Transcripts For BLOOMBERG Bloomberg Surveillance 20170420

As saudi arabias Oil Ministers say they may need to extend cuts. This is bloomberg surveillance. I am mark martin. Credit agricole crt head of g10 fx surge. A question for either of them, do run tv function on your bloomberg. Hit i. B. Show producers. Here it a look at markets across the globe today. The stoxx 600 gaining for a second day, marginally up by. 1 . Rising for the fourth day in five. One question i will be asking to valentina is is the election a game changer for sterling . 2. 22 percent. Yesterday evening, we had the feds beige book, the Regional Assessment of the u. S. Economy continuing to grow across the u. S. At a modest to moderate pace in recent weeks. A tight labor market. Mixed. R spending was that is worth noting. Crude oil rising today. 50. 66. Data showed crude production rose to the highest gasoline stockpiles climbed for the First Time Since february. Let us get the bloomberg first word news. Here is nejra cehic. Nejra japanese exports throughout the fastest rate in more than two years in march, supporting a moderate economic recovery in the face of weak domestic demand. Exports rose 12 from one year earlier, almost double expectations. 15. 8 , theped biggest gain in more than three years, leaving a surplus of 5. 64 billion. The u. S. Secretary of state heavily criticized the 2015 nuclear deal with iran. Rex tillerson said it only delays the countrys ambitions to gain weapons of mass distraction and did not take into account its role in sponsoring terrorism and destabilizing other countries. The announcement is the strongest signal today that President Donald Trump may walkway from the agreement. The Trump Administration has no intention of passing the buck to a future administration on iran. Is clear, irans provocative actions threaten the United States, the region, and the world. Nejra china needs to let more participants trade the yuan onshore on market dominated by commercial banks before it can do are lifting capital controls. Of ther Director International Payments Department at China State Administration of Foreign Exchange. He said he does not see any major changes to the Foreign Exchange regime before chinas Party Congress later this year. Marketplace has the ability to maintain stability, probably the market will not attack the currency. The second scenario i think its probably the economic recovery is becoming more and more solid. The dollar index is not so strong as the market expected. Getably it could fundamental support. Nejra former fed chairman paul volcker has questioned the idea of a new glasssteagall. It was formally repealed in 1999. President donald trump signaled a willingness to revise or 21st century version of it while on the campaign trail. If they are doing that and thinking that Investment Banking operations, Trading Operations and escape supervision regulation, which is what i assume may be the thrust of this, but that just does not slide. That is where we were, and that is what broke down. Powered by more than 2600 journalists and analysts in more than 120 countries, ia nejra cehic. Mark the u. S. Economy is growing at a modest to moderate pace. A tight labor market helped broaden which games. The beige book economic report knows Consumer Spending is mixed. Separately, Stanley Fischer has painted a picture of a brightening Global Economy, saying overseas essential banks should be able to manage the spillover of monetary tightening and the u. S. Blackrock chief executive expressed concerns. There are warning signs here because getting darker we have seen some pullback, you have seen the in car sales, you are actually now starting to see a slowdown in m a. You are starting to see things that are now people are taking a pause. Valuations are very high. That is slowing down m a. Uncertainty is slowing down. You have all these issues. Mark hawkish gentlemen, thank you for joining us. If i can start with you, do you sare larry fink con concerns . Not necessarily. We think the latest data out of the u. S. Could be a temporary phenomenon. On the whole, we expect the u. S. Recovery to remain fairly decent, which allows the fed to continue tightening policy from here, so looking at that as a temporary dip in the data. Is to continue tightening. If you look at our wonderful work function, it says june is becoming less likely now. This summer rate hike maybe not on the cards now. May be is an interesting word, but most likely, it probably still is on the card. The u. S. Data are normal. We had that her many years now. We had that for many years now. By and large, with fluctuation, the u. S. Economy is expanding at a pace at or slightly above 2 . We have not yet seen in the hard but any big trump impact, congress has not passed anything, so we should not expect to see a big trump impact. So far, business as usual. A steady u. S. Economic expansion with mixed dan and in that scenario, the fed probably should go into it. Business asin, usual in the u. S. , but what about globally . The imf raising its forecast marginally from its early year assessment. Are we witnessing a turning point for the Global Economy . Valentin it is tempting to conclude that after years and years of central bank, monetary stimulus, the Global Economy, the developed world particularly starting to respond in a more sustained and positive way, but we do see evidence across the board. It is quite encouraging. The hard data, trade data out of japan earlier today, but other hard data is starting to converge. Already pretty upbeat sentiment data. To soft data is starting converge with hard data and strengthening Central Banks that indeed the Global Economy is on the mend. The implication of that in the fed, ecb, the boj will conclude that it is not such a dire need for further aggressive easing from here, so they may get some comfort in the data. They may decide to withdraw some of that stimulus. How the markets respond to that i think is a big theme of the second half of this year, but i think the latest data releases it is preparing the ground for that next big market. Mark how will markets respond to a less loose said, ecb fed, ecb, boj . We have had years of a gradual fed exit from the altra ultrastimulus they had. A little taper tantrum here. It was for markets briefly a big event, but if you look at the Economic Data, it it did not impact the Economic Data, so markets got back to their senses shortly afterwards. Holger now, having had that taper tantrum in the pass, we are forewarned. I do not expect massive negative market reactions to what is likely to be a very gradual pace of stimulus removal free economies in the western world that clearly cannot stand slightly less accommodative monetary policies. Mark say there. Schmieding, valentin marinov. Here is nejra cehic. Nejra nestle has reported firstquarter analyst growth that it exceeded estimates as it raised prices on nescafe in europe and asia and sales accelerated. They said sales rose 2. 3 on and a granite basis. Nestles new ceo abandoned the sales and profit forecasts for the company had held onto for a decade and replace them with a goal to jumpstart revenue by 2020. Unilever has reported Quarterly Sales growth that beat estimates. The maker of dubs nope dove saop said they rose in the quarter. First results since rebuffing a takeover approach from kraft heinz. Hbo with a coproduction partnership for a 250 million spending commitment on dramas to counter entertainment heavyweights including netflix and amazon. The company and time warners hbo will see to produce two highend dramas a year in the deal. They aim to get the first production on screen next year. To more is planning than triple the size of its Technology Hub in new york city to increase space for the banks coding and data engineers. The firm is in discussion with Brookfield Property partners to lease an intentional 300,000 nearditional 300,000 feet hudson yards. A spokesman declined to comment. That is the Bloomberg Business flash. Mark. Until thee days to go first round of one of the tightest French Elections in recent years. As many as 40 to make up their minds according to the daily tracking all. Only five Percentage Points separate the top four candidates. Lets get to paris. Caroline connan. What are the pen and macron doing to firm up support in these last few days . Caroline Marine Le Pen was in marseille last night in the south of france, just a day after the Police Arrested two men planning a Terrorists Attack agains the campaign. Marine le pen used this in her rhetoric in her antiimmigration and security speech. She actually said that she wanted to two send all convicted foreigners back home, however, the two men were arrested in marseille. They were actually french citizens. She said her rivals just wanted to turn france into a gigantic candidate,the other emmanuel macron, was in the north, and he tried to appear as a military chief. He was joined by the current defense minister, who is actually the only popular current socialist figure in the hollande government. Mark what happens in the event of a runoff between melenchon and le pen . Caroline if you look at the polls, melenchon has been tested in the runoff for a couple of weeks now and in fact, he was facing emmanuel macron, independent, he would lose against emmanuel macron. This is why the markets are getting anxious. Marine lein against pen and the republican candidate, Francois Fillon. When you look at French Companies, a couple of months ago caroline we are trying a plan b, another Industry Group said they would possibly come to moving their headquarters from paris to london in case of a melenchon win. The head at the moment is refusing to believe in this scenario of a melenchon le pen runoff. If you look at history, this is what we were seeing in 1981 when another candidate was elected as the first president since world war ii. Many saying companies would leave france. One big executive did leave to the u. S. , but he returned to france three years later. Mark caroline, see you later. Caroline connan in paris today. Three days to go. All the election action as it happens in special programming. Do not miss it, sunday evening. France decides. 8 00 p. M. Paris time. 7 00 p. M. In london. More hawkish meetings. Alentin marinov credit agricole. Who is worth for france, melenchon or the pen . Le pen, economically . That question. Both very bad. Having said that, le pen is morebly more beholden to extreme views and hence, she could be more dangerous. She is the head of an established party with significant support, so the risk that she would put through her small, but bigger than the rest melenchon would find somebody in parliament to implement any of his weird ideas, so i am more afraid of le pen than melenchon. Mark put simply, if either fillon or macron get to the second round, does the euro rally monday morning . At least, if one of them gets to the second round, does the euro rally on monday morning or not . Not necessarily. All eyes will be on how well melenchon or le pen do in the thet round, whether one of two will get to the second round. Our assumption is le pen will be in the second round, full stop. Le reaction will depend on pens support. The big risk, and why we are thinking euro risk may be on the downside early next week is that there will be a better showing. Le pen will get more support than currently employed by the polls. To give you an idea of what a panic threshold there could be for the market, back in february, when i was asking client in paris the question, what is the level of first round support for le pen . Open the will blow effects of the second round in which she has a realistic chance of winning. 