Transcripts For BLOOMBERG Bloomberg Surveillance 20170517

Im Francine Lacqua b the finishill talk to centralbank. Were looking forward to what they make of the latest with President Trump. Of course, President Trump shows here next thursday for t meeting. Mark . Mark the stoxx 600, a little bit lower. It is all about trump today. Which we will discuss in detail. Dollar. Up against the certainly a flight of safety today, benefiting the yen and euro. It is benefiting core government bonds. Yields declining. The german 10 year, 40 basis points, down by three basi gold is getting for a fifth. Onsecutive day, lets get to the bloomberg first word. Reporter all of the focus is on u. S. Political risk, but elsewhere, the country is considering expanding the laptop ban from flights from europe and beyond. That is according to a department of Homeland Security day the European Union asked the u. S. To refrain from banning laptops from the region, saying both sides stated to Work Together to curb the threat of terrorism. The democrats will pledge to offer a final vote on brexit. The general election manifesto will be unveiled later today. The just nine seats in parliament, the party is looking to resurrect the Political Party by appealing to those who voted to remaini in the eu. The European Union is refusing to allow the brexit talks to take place in secret, despite appeals to keep the location secret. They will make the negotiating documents public every step of the way. Sothebys has sold a pair of pear shaped diamond earrings. Pinkpollo blue and artemis diamonds cracked the range of 50 million to 70 million and were a record for earrings sold at auction. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. This is bloomberg. Francine . Francine thank you. The u. S. Dollar has fallen for a sixth day and futures are pointing lower after the latest controversy involving President Trump. He asked the former fbi director to drop the investigation into ex National Security adviser michael flynn, according to a person who was given a copy of a followingcomey wrote his Oval Office Conversation with President Trump. It introduces the possibility that the president might have obstructed justice, which is an impeachable offense. The white house has denied the version of events described in the memo. Lets get more on this with bloombergs Global Business correspondent, stephanie baker. We also joined onset in london maxeoffrey yu and kettner. Stephanie, let me start off with you. How big a deal is this . Is this actually impeachable . Where did well from here . Where do we go from here . I think it is a big deal. If it does turn out to be proven, if there are tapes, you will see a growing chorus in congress, at the very least, for a special prosecutor. Obstruction of justice is a broadly defined term that can be interpreted widely, but you are hearing that word muttered far more frequently in congress than you did a few days ago. The problem is, the what houston i this happened and have undermined their own credibility the problem is, the white house has denied this has happened, but they have undermined their own credibility. Has madeer statements about what happened, only to be undermined by the president himself. Intent is the big word, stephanie. What was the intent . What was the intent behind it and the entire thing could hinge on that. Exactly, and that is what the fbi investigation into russias meddling in the election and the possible collusion of Trump Officials hinges on as well. Can they show that if this is true, that trump intended, because of his concern about the russian investigation, intended to get rid of james comey because he refused to drop that investigation . That creates a basis for them to pursue those charges. I think it is a big deal. Stephanie, how will the Republican Party react . Yesterday, we heard from Mitch Mcconnell. This was before we heard about the memo. At the time, he said President Trump means to focus on work instead of talking about everything else. Will the republicans go hard on their president . I think you are seeking a different town coming out of i think you are seeing a different tone coming out of congress, especially from republicans. I think the issue is, this is a story that is quite easy to tell to the american public. This is a president who wanted to have the fbi drop this russia investigation, drop the investigation into flynn, and therefore, fire comey. It is an easy narrative to sell to voters. As a result, youa r are seeing an increasing number of republicans willing to go against the president , finally. Flight to safety today is the trade. How long does that last . It depends on how investors view the u. S. Political change, and does this change the underlying picture for the Global Economy . If we take a step back, clear the political life, in terms of policy implementation, has that actually accelerated u. S. Growth . I would say, not yet. But maybe some marginal effect, which trumpflation couldve benefited things from, but ultimately, i dont think we see much of an impact on the big picture here. Francine max, what are the markets worries . Are they worried the president will continue to get distracted instead of focusing on tax reform, Infrastructure Spending, and what he has promised . I think that is exactly the scene here. We need to take a step back from the day today twitter and the d ay to day News Releases there. I think the important part here is what is priced in with markets. In equity volatility, not much. We do see a very volatile washington. We dont see a very volatile new york. Thats sort of divergent. Ant is something of unlikely from a macroeconomic perspective, if we see the server data, which has been holding up quite well, even in the last company, some of them have come off their highest levels, but the big danger is if we see that dropping, the effect on markets could be severe. Mark great quotes. Stephanie baker, thank you, our Global Business correspondent. Geoffrey yu stays as is, as does matt kettner. Inflation expectations with the latest euro area readings. Why economists are seeing it lower for longer. Then we assess that further with francesco papadia. This is bloomberg. Reporter lets get the Bloomberg Business flash. In the u. K. , Lloyds Banking group has returned to full private ownership almost a decade after it was bailed out. The treasury confirmed this morning it sold the remainder of its original 20. 