, with plenty more on what the fed will do. Coming up, we speak to the chairman of bayer. Bayer made a huge offer, 64 billion, to monsanto. We will ask about that in the next hour. Francine live pictures from london. Look at that. Its actually sunny. It wont last. Would turner have been for brexit . Francine [laughter] i dont know. I will look into it. I wonder what michelangelo would have said. Tom keene in new york; im here in london. Lets get to the Bloomberg Business flash with shery ahn. Ayer is proposing a blockbuster deal that would create the worlds biggest supplier of Farm Chemicals and genetically modified seed. Bayer wants to buy monsanto for 62 billion in cash. That represents 20 premium to monsantos last close. It would be the biggest takeover ever by a German Company. Coming up in the next hour, we will speak to the ceo and chairman of bayer. The Largest Insurance Company in france, axa, is getting rid of all its assets and tobacco. That is 2 billion worth of stocks and bonds, after it called smoking the worlds biggest threat to public health. The largest Discount Airline in europe forecasts Earnings Growth will slow down. They expect net profit to rise 13 in the next fiscal year after 43 in the previous 12 months. Attacks and terror lower fuel prices will prompt airlines to cut ticket prices. Thats the Bloomberg Business flash. Francine thank you. The u. K. Treasury says britain will face a yearlong recession is that leaves the eu. Are chief european economist for Bloomberg Intelligence joins us now. Srikumar is still with us. Thank you for joining us. We are getting more from the campaign saying this is why we should not leave the eu. They are coming out with figures of how much we as house buyers or owners would pay the price. Yes. We saw have seen ouare the mediumterm implications. What we are going to see now is the shortterm implications, over the next couple years. These are enormously uncertain, and they depend in part on the first part of the analysis, the mediumterm. If you expect to be poorer over the next 30 years, you dont wait to cut your spending, you start now. That is what the shortterm is talking about, where the previous bid was over 30 years. Francine how difficult is this to model . When you listen to George Osborne, when he is at japan, they are trying to put concrete figures on it. House prices between 10 and 18 . How can they know it is 10 at 18 and not 21 . You have to love the precision. That sort of accuracy is spurious. 18 e is no way you can say or 10 . It depends entirely on complements. We just dont know. Havent to watch i happened to watch a couple movies on churchill. What would churchill do . I love how you cast aside the precision of the math. Is there a churchill out there in this debate . I dont see it. We know the economics as part of the argument, but it will not be addressing a lot of peoples concerns. Its more about sovereignty, feelings on migration. So no. I dont know which book you read, but i believe Boris Johnson wrote a book about churchill. Tom srikumar. This is the need to history. When you look at the prism of brexit, i would suggest you look at not only the economics but the emotion. The emotion has overtaken the economics recently. Look at the number of people who are opposing brexit. Prime minister cameron made a mistake in promising it a couple years ago; now he has to keep his promise. Obama,n George Osborne, all against brexit. ,ark carney talked recently that you would have a recession. Now it is being repeated. I think the hype is not greater than reality. Is a lot greater than reality. Tom can we do matthew . Math here . Does math work . I dont think it works at all. Game theory would work, if you are at expert at chess it would work. Quit, what areo the europeans going to do to you . Are they going to make more concessions or not . I think the big difference between remain and brexit you dont know which way game theorists go to. Tom francine, please. Francine jeanclaude yunker just said, look, there wont be any preferential treatment for deserters of the u. K. If they decide to leave. But if you lose the economic ground and if you move on to this more emotional do you believe the polls, that the u. K. Stays in . I dont think the polls are clearly suggesting they stay in. If you look at the difference, 40 ,ine, roughly 46 to that means another 14 or 15 are undecided. The question is are the undecided people that way because they are truly undecided . What are they waiting for . Or if you want to brexit, dont you want ttell your neighbor, and the poll taker, and the bookie . I find the big undecided word to be troubling for the remaining people. Tom thank you so much. Item sure we will see you in the coming days. Jamie murray. We will lookour, at the commodity rollover through the litmus paper of Foreign Exchange. Mark chandler from Brown Brothers. Stay with us. Tom good morning, everyone. Francine lacqua in london. I am tom keene in new york. It was in their 40 or 50 years Intercontinental Hotel in hanoi. The president has visited japan, and japan will be front and center. Today he spoke in hanoi, saying bill United States is lifting its lethal ban on weapons. With the president is our own toulouse. This carries all sorts of weight. How is he greeted how was he greeted . The president was greeted with open arms. President is trying to solidify and grow the u. S. Vietnam relationship, and the vietnamese are very welcoming, even though 40 years ago there was a war going on. Tom what kind of state is it . Compare and contrast the stereotypes we have a vietnam to their nascent capitalism in the form of government. Lets start with the democracy. It is not a democracy, is it . Is not a democracy, but it is a very