40 support in the first round. In march, as he got closer to the votes, thats threshold has dropped. We have been talking about 32 . The point being, if indeed le pen does better than what is implied by the polls at the moment, i think the markets may defensivea more stance. Even if fillon or indeed macron end up competing against the pen in the second round, i do not think it will make that much of a difference. The only thing from a claim point of view, it seems like macron is better able to defeat le pen in the second round, fillon less so. It worse outcome would be fillon versus le pen. Mark can you see le pen above 30 . Anything is possible given the elections we have seen in the last 12 month across the world. Holger that would be a margin of error far beyond what we had seen in the prebrexit polls. The opinion polls were only a little away from the final result. France has the popular vote. Opinion polls are currently 23 for le pen. It would be really unusual. Nothing is impossible, but let us hope that french polls, as in the past, are actually not worse, but better than polls elsewhere. Mark yes, they are. Stay there. They stay with us. Our next, consumer giants beating estimates. Results from nestle and unilever , and what they tell us about the Global Economy. We will break down the numbers. This is bloomberg. Worlds biggest consumerbased income companies, unilever underlying sales up 2. 9 in the First Quarter, well ahead of the 1. 9 penciled in by analysts. Nestle reporting a 2. 3 increase in sales. An uptick in pricing at nestle also signaling a possible foodvement in a sluggish and Beverage Market. Let us get analysis from duncan fox at bloomberg intelligence. Let us start with nestle, duncan. We have got a pickup and pricing. Does todays revenue signal an uptick in what many have called the sluggish food and Beverage Market . Duncan it may be the start because currencies are stabilizing a little bit in emerging markets and in a lot of the raw material prices, which have gone up because of volatile currency moves. You have to get that back in pricing otherwise your margin structure is completed blown apart. More stable currencies now probably helping push pricing to more normal levels within the business model. Mark what is the top of schneiders to do list . There was a disappointing target. What has he got to do to turn nestle around to achieve his new longterm goals . Sharper ate them innovation really. They have done excellent innovation previously, but across the whole board, they have not really been pushing those products into the market to really give us the opportunity to keep buying their products at the right price point. Thing unilever said on their scorer 15 to 20 minutes ago, they really stepped up innovations, speed of innovations. That is what nestle has to do to get to the next level. Mark is that an example of its innovation . Duncan that is one thing, yes. I market within 12 weeks. That is very quick, the sort of thing people are doing now. The average product lifecycle in food is about 4. 5 to five years. Quickly, yout in would have missed the opportunity. That is something nestle mark when it comes to unilever, we are showing off after the craft heinz interest. Is it enough in todays figures, todays news to deter a future bid from kraft heinz . Duncan they are putting up the sale, restructuring. It was 50 basis points off the ground, so that is the big laggard in the portfolio. Everything else was very good, good pricing. Not bad volume, either. They have one problem business. It is a developed market be good for it will emerging markets read it shows why they are restructuring and if they can get out of that business quickly, then it will be difficult. Mark what is your up like regionally for both these companies . How is europe . They have had Lower Consumer prices in europe. Duncan it has been deflation, but it is starting to improve. I would not say it is brilliant on the reflationary point, but you are starting to see improvement in the pricing. Volumes are still dull, but on the whole, it is improving, but very slowly. Mark duncan, good to see you. Duncan fox from bloomberg intelligence. Unilever revenue by region. You can see how important asia and ever are to unilever. Valentin uplger and next. What will theresa may for the brexit negotiations . E. U. Exitnd its plans. This is bloomberg. Mark i am mark barton in london. Here is nejra cehic. Japanese exports grew at the fastest rate in more than two years in march, forcing a moderate economic recovery in the face of what we domestic demand. Exports rose 12 from a year earlier, almost double expectations. Imports jumped 15. 8 percent, the biggest gain in more than three years, leading a trade surplus of 5. 64 billion. The Federal Reserve says the u. S. Economy is growing at a modest to moderate pace and a tight labor market held strong wage gains. However, the beige book report notes that Consumer Spending is mixed. Fed vice chairman Stanley Fischer has painted a picture of a brightening Global Economy, saying overseas Central Banks should be able to manage the spillover of monetary tightening in the u. S. U. S. Secretary of state has heavily criticized a 2015 nuclear deal with iran. Rex tillerson said it only delayed the countrys ambition to gain weapons of mass destruction, and did not take its its dust into account role sponsoring terrorism and destabilizing other countries. Strongest Statement Today that president donald may walk away from the agreement. Secretary tillerson the Trump Administration has no intention of passing the buck to a future administration on iran. The evidence is clear. Irans provocative actions threaten the United States, the region, and the world. Paul former fed chairman volcker has questioned the idea of a new version of glasssteagall, which separated commercial and Investment Banking, formally repealed in 1999. President donald trump signaled a willingness to revive a 21st century version of it while on the campaign trail. Thehat i would oppose Investment Banking operation, escapeding would supervision and regulation, which is what i assume the thrust of it is. Fly. Just is not that is where we were. That is what broke down. News powered by analysts in more than 120 countries. I am nejra cehic. This is bloomberg. 48 hours after u. K. Prime minister theresa may announced a surprise general election, some commentators are trying to work out what it will mean for brexit. The blackrock chairman and chief executive told us he is watching the developments. We still dont understand what brexit will mean for the u. K. I have been in constant dialogue administration. They ask your intentions. Our intention is to stay pat and watch. Mark let us get more from our guests from credit agricole. Is the snap election a game changer, breaking through the 200 day moving average, raking through that 127 range where it has been since october . Is it a game changer for the pound . Valentin not necessarily. In our view, what we are seeing at the moment reflects two key drivers the fact that the market is still supershort the pound and that the pound is still looking fairly undervalued. At currentd a buy levels . I think the answer is no still. Distinguish between two factors. On the one hand, we have a lot of Political Risk already in the price. It is telling, if you look at the chart. 120 in cable,ng time and time again, but for different reasons. The first time, it was for versus soft brexit. Next, it was very hard versus hard brexit. Ust the elections could give could be the help the hope we will avoid a disorderly brexit. That is positive for the pound, or not necessarily. It just reflects the market position. Snap electione was called just a couple of days ago, there has been a big debate about exactly that. Does it suggest we are going to , or a lesserbrexit brexit . There has been an argument on both sides. Which side are you falling on . If theresa may gets the majority many are suggesting she will win there are arguments on both sides. Get ridon they may of some of the nasty brexiteers. You might get rid of some who do not want any brexit at all. She will have more power if she wins. Does that make a difference for brexit . Probably not very much. After all, the u. K. Is in a very weak bargaining position anyway. 27 change its view of brexit in response to the u. K. Election results . Not at all. Mark it gives her a strong hand in negotiations. If there is an election coming up in 2020, which there will not be, she does not have to compromise. Gives her a strong hand in selling to the domestic audience in the u. K. , whatever she wants to sell. But it does not give her any advantage in selling in poland or in romania, or in france or germany, whatever she wants to accomplish. Brexit will be shaped mostly by what the e. U. 27 is ready to offer, and theresa may will just have to accept that. She can of course, in a way, shape the results, saying, we want to be much harder than this, so we can set more restrictions on preferential trade access. To ultimately, this is going be a negotiation with e. U. 27, who will set most of the terms the gardeners. There is not a change between the relationship between the sites . Valentin i agree completely. In terms of our forecast for the pound, we are thinking most Political Risks are in the price. It just shows the price action is influenced by that. But it does not give you any clear direction from here. The pound will be driven by the think, byutlook, i the bank of england policy outlook. What worries me is the fact that the u. K. Consumers are running out of money to spend, and spending quite a significant part of this income. Their real purchasing power will continue to be eroded by cost inflation. At the same time, the businesses are not investing as much as they did before the e. U. Referendum. With those two factors, or Consumer Spending data businesses are not spending as much as they did before. The u. K. Economy will continue to slow. Household saving rates here, with white line weekly earnings. Valentin the economy will continue to slow down. The bank of england is nowhere near hiking rates on normalizing policy. From that point of view, we didnt have a jump through technical levels, and people get excited about that. Mark such as me. Valentin we still think it is a sell. We are just waiting for the price action to become more appropriate and more attractive to adjust a short position. Mark we have so much to squeeze and. A real squeeze. Perfect time. Our guests are staying with us. Lets to get through. Stay with surveillance. Plenty coming up. Crude crumbling today after a week of declines. What the Saudi Oil Minister has said about opec production cuts. Signals from the ecb that qe could be nearing its end. Mark i am mark barton in london. Lets check in on the markets. Nejra i am starting with gmm, looking at what is happening in the markets. Resign european stocks drop on tuesday by more than 1 , the most in snow member, then a bit of a rebound yesterday. It seems like that is staying. Zero point 6 , days away from the first round of the french president ial election. 0. 5 . Fx space, europe up we are also looking at sterling 0. 