3 billion pound investment in britains biggest markets under. Completely, with the right financial structure, we will help the country prosper. Our purpose is helping the country prosper. We are the largest unit in retail and commercial banking. What is good for the economy is good for lloyds. Clearan easy and strategy, what is good for the company is good for the bank. Reporter the five ship hedge fund suffered about 1 billion in outflows in april as investors continue to pull money. That is according to a Bloomberg News calculation based on the letters to investors. At this managed by Brevan Howards master fund dropped to 8. 7 billion at the end of april. Plans to sign deals with tenuous companies when President Trump visits the kingdom this weekend. With 10 u. S. Companies when President Trump visits the kingdom this weekend. They did not immediately return phone and email messages seeking comment. Apple plans to announce an update to the laptop lineup early next month. According to people familiar with the matter, the company is planning three new laptops in a move that could help offset new competition from microsoft. They declined to comment. That is the Bloomberg Business flash. Mark we have the latest reading of euro area inflation in just under one hour, expecting a 0. i inflation. Target, juste below, but close to 2 , which is the ecbs mandate. Still with us, geoffrey yu and matt kettner. Look at this chart, this is the , obviouslyre cpi moving in the right direction. I will start with you, geoffrey yu. Is that enough to persuade the ecb to tweak its Forward Guidance in june . I think levels are less in port in the direction. Probably slightly on the early side. But they should at least acknowledge the direction. I still think they want the optionality. I think we take a slightly different view here, at least in core inflation. Core inflation is dropping and has been sinece 2015. Therefore, the exit will not be as smooth. We dont see a rate hike happening in 2018 either. I think we are taking slightly less mark the rate hike happens after qen. In our view, it is a lot after that. It will not be in 2018. What is priced in markets of the moment is we do see a hike, with 60 to 70 probability priced in 2018, that will probably be taken out over the course of this year. The ecbs mandate is not core inflation. That is somethign for the under rlying inflation. I think the headline cpi will matter to them. But in terms of tapering first and what kind of hike, will it be symmetric or asymmetric, that will be up to discussion. The underlying story is draghi wants to keep the optionality. Mark november highs, there is the trump side of the equation. And there is the European Economic backdrop side of the equation. Which wins otut here . I will wait for the june stop productions to come out. I would roger base it on the averaging aspect. It will probably be around 1. 07. As long as we do not move too much above it, 1. 13, i think the ecb will tolerate that. I think markets know that as well. Mark is that about right . Is there a ceiling . 1. 14 is the level where the ecb would get more concerned and we would see officials saying, hold on a second. Mark are we done with Political Risk, max . Probably not. Mark but for the time being . The last two to three days, it has been a quick reminder. This chart we had before, trump tweets and trump impeachments. Mark these are the number of mentions on twitter containing trump and impeachment. We saw that even yesterday. Regarding the potential impeachment of President Trump. Though she declined to comment, but the fact she has to comment on this in a town hall speaks for itself. It means we are in a highly politicized environment. Mark we have scales, geoffrey, and european Political Risk and u. S. Political risk, it seems to be moving like this. But how does that affect the underlying market . Survey weto this launched today, over 70 say they only care about shortterm issues. 82 think this is the most uncertain time in history. Mark thank you both for staying with us. Up next, we look at the most unpredictable period in history. What can investors do about it . We talk risk and reward in a volatile world volatile world. This is bloomberg. Mark you are watching bloomberg surveillance,. I is unpredictability the new normal . We live in the most unpredictable period in history, one of the findings of a Global Survey by ubs wealth management. Lets talk about risk volatility and walth management. What an interesting survey. What is behind the view, geoffrey yu . We do these in surveys from time to time. We wanted to see what the main source of investor concern was right now. There has been a lot of Political Risk over the last 12 months. We wanted to see how prominently this affected this. It is widespread. We looked at the seven major markets. Tit really is quite telling, in terms of general attitudes. We also look at individual demographic cohorts and age groups and how they think about things, and the last decade, crisis after crisis, how that has affected investor outlook. Ultimately, are they posit optimistic or pessimistic about the world . Mark and what are they . What are the implications of investing . It is surprising. There is still a great deal of optimism about investing. They are also highly distrustful of the current institutional structures. I find it telling that amongst younger cohorts they actually think stronger governments actually can work longerterm. Slipperya slope. How do youow, reconcile those views . The older demographic associate stronger leaderships with the wrong kind of regimes. They believe in democratic governments. Mark despite this unpredictability, measures of volatility are at multiyear record lows. Why is that . Again, taking a step back, what we need to distinguish between is risk and volatility. If i tell you, 10 volatility in equities, everybody would assume it is vix or some