young and dynamic country. It is opening up more and more to business. They want more investment from u. S. Companies, from foreign firms. They are trying to open up their economy. Even though it is not a democracy, it is very much open for business. Olus, president obama has also said they will lift the ban on lega lethal arsenals sales. Do we know what they are ready to sell . That is a question that hasnt been answered. The president said this would be a casebycase basis. There is still the issue of human rights for any of these sales are made. The u. S. Government will have to do an assessment and make sure the record is in line. They will most likely look at maritime access and equipment. This deal, where the vietnamese are looking for more help. Toluse, traveling with the president. Tom, when you look at trade around the world and the possible deals, this is quite significant. Sri, what is your take . Is it only the first process of a much more engaged u. S. . I think it is the first stage, as you said, in a much more engaged relationship between them. Even more important, i would say the 800 pound gorilla which was not in the room is china. The whole affected terms of selling arms to vietnam essentially puts vietnam on the same plane as the United States and japan as they counter the chinese domination, and that is where things will be positive. Tom thank you so much. This is bloomberg surveillance. Cameron, theid Prime Minister of the u. K. , talking about brexit. We had just a couple of hours ago the u. K. Treasury publishing their latest report saying they face a yearlong recession if they to leave the european union. Undecided voters say the risk of brexit is too great. Davidect to hear from cameron, and i believe he will be joined by a chancellor. First, bloomberg first word news. From greecekers have cleared the way for more loans. They have called for austerity measures including more taxes. That is one of the last things they have to do in order to unblock the next round of loans from the bailout. Angela murky has returned to turkey. She is trying to shore up an agreement on refugees. They agreed to halt the influx of refugees making their way to europe. They have been slow to deliver the almost 7 billion in aid and tosa free travel germany. Fors a virtual dead heat austrias election for president. One candidate has agreed to break with the role of decades of president s who have played a ceremonial role. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. I am shery ahn. I believe you have more on the elections. Francine thank you. This is my morning must read. Fromked out something bloomberg, writing francine what this goes back to is a little bit of what we are seeing from the u. S. That people are scared. They are voting for people in the extreme parties, which we probably would not have had just a couple of years ago. Tom absolutely. I think it is really front and center. I did the thing in the Washington Post the other day on fascism. Not to make it front and center, but that did be is there the debate is there. Francine through the central bank, you cannot openly talk about politics, but these are the things you must be looking out for. We speak with michaels feed. When you look at the rise of extreme parties, not just in europe, but elsewhere, how does the central bank look at this . Thatyou look at the risks the central bank faces, this must be part of it. Michael obviously, there is this continuing trend, especially over the last couple of years with the political ship. The way that Central Banks look at things, with they will be worried about is the economic policies that have been put in place will not be the best. Nothing best in terms of austerity needed and budget deficit targets. What is interesting in terms of the markets perspective is when Central Banks are delivering qe, it breaks down the risk between political markets. Francine how crazy is it we are eight years on from the political crisis but we talk about the austerity versus growth debate. Two reaches need to abandon the monetary qe that has been put in place because it is not word the way we worked the way we thought it would. You are right. Youre getting onto this chapter of needing lose policy and fiscal spending in order to get Inflation Expectations move higher. Tom lets introduce our best chart. We will introduce it in the next hour, but it works perfect for you. There is the plunge in swiss francs in the gradual measure managed weakness. I would suggest it shows the tension of currency dynamics. Do you just assume currency depreciation is the solution to the trilemma that europe and asia faces . Michael i would not say that currency depreciation is the only solution. It was originally thought that currency depreciation would help expectations. What we have seen is the than if it is quite shortlived. You get expectation moving higher for a year and then the effects wear off. You learn that you need other tools. Expansion, for example. Tom it is a more open system now. They are directly different system. They are. The market collapses in early 1990. I dont think they want to do that. Freshes of 1985 are still in their mind. Drop. Has had an expo i think germany will have a tough time. Tom francine, please. Francine when you look at the g7, and i dont know if it is a mistake or not, but overall, it is difficult to argue we are not in currency wars. Is that fair . Michael i think we have moved away from currency wars. Francine despite everything that has been done . Michael the central bank has moved on. They moved on away from concerns. Bout the euro they are using the same tools, but in a slightly different way. Francine japan still struggles with a higher yen. Michael they always