5 r, after it closed lower yesterday. Looking at a fixed income space, a lot of focus on the only people and spread on the bund widening, and a lot of focus on the 10 year yield. This has been fascinating for me. Earlier this week, we saw a drop to the lowest level since november. It had already broken out of the range the 10 year yield had been in since the end of november. Then we saw yields rise five basis points yesterday. Today, they were lower. Now, they are moving higher. This is something you want to keep an eye on. The fiveyear forwards yielding the lowest since january. Is that a signal that yields might stay lower . A lot of things have been cited for the rush of these bond bulls geopolitical tension, Political Risks, as well as Inflation Expectations coming down. But you have others saying that Global Growth is looking very strong. Interesting to keep an eye on. I want to show you this. We have been talking about a stronger sterling today. The correlation with the ftse 100 has turned the most negative since 1983. This is interesting in relation to the French Elections as well. We have some commenting that if we see a weaker euro off the back of the French Elections, that could be positive for the cac 40 to. Too. Spread atnd ftse 100 the widest on record. Wti futures testing the fibonacci. I took this on the mlive blog. Wti crude futures only just clinging onto the fibonacci line for support of the 38. 2 . Thehat does not work out, next major support area could be around the 61. 8 fibonacci retracement of the trading range since trump was elected. Mark wonderful. Im am looking at our wonderful function as well, our breakeven rates, which i will come to in a second. Excuse me while i look to my right. This is the twoyear breaking rate. It ties beautifully to what nejra is saying. Saudis oil minister saying they may need to expand output after stockpiles in the u. S. Cables reason to pause following the longest price rise in two months. Our guests are not going to get into oil specifically, because that is not our remit, but we are going to get into the implications of a higher and lawyer lower oil price. Breakeven, look at that. Earlyand of february, march. We are down to 1. 3 . Holger i would say we should largely ignore these charts, if we are not economists, because they seem to mirror the development of headline inflation, which had the spike in february, went down in march, may go up a little again in the near future. The movements we have seen an oil prices say over the last three or six months are not big enough to really affect the inflationm economic outlook. We should largely disregard them. Markets over do it in both directions. The inflation outlook is fairly clear for where we are in the u. S. And the u. K. Underlying inflation is likely to edge up modestly, requiring a Central Bank Response over time. Whereas in the eurozone, it will take longer for underlying inflation mark we will save the euro zone for the next section, a special ecb segment. Showed. The chart nejra are we shrugging it off . Valentin the ecb asked them monday to focus on the headline inflation. From that point of view, it is somewhat more important, what is happening with the headline expectation situation. It does not help the case for removing stimulus before long, if Oil Prices Continue to struggle. It is a Welcome Development for Central Banks. I would say in a sense that what we have been seeing is a headline inflation, which most notably in the u. K. Was ignoring eroding the purchasing power of the consumers. Sometimes, less inflation is not a bad thing. Push,end the lower cost inflation, spending and the consumer space in the u. S. , u. K. , and eurozone ultimately, that development need not be negative. It could be growth positive, and should allow Central Banks the fed, even the boe at some point to hike rates further down the road. At the moment, in terms of market impact, i think the investors will respond to that. And the first order response is to pair back rate hike expectations. Positived would be a impact on growth, which should reaffirm the view before long that the fed in particular mark should this ignore the headline . Should the 10 year yield be much higher . Holger it should be significantly higher. We need to get over the Political Risks we talked about, but if they do not materialize, we should have a significantly higher 10 year over time. The fed will hike further. The Global Economy is doing quite ok. Consumers are borrowing more. That should drive up the special u. S. Yields over time. Mark we believe time for our ecb chat. Stimulus. Topping signs from ecb policymakers that qe could be coming to an end. Mark lets get the Bloomberg Business flash. Here is nejra cehic. Nejra nestle has reported exceeded growth that analyst estimates. Asian sales accelerated. The worlds Biggest Food Company said sales rose 2. 3 on organic basis. New ceo Mark Schneider abandoned sales and profit forecasts the company had held onto for a decade, and replace them with a goal to jumpstart revenue by 2020. Unilever has reported Quarterly Sales that beat estimates. The maker of delve soap and magnum ice cream sent underlying sales rose 2. 9 in the First Quarter. The company affirmed its outlook for the year in its first result since rebuffing a takeover approach from craft. Sky and hbo are widening a coproduction partnership, with a 250 million spending commitment on dramas to counter entertainment heavyweights including netflix and amazon. The european paytv company and time warner hbo will seek to highend dramas per year, the first onscreen next year. J. P. Morgan is planning to more than triple the size of its Technology Home in new york city, to increase space for coders and data engineers. The firm is in discussions with Property Partners to lisa an o leasenal 300,000 tw an additional 300,000 square feet. That is the Bloomberg Business flash. Mark ecb officials of signal theyve gotten close to the end of of unprecedented stimulus, with the last round of speeches before the quiet ahead of next weeks policymaking. Members agreed the euro euro recovery has become broadbase, with a potentially explosive election in france coming ahead. It may still be too soon for a change in the ecbs currently cautious tone. We are joined by an economist and ahead of fx research. The balance of risks it could be changing next thursday. Is it too soon because of the French Election . Holger it is probably early to change the balance of risks noticeably. I expect them to switch to a neutral balance of risk in june. They may expand on their little change from the last meeting, saying the Downside Risks have receded. Mark no change . Valentin for a change. Mark lets get to the second half of the year. Ecb officials for a discussion of stimulus exit. What month to they announced they will be doing it in the future . Valentin they will tell us something in september. They may in september already say they will buy less than in january. Or they will tell us in september that they will make the forward statement of how much they reduce their purchases in january at the meeting thereafter. So september is the month to focus on for any news on their asset purchase. Mark are you september . Disagree, come on. We believe the announcement to extend qe for another three months, the First Quarter of 2018, and then beyond, as part of the same announcement. Mark keeping valentin the same pace. The odds that, a more gradual reduction beyond that, a more gradual reduction. Mark i want a debate. Holger we can debate the details. I think this year they will buy fewer bonds as of january next year. Mark 40 . 40ger probably going from 240 from 60. That will last three months. They end in the middle of the later. R a few months by the end of the Third Quarter of next year, they will very likely have ended their asset purchases, and we will likely have seen a rise in the late in the meantime already. Mark they can raise the deposit rate while we are tapering . Having ahey are discussion about it, and i am on the side of those who think they can. There is a question. But they probably might want to do that. It just helps the sabres a little bit, helps with the political discussion a little, and does not tighten Credit Conditions much. We assume the current qe pace will continue for a bit longer. We also expect a more aggressive taper in the second half of 2018. We have the same conclusion that ultimately the ecb will stop expanding its Balance Sheet in late 2018. As regards the deposit rate hike, it is an important issue, but we do believe they could it is wellnce underway, which is consistent with that view. Point ofrom an fx view, analysis strategy. It is the case for the investors they do not what seems to the ecb hasat effectively hit the end of the road. They are moving close to the exit. What we like to highlight the clients also is the fact that it is not always necessarily because of the improvement in the underlying data. There has been some improvement, but a big part of the decision to taper could be asset quality. We are seeing from a market perspective that any taper announcement in the second half of the year could be a test for the markets. Core in 10 seconds, this inflation figure they cannot be tapering now, without. That. With valentin that is the easter effect. We will be at 0. 9 soon for court and for core inflation. Mark thank you for joining us. Francine and tom will be live next out of new york. Francine mixed markets. Crude oil regains ground after month. Gan strap and a japan, solid trade figures. Fighting for the republic. A fresh poll gives macron a lead at of the vote. We either change your of poor relief. And House Republicans reveal a draft of their doddfrank efforts. Welcome to bloomberg surveillance. This is a special tom we are special. Francine i dont know if this is that we are special. Tom this is jet lag. Did you get any sleep last night . Francine no. Do you need sleep . Tom and you are going on to paris for the first round of the French Election. This is different because we realize the concern of the effect of european public. John lipskyt with and geoff dennis. Francine lets get to the first word news. Taylor the Trump Administration wants to make it clear. It thinks the nuclear deal with iran was a bad agreement but they admit that iran is living up to it. Rex tillerson says this represents the same failed approach of the past. The Trump Administration has no intention of passing the buck on the deal with iran. Regionactions impact the , the United States and the world. Taylor he says it doesnt take into account irans role in sponsoring terrorism. Signals the strongest yet that trump may walkway from the deal. Vladimir putin is taking advantage of mixed signals from the u. S. On ukraine. He has taken hold of two rebel regions. People close to the leadership the strategy in ukraine is to keep integrated the rebel regions with russia. In the u. K. , authorities appear to be gearing up for Insider Trading cases after dealing with a Record Number last year. 70 insider investigations in 2016, more than double any other year in the last decade. And the former fed chairman is questioned the idea of bringing back glasssteagall, the law that separated commercial and Investment Banking. It was repealed in 1999. What i would oppose, if they are doing that, Trading Operations regulation. Which is what i assume would be the thrust of this. But that just doesnt fly. That is where we were. And that is what broke down. Is indicated he is willing to bring back a version of glasssteagall. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. I am taylor riggs. This is bloomberg. Tom one screen today, not to. Data is quiet but lets frame equities, bonds, currencies. 1. 01 but weown to a rounded up to a 1. 