sort of equity volatility issue. If i say 10 risk, nobody knows what to make out of it. There is a difference between risk, which is sky high, and serves Economic Policy and uncertainty, and there is volatility, which is extremely low. It is a mixture of investors not knowing how to price that risk, how to price Political Risk in the u. S. , and on the other hand, some kind of complacency. We have seen flows into emerging markets that a year ago, we saw drastic outflows and the fundamentals there have not changed that much. You know, you still see the inflows at the moment, despite mark this is perfect timing, max. One of our viewers has sent a question directed to you. How should this news of trump affect emerging markets . I think it is more of a broader theme than just saying, if we take Political Risk in a broader context in the u. S. , then you have an environment right now we dont speak about fiscal stimulus or Corporate Tax cuts. Only talk about you show that chart about the impeachments. We were talking about the future of the Trump Administration. From a broader perspective, it point whenat one server data comes up, one macro data comes off and growth is not that spectacular and equities suffer a little and in the wake of that the emerging market is affected. Mark geoffrey yu and max kettner, both stay with us. Coming up next, we will speak with francesco papadia. This is bloomberg. Good morning, everyone. You are watching bloomberg surveillance. We have plenty more from the banking conference but first lets get to the first word news. Nejra francine, first with a story dominating markets. Donald trump asked fbi director james comey to drop an investigation into former National Security advisor michael flynn. The memo introduces the possibility the president may have obstructed justice, an impeachable offense. The white house has denied the version of offense described. The u. S. Is considering expanding its laptop ban on flights from europe and beyond. Yesterday the European Union pressed the u. S. To refrain from banning electronics and cabins of flights to america from the region saying both sides needed to Work Together to curb the threat of terrorism. In the u. K. The liberal democrats applies to offer britain of final vote on the brexit. As the leader unveils its manifesto later today. The party is looking to resurrect its political fortunes by appealing to the 40 of britons who voted to stay in the e. U. Is bloomberg. U. K. Worker seeing their real earnings fall in the First Quarter for the first time in 2 years, despite unemployment dropping to its lowest in four decades. Now, regular pay adjusted for inflation fell 0. 2 . Nominal earnings slow to growth of 2. 1 . The Unemployment Rate falling 4. 6 , lower since 1975. These figures certain to fuel the debate over Living Standards in britain prepared for the snap election on june 8. Real earnings is still below the level before the financial crisis. The recover over the last two years is going into reverse as a weak pound pushes up prices. A big piece of data. Francine thank you so much. That is your data. We look at wage growth and what that means for the inflation forecast. Lets get back to brussels and a big banking conference. Later on i will speak to the aribas, firstnp p of all, trying to understand Financial Stability and where europe nan brussels goes from here. Im pleased to be joined by francesco papadia, the former director general of the European Central bank. No one better to speak to about the future of europe and the impact of withdrawal of quantitative easing. How would you describe, first of all, over, Systemic Risk in europe. We are seeing growth, it is not bad but there are risks remaining. Francesco on the economic side, things are ok. They are not exciting that they are ok. I think growth is consolidating. And eventually the forecast of the ecb that they will get back their 2 se to target. They said that many times and it did not come. From an economic point of view, things are quite ok. In the u. S. , they are good. Er, unemployment is a bit low getting closer to their 2 . Economic front, things are moving in the right direction. And, political side, i see a difference between europe and the United States. Franince meaning that we have appointed something the markets were not have like in france, and, therefore you feel better about the political situation in europe . Francesco i think if you have two points, you can drop a line. If you have three op you can start runni if you have three points you can start running a regression. We have austria, the old austria, not the new austria. The netherlands and you have friends. France. And this shows that this populist antieurope is a growing threat. This is important. And, of course, now there is italy and there is austria. Of the woods out but the distribution of events has become much more favorable. Ou worry that the European Central bank because they are seeing strong growth fundamentals will start actually soon,g down q. E. Too and that we something ugly emerging out of italy, for example. Francesco i do not fear that. I expect that. I think maybe in the autumn of 2017, they will say that they will line down the q. E. , which would also meet their operational constraints because they managed to do that but we know they cannot go on for very long. So, i would not be surprised if in the first half 2018, they would complete the tapering. Then they would use the second half of 2018 to move away from negative rates. Francine what do you see is the ecbs biggest challenge . Do you expect more integration of your because president macron is elected. He wants to do things on the deficit to get france more leeway. But that is what france will hollande try to do in 2012. Francesco i think things could look different after september, after the german election. I think there is growth for a gain between france and germany that would help the euro zone and maybe indirectly could also help italy. I think there are two levels, the grand bargain and the small bargain. The grand bargain is unlikely, but would have a big impact. Francine what do you watch, the deficits . Francesco talking about really big