use a currency struggle with currency. Thearyen, most of variation will be given by expectations from the said. With the japanese need our terms to talk about a june or july rate hike. That will get the intervention from the bank of japan and help for a few days, but not to really shift the expectations. Tom thank you so much. We will address this in the next hour with mark chandler. Forill talk about the call a slower recovery then expected. On bloomberg though, a smart op ed the other day. It is bloomberg surveillance. Francine im in london. Tom keene is in new york. Lets get a look at the corporate dealers we are watching. Buyer has made an unsolicited monsanto. H offer for we have our european deals maker that broke the story this would happen a couple of weeks ago. Thank you for joining us today. It is such a huge deal. Buyer shares are down quite significantly. People fear they would be overpaying for monsanto. Arehe equity race they talking about, at the least, euros. 15. 5 billion that is huge. Cash, thereat all was a really big one in the chemical space. I think some part of this is they go to existing investors and believe this is a good move for us. Investors are bit nervous. It is not just the price, but also because the way they are funding and the stock is responding. Francine are they going to pull this off either on the investor basis or the general appetite . Milliondollar question for them. When we first wrote the story, people were calling and saying, you are crazy, this will never happen. Dont German Company has ever attempted a transaction this big. I think everybody investors, the market m i have to get wider ladels. This is reading like the 1980s. I get your point that it is an all cash deal, but they will to a Share Offering of 25 of the transaction. All cash is really misleading. To an extent. They expect investors to put up the cash for this which is why when they talk about them coming out and saying what they are paying for the deal, one of the reasons theyre are doing it is because the stock is taking a huge hit and theyre worried that investors may not be buying into the story. Tom bring up the chart, if you can. Share price ishe south, and south with a vengeance. To shareholders have any power . To say no to the deal . They have the power to say no to the captive raised. Off of this, can they pull a deal this big and with such a huge equity frankly, ive not seen such a huge equity in a while. Have you . Francine something of this size, i think we have to go back to 1997. Does this mean the german business is back . That they are hungry for it . Are they cannot grow by themselves, so companies are looking for m a when you see no growth in the world. What you find is the best way when yoush is m a dont want to expand. Companies find that does not as easy to grow organically. It is much easier to do that in terms of acquisitions. We are also right in the liquid cash. D availability of i questioned the approach of saying there is all of this debt behind it. Tom lets remind yourselves that he worked for a small start up firm a few years ago. This is one massive flashback. The stock is down. It is clearly massively diluted. This is the desperation of acquiring nominal gdp and topline growth. The monetary conditions clearly facilitate that. The signal taken is that this is ideally what the government wants you to do. Tom are there any Regulatory Police here . They may be stepping in to say maybe not. What is the prognosis . From both the u. S. And europe there will be plenty of regulatory scrutiny, when talking about making this the Largest Company in the world. I think they will first have to convince shareholders that this is a good deal. Tom help me here, i need a question. It is monday. I will ask him why he thinks he can get away with doing this. [applause] [laughter] francine thank you very much. About u. S. Talking gdp. We will ask, can they get away from this . That is right here. Francine chancellor George Osborne along with David Cameron trying to talk and convince u. K. Citizens to stay in the eu. There talking with the dangers of leaving the european union. Brexit,s surrounding they say, would cause a yearlong recession. E are mine drink any headlines this throughto do june . One day francine per month. Francine this is important. If it does not happen, it will be a mess. Tom it will be interesting along with the president ial campaign here. , he has beening adamant about a slowdown. He joins us right now. The chart is simple, the rate of the green line and the modest recovery. You buy the consensus view of a better 2016 . Better in the sense that the economy will be better than the first quarter. Of goinggood in terms to a cheaper growth rate. Tom why are we being held that back . Go productivity growth is very slow. You dont have worker retraining , tax reforms have not been done in the last years after the. Inancial crisis were basically on a one track race, just depending on Monetary Policy. We have run out of ammunition. Francine if that is not . Orking, what do we do next what they did in 2013 when the economy was stagnating, germany was called the sick man of europe. It takes time. Electionellor lost the in 2005. That is about the only way to do it. I hope the new president , in the u. S. , he or she would have just taken office and hopefully they would have been able to start in. He new term francine through what . Through infrastructure and spending . It is a small part of it. The take part is what incentives to give for private businesses to invest . More to me, is even important then spending. P a quote. Bring up that noble laureate of columbia tom what a cautious outlook. That is absolutely right. Very close to what i said to