04. Feeling wee crisis have had. Oil is recovering after the ugly afternoon yesterday. Francine there is no crisis feeling but if you look at the the three month risk reversal, it is jumping higher. So stocks are mixed. We have a lot of concern about the Economic Data. The dollar declining a touch. What i would also show is that oil is rebounding after the biggest slump and we look at the pound as we get into the election mode. The markets and geopolitical concerns and how they impact how investors view risk. We are with geoff dennis. Great to have you on the program. Thank you for coming in. Give me a sense of what the markets should be looking at. Of this has an impact on emerging markets. Are we do a correction . Geoff i dont think we are julie big correction. We have had a positive emerging markets over the last 34 weeks. A pullback. You have seen and easing of the reflation trade, globally and i think that has caused us to pull back a little bit. And we believe that conditions are place for e. M. E. M. To continue to do well. The dollar is on the weaker side. Bonds are being well behaved. The big risk right now is the geopolitics. Happen to know what happens with the French Elections. Francine do markets care about politics or will they correct and move as soon as we Start Talking about Central Banks . I that is probably right. Obviously, there is a concern, as we all know, depending on the outcome of the French Elections, that could give you a bit of time where people are more worried about it. But markets have been resilient to these fears, recently and i think that is interesting. Geoff you have tom you have a tough act to follow. Your colleague yesterday was brilliant. With emerging markets. It is a squishy nests of supply and demand. Is this the same knowledge that it was when you are a dumb buck or is it new emerging markets . Geoff i think it is very different than 20 years ago. The biggest difference from 20 years ago is that you dont have as much inherent growth in the emerging market index that you used to have. You have big roles for the chinese economy slowing down on trend. Big roles for career in taiwan. Theirompare and contrast dynamics. Their elasticity. And downthat move up versus what we assume every day in america or the United Kingdom . To korea andespect taiwan, i think it is similar. Tom indonesia . Geoff there are economies like indonesia and turkey and south africa which if you like lower gdp, which does has the potential to grow, within the index itself, you do have sluggish growth compared to where you were 20 years ago when you had stronger growth. I do think a big difference the fundamentals in emerging markets are better than they were then. You have less in the current account in balance. Francine we know that they went to structural reform. At can you really call them block . Should we not move away from that . Some are subject to the whim of a Trump Administration . That question comes up all the time with investors. It is a somewhat odd index. A huge, different range of countries in there. And it does mean that you get different responses to these threats. For example, trump and his trade. S on it affected mexico dramatically in the followup from the election to the end of the year but now that is calming down a little bit. Commodity story fx countries in different ways. As i say, you have real, developed countries in that index. Francine so what do you go for . Currencies . Some currencies have risen so much do a correction, im thinking philippines . Geoff there are currencies that of got up too much. Opinion, onin my the flipside of that, the performance of the dollar, they are tremendously important for the markets. Where you have a softer dollar, it does tend to bring flows into e. M. They are maybe a little overboard. Tom this is why it is bloomberg. She brings up that was killer. The philippine peso. [laughter] of ere is the medical here is the miracle of the peso. To talkrgon up to speed to john lipsky . Do i look smart . An and 11idea what country geoff it probably is. It is bigish. I know that is not a beer as opposed to say this day. Fairly large. Is not what were supposed to say today. Fairly large. Tom were coming back with a banner. Heres what we have for the next few days. Before that, we get smart with Jason Frankel and alice rivlin. We do that tomorrow. Taylor this is bloomberg surveillance. Lets get the Bloomberg Business flash. Posted firstquarter sales growth that beat estimates. Revenue grew 2. 3 . Among the reason, priced caps. Nestle has been able to raise its prices 1 in the wake of weak consumer demand. Earnings. Lso posted this is the first Earnings Announcement since turning down a takeover by kraft heinz. They gained in the personal and home services. Two of the biggest highspeed trading firms will combine. Profits in the industry have been shrinking and a deal would represent a major strategy shift for virtu. Kcg has twice as many workers. That is your Bloomberg Business flash. To go andthree days not a clear winner in. The latest poll published this morning has the top four candidates in six Percentage Points of each other. An australiabased firm is forecasting extreme moves. The polls are closed. They have been closed for a couple of weeks. Give me a sense of how the various candidates can convince the undecided voters who to vote for with two days left . For the first election, the undecided portion of the votes are closing. It is now around 30 . Interestingly, usually not necessarily look at the top two contenders but the smaller candidates. How many votes do they take from the big contenders . Macron and Marine Le Pen . And macron. Francine have a lot of Company Started to make contingency plans . Lets say we get melenchon that would be worrying for companies. How do they react . Just a couple of months ago, most French Companies telling us plandid have a contingency in case of a Marine Le Pen victory. A is scaring markets with melenchon victory. A big executive for a company who didnt want to be identified told us that he was actually. Rawing a plan b another Industrial Group in france told us they would consider moving their headquarters from harris to london in the case of a melenchon victory. That is the scary part. Melenchon is now in the runoff. He would lose against melenchon that he could potentially win against Francois Fillon or Marine Le Pen. Tom helped me here with the cleats of this. There is a book out the last 48 hours on Hillary Clinton in the total disarray of her campaign in october and into november of last year. Is everybody on the same page within the Marine Le Pen camp . Is everybody on the same page in the macron or Francois Fillon camp . It is interesting to see that forid have calling french people to call for melenchon. That might be surprising. And heonsidered far left isnt exactly a Mainstream Party. Interestingly, the base of given that she has now trying to direct her speech to target immigration, she may have a hard time expanding her base. Tom a personal question as francine gets on a plane to come over and see you for our coverage sunday night into monday what are you watching . Forget about what the experts are watching, i want to know what you are watching. Watching theill be last interviews on National French television. 11 candidates have 15 minutes. Ach obviously, in the finishing trade, the candidates launch and we will beks watching if Marine Le Pen is trying to expand beyond her antiimmigration rhetoric to expand her base and for melenchon, i will be watching for the youthful vote. A lot of french people are usefulring what would a vote mean. Connan. carolyn thank you very much. Ive never seen four candidates so to get back. Anything it happen and we will have live coverage starting from sunday. As soon as the polls close. Of so it is the evening sunday. Local time. 00 p. M. Plenty more from bloomberg and as it were just saying. 8 00 p. M. From paris. Watch us on sunday. We will give you the polls as they come out. This is bloomberg. Francine this is bloomberg surveillance. Coming up later, we speak with south africas new finance minister. That is the first interview he will give since he took over from gordon. Markets really liked him. Tom is he familiar to madame lagarde . Francine we dont really know. It is important to see what he gets with the vision. The Credit Rating is what we care about. Aravelos willat aroun be here with us in a bit. , on with us is geoff dennis emerging markets. Let me bring up the emergingmarket chart. It is the u. S. Dollar, the bloomberg dollar index. You will see here. We do it right there under the condone at sign. ,he big move in the green arc and then we are. Pausing as we are. Yellen at the end of the day the central banker to emerging markets . Geoff to a great degree, she is. We are dramatically driven in our opinion of em equities by the performance of the dollar. The rally that you show there if coincided2016, with a dramatic bear market. So she drives the stock then primarily, yes. Tom the imf meeting is the great distortion. It will be my first question to john lipsky today. Market in the em space that can be distorted . Or is it like when we were kids and it was all equities . Geoff no, it isnt all equities. You is interesting is that see this dramatic spread compression of emergingmarket bonds versus treasuries. Spreads have come in. The interesting thing in emerging markets is that equities are a little bit expensive. Not dramatically so. But emergingmarket bonds are icy. Is that if there were a rise in treasuries, you would see a double memory to em because the spreads would go out as well. The extent is that emergingmarket rallies have gone as long as they have. Francine is dairy currency where you would buy the spread against currency . Geoff in terms of the sovereign bond, we like brazil because the spread is relatively wide. And in a world of a flat dollar or weaker dollar, depending on the outcome of the election in france, in the short term, we can continue and brazil is cutting Interest Rates. Into the get reflected bond yields. Francine but it would take a long time to go back to the glory days. It has been a tough couple of years after the political scandal . Basically ais treasury story. It is a market story. Getting brazil back on track to decent gross certainly wont happen this year but it could happen next year. You dont even notice the reform will go through. And next year, we have the elections. And we think the French Elections are unclear. Nobody has any idea if they will be able to run next year because so many politicians have been tainted by the scandal. The shortterm and brazil looks clearer. Us geoff dennis is with through the entire hour to get us framed up for the meetings of the world bank and the Monetary Fund in washington. Speaking of emergingmarket, Michael Mckee with robert kaplan. Robert kaplan from dallas. Francine from new york, this is bloomberg surveillance. This is what we are looking at. This is the brainpower we will bring you. Conversation with True International economic experts. What a lineup. Fromlipsky will join us stanford. Deputyhe former first managing director of the imf. It will be with us. Of these three, who is the most interesting strategically about economics it is olivier blanchard. Tom a great man. Francine we like them all. Tom alice rivlin will join us as well. We have a great lineup with geoff dennis with us now. Here is taylor riggs. Taylor the u. S. Ambassador to the u. N. Wants iran to be the agenda the middle east not israel. Nikki haley will use the Security Council meeting on the region to discuss irans role in yemen and syria. She will also bring up support for hezbollah. Report that exxon mobil wants a waiver from u. S. Sanctions on russia or a project with the Russian State Oil company. The waiver application was made under the obama administration. Rex tillerson was the exxon ceo at the time. He has said he did not lobby against the sanctions on russia. Top official says regulation designed to keep banks from is tough to enforce. The role may actually drilled liquidities from the u. S. s banking system. The Trump Administration has targeted it as it prepares to roll back provisions of the afterrank rules imposed the financial crisis. And in japan, experts grew in march of the fastest rate in more than two years. Foreign shipments were up almost twice as high as the forecast. They have become a bright spot for the economy. But there is a question over whether japanese consumers will start spending again. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. This is bloomberg. I am taylor riggs. Francine House Republicans have unveiled a draft of the new doddfrank replacement. They will hold a Committee Hearing on april 26 on the bill. Differentn is led by selling. It seeks to roll back banking regulations. Paul volcker spoke on the topic of regulation and he questioned the idea of a new glasssteagall. What i would oppose as if they are thinking that the Investment Bank trading operation is going to stay is going to state supervision and regulation. But that just doesnt fly. That is where we were. Wrote down. What francine geoff dennis and , somewhat of aan regulatory expert. Thank you for joining us. Let me start off with you. What we know what regulation needs to be of the do . You need to be will to enforce it and it needs to be simple and it needs to protect from the threat of liquidity. Sharyn thats right. Theeeds to protect from harm as we do to a market economy. It needs to allow for the markets to work. The efficiencies of the markets. And it needs to make sure that those who would be heard by it wont have the protections in place. So those are the basic things that need to go into play. Merging back into a glasssteagall that basically will not be able to be enforced, where you have seen so many non market and nonfinancial institutions working within the institution will be difficult. So you can put in place as many regulations but the nonenforcement will lead to a poor and inefficient system. Francine what you think of this so far . Does it put u. S. Financial services at a huge advantage compared to the rest of the world . Sharyn it isnt necessarily an advantage to have a poorly regulated system. Francine less regulated . Sharyn poorly regulated. If it is a poorly regulated system then that is not ok. And that leads to inefficiencies in the market arbitrage and less protections. And that dilates the regulation. Tom you are arguably our most rigorous academic on regulation. You drank the koolaid in the land of james hamilton. You know this like nobody else. A this going to be quantitative, measurable regulation . Are we flying blind . They tend not to do the impact of these regulations on Market Performance and so forth when they impose them and i havent seen any type of studies done so far on that. They need to do that. Tom thank you. Sharyn because they have yet to understand what these impacts are. Tom these are critical. We are sitting here because we say, we dont trust her because she wont measure. When will they start measuring the effects of doddfrank . Has a professor and not a regulator. Tom this is what conservatives in america want to know. Thatn i dont believe regulators are now beginning to understand and bringing tools to them is crucial. And i think that is the place where academics can tell the gap and the void between Market Participants and regulators. And Sharyn Ohalloran Michael Spence have led the call on this. Francine but how do get a change . Who is the person they listen to to out Better Regulation . Or is it too far down the line . Sharyn theres a difference between the politicians and the regulators. There is a need to fill the gap between setting standards and having people feel it is a fair benchmark when you set the standards and understanding the impact of each of the regulations on markets. And if you have a benchmark and you can assess that, it is crucial. Market for disciplines would actually go for that. Geoff i guess i am the poacher in this group. [laughter] francine well regarded. I guess the concern has been that he and from an unregulated system to perhaps an over regulated system. Everybody always says these rings swing to excesses. Do we try to bring it back to the middle or do we not know . I will be bring up with a situation where we again, it isnt necessarily more or less isulating, it is how it regulated. To say that, it is wrong. Do we have the types of regulations necessary to meet the challenges that we are faced with as that becomes important. To have efficient regulations . Is it market informing . At you have students columbia raising their hands and people are asking the same question. Are u. S. Banks overcapitalize. What is your capital . 100 10 . Is jamie dimon overcapitalize . Sharyn it depends. I have to say this as a professor. Dont we have a trap door for someone who says it depends . It depends on if you care about what youre trying to focus on. If it is the safety and the soundness of the institution and the assortments of that risk than the regulators would say no, he has meeting the requirements of the regulations. He at the saying, is maximum, optimal level to have loans in the economy and the most efficient way to balance risk, others say he is overcapitalize. So there is bouncing of the two. The other question i have to ask is that all the focus in theu. K. At the moment is introduction of next year. A lot of people say, does that lose its teeth or get water down if the u. S. Goes in the other direction of less regulation . Goodness me, i am way above my pay grade, i dont know but it is so much dominating our industry right now and it is one of the indications. Think there is going to be a lot of uncertainty now in how that plays out but i understand that the u. S. Has to play in the international market. So there is some aspect where we have to comply with International Regulation to be in that market. So to the extent that the u. S. Wants to deregulate, it is limited to what it can if it wants to be in the u. K. And eu. Will be back with Sharyn Ohalloran and geoff dennis. Today, donald trump is hosting italys Prime Minister at the white house. They will hold a joint press conference at 3 50 pm eastern and we will bring you full coverage of that meeting. This is bloomberg. [applause] live pictures of Jeremy Corbyn, the leader of the labour party in london. This is the official launch of his campaign of the snap election on june 8. This is what theresa may called on wednesday. If you were there, what would you ask him . There so many people in the audience if there are only 12 labour members left in the country . Francine there are a lot of labor numbers labour members but theyre not getting traction because they are so far to the left which is why the conservatives are so confident. Tom what is the overlap of gordon brown and Jeremy Corbyn . Francine practically nothing. Especially if you look at tony blair and Jeremy Corbyn. People say it isnt even the same party and yet, it does live on. It is now the countdown to june the eighth because the parliament has approved an election that sends voters to the polls three years early. The leaders are asking how election is impacting the election campaigns. Geoff dennis is here with us and. O is Sharyn Ohalloran theresa may clearly thinks she can win this. She wants the legitimacy to placate her own party. Say, i woneal the this election fair and square and now i am in charge of these negotiations. Who are saying this delays it and what if she doesnt have a clear win . Tom help me here. What is glorious about this is that it is such a short campaign. Isnt it a huge advantage for the Prime Minister have a timeline of june 8 . Geoff it is only a snap election in that we werent expecting it to happen now. The fact that you got six or seven weeks after the election you know well in advance when it is going to happen. The trade. You learn that with a broader range of probrexiteers. Remaindersre more how important was it that theresa may class called an election before they started brexit . Rse reactions of there is no doubt that as you go forward, given the weakness of sterling, you see the pickup in sterling, it and theb Income Growth uncertainty of how this will play out will hurt this, it is a good idea . Francine we did have elections is this a new brexit referendum vote . If it is, would theresa may win by a landslide . I dont want to opine too i think whatlitics is more likely is that conservatives win dramatically. That is what the polls would tell you. I think you have to look at this as well, the labour party, Jeremy Corbyn is the populace canada. And unlike a populist candidate, he is going to get badly beaten. So would only interesting to see how this plays out. But we dont think this will lead to a rerun of the brexit process. Gideon roseor, h will be with us. The phrase of the moment is the zero sum Global Trading system. How does Great Britain do the island empire of trade from one edge of 50 years ago, how do they do in a zerosum trump trade world . Sharyn it is basically trade diversion. Is trade diversion . That is a smart professor term. Sharyn they will be shifting their trading partners around. He will talk about less trade and more trade with u. K. I think that is probably not going to be as effective because there is a lot more competition directly in this profile of their trading. And i think that is probably not going to be as beneficial. But that is the perception of what they will be able to do. Tom very good. Professor, thank you so much for coming in. It was brilliant on regulation. Sharyn ohalloran is with columbia university. We will continue on and a need to tell you now about something new on bloomberg. Com. This is linked very much with the owner of Bloomberg Media and television, michael bloomberg. Com. Techanged ,t is a really interesting graphical interface of many of the themes and debates of Climate Change worldwide. I took a look at it this morning. The bloomberg by graphics team. This is new york. It is warming today as we move to washington tomorrow and francine moves to paris. This is bloomberg. Taylor this is bloomberg surveillance. Lets get the bloomberg british flash. The British Investment government has sold the which is a consortium. The u. K. Government set up the bank in 2000 12 to spur clean energy investment. It was put up for sale last year as part of the drive to raise money from privatization. Sinclair broadcasting has tv station owners for a takeover. They want to finalize a deal on or before the same day tribune reports firstquarter earnings, which is supposed to be the week of may 8. Tribune has a market cap of three point 3 billion. And bill oreillys departure looks like a nonfactor for the profit machine of the fox news channel. Bill oreilly was the mostwatched star on the cable channel in the u. S. And he is leaving the channel over allegations of sexual harassment. May cost justs it a couple of percentage point in ad sales. That is your Bloomberg Business flash. Thank you. Brent crude has rebounded after a down six weeks. Opec led supply cuts. Afterumped by the most u. S. Production data climb to the highest level since august 