things. And talking about france orering the to germany maybe sharing its United Nations Security Council seat with germany and having something in return on the immigran economic. Terandrn of the kohlmit agreement. That is unlikely. Then we have the small bargain. So, france does thing on its economy. The germans concede something on investment, on flexibility. And this is much more likely. But would have much less of an impact. Francine we are very busy on surveillance. Phones ringing. Papadia, what do you worry about italy the most . I know the banks of being taken care of. Francesco unlike the situation prevailing in france before the elections, it is not easy to figure out a positive development in italy after the elections. Basically, there are three sectors that have the same support i nthe electorate. And its difficult to see that anything stable and effective will come out of that. On the other hand, i do not see very dramatic events. Me, is a low probability. Because when it only will be confronted with the consequences, something will be done in order to avoid it. And maybe that would be the troi troicka coming to italy. Francine if you go back to the lira, that is devalued and your exports become very cheap. Francesco this would be our a repeat of italy before europe. You lose competitiveness and regain and the moment bike evaluation. But that is not the way to run a good economy. Francine inflation was rampant. I remember feeling very rich when you had 1000 liras being the equivalent of one dollar. Thank you very much, francesco papadia. Im going to hand it back to mark. I know we had some breaking news on wage. Growth ins has seen the first drop in real wages sense 2014. 350 has been ase tear. What does recent history tell us about British Elections on the stock market . We will bring you our research. This is bloomberg. Mark you are watching bloomberg surveillance in london. Lets check in on the markets. Nejra with u. S. Political risk front and center we are seeing risk off pretty much across markets. European stocks lower, u. S. Futures pointing lower. And u. S. Assets have taken quite a hit. The dollar index was down for the sixth month low. It is unchanged now but looking at dollaryen, some are seeing a weaker dollar against the yen. The yen has been the biggest g10 beneficiary of dollar weakness. The spot falls below trend, yen, the bull remains in play. Markets are saying the dollar drop will not less. Some of the best forecasts see no reprieve for the greenback. Euro has also been benefiting from the dollar weakness today with Political Risk growing in the u. S. To some extent being priced out of europe. We saw the euro at the highest since the u. S. Election, 110. 92 right now. Take a look at it versus the year end forecast. Although we are seeing the bloomberg dollar index stabilize, 10 year treasury yields are still coming down. We are down 3 or 4 basis points, below 2. 3 . Two weeks and it is dragging down yields across the european bond space. Money moving, the into the safe havens of bonds and yen. Take a look at gold, rising for a fifth day. Mark the jury is still out on whether a conservative win next British Election the to fresh records four times in the last week. What is history tell us about British Elections on the stock market . Weve been researching the subject. Guests. H us our investors like certainty when it comes to elections. They certainly do. We have been looking at the recent history of u. K. Elections and it seems like the ftse 250 tensed again in the runup tends to gain regardless of who predicted winner it. What market wants to know, they want to know who is going to win, and they want the polling to tell them a clear answer. Mark is there a view that a clear majority for the conservative party will lead to which,disruptive brexit, in turn is less of a bad Case Scenario for the ftse 350 constituency . Justina i think for now there is still a bit of a debate about that. But markets do like the toryinty of a solid majority being projective right now but at the same time there is the debate about whether a solid tory majority is good for brexit talks. At first, we had some people say that oh, maybe this will help theresa may sideline some of the hard brexiters of her party but there are so many moving parts. Side of also the e. U. The story. And you have to wonder, what is th outcome theresa may herself owants . Thats really still up in the air. Mark the transition period is possibly more likely under a large may majority which is one fewer hurdle to overcome. Justina exactly. A lot of investors like to look at the short term or the medium term for now. I think for now this uncertainty the possibly longer transition allows them to focus on the positives. You have got better risk better earnings. Mostly decent economic data, though we do not know that is starting to change. Mark the city economic surprise index isnt at hiits high. The weak pound benefits the it came off it slows. Its lows. The ftse 100 has been doing ok and with the pound steadier and rather than depreciating quickly, there may be a currency coin correlation that may be starting to we compared. Majoritys a large tory presage a less disruptive brexit . Markets like certainty. And when you look at Something Like sterling volatility, shortterm or even one year or twoyear, theve been pretty much collapsing. Markets do like certainty. For brexit talks, its between either side. I do not think anything much is going to happen until the german elections because they will be tied up with the campaigning themselves. The social democrats have come out with some more pieces of their program. There wont be a lot of things happening until the autumn. I would be not too surprised if we see cable and sterling mark worker seeing their first sinceing in real wages 2014. That will be a concern for bank of england. I think the marginal impact on sterling and the u. K. Economy as a whole from falling real income is going to be limited, but Central Banks the outlook is trying to offset that. At the very minimum, that means outlook for sterling. We still like sterling. 