francine. Fiscal policy and expansion could help, but that cannot be the only solution. Tom right, but the terminal rate call that the fed is grappling with is a call for a rate. Wer run are we japanifying i Economic Growth . The question is how long will we do it. 82an started this in 199119. We have had seven or eight years of the policy. Europe more of the danger of becoming a japan . At the end of the day, they dont live that badly in japan. People to live that badly because the population is changing. You have essentially a declining qubes population, but on the other hand, you have an spending onount of health care. There are other issues. You have japan doing well for. Ome reason much coming onso an early monday morning. A very cautious american view. Coming up in the next hour, we need to get you started for the week. We do that with mark chandler. We speak to him about Foreign Exchange dynamics and the immediacy of exit, one month away. Of course, the linkage into fed policy on june 15 and the american economy. That coming from a beautiful new york city. That is gorgeous. Stay with us. Another hour of bloomberg surveillance. Tom it is a 62 billion unsolicited did. They are goes after monsanto in this hour. The chief executive officer of bayer. March, on the new commodity rollover. Timothy obrien on taxes and clinton caution. This is bloomberg surveillance lies. I am tom keene. Francine the clock, osborne and cameron talking right now. Francine one month away from the referendum. Of course, the currency wars, the underlying consequence. And, seeing about this possible megadeal. That is coming up. Tom right now, with the summary of the difficult news this weekend of egyptair. Here is shery ahn. egypt is sending of remotecontrolled submarine to search for remains from the jet. They will try to locate the voice and data recorders which could be almost 10,000 feet below the surface. French investigators say the plane generated automatic radio message about the smoke in the cabin book for moments before the disappearing. President obama has a limited one of the last remaining symbols of animosity. He lifted the embargo of weapons sales to vietnam. President obama this will ensure that vietnam has access to the equipment they need to protect themselves. It underscores the commitment of the United States to for the normalize fully normalize relationships with vietnam and this region for the longterm. Shery the improvement in the relations is being driven by mutual concern over china. And, members of Congress Warned there could be a shakeup at the tsa if something is not done about the long airport lines. There maybe i need for Management Changes at the agency. Recently it has been taking 90 minutes or more to get through security at some u. S. Airports. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. I am shery ahn. Tom 90 minutes . Come on. It took you three hours and 40 minutes when you got off the gulfstream in asia. Shery International Flights are taking much longer. Tom thank you very much. Let me race through a data check. Mark chandler is waiting to talk Foreign Exchange and crude iron ore weaker. On to the next screen. , ratheras we see elevated from last week. Franc, weaker this morning as well. Francine . Francine european stocks, up, up. , back crude below 48. We will talk to the ceo, by herself. I love to speak with mark chandler. He looks at currency pairs. He joins us right now. I dont usually do this. I will ask an open question. Which major currency pair has your attention right now . Moves the all of this needle towards the u. S. Dollar. It bottomed on may 3. Theave then up later by idea that you could tighten next month. Euro parity . Not quite yet. It looks more like next year. We are looking at two or three rate hikes next year. Maybe chama has the sector right. Francine it was all over twitter, the parity watch, then it went away. Why have we been so late in seeing divergence . It is clear that the fed is ready and mario draghi wants to do better. Why do we not talk about it anymore . Narrativeimes the follows, other than the other way around. Amis one of the reasons i skeptical of a secret agreement in shanghai. I think that now we have them , people will start thinking. Gain about parity i think the next big stopping point is the old range. Francine what happens to swissie . Good question. I think a lot depends on what happens in brexit. Most likely we want the long dollar. Swiss rate is the could he dragged down by the euro. Tom this is a trend, if i ever had seen it. Is this was National Bank managing the chart or is there some other story there . Managing. Ss are points. At 70 basis tom they have latitude. Apan doesnt i think a lot of them are focusing on the japanese. I want to say this. It is not the u. S. And japan. The eu is not seeing japanese intervention either. Look at the chart rate. The Canadian Dollar has strengthened, but canada is not threatening about intervention. Francine what does it mean . You are not expecting a fed hike straightaway. I think it is over. E have seen a turn i think the emerging markets are prompted by fed tightening. Iron ore, either way. Still, lower. Emerging markets especially are sensitive to the move and commodities. Francine thank you so much. They officially said they are putting in a 64 billion bid for monsanto. Has monsanto responded . Here in london. Tom keene is in new york. This is surveillance. Lets get to the business flash. Here is shery ahn. Shery the largest Discount Airline in europe calculated that discount are down. The reason, terror attacks and lower fuel prices will prompt airlines to cut ticket prices. Ayer is proposing a blockbuster deal. They want to write monsanto for 62 billion dollars