Transcripts For BLOOMBERG Bloomberg Surveillance 20170427

Then actually our revenues are slightly up versus the First Quarter of last year. The Analyst Community was looking for was a sign that you had client balances back to levels we would have seen last year,. Especially your prime brokerage have you got that . Our prime workers business, we have recovered 50 of the bells we lost in the Fourth Quarter of last year. Not yet fully back. We see this in all businesses. When we need to be mindful of the fact that when clients come say, lets reengage, it is not that the following morning you report new revenues. It takes time to work on transactions. Take corporate finance. In reality what we are seeing is revenue in the First Quarter of this year is largely stuff we worked out in the prior quarters. See a lot of reengagement of clients across all business lines, or you can see some immediate effect in Asset Management, new assets and wealth management, that you can see immediately. Prime brokerage. When you compare with the Fourth Quarter of last year revenuewise we are up 100 million and we recovered 50 but it takes some time. Matt got to warmup the engine before you are firing on all cylinders, i get that. Your u. S. Peers saw a 24 gain in fixed income in currency trading. You had an 11 gain. Are you firing on all cylinders in this quarter . Are you going to match your peers now . Two messages. First of all, we are not yet firing on all cylinders. We are, we have seen the turning point in every space. In particular, when you look into the debt side, one point is really important to highlight and that is in october 2015, we took the conscious decision to exit certain businesses. One of those being the securitized trading business. Thats the business that is performed probably the best when you look at the last three quarters, most notably in the u. S. Aresome othef our peers benefiting from the increase in business five there. Not, because we are no longer an active player. We are pleased with the 11 we are seeing. That, we are very strong when it comes to more complex structured solutions. That can see not happen overnight. There are many things we are working on. I am optimistic with regards to the future. Mark lets speak to matt miller who conducted the interview. Can you explain the disappointment on fixed income and equities trading, particularly fixed income is lagging its u. S. Peers . Matt yeah, well, they basically just had an absolute cratering of client balances. So, the big hedge funds and institutions that trade through Deutsche Banks prime Brokerage Bank and the the Fourth Quarter and stop doing business with it to such an extent that it really hurt their market share of fixed income, currency, commodities, and equities trading. And they have been trying to get that back. But he was saying is they have gotten back 50 of what they lost. Theyre going to continue getting that market share back, or continue getting those client balance is back, because they are still losing market share. The whole pie is growing faster than Deutsche Bank is gaining in , on that revenue line. So, need to get back there and they have reached, he said, the turning point. Mark they are juggling lots and raced some capital. They want to ipo the Asset Management arm. Have we learned anything warned about the Asset Management ipo . [sirens] matt they have given themselves 24 months, two years to do that ipo. Of course, the market is hot right now. The market just digested an 8 billion euro recapitalization from Deutsche Bank. So, what some investors are saying as why not do that soon . I just spoke with union investments. They own Deutsche Bank. Think theydg, we really do this by the end of this year. Within the next two quarters they will be ready. Theyre preparing to do it so they have that option alley. I think investors, at least now, expect them to do it sooner rather than later. Mark did you hear anything from Deutsche Bank about brexit and the impact on employees and plans Going Forward . Matt indeed, we did. Already yesterday, we heard from a regulatory conference in frankfurt. That they could move 2000 jobs eut of britain as far as th banking businesses concern and another 2000 support jobs could follow. A total of 4000. Thats one scenario. Just do notk, they have the visibility yet. He does not think the politicians has the visibility as to how this is going to shake out. Abouts it is going to be a year before he thinks they can begin to really answer definitively questions about heir bankers in t london and how much business leaves the city in the end. Mark . Mark great job. We will speak to you later. We will round out most of todays, the rest of todays new s from banks. We have learned from heard from lloyds and bbva. Chris miller will talk us through Chris Wheeler will talk us through all of those. Lets have a quick chat with the senior european economist at Morgan Stanley. The economic backdrop in europe is far better than it has been for banks. Is lending forthcoming . Is there demand for loans in the eurozone right now . Up forgs are pick uing sure. In the near term, most confident surveys have surprised to the upside. Haverd data less so, begun to normalize an increase most recently. Weak, but it has been strengthening most recent. We are talking about an Economic Outlook that looks better than it is ever been in the past two years. Mark well continue to stay with us on surveillance. Hes under pressure to lay out a for exiting ecb stimulus. Draghi knows there is a lesson to be learned about pulling the plug to say. We look ahead to the Central Banks rate decision. This is bloomberg. Mark lets get to the Bloomberg Business flash. Sebastian lloyds boosted its targets and mid record lows in interest rate. Net Interest Income from lending rose 1 to 2. 93 billion pounds, topping most estimates. Airbus profit more than halved. Its production glitches hit the newest jets. I just as earnings fell to 240 million euros. Nokia has reported firstquarter sales topped estimates after the slump in Network Commands began to stabilize and the company reached more revenues. And Samsung Electronics says it will not convert into a holding company, resisting a push by paul elliott singer. As they posted a quarterly profit that topped estimates on smartphones. Samsung announced its firstever quarterly dividend. That is the business flash. Mark as mario draghi faces increasing pressure to and they ecb stimulus, with you might want to respond with a history lesson. For weeks, officials have been publicly debating whether they might start to wind down there asset purchases and raise rates but draghis is determined not to repeat and error when his predecessor started tightening policy only to see the region slide back into recession. Still with our, the senior with us, the senior european economist at Morgan Stanley. T influenced by six years ago when policy was tight and had to be quickly reversed as the economy move to towards recession . Be extraraghi will cautious this year before he takes the foot off the monetary stimulus gas . In the central bank, that was the history, but in the other sense, you look at the data flow. It has strengthened, but one thing that remains weak just yet, its inflation. And that is the ecb target. Core inflation is. 75 . The European Central bank rather than shifting from dovish to hawkish, for example, will put in place a stepbystep process to eventually dialing down. The talk us through process going through the end of 2017. The process is longer than that. The first step is happening now, is about playing with words. Its about selected carefully the formulation that suggests that risks to the Economic Outlook are no longer skewed to the downside. They are becoming more balance. This will not happen today but chances are that draghi in june, he will say the risks have continue to diminish and in june the Forward Guidance is likely to change in two ways. The lower level of Interest Rates, the ecb may cut or drop or deemphasized strongly and also, the Downside Risks will be described as more symmetric. That is the first step. Then come september, chances are q. E. Cb will say sthe program will continue next year as well at a reduced pace. I would expect the tapering announcement in september to start in january. One thing that ecb will be more or less like the fed. First they scale back the q. E. , program and then wait before raising rates. In another respect, there will be a difference. They will shorten the time between the end of the q. E. Program, sometime next year, and the first rate hike. Mark still in 2018 . I place it in september, 2018. Mark it is a slow process which the market will understand. What is the impact on bond yields, then, throughout this process . The first rate hike actually will be only for the deposit rate. That is important because yes, it is the anchor for the riskfree asset curve, but in a sense it will be a dovish hike. Interest rates matter. Quiteill not change for some time. Commercial banks will continue to be able to borrow from the ecb at zero. Now there is also another rate, a deposit rate is 40 basis points. When they raise that, it will be small. The punchline is that the central bank will charge commercial banks less. It will be helpful for the banking system. A tightening policy, it is just a normalization of policy given that the deflation risks have defeated. Mark are you then hereby saying that core inflation is going to steadily grind reports from its 0. 7 . T low levels of grinding is the right word. I am not saying that core inflation will rise sharply in i am definitely not saying this will happen in the near term. What im saying is, if you take a year and half, yes, core inflation will normalize, for one, will be higher. The commendation of not meeting any more of the deposit rate 40 basis points are not needing needing anymore to keep buying at the current pace of just me that the stimulus gets dialed down. It does not disappear altogether. We will not go from negative to positive rapidly. We will not go from the q. E. Program to nothing. It is a process because the rise in core inflation is likely to be slow. Mark what is the impact on the euro, the currency itself, as this process gets underway, hte flip side,e the dollar and the fed is likely to be tightening policy at the center . The currency is a consideration. For example, if the currency was to weaken, that would allow the use some room perhaps to a faster pace. If the currency was to strengthen, there will be less room to maneuver but that does not depend on just ecb policy but it depends on what the fed is up to. A microclear from standpoint, the currency is competitive when it comes to european exports. It is strengthened by not strong just yet. Mark thank you for the moment. He stays with us. We will bring that ecb policy decision, 12 45. Followed by Mario Draghis News Conference 45 minutes later. You can follow it all. This is bloomberg. Big day ahead. Mark Emmanuel Macron has been booed and whistled by striking factory workers in his hometown in northern france. [crowd booing] [police whistle] francine it came after Marine Le Pen fired up the crowd speaking following the incident, macron attacked le pen as part of the political establishment. Macron mrs. Le pen pretends to represent the people but she comes from a party that has refuse to respect the law. She refuses to see a judge of the french republic. 