2015 and a Bloomberg Survey showed that russia is likely to support output cuts. Joining us now is will kennedy. And still with us is geoff dennis. Much thankso you for joining us. Give me a sense of how likely this is that opec cuts production . Because if they cut production, they havent cheating and industries are going up . Will there is an emerging consensus that the meeting a month from now where they will mull over thee to existing production cuts. As you say, the reason why it is clear that they have to do that is because they have focus relentlessly on global inventories. They had the target of the oil inventories. And it hasnt happened yet because have produced so much at the end of last year before the deal kicked in. So they have work to do. They have to that the inventories down. Tom you know what the chart for brent looks like. It is an elegant chart. This is the 200 day moving average. I rarely use this but it is a straight convention. It is an elegant chart. It is sitting nicely. What is the belief of 70 day of 70 oil right now . Will what has surprised again now is the strength of Oil Production rebounding nine and we will be back at a fresh high. So all of that work that opec did for two years trying to kill the shale industry will be for 70ing, which i dont think is on the cards. Tom help me here with this strange country of indonesia. Ambiguous is what i would call it. Does indonesia care about a drilling percentage . Margin, ande probably cares a small not but he doesnt care that much because it is a reasonably well diversified economy. Produces f oil it tom do you know i asked that question . Francine because you want to see if he knows the answer . Tom no, because i am doing a panel later. Geoff this point about wills segment there is that we are showing that cartels dont work. This only covers a portion of the output. Francine i dont know if we have time for my chart but it is oil breaks and not cartels now . Are trying toy cut output. And it often doesnt work. Geoff dennis and will kennedy, thank you so much. Francine, thank you for the chart. Up next, didion rose. Stay with us worldwide. This is bloomberg. Tom after the u. S. Election in november and with the french, british and german elections to calm, this will not be a normal april meeting of the imf. In this hour, john lipsky. Ierorrow, olivia blun blanchard. In this hour we have george saravelos. And President Trump needs to get american and Global Growth. In this hour, the false promise of protectionism. We speak with gideon rose. From london no. From new york. Wonderful to have you here. Then you go to paris. Before paris we will speak to 15 newsmakers. No clue about what happens on sunday. There are four candidates. Anything could happen. Four candidates and the margin of error. Tomorrow, we have jason furman from the obama administration. , an expert on Foreign Exchange dynamics. Alice rivlin will join us. And angel gurria. He is forcefully opinionated about what needs to be done tomorrow about what needs to be done in the world. Forcefully taylor riggs. Taylor the Trump Administration wants to make it clear that if things a nuclear deal with iran was a bad agreement. Itd midst the iranian government is living up to it. Rex tillerson says the agreement represents the past. Lex the Trump Administration has no intention of passing the buck to a future administration on iran. The evidence is clear. Provocative actions threaten the United States, the region and the world. Taylor Rex Tillerson says this delays irans attempt to make nuclear weapons. He says it doesnt take into account irans role in sponsoring terrorism. This is the strongest signal yet that trump may walk away from the deal. Ofin is taking advantage mixed signals from the u. S. On it ukraine. He has tightened his grip on two rebel regions. Sanctions will likely stay in place. People close to the leadership in moscow say putin strategy in ukraine is to integrate the rebel region with russia. Russian diplomat say the white house seems on. Authorities seem to be gearing up for more Insider Trading cases. 70 insider investigations since anyn 2016, more than double other year in the last decade. And paul volcker has questioned the idea of bringing back glasssteagall, the law separating commercial banking. It was repealed in 1999. What i would oppose if they are thinking and doing that with the Investment Banking trading operation was going to state supervision and regulation, which is what i assume. But that just doesnt fly. That is where we were. Is what broke down. Taylor trump has indicated he is willing to bring back a version of glasssteagall. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. I am taylor riggs. This is bloomberg. A quiet day today. One screen for me today. Curve, a better feel into the imf meeting. The year were really reaches out. Euro over the last couple of days. Francine i dont think it is that quiet. It is quieter than usual but we have strong corporate results in europe to help offset earnings ahead of the French Elections. You can see a little bit of quiet in the markets but oil is rebounding on signs that the output cut could be extended. It is a long way from a racing the slump. And why not look at the pound . A daily check. As a resolve Prime Minister may speak the other day, we were. Oined by dominic constant i read alan ruskins notes of the bank. And joining us now is the global coed of Foreign Exchange research, george saravelos. Right, they call got the call wrong, one thing. When the facts change, i change. What was it like within your research combine when you heard Prime Minister mays announcement . George one of the worlds most said that whent the facts change, i change my mind. Is what happened yesterday. The facts change with the announcement of the early election. And the way we see it is that this is not a debate on a hard or soft brexit. It is really a question of the smooth versus a crash brexit. And what we were worried about in terms of the negative outlet was the risk of the crash brexit. Because the time was just too short. We didnt have time to negotiate by 2019 and proper agreement with an implementation time. And this just buys more time. That is the most important thing. Of this is an approximation dr. Ruskin. Is idea is that sterling here in white and the squeeze is there. This is a representation of the bet in sterling. Within your set of research notes, there is a mystery about where we go to, and given how everyone has been wrong on the trade. 1. 28 oreally are at could we get out to 1. 30 . George we have had a structurally negative you on the pound for two years now. 1. 6re more negative around zero. Our forecasts are under review. So we wanted to start with a clean slate. And in the last year, it has been all about brexit. We really want to incorporate all of the different drivers. If we look at the sterling against the dollar, there is a view in terms of what the fed will have to do and how the dollar will be affected. And the current account deficit. Onwhile we are reduced negativity in terms of the , weit implementations remain bullish on the dollar. There is the potential for a. Queeze it could be heavy. We could go to 130 or above. We are projecting a stronger dollar which implies a weaker sterling. It is just less of a crash risk. Francine what is the impact that the u. K. Election will actually have on the eu side attribute to brexit . 8,theresa may wins on june they wouldve wasted that much time. George what idea is that because she will have a great mandate, she will have a stronger position. It from our perspective, what matters more is that she has a stable government. She is less under pressure to cave in to small minority views within the conservative party. And it is interesting because if you look at the European Reaction over the last 24 hours, it has been positive. The europeans are looking for someone in a stable position, able to be credible around the positions they are maintaining. And that will allow for a better deal on both sides. Francine im looking at a Morgan Stanley note, they say the better election on june 8 will push the boe to raise Interest Rates more than expected. Or quicker than expected. Any truth in that . I think that is quite premature. Wages, wages have remained weak. As sterling appreciates, it puts Downside Pressure on. So i wouldnt be as quick to conclude that. The economy is underperforming compared to how europe and the u. S. Are doing. Partly because the broader insecurities are there. So i look for the bank of england to be firmly on hold. Help madame lagarde here with donald trump. The president s ability to push the dollar higher. Own of the weak dollar. What you think of the president s ability to mess this up and give us a move in the dollar . But i find interesting is that you have the treasury secretary if you days after trumps comments coming out to say in a separate interview that we should be separating words from actions. In reference to trumps comments. So the capacity to jawbone is quite limited if it doesnt have on the fed policy. If on the fiscal policy side, we get more stimulus which is the trump position and the fed keeps on tightening, and he ultimately it is the actions that will matter more around the dollar rather than the job owning itself. Thank you so much, george saravelos. Coming up tomorrow, live from the imf meeting, we speak with Global Financial ministers. With one from colombia, sweden and norway. This is bloomberg. Taylor this is the bloomberg surveillance. Lets get the Bloomberg Business flash. Nestle posted firstquarter sales earnings that beat estimates. Among the reasons, the price. Ike on next cafe overall, they have been able to raise prices 1 in the midst of week consumer demand. Saleser posted quarterly growth that beat estimates. The maker of dust soap in themed their outlook first announcement since turning from kraftover heinz. Sales were unchanged in the food division. And two of the highest highspeed trading firms will combine. Virtu financial has agreed to buy kcb holdings. Kcg has six times as many workers. That is the Bloomberg Business flash. Days to go and not a clear winner inside. The toppling candidate is within six Percentage Points of each other. The numbers represent has citizens plan to vote. Australiabased firm is warning that the result may cause extreme market moves. Cannon joins us now. Can they move the needle on the polls . Theline it is over with big rallies because Marine Le Pen did her last one in marseille last night. However, as you mentioned tonight, there will be interviews on national television. Initially, a leading candidates were supposed to face each other in a debate but the far left wing candidate, melenchon, refused to dissipate. They have changed the format. It will be 15 minutes each. The last thing they can do before the first round in order to convince. In terms of the polls, we should have daily ones until friday evening midnight because on saturday, it is a blank day with no polls allowed 24 hours before the first round. I imagine businesses are concerned that if you have a second round that would look like Marine Le Pen versus melenchon. In that case, what would companies do . Course, that is the scariest scenario for businesses across france and for investors. We did speak with one who refused to be identified who said they were drawing up a plan b in that possibility. There was another who said they were considering moving fromters from london paris to london if that happened. Francegest impact in will be that refusing to believe in this scenario and they will spend the last couple of days trying to convince the french to not vote for the extreme. Tom im sure we will be speaking to you shortly. Quickly, we had taylor riggs yesterday talk about great european auto sales. And on a first glance down the income statement, a pretty good number from bmw. Francine the mws one of the strongest. 