130 and another five big figures and that is it. Bad brexit news is having less of a downside than good brexit news. Bloombergs justina and our guests. Thank you all for joining us today on surveillance. Coming up, does not compute. Concerned raised over u. S. Plans to expand a laptop ban. Calling for more information on the nature of the threat. Details next. This is bloomberg. Mark you are watching bloomberg surveillance. Lets get to the Bloomberg Business flash. Nejra in the u. K. , Lloyds Banking group has returned to full private ownership almost a decade after it was bailed out in the financial crisis. The treasury confirmed this morning it has sold to the remainder of its original 20. 3 billion pound investment in britains biggest mortgage lender. Our purpose that we have completely, the right financial structure, is to help the country prosper. We are the largest bank in the United Kingdom. Therefore, what is good for the economy is good for lloyds. It is a very easy strategy. What is good for the country is good for the bank. Aramco plans to sign deal with 10 u. S. Companies when President Trump visits the kingdom this weekend. They include ge and halliburton. Spokespeople declined to comment. Ge didnt did not immediately return phone and email messages. Apple plans to announce an update to its laptop and an annual conference next month. The company is planning three new laptops in a move that could help offset new competition from microsoft and declining ipad sales. Apple declined to comment. That is the Bloomberg Business flash mark expanding the u. S. Laptop from yourlude flights could cause the airlines in excess of 1 billion. According to the chief executive of the International Air transport association. We spoke exclusively to bloomberg. We have written to the european authorities. The e. U. Commissioner and the ministry of transport. Of European Countries to say that we are concerned about this u. S. Ban on electronic devices. Could impose an additional cost of more than 1 billion on passengers. We think it will disrupt business between u. S. And europe. So, we do not see that as a good measure. And, of course, we will urge european governments not to take theirmparable measure for flights coming into europe. That we hope that we will be able to find the appropriate measure to face this threat. A system that works. Trace electronic detectors. You can trace explosives on various objects. It is already in place in many airports. For those traveling, you know that. Training people, random controls on electronic devices. Exactly the same measures that have been in australia, for instance. So, there are alternative measures that are not so disruptive. Guy if you talk to tim clark at emirates, what would he tell impact . T the economic give me a sense of if this were to affect european carriers, they make a lot of money on the transatlantic route, give me a sense of what you think it would mean for the european carriers and their bottom line. Its difficult to make a financial estimation. Youre right to say that transatlantic traffic has been very good for european carriers and u. S. Carriers. Usually european and u. S. Carriers, the joint venture is already atlantic. They share the revenues and profits and the traffic has been very dynamic. The growth has been the the growth of the first months of 2 017. So, the atlantic is a big source of revenue and profit both for the eurozone the u. S. And europe. The growth can be significant because of at least two reduction i the ban can be significant because of it leads to reduction of travel, because people do not want to travel, it could lead to a decrease in revenues. Mark bloomberg surveillance. Continues. Ene will bring you a you exclusive interview with the bnp paribas chairman. This is bloomberg. Riskcine the white house deepens. Formertrump asked the fbi director to shut down a probe into michael flynn. Caution reigned. Higher and gold jump after the stream of revelations come out of washington. And coming up, i speak with Jean Lemierre about the future of france. This is bloomberg surveillance. Im Francine Lacqua, in brussels. Bethis forum, we will speaking with the finnish centralbank government. Tom keene is in new york. We are looking at the followup from the white house and the report on the memo, the conversation between mr. Comey and your president , and what that means for the markets and foreign investments. Tom we can say today, for the first time folks, markets move aggressively off of political news. We noticed a stronger euro yesterday, but it is a major shift to risk off this morning off of that bon bombshell release. Francine look out for the swiss franc. First, lets get to the bloomberg first word news. Reporter we are starting with political news in the u. S. , another political crisis for President Trump. The question is being asked, did he commit a crime during his first month in office . About amey wrote a memo conversation with the president , saying he asked comey to drop an investigation into National Security adviser michael flynn. That is according to somebody given a copy of the memo. The request could be considered an obstruction of justice, an impeachable offense. The u. S. Ban on laptops in airliner cabins could be extended to more than just flights from europe. The Homeland Security Department Says of the regions are being considered, too. The eu is pressing the u. S. Not to impose the ban. The two sides will discuss the issue today in brussels. Rejectedean union has appeals for the upcoming brexit talks to take place in secret. They will make the talks public every step of the way. That document was obtained by Bloomberg News and it is called guiding principle for transparency. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. This is bloomberg. This with go through a little bit of pace. Futures, negative. The euro continues its strength. The dollar is weaker. Even oil takes a bid with the curve flattening. Look at that timing. The vix, 11. 74. 2. 