10 ounces and tell those who has lost hope denounce and tell those who have lost hope, she is not the answer. Mark are you looking ahead be on the second round. Are you confident macron will win and casting your eyes on the legislative elections which take macronsjune, andm ability to a, win a majority or b, be able to push for reforms . Theres two angles. We are looking beyond the second round. Best guest was that macron would make it to the first, even before this result. Yes, the legitimate elections are important. Our best case is that well have a more Fragmented Parliament than usual. Of gradual,one study, progressive reform rather than radical, sudden reform. Mark is that possible in a Fragmented Parliamentary system . To the extent the process is gradual, yes, i think its possible, but a Fragmented Parliament makes it more difficult. And the program would argue not for a sudden structural transformation of the economy but hopefully study, steady, progressive improvement. Economy that an finally got the win senate sales the winds in the sails . Look at the confidence data. This is a country that is outshining germany. Now the cycle is getting better. Less cyclical than the german and he italian economies. When it comes to france, that is important as well the global cycle, the domestic cycle, the but what ismentum, more important is that the economic public presence. The potential growth rises. Albeitreforms moderate, this is what will make us more positive over the longer term. Mark the fans that france has caught up with germany the fact that france has caught up with germy, it means that a rising tide is rising all boats . Dataem to be seeing the eurozone strengthening. The economy is firming up. Yes. Now we have more countries and more sectors contribute into that. No longerrea is flying on one engine. Mark what are your big concerns Going Forward, politically or economically . Two concerns. One is beyond the cycle, there is an institutional restructuring of the euro area. There is a lot that needs to be done on that front. Some has been done already. The Banking Union as an example. But we need to see a striping of an institutional architecture macron victory ensure that process quick and . Easier formake it any german chancellor to work with france but i think the issue is broader than that. Eventually, extra integration, one would want to see. That is a concern. The other is that the cycle has strengthened, but from a low bas e. The numbers are good but more from a european perspective. Rather, they would be quite disappointing still for other faster growing economies. We need to see a potential growth recovery, not just a cyclical recovery. Mark thanks for joining us for Morgan Stanley. Up next as lloyds shakes off brexit concerned, we will bring together in the news from all the European Banks reported today. This is bloomberg. 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. Mark you are watching bloomberg surveillance. Lets get the latest first word news. Sebastian the white house says President Donald Trump will not immediately his countrys participation in the north American Free trade agreement. The decision came after trump spoke with the leaders of mexico and canada about ways to renegotiate. Meanwhile, the Trump Administration has made an opening bid for the biggest tax cut in u. S. History. The plan calls for the slashing 15 he income tax rate foto for businesses but fewer than 250 words, the document offers little in the way of detail, including on whether the cuts would increase the deficit. This package is about growing the economy, creating jobs. It is about the economy. As a starter, President Trump aboutin and talks Economic Prosperity and jobs and what are we doing to stimulate Economic Growth. That is how we are looking at this plan. Sebastian the bank of japan has kept its stimulus. Policy settings unchanged the Central Bank Says it is likely that cpi will not top 2 until after 2018. That underscores the view that any exit from monetary easing remains far away. How we implement the exit strategy depends on the status of the economy, inflation, as well as the financial conditions at the time. Discussing the specifics of the exit is premature. We will continue to communicate with the markets as needed. Sebastian we get the ecbs latest policy decision at 12 45, followed by Mario Draghis News Conference. Bloomberg customers can follow that on tlive go. Emmanuel macron has been booed and whistled by striking factory workers in his home town in northern france. [ crowd boos] [whistles] sebastian it came after Marine Le Pen fired up the crowd. Speaking after the incident, Emmanuel Macron attacked le pen as part of the political stubs and. Was born in a castle of a party and she is giving lessons. She pretends to represent the people, yet she comes from a party that has refused constantly to respect the law of the republic. She refuses to see a judge of the federal public. To announce it a denounce her and tell those who have lost hope she is not the answer. Sebastian the cbi says a good brexit arrangement is not about doing the u. K. A favor, which should be based on solid economic reasoning. Other leaders will hold a summit in brussels to discuss the collective response to brexit before formal negotiations can begin. Global news 24 hours a day, in 120 countries. This is bloomberg. Mark . Mark lets focus on European Banks. Deutsche banks largest source of income rising 11 in the First Quarter from a year earlier. Less than half the increase reported by the five biggest u. S. Banks, with Bank Earnings season in full swing, weve heard from swedens, lloyds bank and bbva of spain. Busy week. Lets get analysis. Chris wheeler is here. Hi, chris. That gap betweend and its between Deutsche Bank and its can itanopy close, be close . They have got above Goldman Sachs and Morgan Stanley who have not been as bigger player. They were never a big. Ranks they were brokers. It is done quite well, i think. But the problem johns got is he seems to have stabilize the business, but people want more. That is always what you get when you get the kind of situation. Mark what about the clients . Has he yet to win back the full trust of clients . Evidence says maybe not. Well, you know, Deutsche Bank has an amazingly Loyal Customer banks because it is Deutsche Bank, the biggest e. U. Bank now and customers have to deal with it. When were going to the crisis, people have to come to deutsche. Ank that is still the case. But what you want is you want them to come with a smile on their face and doing more higher margin business. That is what he is going to want to do. Some of them really fancier trades. Mark controlled growth, he calls it. Aboutrybody talks controls growth. People do not want to think of back about what was going on before the crisis. I think what john wants is growth in the revenue line. Some technicalby accounting issues in the First Quarter. Mark the worst behind it . The fears of the end of 2016 are long gone . Chris i have been on here so long saying theyre over done to her liquidity was strong. The deposit strike was strong. Capital needed to be strengthened. 14. 1 is too high for the ratio. Look at the u. S. Players and theyre trying to get down to 11 . Whats perplexing to me as whether they are really going to go ahead with this ipo of their Asset Management. It does not seem to make much sense. Mark the plan was to do it in a year or two. Is now the time to sell . L . Ris why sell at al we are going to ipo the siwswiss business. This business made 52. return. It is capital light. The bankers all made 4. . I do not think you want to give away 10 of those earnings. Say, yesterdays big news, the rights offering, we are not going to ipo the swi ss division. Have capital concerns been put to bed at Credit Suisse . It was not just a tentative yes, yesterday. It was not a 100 yes. Chris the probably have in switzerland is the one they had before the latest changes and the United States in terms of the administration because the swiss have been gold plating all of the requirements. It has been quite difficult. It looks like hes done it. He stepped away from lets float the swiss business but all my years in banking, people come up with complex ideas on how to solve capital issues and then say, by the way, the rights issues, 4 billion swiss banks would do it. I think we are back to that. The question still is about Credit Suisse, surprisingly, the ceos strategy is confusing, away from switzerland and away from asia, where doe the other businesses fit in . Mark thumbs up . Chris i think it is there but but he, he knows what he has got to do. He has got to give more clarity on the businesses that sit outside his two core markets. Mark lets talk u. K. Lloyds. It is a low rate environment. 97 of their business is in the u. K. , but they boosted their targets for lending margin next year. Rises. Este margin chris first of all, one of my neighbors in gloucestershire was telling me how it is going really well on brexit. Because nothing is happen. Lets think about it. I was talking to my colleague earlier and saying the one thing i remember is the 2011 when he laid out his plan and we came up with a challenger plan in halifax. What he talks about becoming a u. K. Centric bank with good returns, h es got there. He has got a few tailwinds. A slightly better marketplace. I t hink the business is in good shape. Mark what about the acquisition of bank of americas u. K. Operations . The boe has warned about borrowing. Chris you know i focus on u. S. Banks and we just had city bank and j. P. Morgan go out really successfully. It is a great business because it is free income from night commissions from the commissions. The unsecured lending that you might have used to do as an unsecured loan, you have a lot of data on how we behave, our credit cards. Your limits. Because they can see how you behave. Do you pay off regularly . It is a very Good Business in terms of including the quality of underwriting standards. Mark thanks for joining us. Chris wheeler. Fromll get earnerings barclays rocker the first interview to bloomberg. U. K. Timet 7 a. M. Tomorrow. Stay with surveillance. Theresa may and Jeanclaude Juncker met in downing street. Others gather and luxembourg. We will speak to a minister for European Affairs at 9 50. This is surveillance. Mark the white house says the donald trump will not a merely terminate his countrys does the patient in nafta. The decision came after trump spoke with leaders of mexico and canada about ways to renegotiate the accord. The Canadian Dollar strengthening against the greenback after the announcement. Meanwhile, the Trump Administration has made its opening bid for what officials described as the biggest tax cut in u. S. History. The plan calls for the s rateng of the income tax to 15 for businesses and partnerships of all sizes. About growing the economy, creating jobs. It is about the economy. As i started, President Trump comes in every day and talks to us