in cash, representing a 20 premium to monsantos last close. It would be the biggest takeover ever by a German Company. That is the business flash. Francine we are very pleased to see we are being joined by mr. Aumann. Your share price under pressure. A lot of concerns whether you can pull this off. It is a huge deal. How confident are you that you will be able to push it through . First of all, thank you for having me. We are very excited about the offers for monsanto which we submitted. You kind of indicated the headline, the share price, and the company valuation. This is a great opportunity to drive the model going forward. We are very much convinced that this is a Value Proposition for the monsanto shareholder. We are also committed to the transaction. Francine do you think you will get shareholder backing on your site . When to expect to have an answer from one central . Towe are starting today communicate many things that are shareholders need in order to assess the quality and the Value Proposition of this offer. We have always gone where we can create superior value. If you look at the value of the company over the last 10 years, we have quadrupled the value of the share. Segments,ne, in other hitting on pharma, and most recently, an ipo. To they take your debt out 42 billion euros. Critically, they dont see return on invested capital doing better than cost of capital until 2023. Can your shareholders wait for a five years orp six years, or seven years . There are a number of things that needs to be understood. I cannot relate to the figures you quoted. Let me tell you how we see the Value Creation of this transaction. In the first year after closing the transaction, we see doubledigit earnings per share. With it, the ability to pay a higher dividend to shareholders. Starting on the second year, this will be a doubledigit. Ncrease in terms of return on capital, we will beird year earning the cost of capital and the premium thereafter. Rapidly Value Creation possibility. There are various ways to go. The shareholders speak. What i would like to know is how you hold the 42 billion euros of and others. O draghi you have the gift of free money. What happens to your company and the transaction is Interest Rates go up . Look, ofof all, we course, at the financing structure and the ability to create free cash flows and deliver. That is something that is the core element of prudent financial policy. Pleased because there is an indication that we are going to have a very solid investment rating going forward, and also the chance to obtain an excellent profile for ratings. Tom they say that this transaction makes strong strategic sense, but they look for monsanto to beg for a higher offer. Francine this is where i was monsantoas the ceo, if rejects the offer, are you ready or do you have the capacity to increase the offer . Totally convinced about the attractiveness of our offer. If you look at the fact that it is a 37 premium over the share price, and that is strong testimony to the Value Proposition to the shareholder. Weme of the transactions are convinced that it is an attractive offer for monsanto corp. Francine is this the final offer or just the first . It is the best and strong offer. We are ready for the response from the board of directors from monsanto. Tom one final question. Alastair campbell having a lot of fun this morning. Will you name the company baysanto . It is too early to speculate what the name of the company will be. Bayerstell you, the name and reputation stand for science and the utmost responsibility for societys needs. Francine have you discussed the deal with any major regulators that have given you the green light . Given the private corrector ,f the discussion of until now we have certainly done our own work internally with internal and external expertise we have at the table. We have not gone so far to involve external regulators. Tom thank you so much for joining us. I greatly appreciate the clarity of your answers. Of course, this is an unsolicited transaction or offer, i should say for monsanto. Will join us on television and radio with a blistering oped on donald trump a few days ago. This is bloomberg surveillance. Tom he speaks everywhere. Aqua in london. Tom keene in new york. Course,deadline, of june 15. Tim obrien is dialing forward the dialogue on the president ial campaign. What he has been doing is writing a series of stories on mr. Trumps taxes. The conflation of his is this transactions with his income at the top line. I dont get to do that, do i . He is putting these in as documents for the federal election commission. Actionable. S he is putting it in as an alternative statement. Tom right. Mitt romney is not doing real estate, but governor romney had a lot of outside business interests. Did he complete to the fec . Indication that he did. Trump has done this twice. I think it is part of the longterm roadshow that he has pretending his income or wealth might be larger than it is. Francine does that change the view . Publishbe forced to them at some point . Will change the view of how we see him . Tim no one cares as much about Donald Trumps wealth and income as donald trump does. The question is why he does it. It has allowed him to stay in the media for quite some time. His wealth has been fodder for the media for quite some time. Badge of multie billionaire and, therefore, completely successful businessman. He has flirted with personal bankruptcy, and i think there is a lot of smoke and mirrors around the numbers he put out because it keeps people away from paying attention to the true facts. Francine i keep on being told that the trump phenomenon is because of inequality. How does he get in the next her badge for being a multibillionaire . Tim the trump phenomenon is more than just about inequality. It is part of it, but is also about anger with the establishment. This informs Bernie Sanders campaign as well. What is going on is he is channeling does taste with establishment politics, theblishment media, establishment economy because people are hurting. He is channeling it in the most horrid of ways. He is telling people who are hurting, i can help you because , when ineat deal maker fact, his history of dealmaking is abysmal. Carethe polls are changing. What are you and your teams to look for from secretary clinton this week . she will have to make the case why democratic voters have to unite behind her instead of Bernie Sanders. He is clearly not going away. Longterm, presuming she goes into this with trump, she will have to say why she will be a better steward of economy and u. S. Foreignpolicy than him. Tom congratulations on your set of essays on the republican candidate. We will continue this discussion tonight with all due respect. Must watch. Look to that, 5 00 tonight. Were with mark chandler. This is bloomberg surveillance. Francine im Francine Lacqua in london. Tom keene is in new york. 17 degrees. We are just four weeks away from the u. K. Referendum. Up his attack on the proposal to leave the european union. In a siege, osborne says the Economic Impact would be too high a price to pay for brexit. Today the treasury is publishing its details and rigorous analysis of the Immediate Impact of leaving the jobs, wages, house prices, and on our nations finances. The conclusion is that all would be hit. A new treasury report says brexit could cause up to 820,000 people to lose their jobs. It is a virtual dead heat in the election for president. Absentee ballots will determine whether it will be the freedom he has pledged to break with decades of president s playing a ceremonial role. Lawmakers in greece have cleared the way for more emergency loans from the euro area. There is a call for more austerity measures, including higher taxes and bad loans to address the debt fund. And Germanys Angela Merkel has returned to turkey, her fifth trip there in eight months. She tried to turkeys prime , says the e. U. An has been slow to deliver almost 7 billion in aid and on the promise of fisatreat of visafree travel. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus im shery anh. D, tom . Tom lets look at the big picture with Marc Chandler. Over to the bloomberg terminal. We talk about two americas. This is trudeau, the elder, with massive canadian weakness, a bit of a recovery. Here is the china miracle, the commodity boom through than Marc Chandler, the recent idea here of canada weakness, canada strength, withers here for the Commodity Currencies. There is a huge question, isnt there . We went at a very big move, one of the strongest currencies to rival the yen strength. Back, oil prices pushing but also the idea that the bank of canada is on hold, but Interest Rates had risen in canada, but now they are pushing back down because the canadian economy looks like it is losing momentum in q2. Tom you bring that over to australia without the adjacency to the exorbitant privilege of the u. S. Dollar. Marc it reminds me of what the president of mexico once said. Being a small country next to a big country has its advantages and disadvantages. In australias case, next to china, i think iron ore might be down 30 . Tom down 7 just today. There isy of us think another cut coming in the next couple of months. Francine if you look overall, lets take a big umbrella and put the market currencies and commodities in there, what would you be buying right now . Marc i think i would stay away from Commodity Currencies as well as those currencies related that are sensitive to the drop in the fed tightening. There would be these countries that basically borrow dollars and have not paid them back. Says two thirds of the capital flows from china last year were not speculators leaving china, but it is really chinese corporations paying back dollar debt. What concerns me is this currency mismatch traveling into the emerging markets. I would rather avoid the emerging markets. The first four or fivemonth rally this year is over. Now we have to look at the downside. Aussier candidate over as far i prefer canada over aussie. I think malaysia is tied to oil prices. It is one of the few Oil Exporters from asia. I would avoid those countries that are tied to china as well. The poster child of emerging markets to avoid, commodity ties , dollar debt ties, and china debt ties. This, andwe look at we still use Foreign Exchange a litmus paper, are we going to tilt toward more managed currencies with the capital flows we are seeing, or can the floating rate regime of the last 20 years withstand the stresses of the moment. Consensuse is a coming out of the g7 meeting to float currencies, to let the market determine value. It is almost like an arms control agreement, that countries could use chemical and Nuclear Weapons but have agreed not to. Tom we are using the phrase overshoot for inflation. Everyone agrees chair yellen could overshoot inflation. That came from dornbusch in your foreign world in exchange. Are we going to overshoot on the strong dollar . Marc i am not so sure we are, but the trend in the market is that there is an over shoot. Rallied as dollar well. Given the pressure on countries like china and japan not to intervene in the currency market, i am not sure we are at a point where we could say we should join intervention to stop the dollar from rallying. Francine what do you do with brazil . We covered the downfall of Dilma Rousseff and the emergence of this new government. Can they pull it off . Marc the most interesting