2. 5 billion euros. Tom this is the new Foreign Affairs issue. We do this in the next section. I love this title president after destruction. With us is gideon rose, are we observing at present the destruction of france . Rose whatever i say is not going to happen. Obviously, extremists are going to win. Pen will win . The most unpredictable thing in the entire world is the undecided voter. A harde predicting is thing. Lets leave that to the markets. What is the underlying cause . Is it populism or is it wellknown politicians being not Strong Enough . Gideon theyre combined. What have seen in the next in the past few years is that in the European Union are the , that order generally seems to benefit certain groups and sectors more than others and those who dont feel they have done well by globalization are sort of dissatisfied and are pushing back. The mainstream parties in most countries. Voters are pushing back. It is the failure of a Mainstream Party to read discontent properly. Francine what are the populists doing for the working class . Thatn the real answer is populists have a good way of expressing outrage but their policies are idiotic and they dont work well in practice and usually, everyone can see that enough so they dont actually get tried. And then you have a situation like trump where you get in and no one knows what you will do next. Tom the liberal orders break. Rigged. Quis quite the statement. Gideon but not in a way that it cant be fixed. Obamacare needs reform but dont throw out the baby with the bathwater. Francine i have a million other questions. He is flying to washington with us and then to paris with francine this weekend. Francine a reminder, stay with bloomberg for the latest on the French Elections. We will have special coverage of the vote as soon as we have polls. That is at 7 00 p. M. In london and 8 00 p. M. Local time. This is bloomberg. Tom there is a morning mustread. I can pronounce her win. I mispronounce this again. Im very sorry. On poweredassic text interdependence. This is the great douglas irwin. Mr. Trump seems to View International trade as a zero sum game, in which one country wins and another one loses, with the trade balance being be scorecard lessons from the past, such as the trade disaster of the 1930s, suggest that protectionism begets protectionism. It can take decades to repair the damage. In your magazine. Gideon if they go forward with what they say they are going to do. All of the things they say theyre going to do has no basis in reality. Have to govern. They cant just look to their promises. They have look to the markets in the world of governance. Which isnt amenable to the simple easy solutions that they have promised. Francine action form is something that people want. Is something people want in the abstract but when you drill down, everybody wants Something Different and unless are very smart, you wont get it. Theyre not going to get it. Francine give me an easy win. What can they do so that nesses and ceos gideon nothing. Markets dont understand this yet. Topxxon mobil fired its leadership and hired Jerod Kushner as the head of the company, and we talked about exxons new strategy, people and say, what is going on . That is essentially what is happening. The entire layer of domestic policy apparatus has been removed with amateurs put in at the top who dont know what theyre doing. And that is the big picture. If that changes, it will be chaos. Backdrop forthe mr. Kim at the world bank and madame lagarde at the imf. This was almost the chart of the year last year. World trade, 10 year moving average. World trade is below where it was in 1989. Do they understand how bad it is out there . Gideon it depends on who is they. Entire leadership vacuum and people in the white house who dont understand what government actually is or what it does and how to make it work. Francine unless you go back to what the Trump Administration is trying to do, not have any government, so that the theory. Is you can deconstruct. But the fact is, that is just rhetoric and there is no reaction to the realworld circumstances. Tom gets the print copy. Around with this. I do this seven days a week. Foreign affairs, a new issue out. We continue with gideon rose. Stay with us from new york. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. Francine bloomberg surveillance tomorrow on bloomberg tv and radio, live from the i. M. F. Meetings in washington. Tom and i women travel there this afternoon and well speck to the Global Finance ministers and talk about trade and the rump administration. Well have many guests. And im really excited about going to the i. M. T. And speaking to people of all walks of life and world because i hope it will give us a broader picture of what kind of world growth were seeing. Tom this one is different, so different with the elections in france and germany coming up. But of those interviews bring up the finance ministers again, you yawn and youre like so what, big deal. These are really important interviews. Francine the finance minister of south africa. Hes been in charge for a little bit over a month. He was a friend of the show and replaced gordan and we wanted to ask him about strkchur reform and holding on to the currency in south africa. Tom heres taylor rigs with the news. Tailor they want iran to be the core of the administration will middle east agenda and not israel. Today nikki haley will use the Security Councils monthly meeting to discuss the role in yemen and syria and bring up a report on hezbollah. Haley accused them of having an antiisrael bias. They want a wiffer for russia with a drilling project for the oil company. The New York Times said the waiver was made under the obama administration. Secretary of state Rex Tillerson was exxon c. E. O. At the time and said he did not lobby against the sanctions on russia. The i. M. F. Top financial risk official says u. S. Regulation designed to keep things from speculative at best is tough to enforce. They will drain liquidity from the u. S. Banking administration. The Trump Administration prepares to roll back the dodd frank rules imposed after the financial crisis. Global news 24 hours a day powered by 2,600 journalists and analysts. Im tagor rigs. Francine and tom . Tom we welcome you all worldwide as we begin our i. M. F. World bank coverage. Heres a quote from madam lagarde as she talked about these meetings. Francine had an important interview a few days ago. We Work Together to ensure the Great Recession did not become another great depression. National policies tend to have major spillovers across borders. We are all sitting figuratively in the same boat. At the helm of the boat a few years ago, john litky joins us formerly with jp morgan, an american who came to the rescue of the i. M. F. In its point of crisis. John, when i look at this meeting, im saying flatout, its not normal. I have france and i have a snap election in britain and i have trump. How unusual would these meetings be . John very unusual in the sense of degree on policy and certainty. Lets call it Political Uncertainty that looms just days and weeks and in some cases a few months away that are going to have an important impact on the near term structure and perhaps the medium term structure of the Global Economy. This is not normal. Not so dramatic as you talked about in 20082009 but still not normal. Tom they released the green book, the Financial Stability. My theme for these meetings is the continued great distortion. Can we have Global Recovery if we have the oddity of where nominal and real yields are now . The great distortion continues as we see with the german twoyear, correct . John indeed. But of course this reflects the relative modest growth in the world economy. After all, the i. M. F. s new forecast which is theoretically more upbeat than their previous one still has the advance economies growing by less than 2 when their long term average was around 3 and they never fell in the hole they fell in to in 20082009. This is the underlying problem, the worlds growth has still been too slow. Francine right but the same time good morning from francine as well. I have the forecast and spoke to madam le guard last week and theyre more optimistic. Is it based on the data or the economy without listening to the noise of protectionism. This is my chart looking at i. M. F. Growth forecasts . John yes, indeed. The forecasts are better than they were, yet even the language of the World Economic outlook says risks are tilted to the downside. But its not just its certainly not gloomy, the Financial Stability report and the fiscal monitor that were released yesterday offer important suggestions about how policies can support stronger productivity growth in the future and enhance the medium term Growth Prospects. Francine i dont want to be too optimistic but when has Downside Risks not been tilted to the upside, right . This is 20092009, this is the new reality and theres always risks out there, why is it different this time . John there are specific headwinds that they are able to point to, some of the as you just suggested earlier, in the financial system, it is not fully functioning in supporting growth around the world. For example, the Global Financial stability report yesterday highlighted the need for strengthening europes banking sector. There are many aspects like this that are not just always there. And so there are some specific reasons for thinking that the actions still action is needed to strengthen Growth Prospects and will help eliminate the distortions you referred to. Tom i introduced you at the council on Foreign Affairs as you gave a speech on finance. Gideon is here. Help me with the relations. Have you seen a cat fight like we are in now, is it a zero sum ame for dr. Lipsky and others . Gideon its hard to translate it. Theres the Political Uncertainty that will happen with in the elections and policies and so forth. But what they dont actually what people are not factoring is people on the top of the pyramid in the u. S. Making authoritative decisions on policy dont know what theyre doing. Heyre acting like their technicratic cheegs but dont have the background to do it so we dont know what theyll do until they get the department staffed up, they cant make policy. Tom i believe dr. Lipsky is available if youre listening. Francine job plug. Gideon, quickly, at the same time, you have checks and balances. As a foreigner, i keep being told, no matter who is the president and who is in charge, the institutions here are Strong Enough so nothing bad or ugly will happen. Gideon when the administration came in and said theyd do all these crazy things and people got scared, the question was whats goingo happen . What weve seen is they dont know enough about how Government Works to actually do anything effective at all. And so instead of the tail end extremes of radical crazy things happening, whether on the good side or downside, what youre seeing is nothing happening because they cant get anything done and that is kind of likely to continue. All these discussions about the new policies and new syria policy and china policy, at this point i think thats way overinterpreting random actions by people who are reacting to