about Economic Growth, Economic Prosperity and jobs and what are we doing . That is how we are looking at this plan. Than 250 words, the tax plan offers little in the way of details. The proposed cuts whether would it would increase the federal deficit. The director of federal projects for thet tax foundation, says we cannot model this. Not enough detail. Len berman pointed out first draft of reagan tax reform, page volume 500 plus treaties. The first draft of trump bullet points. Joining us a stephanie baker. That puts it into perspective. Reagan versus trump. Stephanie the scant details makes it all the more clear for attempt foris is an him to rush out something to fulfill his Campaign Promise for tax reforms he made on the campaign trail. Clearly, they are not prepared. They have not costed all the proposals. There are no details. We dont know when the detail will come. Mark yeah. He announced it, didnt he . Weve heard in an interview on television at the back end of last week. There was a scurrying to get it done by yesterday. Whats the process from now, even though we have scant detail, his critics are saying, as you said it is not costed. It lets off the rich in certain respects, etc. , etc. , they are obviously, going to have to go ahead with this and negotiate with members of his party, including paul ryan, who has his own plan and try to come up with some kind of negotiated plan that meets in the middle. That is really hard to do. I think the thing i take away from this, that people will Start Talking about more, here we have a sitting president , the f decades thatou is not releasedr his own tax return and not divested his own business interests and has proposed the most massive tax cut in decades. Much of which appears to benefit himself personally. We dont know the full extent of that because we do not have his tax returns. Hes proposing eliminating the inheritance tax. Hes proposed a massive tax cut for companies. And a sizable tax cut for high earners. Just from aknow, political point of view, the optics of that do not look great for him. Mark how will he cost it . Revenue neutral is the expression. It has got to be revenue neutral. Otherwise it is not going to last longer than 10 years. Alsoanie remember, he proposed massive cuts to the state department and the Environmental Protection agency. Really, bringing those two agencies down to the bare bones in order to pay for his increase in military spending. Where is he going to get the extra budget cuts to pay for this . He hasnt proposed any tax increases. Adjustmentave the tax which paul ryan, the leader, had proposed as a way of paying for this. Mark is that dead in the water . Trump has not given it his whole support. Chinhanie secretary mnu says they cannot support it in its current state. They go back and see if they can revise it. This is an unrealistic plan. Mark trumps all about the opening gambit. This is his first gambit. Now the negotiating begins. That is his business brain. Is that how we should look at it . Stephanie yes. This is how you negotiate a business deal but this is not how you negotiate with congress. One of the reasons why he has not made any headway with any legislative proposal so far, obama the repeal of obamacare being the biggest failure there, is that he clearly does not have a sense of how to negotiate and build support in congress for his proposals. Mark mnuchin is going to have to learn that process quickly. A viewer just emailed us. U. S. Can afford trumps radical tax cut. The u. S. Can afford trumps radical tax cut. You say,ng, what can it is not costed. Is it going to boost growth to the limits that mnuchin hopes and wishes . How can they afford it . Stephanie most economists they will increase Economic Growth but by no means enough to pay for it. That is an attempt that has been tried before and failed. Look, there is no question the desperateode is in need of reform. Everyone agrees the u. S. Is the only country in the world that taxes corporations on worldwide profits. It creates disincentives for companies to keep profits overseas. There needs to be reformed. Even for individuals, the tax coat is so, located, i can speak from experience. There is no way that i can file my own tax returns. And we desperately need some publication. Simple vocation. Simplification. However, when he proposed is unrealistic. Mark next, the brexit battle. Ministers from the e. U. Ministers meet with the chief brexit minister in luxembourg to prepare for talks. Im going to speak to one of those ministers next. This is bloomberg. Mark European Finance minister meet with the chief negotiator in luxembourg to prepare for talks on the u. K. s exit. We have heard from barnier. He says we are ready ahead of the brexit meeting. Nejra is there alongside one of those attending todays meeting. Good morning. Nejra good morning. Ish ministery the ir of state. You are signing off on the draft of the negotiating position for the e. U. Which will go to brussels on saturday. Youre not expecting it to contagious until the u. K. Come in. Are you confident that you will stop any u. K. Attempt to divide the e. U. Im not sure that is a tactic. I think theresa may and others have said they want the European Union to be strong and to continue after the United Kingdom has left. I do not think they are approaching this from a divide and conquer approach which is welcome. That said, the unity of the 27 is very important and that has been displayed today. There were many who fall perhaps that there would be far more division in advance of a grin the European Union position. I think we have seen very strong, very strong consensus from the european parliament, the european commission, their documents. Ndeed, from member states, strong consensus about what we want to achieve for the European Union. Nejra Angela Merkel has talked about that unity. It is mentioned in the negotiating guidelines as well. Whats also mentioned is Financial Services and interestly the wording on a trade deal. Should the u. K. Give up all hope . It is clear and even under the wto rules a sectoral deal can be done. When one leaves the European Union, there will be implications and that will apply to all sectors. So, we will work the irish position, the European Union position it is clear, we want the closest possible relationship between the United Kingdom, which will not be in the European Union but equally the European Union will have to seek to ensure that our own future, our own Economic Prosperity is also injured. Nejra yes. From Financial Services to financial implications, the controversial exit bill. Might a compromise be reached and what could it be . A compromise will be agreed. That is the nature of european politics. There may be some disagreement in advance of that. I think it is very important to te we are resta talking about commitments that have been made, agreements in support across europe. Many countries, projects and businesses are dependent on these commitments that have been made. I think the approach currently is correct. We are looking at the clearly, again, here this is going to be something that will be the subject of much discussion and debate but i think both sides want to see an agreement that is fair and within the legal commitments that have been made by both sides. Nejra could that commitment be 60 billion euros . Im not sure theyre putting a number on it we are focused at looking at the methodology, looking at the commitments, legal commitments that have been made, in the figure will follow from that agreement. Nejra dara murphy, irish minister of state for European Affairs speaking me to me i luxembourgn. Mark bloomberg surveillance. Continues. You can see pictures of the brexit minister taking questions and permitted a busy few days after Jeanclaude Juncker met with Prime Minister may yesterday. Surveillance continues. It is guy johnson joining tom keene. They will talk to as the luxembourg meeting continues. As david davis continues to meet with his fellow mps. Michel barnier says we are ready ahead of the brexit meeting. This is bloomberg. Tom Deutsche Bank is not an american too big to fail bank. They regroup and they go in search of controls growth. This morning, sterling strengthens. The Canadian Dollar finally find a bid. Oil has a fragile bid at 49 a barrel. On trump backtracks rapidly the end of nafta head spin. Filed under you cant make it up. Good morning, this is bloomberg surveillance. Francine lacqua is off today. Shorthnson pulled the straw. What are you focused on its United Kingdom right now . Do we go right to the election . The ecb. We have party at the boj being more dovish. We get the hat trick today with mario draghi . Tell him so well said. Lets go to the first word news with taylor riggs. Taylor in washington, trump the u. S. Out of nafta. He ruled out terminating the Free Trade Agreement right away after talking with leaders in mexico and canada. They will renegotiate. There are plenty of questions today about trumps tax plan. The administration handed out a onepage list of bullet points that will make up the biggest tax cut in history. Officials are not saying whether the proposed cuts will increase the budget deficit. That could determine if a proposed cut in Corporate Taxes from 35 15 would be temporary. Central bank is underscoring that it is still far away from monetary easing. They will keep the program unchanging and has lowered the inflation forecast. They offered an update assessment of japans economy. 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. Equities, bonds, currencies, commodities. Sterling at 1. 29 is the item of note. Onures are steady at 21,000 the dow. And there is west texas 49. 07. Iate, the euroyen shows a strong euro and a weak yen. 1. 2 9 we cant feel it. European stocks are going sideways. A great rally this week. On. 09. Dollar is he stated confidence number out of germany earlier was very strong. We had Economic Confidence out of the eurozone at very strong. That data in advance of mario draghi we have to put up on in there. And there is the cable rate. Tom this is a speed pooper a. Peed bloomberg here is brexit. Here we go down to the first level, the first range. Dont we go to another range. Where does this go . We really dont know where this goes but it is pretty elegant. Maybe beget back to the 1. 311. 