96, and those fields should be read. Those are lower yields this morning. Even switzerland adapts to the trumpcomey memo. Francine . There was quite a lot of big data out of the u. K. , tom, and brussels. Were also getting data out of europe. I would argue the only thing the markets cared about today is what you were talking about. Everyone is talking about trump. A lot of people are saying this will give us a rally in some of the stocks. But the u. K. Wage data, in line with forecastss, meaning wage growth is not happening in the u. K. This is not painted great picture for the u. K. Consumer. Tom we have a great chart coming up, the shock to u. K. Wa ges. Let me go to the bloomberg, very quickly. We have shown as before. Here is the election and the jump the day after the election, the enthusiasm of a trump republican plan. Here is the sequence of rollovers and again, in the last the spread rolls over almost back to where we were on november 8. The uproar has been great. We can start with kevins interview yesterday with the Senate Majority leader. Heres the senator from south carolina, who has been a harsh critic of mr. Trump. Heres lindsey graham. Alleging themp is president did something inappropriate, i dont want to read a memo. I want to hear it from him. Tom the senator from south carolina, hiding the tone, as far as he could. Kevin joins us now from washington. Kevin, this memo clearly has moved the market. What is the why . Why does this moment differ from the many other whys we have seen since november 8 . It implies President Trump specifically got involved and try to handle an investigation into his own staff. Oustedse, the now member of his administration who did have that connection to rush it, whsia, who he fired. But there is no question, this only intensifies pressure. Former fbi director james comey must now testify publicly before congress. Tom albert has a phenomenal the note on the heart of congressional response to Richard Nixons misdeeds. Who are the republicans you are watching, kevin, to see how they migrate, change, adapt, and adjust . Senator Mitch Mcconnell, the Senate Majority leader who called for less drama. That is not going as far as being critical of President Trump. However, it was a signal in a message to the white house to get their act together. Other folks include senator richard burr, the Top Republican on the Intelligence Committee and House Speaker paul ryan. As of now, all three of those folks have not suggested have not spoken in as harsh of a language as the mother folks. As some other oflks. As some other folks. I spoke to a prominent member of congress yesterday, who told me that republicans are losing faith in this white house. Francine kevin, first of all, congratulations on the Mitch Mcconnell interview yesterday. Even before this memo was leaked, he was saying he wished his president would focus on matters on hand, instead of being distracted by all things other. What comes now . Is there an investigation . Thank you, francine. These investigations are ongoing. The fbi has several open investigations. They also have investigations in the congressional committees. So, these investigations are going to continue, but the question becomes, when are the results made public . Tom kevin, thank you from washington. I am sure we will hear you across all of our platforms today. Synthesize here, the International Response to a wounded president. He is going abroad. This is dialogue does his dialogue or discourse change . As he goes out into the world, the next couple days. He meetsresidents with, see him as critical as they used to see him, especially with the leak of foreign intelligence. Tom i am looking at the moment here and i guess we move forward stepbystep. What will you be looking for this week from Congressional Republicans . Isers well, i think it amazing to see what the republicans are now saying, and how they are slightly changing. When republicans start sounding like democrats if you look at what mccain or paul ryan says, subpoenaing documents than can put trump into impeachment, then you know he has got problems. Not only does he have problems, but the congress will have much more leverage over trump. Even if he does not get impeached, there is a profound shift of power to congress. Tom that means the president is receiving advisers. We saw the general, the nsa head yesterday. Where are the other advisors for mr. Trump . Have they been muzzled, muscled, or can they give advice to a beleaguered president . Anders i think trump has started to alienate his advisers, even in his family. So, what you are going to see is the leaks are going to increase. As long as he cannot get a control and manage his own people, and support his own people, then they will month support him. Hes finding that his go it alone attitude is not a successful management strategy. Francine what does this mean for the things President Trump promised in his campaign, Infrastructure Spending and tax reform . Anders well, the tax of form and health care, all of that has been sidelined now while republicans have to wrestle with these issues that are coming rapid fire at them. The pace of the news right now is insane for the republicans. You cant do real business when that kind of thing is happening, which is why the republicans, i think, are now doing things, such as seeking to subpoena an impeachable document, the comeytrump memo. Now they are doing things that could lead to impeachment overtime. If they do get pence in before 2018, it will help the election possibilities for them. Francine this is of course, two days before President Trump is getting ready before his first trip abroad. He is going to saudi, israel, rome, and then showing up in brussels on thursday. Will his allies withhold information because there are concerns of memos and leaks . Anders i think they absolutely will. Theou see mcmasters, National Security adviser, hovering over trump and interceding as he speaks with other leaders, people are not really trusting him with sensitive situations anymore. If you cant trust the president , he becomes not only less useful, he becomes an absolute liability. Francine thank you for joining us today on the phone, anders corr. Coming up later this hour on bloomberg surveillance, we speak with Jean Lemierre, the bnp paribas chairman. He has one of the strongest banks in europe and france. This is bloomberg. Reporter this is bloomberg