thing about brazil is that the currency and the stock market rallied despite the horrible economics and the horrible fundamentals. Can brazil pull it off . At the beginning of my career, people told me brazil was the country of the future. Long after my career is over, i think people will still be telling me brazil is the country of the future. Tom you wrote a wonderful book on the u. S. Dollar and the strength of europe and the size of europe. Is europe the United States of europe . Marc i dont think so. Europe is sort of this halfway house. During this crisis they have gone more integrated in many ways, but i am not sure they are at the point where they have a Federation Like the u. S. Has. Tom does the imf get its way on greece . What a shock last week that 2040 was mentioned. Between the imf and the eurozone and those creditors i am not sure the imf will get what a want this time. Tom Marc Chandler with us. The fed meeting in june with our coverage, and then on all this month, on to brexit. I believe it is june 23. Let me get a data check here equities, bonds, currencies, commodities. Ght to the tape. Commodities weaker. Iron ore out of singapore, the intermediate,xas brent crude 48. 16. From london and new york, stay with us. This is bloomberg surveillance. Francine this is bloomberg surveillance. We cover macroeconomics and the markets. Lets get straight to the Bloomberg Business flash here here is shery anh. Exports have fallen in japan for the seventh month in a row. They dropped 10 in april. The yen has gained 9 against the dollar, making japanese products more expensive. Overseas demand has gotten weaker. Boeing has won an order for 100 jets from the of non. From vietnam. Airlines generally get discounts on their orders. The agreement was timed to coincide with president obamas visit to vietnam. The u. K. And 13 other European Countries are urging caution on any new e. U. Rules on internet services. France and germany are among those calling for limited growing power of google and other online companies. The e. U. Is likely to say this week that companies can no longer avoid rules that govern other industries, such as telecommunications and broadcasting. That is the Bloomberg Business flash. Francine . Francine here is what we are watching for the rest of the day and the rest of the week. A very busy week. Three fed president s are speaking at different events. James bullard just spoke. Your area finance ministers discuss how to conclude greeces bailout review. On wednesday the bank of canada will announce its Interest Rate decision. We have plenty, plenty of central bank watch. We also have to talk more about the fed and wage growth in the u. S. Michael mckee joins us. He will do three hours of radio with tom later. Michael you make that sound so bad. Nobody is getting a raise and the rich keep getting richer . That is starting to change. The atlanta fed has a wage growth tracker, and it is at its highest since the recession. Take a look at this chart from the atlanta fed. They have divided it into high wages, low wages, and medium wage jobs. The Unemployment Rate shows wage shows wage growth unemployment for those three categories has been coming down across all of the three. Lets take a look at the other chart that shows gains for wages going up at a fast rate for median and lowwage jobs. Median wage growth for lowwage jobs is back to its 20032007 average. High wage is at 75 of its prerecession average. Tom i look at these dynamics, and it is clearly a better economy. Are we at escape velocity yet on gdp growth . Michael we do not seem to be. But the question is, how low is the atmosphere here. If the potential growth rate is 1. 5 to 2 , you could argue that the atlanta fed also tracks gdp now and they are tracking 2. 5 . Tom can you bring it over to wage growth and say wage growth is not at escape velocity even if we get better wage growth . Michael the question is, is it starting to feed into inflation . According to the atlanta fed, if the trend continues it is likely to happen and that will produce more inflation. Jim bullard talked about that in his remarks in beijing, suggesting that when you look at the actual Inflation Numbers and what is happening in the labor market, you have a case for raising rates, according to the feds path. The market is saying look at expected inflation going forward. They may not be incorporating wage growth of this level into it, and he says you have a case for not doing anything. He does not make it is tension say which way he is going to vote. Francine we understand that they are ready to overshoot on inflation, right . Michael a number of fed Officials Say they never reached agreement to actually do that. The issue is inflation is low enough that they could let the economy run relatively hot and not risk going too high, but they do not want to go too far over it because they may have to slam on the brakes and the markets would not be ready for that at all. Francine is there still a shift . We heard from policymakers that they are ready to act in june. Is this just a shift in Market Sentiment but they will not go through the shift in june . Michael they want to raise rates. They live with them to zero and now they are barely above that. For an emergency that emergency is over. You want to look at the growth rate in the United States. It is definitely not in recession, so they are thinking rates could be up higher and they want to be there sooner rather than later and they do not want it to be all at once. Monday with a Michael Mckee without the dots chart . Here are the dots of people, the fed people gaining us out to longer term, 2018. Marc chandler, here is the market. Is this line coming down . More importantly, is it going to