32 range . Me you might even encourage to come visit you in new york. I highlight this because of the technical. Destocked 50 continues to trade above the average is at the moment. The real question is, is the earnings season going to confirm and to continue the trend . Gettingtics seem to be easier but now we need some hard data. Season,of the earnings the wait for the banks at Deutsche Bank goes on. The firstts peers in quarter with shares slumping this morning after the revenue from trading bonds and currencies disappointed. Ceo. Oke with the lets get his take on the assetmanagement unit. Duringndow of 24 months which will execute. We also found that we need to make sure all of the carve out order. Ies are in at that will take another numeral two quarters. I will be ready to go and when rico, it will be decided and it will be dependent on market conditions. There is the ceo talking to matt miller. Growth that he has promised . That is the big question the market is asking. Matt so he saying that they awfulo recover from an Fourth Quarter where clients come hedge funds and institutions stopped dealing with Deutsche Bank because of a loss of confidence. Reached a turning point and passed it so it is expected to come any point soon. Us square Deutsche Bank and Credit Suisse from yesterdays news fits into the global landscaping into the global landscape. It is a jpmorgan equivalent . Matt Deutsche Bank had been a ,oint of National Pride especially as it grew out of its european peers comparison and started to really take market shares on wall street and competes with the big guys. It has been a real disappointment. The average citizen is disappointed with the losses and the change in restructuring at Deutsche Bank. It is something of an embarrassment. Matt miller, thank you very much. Lets bring in Chris Wheeler. Why would i own Deutsche Bank when i could own Something Else . Stock is down 3. 5 . What is it that investors cant get on board with . Chris the first part of the journey has been stabilizing the bank. Ratio and he has litigation, most of it behind him. 3. 4 andage ratio is it looks robust but unfortunately, it is only a 3. 5 r. O. C. Bank. It was losing money. Do you keep going for the ride on this one to say that john will get a taxable equity up or do you say actually, it will be a long haul and we can get value elsewhere . Guy rbc the effects coming through of people leaving . Income number,d they are still 4 among the big banks. Fourth behind the big players. There was improvement. A strongt have such Growth Profile as compared to jpmorgan or take america. But they are getting clients back. People have to deal with Deutsche Bank because it is the dominant right in the eu. That is still the case. John has to crank that up and get post bank merged back into the bank. Tom there is a lot of talk within the research about postbank and working up the Deutsche Bank Asset Management. This is a merchant bank, trading is terrible. What is the urgency to write layoff, fire and cut costs . That is how this is done. You and i know that. What do they do it . 3500 staff have shed in the last three months and there will be more cuts to go. They used to talk about was the fact that the platform, which they cobbled withher before the crisis so much volume, they no need to get that down to a level to take advantage of digital transmission advantage of digitalization. The lets take a look at chart of Deutsche Bank. There is Deutsche Bank on trent, going back to the beginning of the u. S. Financial crisis in 2007. Chris wheeler, go up to 60,000 feet radel, where does Deutsche Bank fit into Global Banking in five years . Chris an interesting and important point. They will be a dominant part of the eu in terms of fair trading activities. Equities are much smaller compared to the peers. It will still be a big player in the fixed income markets. Because they are expanding in the space. Lending, which is hysterically which is historically what has happened in europe. The big question is, can they get the noninvestment banking up . The retail and the assetmanagement businesses. That allow them to have lips went the market turns down and make a return on equities. Long way offl a that. Guy think you so much for your time, that was Chris Wheeler joining us. Coming up tomorrow, a conversation with jes staley. We are looking for to that conversation. This is bloomberg. Taylor this is bloomberg surveillance. Lets get the Bloomberg Business flash. Thirdquarter earnings fell by more than half at airbus. Glitches with the companys latest jet. The ceo says airbus is getting on top of the problem. They are standing by an earlier byecast that they will rise this year. The uks Largest Mortgage Bank posted profits that beat estimates. That is despite record low Interest Rates that were introduced after the company voted to leave the European Union. That is your bloomberg is this flash. Guy thank you. The bank of japan lowered the inflation forecast overnight. Governor kuroda says it is likely they will not top 2 until after 2017. Up next, it is the ecb. The focus will be on any signals from mario draghi has the bank is debating at exit from the extraordinary stimulus. Were joined by james bevan. And Andrew Bosomworth. Good morning, andrew. You. Start with has macron opened the door to the exit from the ecb . That is for me . Sorry. Well, i think the data is opening up the exit for the ecb. The ecb has been fixated on focusing on risk and the downside scenario that could potentially happen in geopolitics. But their message was overtaken by the economic data. The growth looks pretty good for european standards. The problem is, from their perspective, there is not much in the way of wages coming through. Things like wages and oil very important for inflation they are outside of the control for the ecb. They are getting to the point where we will have to change the narrative and recognize and acknowledge that the data is getting better. Today whatomes has the right trade around there . We have seen spreads pining in europe. Is it the right position to hold going into the ecb . Do you think there is a possibility that he is more hawkish, the spreads blowout again . Spreads willnk the be reasonably ok. Particularly the french ones because the probability of the looks round there reasonably ok from a geoPolitical Risk perspective. The asset prices that have been most influenced, if not policy,d, on monetary they are the periphery, securities, as well as the front end of the bund curve. That is very specific and purchasing securities below the interest rate. Those are the ones that we think will move and signal any change in the message coming from the ecb. And by the way, we dont expect anything major on the communication front at this meeting today. Tom i thought sweden blinked today. This goes back 30 years, including the historic bailout when they had a lot of courage to save the bank. Here is the inflation for sweden. Years,mal for 10 precrisis, here is the crisis. And this is the great fear. The deflation you have seen in sweden. Lets go back to the band you love blink182. Is this blink2017 . Ande they talk the talk they dont get more restrictive . At this meeting, i dont think the ecb will get more restrictive. Even the governing Council Members themselves say they see the risk dissipated. And that is slowly starting to page out the Downside Risk to the growth outlook. The centralown and banks that we have to get our heads around is, why are wages not taking up so much . Seeing wage not inflation come through . And it is being reflected in headline cti. That is what we have to get our heads around. Phillips curves are very flat. And the level of Unemployment Rate now, it seems to be shrinking. So it seems there working pretty well. They are doing what they are meant to be doing. Ist they are doing increasingly Financial Security risks. Guy andrew, great to see you this morning. That was Andrew Bosomworth joining us from cope. Lets get you james bevan. If we think the ecb has to talk the talk and then walk the walk europeanng to exit banks looks like the nobrainer. Absolutely not. And this is the global issue of where inflation is coming from. China is exporting inflation and the same in taiwan. We have a change in the challenge that Central Banks now face. Globally quarter traded. If those prices are falling, Central Banks have a huge task to get inflation up. With no inflation coming through , i think the central bank is going to start thinking about wanting to tighten policy but i dont think European Banks are still generally wellplaced. One looks at the nonperforming theynumbers in spain and are improving rapidly as is the employment situation. Stay with us. Plenty more to come, we will be back with james bevan. Remember that we have plenty more coming up on the ecb. We will have the announcement and press conference at 7 45 in new york. We bring you coverage of that decision. The News Conference is a must see event. This is bloomberg. Guy guy johnson in london and tom keene in new york. We are right in the thick of the earnings reporting season this morning. Bsf out, high quarterly profits. Airbus having production problems. Deutsche bank, we talked about that already. The European Equity story at the moment if you look at the charts, it looks incredibly positive. Only get confirmation from the politics, policy would view and the earning point of view . James bevan is with us. Is the drive into the european equities the right impulse . Getting lots of positive evidence that the european recovery is on track. It is too early to give up on the recovery in the United States. A lot of people are saying that there is value we see companies coming out with better numbers and guiding numbers higher through the rest of the year. And that says to me that we are not do a better market in u. S. Equities. We could still see multiple Earnings Growth and it is too early. Guy in terms of the valuation discrepancy, isnt there more headroom in europe as the earning start to come through . James there is. But the companies that stand out in europe are not cheap. So take lvmf. As a global company, it isnt cheap. It is undoubtedly a Great Company and should be considered as a longterm Core Portfolio holding, but it isnt a sensible moment to say the shares are cheap so we should go overweight. Tech has been outperforming as of late. Google is out with earnings tonight. By were sell . Do you buy or sell . When one looks at the data, the industrials and Materials Company have outperformed during the month of april. And this is because we are seeing q1 numbers coming on the back of the resurgence on the back of oil and prices, generally. Tom we will be back with james bevan. A lot to talk about. In the next hour, it is a good time to speak with william lee on the ratification of the president s. This is bloomberg. The ramifications of the president s tax reform. This is bloomberg. Tually hold your business back . Say goodbye to slow downloads, slow backups, slow everything. Comcast business offers blazing fast and reliable internet thats over 6 times faster than slow internet from the phone company. Say hello to internet speeds up to 250 mbps. And add phone and tv for only 34. 90 more a month. Call today. Comcast business. Built for business. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Tom got him. The fog of gotham. Robin and i are in the batmobile. Look, it is gorgeous. London has to be better. Little bit of fog and cold drizzle. It looks like london. New york is looking like london. It is a beautiful site. I walked over on the way to work and i took some photos because it was remarkably beautiful. Also beautiful with the news is taylor breaks. Taylor the white house hardliners lost their battle to from naftao withdraw this week. He is agreed not to terminate the trade agreement after talking with the leaders of mexico and canada. They will discuss ways to make the deal more balanced from a u. S. Perspective. Billlicans have proposed a that would keep the government running for a week passed the friday deadline which would give lawmakers a time to complete work on the spending bill. The Trump Administration backed away from demands that it includes money to build the wall along the mexican border. Wan will provide an early they plan to add the f35 fighters to a list they will submit to the u. S. As soon as july. That will boost exports against his attempts to operate with china. Sales with taiwan have been a source of irritation to the chinese. Angela merkel says some in the u. K. Have illusions about exit. She says that is a waste of time. She said to german lawmakers that they will not keep the same rights and privileges that they have in the eu and she will put the eu interest first. 