events with no strategy whatsoever. Tom i need one more question, john, and well come back with you as well. I remember lipsky and glassman and now we have bruce cassman at jp morgan. Doctor, do you believe in hard and soft data . Thats all the rage right now. Have you heard anything silly as parsing hard and soft Economic Data . John well, this is nothing new. Theres always been a tendency for distinction for things like confidence figures not necessarily always lining up with the actual prints but this opens a broader issue that we have to ask, this is our Economic Data, is it really providing the best view of actual Economic Activity and situations that it could . And there are a lot of efforts underway now to try to improve that through mining big data that i think will go a long way to help eliminate this kind of worrying about what does the hard data show, what does the soft data show and give us a more accurate picture but effort is needed to take advantage of the Data Available but not always used for traditional economic statistics. Tom lets do back to john lipsky. Gideon rose joining us and we have a wonderful conversation with gideon on the financial ministers well speak with today. It is important conversation later this morning. The Prime Minister of canada, Justin Trudeau, in a conversation with our colleague, Justin Trudeau on canada. Maybe well get an opinion on the toronto maple leafs. This is bloomberg. Francine coming up shortly, bloomberg daybreak american th david west and Jonathan Farrell and alix steele. The cofounder of home depot well catch up with him, a republican donor and his thoughts on d. C. For me i find it remarkable, the stability and uneasy calm and the french bond stable and the euro calmer and the first round of the president ial race saturday, anything but certain. Francine ive never seen anything like it. It can go either way. Imagine what the markets will ook like, jonathan, if we have the second round. Tell me what you saw about the euro and german currency . Well get back to all of that in market movements and the story of the day. Were back with john lipsky, the first managing director in washington. Gideon rose of Foreign Affairs magazine is with us as well. John lipsky, great for you to stick around and give us your time. Whats the greatest risk facing the economy apart from popularism and Foreign Policy, is there something in the markets the way central bank is Still Holding on to policies that may sew the seed of the next financial crisis . John certainly one of the tail risks is the rapid growth of credit in many emerging market economies that could cause trouble that has been widely noted. The growth of credit in china has been quite exceptional and outsized. In the near term things seem well controlled but in the medium term, its clear there will have to be Reform Efforts undertaken in that economy and a fix in the financial sector. So there are still plenty of Financial Risks around, although in the near term they do seem under control. Francine should we worry more about china . We talk about it quite a lot and they have this dilemma to deal with and dont know what financial conditions will look like for banks . John authorities are well aware of the issues and have very concrete plans to deal with them. Hopefully theyll be able to carry through the very clear Reform Efforts that they intend to. So its a risk. We shouldnt overestimate, but its certainly an issue that will have to be dealt with and its not the only place where there are potential Financial Risks and i think the i. M. F. s Global Financial stability report talked about that yesterday. Tom john, im taking liberties with your experience at these meetings. What will you listen for in the corridors away from the microphones and what will it be like in these meetings . John two aspects. One is short term and theres a lot of tension about what will happen with greece. And theres clearly a need for compromise, its very clear, between the i. M. F. And the european authorities over how to move forward and avert yet another destabilizing greek crisis. And i think the chances are good that thats the case. But there will be attention paid here. Second, remember, tonight and tomorrow are meetings of the group of the g20 finance ministers and its going to be very interesting to see with the new u. S. Authorities and the others, can this organization really move forward in a useful way . Tom lets get a final question to you, is there a g20 . John oh, there is a g20 at the technical level, a lot of work has gone on. The question is at the political level, is there really both the spirit and intention to Carry Forward with meaningful economic and financial collaboration . Tom very good. Thanks for beginning our i. M. F. And world bank coverage. We greatly appreciate it, with the Johns Hopkins university. This is an important announcement and something new out of bloomberg. Com. Climatechangeed. Com. It is spectacular graphics in presenting all about Climate Change and the environment. Really look forward to diving into this. I took a quick look at it this morning. Released today, climatechanged. Com. Well come back with gideon rose on important discussions in washington. The fog is in new york. This is bloomberg. Taylor this is bloomberg surveillance. The British Government has sold its green Investment Bank for 3 billion and the buyer is a consortium. They set up the bank in 2012 to score Clean Energy Investments and put up for sale last year to raise money for privatization. Sinclair broadcasting targeted try bune media for a takeover. According to those in the know about the matter, they want to stabilize First Quarter earnings which is supposed to be the week of may 8, tribune has a market cap of 3. 3 billion. Bill oreillys departure looks like a nonfactor for the profit machine at fox news channel. Oreilly was the most watched star at the most watched cable channel in the u. S. And leaving the channel over allegations of sexual harassment. One analyst said oreillys exit may cost a couple Percentage Points in ad sales before factoring in the channels expected growth. Thats your Bloomberg Business flash. Francine and tom . Tom how about a foreign change reporter, sterling is clearly the story with quieter data. The euro 107. 55. The stronger euro and yen at 108 and is weaker over the last 24 hours. There is sterling 128. 35. Still green on the screen on sterling. We celebrate the new issue of Foreign Affairs magazine with gideon rose who brought a real sparkle to the magazine. Donald trump, present at the destruction. Wonderful magazine. Well talk now about the i. M. F. Meetings and their Foreign Affairs. Bring up the chart, the idea rand. South african francine will have a series of financial interviews throughout these meetings. This is the other i. M. F. Meeting going on. Gideon this is fascinating. The people youre talking to and will be interviewing and the officials at these i. M. F. Meetings are dedicated, serious professionals who spend their lives doing this stuff. They have w parts in the u. S. And this is the thing people dont appreciate right now how strange the Current Situation is. The same thing is true in Foreign Policy, you have diplomatic corpses where professionals are tasked with managing relations and in the u. S. We work on a political spoil system and appoint our diplomats and ambassadors at the top level out of the president. About a 1 3 of them are political appointees. Some of those political appointees are impressive, serious people who happen to be outsiders to Foreign Policy and others are donors or cronies the president appoints and the professional staff has to work around. When youre in a foreign country and have one of those big shot donor ambassadors, you kind of know this is the way the game works and you sort of have this dance in which you deal with the stated ambassador but you know the real professionals making policy are either in washington or beneath them. Thats whats going on in the entire u. S. Government right now. There is no serious professional who does Foreign Policy anywhere in the top echelons of the Trump Administration. There is no civilian Foreign Policy professional in the top one, two or three echelons of this government. Francine i need to push back. Its not like unlike this is something people in the western world gideon its why its so puzzling, these poor former technocreates trying to run the world and keep it from going off track have no idea what is happening in washington and who to listen to and what will happen next. Tom secretary tillerson comes in and theyd have to send air force i to get to six blocks to the i. M. F. Building and if secretary tillerson were to parachute in as secretary kerry has in these important meetings, what should be his todo list in the next three ays. Gideon they get the people in the department to the National Security advisor, the president and Vice President Say Something even grossly similar to each other about policy. How about statements that are actually factually correct that people can look to the u. S. Government for as authoritative guidance . None of those things are happening now . Francine if they were elected i dont know what to say, they were elected fair and square. Gideon im not challenging the administrations legitimacy. They were elected but dont know what theyre doing. Right now we have this period of stays us until something changes. Francine will it change . Gideon yes. Its already changing. You had a first group of outside amateurs come in with crazy views and they basically didnt make things work so now those guys are being replaced with moderates, and Foreign Policy security. Tom gary cone with reach out to the ambassador here vats and represented president clinton and they will say it isnt happening because he worked with secretary clinton in the previous administration. Gideon mr. President may say thats not happening, i dont want to wire x, y or z and at some point you have to get past the petty silliness of the campaign and run the country and the world. We havent gotten to that point so i personally have little visibility about u. S. Policy for the next few months until the administration actually inds some kind of bottom and grinding they can move on. Tom gideon rose with us. We have a great lineup. The sleeper for me is the former vice chairman of the rivlin has a view on economics. Francine i have a secret interview i cant talk about but is coming up in a couple hours. Tom did my people talk to your people about this . Francine its secret. Thats why its secret. Tom keene looking at the bond markets and currency markets. You watch out for that later on. Tom ok. Coming up, tomorrow really looking forward to talking to a very strong Peterson Institution commitment, of course the president of the Peterson Institute and the former chief economist for the international Monetary Fund, Olivia Blanchard will join us and well see you on television and radio in washington. This is bloomberg. The outcome of frances president ial vote, anything but certain, french bonds are stable. Euro firmer. House republicans unveil a draft to replace frank and with a little bit of verbal intervention, crude is back. Saudi arabia indicates opec lets supply cuts. From new york city, good morning, good morning. This is bloomberg daybreak. Im Jonathan Ferro alongside david west son and alix steel. Futures here in the United States a little bit firmer. Up six points on the dow. Treasuries up. And crude catches a bit. Alix and 1 00, ive been waiting for this all week. It is the 16