surveillance. American businesses will cash in on president visit saudi arabia this weekend. According to people familiar with the matter, aramco will fun agreements with at least 10 american companies, among them general electric. This calls for manufacturing plants in saudi arabia. For the first time ever, shareholders have voted against the ceos pay package. Peers,cks trailed despite efforts to cope with lower energy prices. The total compensation fell last year by our most 10 . That is your Bloomberg Business flash. Francine thank you. The u. S. Dollar has fallen for a and futures are pointing lower after the latest controversy involving President Trump. Antoine, great to have you on the program. The markets are moving on the back of what we are seeing, memos and leaks from the white house. What exactly are they fearing . I guess, a big part of the narrative in the last six months has been about the ability for donald trump to effectively get tax care uts, health care, and Infrastructure Spending. His ability is becoming more question. Further and further, controversy from the Trump Administration is not great for that. Overnight, that is risk off. Thisine the risks, geoPolitical Risk, if you are a market participant, are you fearing the unknown. Are you saying, we dont know how this will end and we dont know how the allies will react, or do you worry about tax reform not being done . Anton a bit of both. Whats been more surprising is markets have been relatively complacent about risk and about geoPolitical Risk and domestic policy issues in the u. S. It has actually been quite the surprising that you have seen such strong markets and low volatility over the last few months. This is a little bit of a wakeup call. We have been looking at this over the last six months, and Political Risk globally, it is increasing. What you have had is volatility dropping and markets going up. Overnight, there is a little bit of a wake up call to the narrative. It is both geopolitical. It is domestic politics and the ability to get the economy going. A little bit of both. Francine a bit of both. Lets say we have more leaks, and annoyed if it is every day, week, or month. And i dont know if it is every day, week, or month. What would you buy . The riskn is typically off currency. I think the strange thing that has been happening in the last few months has been about dollar weakness. This is counterintuitive, but over the medium term, the dollar is still going to be a safe haven play. Initially it is the dollar and the swiss franc, but over time you buy the dollar, short duration treasuries, and you go into liquid dollars. Tom anton, good morning. Prichard had a superb summary last night in the telegraph of the many themes of china. All of a sudden, short paper and midpaper in china is unraveling. Bring up the chart, jason and anthony. On london radio, this is the fiveyear china with a spike. Heres the average yield in 2007. In 2011, a spike. And here gain, higher yields in china. Is this enough to upset the fixed income applecart . Anton tom, glad you are asking that question because i think market servicare fixating on one story, but the major story is what is going on in china. We have seen a major turnaround there in terms of regulatory tightening. China is the big issue. 70 of credit in the last three years has come from china. We have clearly seen a turnaround in 2017 in terms of the concern around what they are calling financial security. I was in china last week and it is really clear that the tightening from both the insurance regulators is picking up. Yields are selling off. The bond market is under pressure and that is much more important. Tom again, price is what matters here, folks. Shadows are the within the shadow banking of china. Eser, or anybody else, have a clue where the liabilities are . Anton yes and no. To me, firstly, the number which i understand is 4 trillion. How much is on the Balance Sheet is difficult to know. If you put that into some kind of a context historically, if you remember the Great Service that existed, the isize is four times of the service. The degree of the leverage is being created to create this shadow banking is an honest. I is enormous. In the u. S. You had those 20,000 boys at the fed. The actual ability for them to know what is going on and understand how to deliver, i think it is impossible. I agree with the question. Tom mr. Eser is a legal and general investment officer. This is a joy. Eric kaufman will join us, obviously the former vice chairman. Todescribes his decision finance. We will speak to dr. Kaufman about Lessons Learned. Our purpose now is completely with the right financial structure is to help the country prosper. Our purpose is helping britain prosper. We are the largest bank in the United Kingdom. And what is good for the economy is good for us. It is a very clear and easy strategy. What is good for the country is good for the bank. Ceocine the lloyds bank speaking to bloomberg. Lloyds Banking Group has returned to full private ownership almost one decade after it was bailed out during the financial crisis. We are back with anton eser. When you look at u. K. Banking, how intertwined are they with brexit. We have u. K. Data today and it is very clear wage growth is falling and inflation is going up. What does this mean for u. K. Consumers . Anton it has been surprising how well the consumer held up post brexit. It was very clear from the data savings. Bore down on savings are at financial crisis lows in the u. K. , and that is not sustainable over the medium term. The pressure we see in terms of real wages is not particularly high and inflation has been high. It is a structural issue. That will impact consumption and the u. K. Economy over the next 24 months, and the longerterm. Brexit is a big deal. And you know, mediumterm, it is hard to see how the economy does accelerate from here. Francine of course, that has Huge Investment implications. Anton eser, thank you so much for now. He stays with us. Anton eser will be talking a little bit about the baninking sector, but coming up, we speak with Jean Lemierre. We also speak with olli rehn. President trump coming to brussels