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. Thank you. I probably will do this at the 6 00 a. M. As well but lets do this for the global audience on the 97 of the Trump Administration. If i go to the bloomberg terminal, here is the headline. Corporate rewrite faces major cost. Shows how everyone is talking come on a pair on Richard Rubin in the journal. Trump unveils they have the massive cut with bush and reagan and kennedy in 1964. The New York Times takes a different tack tax overhaul will benefit the wealthiest. We have james bevan. And jim hertling. Taxybody is talking about reform. Did the london press take this single page document from our president . Jim it is less of the plan and more of a series of olid points. More of a wish list than a plan. Tom Maya Mcguiness is calling it magic beans. It almost borders on irresponsible to get peoples hopes up on this. Do you have the message to their madness . Jim the method is, if you look at the 100 day mark, saturday, and you put that against the flurry of activity that you have seen us in the past 48 hours, you begin to get a sense of what is going on. Trying to create a sense of activity and forward motion. The Administration May not be accomplishing much beyond that but there is a story changing from how little has been done in the first hundred days to how much they are trying to do beyond it. Guy what happened with walking away from nafta . Jim you have noticed a trend in this administration that there down,e hard lines laid lots of bluster. It inevitably, you did see that with obamacare. You saw it with nafta and the border wall. There is a disconnect between the pr line and what is actually happening. And it could come back to undermine the administrations credibility down the line. Credibility,s like especially when it comes to what happens in washington. You were trying to make investment decisions. I spoke to the ceo of roche today. Everyone looks at the q1 numbers. Most companies have relatively high tax charges. Why arent High Tax Companies outperforming low Tax Companies . James because the big winners in terms of the earnings are those that are highly cyclical. Those that have exposure to industrial and commodity activity. And the tax charges are a red herring. It gives an extra leg up. Tom james bevan, help me with the basic idea that if you have fiscal irresponsibility and a massive 3, 4, 7 trillion tax interestuts a higher rate into the system, it makes it fiscal and is the debate on tax reform not only a text debate but also a monetary debate . James it is. If there is fiscal expansion in the United States, the big bet that you like, it leads to an acceleration of growth. I know that the New York Times is critical in anticipation of tax cuts that benefit the rich. But the point is that tax cuts benefit the rich trickledown to the employment of those less welloff. Now that is the key philosophical question that we dont have an answer to. But it is at the heart of the agenda. Is this even feasible in programs and american spirit . Can this happen in europe . Dont think so because the social welfare system is different in europe. Europe, nobody has spent decades undermining the legitimacy of the government. In the puzzle and since the days of reagan has been government trash and big government. You dont get that sort of rhetoric in the eurozone. Comment, thereur has been a Lab Experiment of where they have tried to do this. They have reduced the tax rate and the netuilt in result has been not good. Those who are keen on the concept, look back to the reagan time and the 1970s and the shifting to globalization and they say it can be done. We dont know in a big economy context how this will play out. Jim absolutely, times are different today but the marginal gains are much lower today. Isnt the problem with the u. S. Is that we dont understand how some much the element , you heard how it feeds through. Part that dont understand where it will feed through. That was the missing piece of the puzzle yesterday. Player is the image after spending . Where is the pickup in productivity that we need to come through . Jim that is an excellent question and you will not get the analysis right away. Went to the u. S. Treasury website before i came on to educate myself a little bit to see who is running the numbers and who will be researching all of this and there are no Treasury Department officials named. Tom this is what love having jim hertling on. From two days ago. Hertling, talking about kansas. Governor of kansas taxes leading the proclamations from the right. It is commuting it is committing economic suicide the state has experienced impressive employment and Economic Growth. The trump agenda it is just who do with extra bad math. I do want to dial it back a little bit, i am not channeling paul krugman and he is not channeling me. The other issue is deregulation. One goes back to the trump promise there was deregulation. Deregulation has been a musthave. The soft data says we dated and it isnt coming. Where is it . Tom james bevan, a really good about the combined tax reform and regulation. Would you just witnessed here folks is a lot i quickly saw on day 97 yesterday. A naftaast night with phone call from the president to the leaders of canada and mexico. Yesterday was bizarre in american economics and finance. Thank you, it jim hertling. Coming up on bloomberg surveillance. Bolten, the esteemed omb director and chief of staff at the white house who is now with the business roundtable. An interesting interview. This is bloomberg. [booing] [whistle] it was a total ambush. Le pen got there first. Acron got there afterwards. It didnt start well, dated finish well . Macron faced down workers who matter le pen had got going, saying she would not shut the factory down. It was a media ambush. There. S this was an amazing thing to watch. I followed some of it on twitter. What was it like to be there . Was it an ambush . How does macron come out of it . Mark it was amazing to be there. You felt like you were witnessing a piece of history. And how did macron come out of it . We will see. But the initial reaction widely is well. To give you a rundown of the day yesterday, macron announced he was going to meet with unions to discuss what was happening with the factory. He did that behind closed doors. As he is meeting with the union in a closed room, Marine Le Pen shows up at the factory gates a couple of selfies. She stays for 1520 minutes and she goes and that is it. It is the news of the day and everyone is saying macron totally was caught off guard. ,nd in fact, during the meeting they agreed to go to the factory. And there are burning tires and smoke and there are ts by everyone of marine presidant he talk to these guys. Half ers posed him posed him hard questions. There and hestood took it and he argued with them. Tom mark deen, helping with the idea that the washington coast has on their coverage today, talking about what is absolutely four for matting Marine Le Pen is that nobody shows up to vote for macron. I going to turn out on may 7 . the amazing thing is that this before,about partisan politics feeling remains. Attendance is key to victory. We have written that story as well. There are people of the left and people on the right who say they dont feel like voting for macron and the result is that thanictory is less sure the polls indicate. Tom can you give an estimate on what is needed for Marine Le Pen to get close . Is it 15 . 32 . Do you have any idea what that number is . Mark i hate to disappoint, i dont have that number in my head. If you look at output on the bloomberg website, it is there. Impact turnoutat has had in the u. S. Election and in brexit. It is clear that this is exactly what can propel Marine Le Pen forward. Is this how Marine Le Pen will play the game for the next few days . Mouse . She will try to rile him up . Put him in difficult situations and catch him off balance . What is the tactic now . totally. Communication experts are saying Marine Le Pen is great at disruptive communications. We will see more of yesterday. You have to understand that there is sort of a dynamic of the campaign changing from the first to the second round. The first round, 11 candidates and now it is a oneonone fight. A stranglehold and a wrestling match and these two are going at each other. Kicked offlly yesterday. It took a couple of days but now macron is engaged and it is a tough fight. A fight globalization and the euro and the European Union. These candidates are so up for it. They want to take each other on on these subjects. Guy mark deen, great to get your perspective on what happened yesterday. An interesting little fight a big fight. Mark deen joined us out of paris and lets get back to james bevan. Equity markets in europe, there was a relief rally. Was that overdone . If im sitting there and im thinking about my positioning right now, do i say actually, i will take protection out against the still not zero probability . James it certainly is not zero probability but i do think the probability is improved for those who are optimistic about the good outcome. S opposed to last week i think there are other big challenges that we do need to recognize. The challenges of globalization are becoming easier than they were a few months ago. There are now beginning to see economies be prepared to recognize a profit motive and deal with pricing that is ultimately inflationary rather than deflationary. And i think that of the developed challenges Marine Le Pen response to are naturally going to diminish. Guy james bevan, thank you very much. Do you want to join in . Your bloomberg. Tv, radio, event coverage. Click on the tv and you get other functions as well. You get a shot of tom keene and you get a market check and functionality that is being used and you get a great blue buttondown here ask a question. That, it gets use sent directly to this team and we put it directly to our guests. This is bloomberg. Taylor this is a bloomberg surveillance. Lets get the Bloomberg Business flash. Deutsche banks return to growth has been delayed. Revenue equity trading with the largest European Bank missed estimates. The result is that going to because yet to win back the trust of clients, including hedge funds, who reduced business in the final months of last year. United airlines is revamping its policies after the passenger was dragged off the plane. Toy will offer as much as thousand dollars to customers who voluntarily give up their seats on an overbooked flight and it will call in Law Enforcement unless safety and security are at risk. That is the Bloomberg Business flash. Guy thank you. Oil has declined for the first time in three days as investors weigh the expanded crude against inventory. They are pretty full, those tanks. Joining us now from the International Oil conference in paris is the opec secretary general. Good morning to you. Do you believe in techniques to extend production cuts . Thank you very much for having me this spring morning in paris. As you mightve noticed yourself, expectations are now being laid by the opec of saudie president arabia, who has been engaged in opec and nonopec who have entered into this declaration of operation in december. For all intents and purposes, we can safely say that the consensus is gradually but steadily building. Back eight. From your point of view, you think that an extension is necessary . If that is the case, how far down the road are we getting are we to getting that agreed . 