move up and give the fed the policy they want without any fomc action . Marc remember in december of rateyear, the fed said hike and the i think the market is moving toward the fed. Over here. It back Michael Mckee, we can do this because we are bloomberg or december, here is where the red here is where the red line is. March, it is up. Michael you are seeing the markets start to reprice. The market level went down after janet yellen gave a dovish speech after the rate increase suggested there was nothing on the horizon. Whether she has changed or not, we do not know. We will find out when she has a couple of speeches. She will speak after the jobs report in june. That will be an important day to watch. The rest of the fed seems to be saying we are getting ready. Half ofm through stanley fischers speech at Columbia University last week. A lot in there on forward guidance. You wonder what the forward future is for guidance. Srikumar will join us on radio in a bit. Coming up later on bloomberg radio, david haro of harris associates. David haro on investment in japan, on the politics of wisconsin. Good morning. Tom how about a forex report on monday. A little bit of a move on the market with a weaker euro over the last two hours. Below that, euro swisse showing. Renminbi a big deal, grinding ever weaker, the chinese yuan. Francine coming up shortly, it is bloomberg. Jonathan ferro, what is on the show today . Would suggest this is exactly how tom keene would run a company. One month as a chief, already trying to take over, the biggest german takeover in history. The headline is that it is an allcash deal. The market is still open to allow them to do that. Story two is project fair volume two on brexit there. Dollaryen and a divided g7. Francine thank you so much, jonathan ferro. I hope we do not ever find out how tom would run a company. Maybe we will, maybe we wont. We will have much more on yen. Marc chandler is still with us. , after weook at yen had the government report hasing that japan unexpectedly swelled to the biggest in six years will they have to intervene . Marc im not sure because of i am not sure it is because of yen strength. I think it is because of crisis, japanese import of Raw Materials going soft over on a yearoveryear basis. It seems to be more likely related to weaker Global Demand than it is about the yen. Many people misunderstand the reliance of japan on exports are japans share of exports relative to its economy is about the same as in the u. S. Tom that is brilliant. That was brilliant by Marc Chandler. Francine it was, but what i am still trying to understand is whether governor kuroda was wrong to support the market. He kept on telling me he needs to do a draghi and promise to be there all the way, which means every two months he needs to do something. He cannot afford to disappoint the markets, which he did last time around. I find it difficult to believe that the japanese criticized at the end of them we cannot expect a central bank to ease policy every meeting. The ecb doesnt. There could be scope for the bank of japan to ease policy. I think it is wrong to think the Central Banks could do that. Early to say too that the bank of japan needs to cut rates further. I think we need to focus i think the focus is shifting from Monetary Policy back to fiscal policy. Tom over to the bloomberg terminal because we can do that. Here is the bank of japan. Here is where they want to go. Here is the yen strength, very translike with this rolling over here. What is the Brown Brothers call . Do we stay within this trend, or does the fiscal arrow assist them to the weaker yen that they want . Marc we are going to hit the bottom and slowly climb back up, helped by higher u. S. Yields and more stimulus coming from japan, both physical as well as monetary stimulus. What stereotype is is the flow dynamic, if you will, of the retail saving if those marc . Of the yen strength marc some of this seems to be triggered by japanese corporations repatriating dividends and foreign earnings back into japan at the start of the fiscal year. I think part of the challenge is they try to export savings. They are not exporting enough. That we the problem is do not know what the boj can buy next. Mark, will abenomics work . Marc i think abenomics is typical medicine that the liberal Democratic Party in japan it is monetary stimulus, fiscal stimulus and it worked up to a point, but they lost their nerve when they hiked the retail sales knacks the retail sales tax. Coming out of the g7, the real the finance minister confirmed to the usa will go ahead and raise retail sales tax the. That to me is the big news. Fiscal tightening, despite the other things they are trying to do. Francine they still have an aging population, and with yen strength and they will not get the inflation backup. Marc for me the real key is that the japanese have a shrinking population, meaning gdp may not be a good measure. Sayper capita that is to the economy is not shrinking as gdp as the population per capita is better than it is in the United States. Tom thank you so much. The yen has found its strength level, according to Brown Brothers. We continue on radio. Michael mckee and i it srikumar joining us. Tomorrow, Richard Haass will join us. A good time to catch up with him. The council on foreign relations. Futures negative four, a little bit of deterioration right now. This is bloomberg surveillance. Good morning. Jon merger monday, an unsolicited bid. You will hear as the buyer chief talks in the next hour. Vonnie and facing an ear a yearlong recession as it leaves the e. U. Yang erts call for for yen strength and. Jon experts call for yen strengthening. I am jonathan ferro, with vonnie quinn. David westin is