25 in ae meeting on may joint conference between opec and nonopec in vienna. And the joint ministry in kuwaity Committee Led by will present a detailed report to all of the 24 ministers. And based on his report and recommendations, i remain confident that a decision Going Forward will be taken in the best interest of stability of the market. Tom secretary general, one of your great strengths is a nigeria and your technical knowledge. About the real question of the moment supply elasticity. The responsiveness of the opecnonopec and u. S. Markets to all of the Oil Production coming on. How is the cartel attempting to waynew technology and the supply can move quickly in one direction or another . Think opec continues to be a cartel a long time ago when we decided to go fully transparent. To answer your question, i think we are looking beyond the shortterm. We are looking at the mediumand longterm picture that is emerging. Which is a picture of stable demand, when supply and will balance itself in the second half of this year. We are very satisfied with the level of conformity of all participating countries in the. Eclaration of corporation alignedlso fully are with the demand numbers that are coming from including ours, which is robust. 1. 2 Million Barrels a dayone point 6 Million Barrels a day. So if you are seeing is the rebalancing process coming forward and in the second half of this year, we went we want to have a balanced market. Tom S Saudi Arabia enjoying the rebalancing . IS Saudi Arabia committed to the opec model with production . The saudi arabia minister, the current president of the opec conference, not only played a leading role in the runup to the three landmark decisions last year, but he is also playing a leading role in ensuring that we fully implement this decision in a timely fashion. Engaged inxtensively all participating countries, to ensure that we have a consensus hearing up for the conference on may 25 in vienna. Guy would it be desirable for opec to engineer some sort of backwardation in the curve for oil . One of the problems that you face is that the shale producers in the United States cant hedge forward their production. If you were to take the slope downwards rather than upwards, you would prevent them doing that. Is that an objective, further down the road . Backwardation of the market is a function of supply, as well as cost, as you know very well. And what we are currently seeing in this quarter is a traditional to seasonal factors, which are transient. In discussions with the key producers in the United States, i think that we agreed that all producers have a responsibility to restore instability to the market. Because we all belong to the same market and we are in the same boat. No one producer was a limited from the market. And what we wish to do in the downturn. I dont want us to focus on the immediate shutdown. We should look beyond that in a comprehensive manner. I remain confident that we are on course. Tom thank you. That was the secretary general of opec from nigeria. James bevan, we need to say thank you to you. Sorry we did not get as much time with you on the equity markets. We have to do that on the valuation that we see. Coming up, an important and timely conversation with william lee, an expert on the border tax. From london and new york, this is bloomberg. Tom Deutsche Bank is not an american to big to fail bank. John cryan and company regrouping and in control of controlled growth. Sterling strengthens to 129. The Canadian Dollar finds a bid. Oil 49 a barrel. Backtracks onp day 97. This is Bloomberg Keene innce. I am tom new york. Guy johnson in london. That was a terrific interview with the secretarygeneral. Of our radar, but 49 a barrel is not the price he wants . Guy they need to balance the books, but technology is working against them. It will be difficult for opec to maintain what they pushed through over a sustained period of time. It is a different world than in the past for opec. You can see that in the inventory. There is so much oil sloshing around the world right now. Tom Kevin Cirilli will join us day 98ended comments on of this presidency. Here is taylor riggs. Taylor in washington, President Trump will not be pulling the United States out of nafta immediately. He rolled out terminating the Free Trade Agreement after talking with leaders of mexico. Nd canada ousley leaders are divided over whether to take a hard line. Are questions about President Trumps tax plan. Authorities say they will make the biggest tax cut in u. S. History. Officials arent saying if the cuts for businesses and individuals would increase the deficit. Taxes god include if from 30 to 15 would only be temporary. In turkey, 1000 people have been detained for being secret followers of an american cleric blamed for the uprising. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Am taylor riggs this is bloomberg. To our esteemed guest in this hour. Futures flat, the nothing for the last few days. Here is oil. Showing 10. 76. Brent crude, 5135 a barrel. Guy . Know, i can remember too, you can remember higher than that. It would he a relief for those of us traveling to your side of pond. European equities going nowhere in a hurry. Down. 4 . Mario draghi will speak later. Bank decided it will push on the qe string. The cable rate almost there, 130. Announcement is below the radar, but is important. How Central Banks can blink. I dont want guy to lose any time on brexit. 140 and change. Another average range. The latest leg up and you wonder if we get back to the 132 level. And we have had earnings politics to think about in france. A lot in european equities. At the moment european equities are well bid. We are trading above all the moving averages as this chart says. There is a floor, but no ceiling. Where does the ftse go next . Som one of the great trueism in our coverage of washington is i dont know what will happen in the next 24 hours. Kevin cirilli is living this in real time. After day 97, i dont know where to begin. Is the president barking out orders that people try to effect, and in case after case they have to backtrack immediately . Kevin i would point to 2 examples from yesterday. It illustrates the administration well. You had gary cohen and Steven Mnuchin unveiling the tax plan. The are widely accepted by Business Community. You had the back and forth in tterverse via the twi of the potential draft, getting rid of nafta, what have you. I would argue Peter Navarro is in decline and gary cohen and Steven Mnuchins of the world are rising. Tom this is important for anyone with a history of american economics. Do i understand that late yesterday the president of the United States had to get on the phone with adjacent nation leaders and say i really didnt mean that . Is that too harsh . Kevin this is been fighting in the Trump Administration. It is how personalities influence politics and policies. You have the Peter Navarros of the world trying to crack policy in a way that doesnt go through the Communications Department of the white house. That is detrimental for a host of reasons. We saw this on the campaign trail with certain individuals. Now, inside the white house. Guy lets think about the nafta conversation. It is said that the president kind of goes with the last person he spoke with. This i am sure is a joke, but maybe there is something to it. What happened on this call . Can you give us details about how the call went, what arguments were on it . Areit a courtesy call, we thinking about withdrawing from nafta, but we just wanted to check how is it executed. Kevin it started with President Trump saying he had great concerns about nafta. He said this on the campaign and transition, as well as early in the administration. Commerce secretary wilbur ross issued executive orders pertaining to Dairy Farmers and the lumber industry a few days ago. That is different than withdrawing from nafta. Tom we want to go from Kevin Cirilli to our esteemed guest dr. Lee. This is a remarkable statement. That this thing was torn to threats. Proposing billions of dollars in tax cuts and casually asserting a plan where vapor would grow and is detached from mp or a goal reality. No serious economist would make such a claim. Real tax reform, however, takes on tough choices. Other thananything appeasing the Business Community that this administration wants to take on trumped choices . Take on tough choices . Kevin the Corporate Tax rate of 15 , they are looking at that as a lowball estimate. Bargainingecomes a situation, that rate could go back up to 20 . You are right. This is light on specifics. It is clearly an opening bid. Tom thank you. William lee was with citigroup and the International Monetary fund. And institute the Milken Institute chief economist. You are an expert on the border wall. How did you observe yesterdays event, if we are not going to have this incoming revenue, that incoming revenue, and another incoming revenue . Is it an empirical fantasy . William it is a fantasy that growth could pay for everything. It is bad for us as economists to give that analysis. When you cloud how the Exchange Rate will take away the bad economic effects, you are mistaking and giving leaders bad advice. The leaders have to know they have a tool in their hands that they should use to raise revenue. Tom where are guys like you in the white house . Adults, thee economic adults, within this conversation in the white house . William the adults are in the childrens room playing with toys models talking about how the Exchange Rate does things it doesnt do historically, distracting policymakers from giving good advice. Tom gary cohen is driving the boat. He is a great guy, but not a front line monetary or fiscal economist like some of these experts. This thing got torn to shreds overnight. Guy absolutely. We are starting a process that is pointing us towards, and you can see it in military engagements, using the mechanism of governmence. William, where is the productivity improvement going to come from . We arent going to get it out of tax . When are we going to get infrastructure spending, what does deregulation look like . William productivity is increasing technology to increasing output. We have failed to do that. One objective is to say how do we increase global prosperity by increasing access to capital that increases technology, access to capital, jobs, wealth, and good health. Those are objectives we have been working for based on good economic policies. They have realistic analyses. Describes itto all. We will come back with a great conversation. Here is Vice President pence on the bully pulpit with tr in the background. They have the mentally dear over here and the bison over here. This is a neoclassical bison and ian bison. And d there is. Someone that will give us common sense on this. The chairman will be with us tomorrow in the 7 00 hour, Alex Greenspan in conversation. Stay with us. This is bloomberg. Taylor this is bloomberg surveillance. Lets get to the Bloomberg Business flash. First quarter earnings fell by half for airbus. The ceo says airbus is getting on top of the problem. There standing by an earlier forecast that profits will rise this year. Lloyds has not been bruised by brexit. The Largest Mortgage Bank had firstquarter profits that beat estimates. This is despite record low Interest Rates that were introduced after the company voted to leave the European Union. That is the Bloomberg Business flash. You. Thank the bank of japan had stimulus into its latest forecast. Governor kuroda said the cpi target will not go north of 2 until after 2018. We have been talking about this. Closech bank, it was a call, split decision. Theyre worried about where the economy is, incredibly negative rates. The ecb is up next. We are waiting for the press conference. The focus on whether president draghi will deliver any hawkish tent that the ecb is thinking about is withdraw of extraordinary stimulus. We are back with william lee. Europe are from a survey point of view, soft data, incredibly strong. The Political Risk is beginning to fade if we believe mr. Macron will be occupying the palace. Occupy stimulus or does the core inflation rate anchor them to the floor . William european economies are doing better, but how much do you want to rely policy on soft data . You want to see hard data first. That is the problem in the United States, too. The market got ahead of itself on sentiment. That is keeping draghi anchor to the current sentiment until they see real data. At the fed we are not as secure in our analyses. They are hoping on a prayer to get data to match the actual data. We havent seen that happen feelings data to match the actual data. We havent seen that happen. Guy what is your analysis on what the policy outlook is . Because ofe ecb, draghis credibility, can get away with a lot. He can ensure everyone that when the data turns in the right direction, he is ready to move. Tom this is the world of diversity. We are not going to do a dissertation. Bring up the swedish inflation chart. This is the average sweetest inflation over a decade. 1 , down we go into this ugliness. Persistent, chronic price decline. Here is the blink with inflation coming back. There is a worry about the path, the japanese and swedish basis. Does janet yellen have a regret that the past frames her action . William the regret is inflation is taking a lot of time to pick up because we have a lot of slack, hidden and actual. Everyone is reluctant to move. We mood has shifted, saying have to be aggressive on monetary policy. We have to start normalization. If they said we need to normalize because markets are distorted, 100 lets go for it. Right now, they arent saying that. Tom at the end of the greek alphabet, absalom is a measurement of moving parts. Has one moving part, the United States of america. 15, 27 moving parts. Is it too complex for mario draghi to get it right . William he cannot rely on fiscal policy. There is no unified fiscal policy in the euro area to help monetary policy. , becauses to be sure he knows he is the only tool around. Possibility has the of fiscal policy coming on, but thats the problem. What we saw yesterday puts everyone in a state of unease if fiscal policy can come into action or not. Guy we will be back with william lee of the Milken Institute shortly. Stay with bloomberg for the latest on the ecb. We will bring your coverage of the policy decision. The main event follows that, the News Conference by mario draghi. It is a must watch. This is bloomberg. Thehen you look into youerent business lance and compare fear, the only one where we are not down is the prime brokers business. It will take time until it comes back. If you do a comparison with the Fourth Quarter of last year, we are substantially up in equities, most in the prime brokerage business. The Deutsche Bank cfo talking about the banks business and what is happening in trading. He was talking to matt miller in frankfurt. He joins us now. Is there is a sense they are still dealing with the legacy when it comes to part of the business that things are going to turn around, and turn around quickly . The market wants to see deutsches do well in some of the trading lines. Matt they seem very confident things will turn around. How quickly is, will they turn around . The legacy problem from the Fourth Quarter last year, concerns about the massive fines from the department of justice when institutions pooled their money out of Deutsche Bank for lack of confidence, thats the problem. The cfo said they had 50 of their client balances back in place, but only grew fixed income trading 6 , when on the street they grew 27 . When their peers grew 27 . Tom the idea that they will move london to germany, is that talks about . That bodies will move from london to frankfurt or wherever . Matt absolutely. There was a regulatory conference and ahead of regulation said the base case would move to hundred from london to frankfurt and 2000 would move 2000 from london to frankfurt, and 2000 support. Have clear visibility, and they dont expect have clear visibility for than theirr, longer u. S. Peers expect to wait before making a decision. Tom william lee of the Milken Institute, their chief economist. You cant talk about the banking industry, and now the rules have changed. You have done Sterling Research on loan demand. Where is the loan demand for Deutsche Bank, for james dimon, for your former shop . William before i left citi people were pounding me, arent you worried about the slowdown in commercial lending . That is the heart and soul of investment. Data, theook at the slowdown is because no firm in their right mind wants to borrow money to extend capacity because they have to much capacity. The Regulatory Environment caused banks to change their behavior. Instead of lending to small customers fueling job growth, they are lending to large customers. That is because of regulation and doddfrank. Tom regulation is a huge deal. We will continue with william lee, not only on banking. On the american economy. Bloomberg daybreak tomorrow in. Ondon, mr. Staley of barclays it will be a timely discussion after the Deutsche Bank disappointment today. Guy johnson in london, tom keene in new york. This is bloomberg. With xfinity x1. Family time is awesome show me the radio disney music awards. Just say it and see it with the x1 voice remote. And you can catch up on all the rdma buzz. With artist interviews. Past performances. And more available now on xfinity on demand. Xfinity the future of awesome. And to find out how to catch exclusive videos featuring rdma host jordan fisher. And the ardy goes to. Watch Disney Channel presents the 2017 rdmas. April 30th on Disney Channel. Am guy johnson in london, tom keene in new york. A Bloomberg Business flash news update. Hardliners lost her battle to get President Trump to threaten to withdraw from nafta. The president agreed not to terminate the agreement after talking to leaders of mexico and canada. The three countries will try to make the deal more balanced from a u. S. Perspective. A stopgap bill has been proposed to keep the government running for a week passed the midnight deadline, completing work on a trillion dollar catchall spending bill. The president has backed away that the bill include money for building a wall along the mexican border. Taiwan will provide an early test for President Trump rapport with president xi jinping. That would fit President Trumps goal of boosting exports against his attempt to boost cooperation with china. Arms sales to taiwan has been a source of irritation to the chinese. Chancellor merkel says so many u. K. Have illusions about brexit and it is a waste of time. She told german lawmakers to u. K. Will not keep the same rights and privileges it has in the eu when it leaves and will put the eus interests first. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Are looking at a lot of newspaper covers. Thank you new york post. Taxes, chainsaw massacre, thank you for bringing this to my attention. Thrilled to bring you on this crazy tax reform morning someone who knows better than all about generational change. She is with the manhattan institute. That barely describes her work on the generational effect of our fiscal irresponsibility. Her book disinherited how washington is betraying americas young is a classic on irresponsibility. Is President Trump disinherited the generation of 2028 . Absolutely not. His tax cuts are going to spur a vast amount of growth, which will create jobs for many people, including 10 years out. If businesses come back and invest, the jobs they create will not only be 2018, they will too. 28 scathing. Have been if we will get growth, how much would we see . Would this generate 3 or 4 gdp america . No growth rate is persistent. We might have 3 or 4 for some quarters, but we cant say we are getting rid of the business cycle, nor would we want to do that. Someuld be 3 or 4 for time. What is important is that our companies that are now at a disadvantage because they face a 39 percent tax rate on a worldwide income will be closer to the average of 25 . Well below that at 15 . They will be able to come back to the United States instead of inverting to other countries, like ireland, burger king inverting to canada. The system we have now is crazy. Small businesses create jobs. How can we make sure the tax advantage andm an allows them to create jobs . That is what we have been talking about through the campaign and into the first 100 days. Diana the tax plan lowers the tax rate to 15 for Small Businesses. The corporations and the Small Businesses have the same rate, which is important. If they didnt, Small Businesses would move to become corporations to take advantage of the 15 corporate rate. It is important that corporations and Small Businesses have the same r ates. Guy do a need to focus more on equities and then debts . Diana equity and debt both have their place. Debt is very popular, but that is something that may change. If doddfrank is rolled back, it prevents some equity some companies from going public. As the fed gradually raises Interest Rates, which we hope will happen is growth picks up. Tom with us as well is william lee of the Milken Institute. You have a question for diana . Guyiam one thing that mentioned earlier about Small Business job creation is we need the right Regulatory Environment to promote lending to smaller businesses. That is missing in action. Two you have any comments on that . Has putresident trump in place cabinet secretaries committed to rolling back regulation. Scott pruitt at epa is taking a solid look at the clean power passedd some other bills under president obama. At the interior department theyre looking at areas designated as national monuments, meaning no one can do industry on them. At the labor department, alexander acosta, when confirmed, he will roll back regulations, too. Tom tax overhaul would aid the wealthiest. This is the response thank you jason for coming on. Tax overhaul would aid the wealthiest. Reform for the wealthiest, how does this benefit a broad middle class in america who are both republican, democrat . Diana it benefits everybody by increasing Economic Growth. The top half of individual income earners pay 97 of all federal individual income taxes. It is impossible to have a tax without disproportionately benefiting the top half. It doesnt mean the bottom half will not benefit also. Guy if the u. S. Goes for a 15 corporation tax, the u. K. Is not too far behind, ireland is in the ballpark. Is this a race to the bottom . Diana i dont think it is a race to the bottom, it is a race to the top. Low tax rate means people keep more of their money, invest more, economies grow faster. Tom thank you for joining us. Terrific work a number of years ago on generational shifts off of tax policy. We will continue with bill lee of the Milken Institute. Polarity, diana is in love with this plan. You have people against it. Where is the senate going to be . William they will be persuaded by good analysis. Now they arent getting it. They need to be given tools. Something like the border tax, we can use it but modify it. We can boost exports and cut back on imports. Is it a border tax, or does that focus too much on mexico, or is it an import tax . William import is key. We want to shut down imports and promote exports, but also promote job growth. We can do that as long as the Exchange Rate is appreciating. Tom is this a president of the 17th century . William he is a president of the 22nd century. Trade will have to recognize supply chains. That will be between companies, not nations. Those are the definitions we have to work with in the future. Tom any idea what will happen in washington today . Someone has to be an adult and tell the president we can use the border tax as a tool and persuade Congress People we can go from exporters to importers, and that will solve half the problem. Tom later today, bloomberg daybreak, must wish and must watch. A true fiscal guy. The former white house chief of staff in an important interview in the 7 00 hour. This is bloomberg. Taylor this is bloomberg surveillance. Lets get to Bloomberg Business flash. Deutsche banks return to growth has been delayed. The largest investment think admits estimates in the First Quarter. Deutsche bank has yet to win back the trust of clients. Directors of sales indicated happyere not with the pay package according to regulatory filing. 60 , 13 million dollars. Salesforce also increasing performance related stocks or other executives. United airlines revamping its policies after a passenger was dragged off of an oversold plane. Moneyill offer for customers to voluntarily give up their sites, and will not call in Law Enforcement unless they think security is a risk. Guy lets take you to paris. A student protest and against Marine Le Pen. Taking itolice are pretty seriously. We have seen demonstrations starting to get aggressive. They are making sure they are fully staffed for that. These are live pictures from paris. Yesterday, we saw amazing political scenes run france. This is Marine Le Pen ambushed macron at a whirlpool factory. She got there and was taking selfies with some of the staff. When mr. Macron. There, he was booed. It was unpleasant for a while, then he started to turn it around. We are also with william lee. Mark, let me come to you first. In some ways, is Marine Le Pen using Donald Trumpstyle tactics . Taking selfies with workers, putting himself on the workers side of the fence. You think it will deliver . I think this is modern politics. There is a resemblance between Marine Le Pen and donald trump. It is also in terms of policy, in terms of wanting to slap a 35 percentrts, a tariff on any reimported products when a factory moves abroad. There are a lot of parallels. These are modernday politics. It is about selfies and social media. It is about knowing how to do youtical antics that k2 attention in an age when we are that willted with get you attention in an age when we are all saturated with media. Guy this was a political ambush, wasnt it . To get a sense that the macron team was not expecting it to turn in this direction as quickly as it has . Mark i dont think the macron team they certainly werent expecting the le pen team to show up on the same day that they were meeting with unions. The feeling on the ground is this kick started the second round of the campaign. It got a stranglehold. A oneonone match going in earnest. The Macron Campaign responded pretty well. 18 flavors of left and socialism in the culture of modern france. How are these people going to vote for a rothschild banker . Newspapers in france, do they presume these people will vote for mr. Macron . Mark absolutely not. If you walk into paris and talk to friends, family, anyone you meet, you meet voters on the left and right who dont want to vote in the second round. On the left, they dont see on theas a leftist, and right to come they dont think they are part of their family either. What we are seeing is that politically the nation is divided. 45 of candidates the votes went to antieuropean candidates. Tom i would assume macron has slick, smart advisors. What is the to do list for thursday into friday in this key weekend for mr. Macron . Mark it is more campaigning. Newsn is on the evening this evening. Marine le pen will be holding a rally in nice. It is a campaign. No doubt, both candidates have surprises up their sleeves for us. We have just over one week of campaigning left. The one daybreak before may 7. It is a rough and tumble fight. Fromgreat perspective paris this morning. William lee of the Milken Institute with us. We knew 2017 was the year of elections. Are we exhausted moving from november in the u. S. , to france, to england, to italy, to germany . Everyone things we are back to internationalist, but the french have an interest in preserving the bureaucracy of brussels. It is no surprise le pen is not getting a lot of traction. The eu bureaucracy has to be structured and deregulated, the way we are deregulating bureaucracy in the United States. You look at revenues on dow chemical, and i have price increases up 7 , volume growth up 16 . There is a first look buoyancy on 104 versus 99. We will have more. David wilson of Bloomberg Radio will dazzle on chemical and a bit. Lets look at tv. It is another round of jenny arthu genius from our program in the bloomberg death star. Thecan watch us on terminal. You can see my ugly face far too much. You can click to go into an older section. You and the can steal a bloomberg surveillance chart. You can take the exact chart. Guy is going mental about that chart. Tv. It is very good. This is bloomberg. Tom good morning, everybody. How about a Foreign Exchange report. 129 at the bottom. Sterling stronger, ian is weakening. , 110,y in the uproar, 109 up to 111. He is an washington, d. C. With a cool interview. David westin will be speaking to one of the smartest guys on the block. Mr. Bolton. David, how will you attack . David we will try to have josh bolten attack tax reform. We are very excited to have josh bolten. As you said, one of the smartest, most knowledgeable, experienced people around. He is working with jamie dimon. We will ask, what did we learn yesterday, what didnt we learn, what will really make a difference . Tom you are having lunch at the bar of the trump hotel. What will you have at the trump hotel today . My head was spinning after yesterday. David what they are doing is dramatic. It is tempting to say there is no specifics, but they are trying to negotiate with the hill. It will be a fascinating process. The wall street journal compare this to the reagan tax change. It is small in comparison. That onwill look for daybreak. William lee, the Milken Institute chief economist. I want to put up a draghi chart. The u. S. Twoyear yield. It is amazing how in the last number of days, people have said the u. S. To hear is the global litmus paper for all central bankers. Draghi, ecb, and the press conference. Do i watched the u. S. Twoyear . William it is a guideline to where the fed is going. Everyone is trying to get a fix on how aggressive the fed will be and what tools they will use. That is where the twoyear comes in. The 10 year and 30 are flattening. Between the zero and 2s, we have uncertainty. Tom was that a good level of jargon from bill lead . That was trophylevel jargon. Steeper wind up with a yield curve at the end of the rate hike cycle . Normally you end up with a flat curve at the end of a rate hiking cycle. It could be different because of the cycle . William we dont have the traditional reason of why the fed would increase Interest Rates, accelerated prices and rising inflation. Inflation is a hope and a prayer. Maybe because we have fiscal policy it could get a push. There is no real fiscal policy in sight until 2018 and beyond. That is why there is uncertainty in the twoyear rate. Tom one more question. Slip one more in, god. Uy. Guy when they start exiting the Balance Sheet, with that means in terms of the u. S. 10year. The magnitude of the difference it will make on the upside. William if anyone says they have this answered, they are lying. No one knows what the socalled portfolio balance is a reuse qe to keep rates down. Now we are trying to guide rates up. You have to have a clear view of how the Balance Sheet will influence the 10 year rate. We have had generations of veiled dissertations that failed dissertations that have try to estimate that. They will be pushing, shoving, and experimenting very slower. Tom what are your marching orders for mike milken . He wants me to say to the world the Milken Institute has one goal, to increase global prosperity. How do we do it . By putting together collaborative solutions. Orders are capital. We want to increase access to capital. We have to have wellfunded capital markets. Lee of the Milken Institute, chief economist. He will continue with us on Bloomberg Radio. It is an important morning for europe. 7 45 new york time, the policy decision of the central bank and the eight press conference. We will do that later. This is bloomberg. Jon President Trumps tax plan one page, many questions. Deutsche bank stock dropped after underperforming the big five on wall street. The ceo says return to growth is delayed. A meeting president draghi might prefer to skip from new york city, d. C. And frankfurt, a warm welcome to bloomberg daybreak. Over in d. C. Is our very own david westin. David its about that plan that , whatut what it means it could get done as a practical matter on capitol hill. Share . 39 per substantially less than last year, but they guided to that. Their revenue was up some. We will be interviewing mark