next thursday. This is bloomberg. Eyes are focused on who and a response to what is going on at 1600 pennsylvania avenue. An important interview with the leadership of bmp. But right now. Lets go to taylor riggs. Taylor President Trumps disclosures of classified information to Russian Diplomats could put foreign intelligence ties at risk. H. R. Mcmaster called the president s disclosure wholly appropriate but intelligence professionals say other countries know may be wary of how much to share with the u. S. A report says israel was the source of the information the president passed on. In washington, protest of a visit over the turkish president. A fight broke out between turkish supporters and the armenian protesters. Inrease, workers are staging arkers are protest over new austerity stock. The greek government has agreed to pension costs and higher taxes in return for another round of money from the international bailout. In the u. K. , Jeremy Corbyn is fighting to stay leader of the labour party, despite the parties likely defeat next month. Pull show the labour party will win 30 of the vote on june 8. Jeremy corbyn says that is good enough to hang on. 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 thank you. What is needed now is a less uneducated comb and may some historical context. We do that with our guests on what is going on in washington. Onabsolute must read bloomberg view. This is on the congressman. Albert hunt spent considerable time with republicans as they wrestled with the fate of their president , a special focus was ber conable. Iva in the months ahead, looking for a contemporary version of them may be more important than finding a new howard baker. Joining us now is marty schenker. Where is the courage this morning among Republican Leadership and republican rank and file . We are still searching for it, frankly. There are signs that the republicans have heightened the level of concern over the latest revelations about the comey firing and the interference by trump but there hasnt been any. Expressed by Republican Leadership over the direction of this presidency. This, 30 put it supports the values of trump and his policies. Are they wavering . Marty we shall see in the days or hours ahead. Thatne thing the report donald may have tried to interfere with the investigation that is much more accessible to the country. People understand what that means. Movie references to intelligence double turns and even the firing of james comey. This may resonate with the base more than anything else. Tom a senator from texas steps away. Mr. Cronin. And we saw mr. Garland say no after the Kevin Cirilli interview. Who is on the top of the pile to be the next director on the federal bureau of investigation . Marty this may change the dynamic of that pic. There were four people on the list. If donald trump wants to change the narrative, he may know expand the search. Current number of people in the Republican Party to think he should nominate a democrat. To change the narrative and dispute the notion that he is trying to interfere with the russian investigation. , have a goodhenker day reporting from washington. It will be eventful. Thinking in europe is even uncle and in belgium is francine the quad. Lacqua. Ancine aboutne we are talking the new banking models and what this means for the future, especially what we are seeing with the wall street banks. My interview of the day is with the bmp chair. Thank you so much for joining us. You continue to outperform rivals. Talk to me about the health of your bank. Which utilities will power ahead . Does bnp bank does relatively well. We are strong in europe and the eurozone. E are rolling in germany we allocate resources. And the u. S. And asia are important regions for us. We see the situation as improving. More political clarity. Hopefully business will grow. Francine almost every day we talk about Deutsche Bank and Credit Suisse and the upheavals needed at the other banks. Ps that an opportunity for bn to gain opportunities . Job. We do our own we try to be good to clients and committed toand society. What do i see . Market consolidation. Many banks. There is some kind of market consolidation. In europe, Cash Management activity. It has been constantly consolidated and it is still being consolidated. But it hasnt a bank opposed to another bank. It is part of the story of the market. To believe there will be more appetite to allow crossborder mergers . , and they do see the wish and they see a need for. Time, it depends on the activity and the size. An issue withe the size they wish. Maybe it will be put not in the short term. Francine it seems the u. S. Is playing more than they were a few months ago . Jean growth is picking up in europe. Need fora mild funding. The banks must be good shape to finance growth and job creation which is much needed in europe. That is the reason why the discussions are so important. We do understand the reviews and the need for adjustment. We have known we have no issue with that. But the conclusion, hopefully we will find the european economy in a safe way. U. S. , in it with the the u. S. , the stigma deregulation. Speak about more stable regulation, not less. We dont know yet what will happen in the u. S. , i think we need time to understand. There are a few sensitive points from which i think there is need for specific monitoring. An example for you, the new inulations on trading books europe and the u. S. I hear different mindsets. Maybe york, i hear that they will not move too quickly. Maybe they have made amends. In europe i hear that they want to implement. This is a very sensitive question on competition. We compete across the atlantic. It is fair and efficient. Do ucf tight for new regulators . What deregulation will look like in the u. S. , but if they loosen up the rules, is there an appetite for regulators to do the same . Jean have a doubt about that. And we need to be clear about this. I may have a different wish. Your question is not about my wish. Your question is about my thinking of what will have. And i think european regulators will maintain a high level of regulation to get a safer system and a safe system. Remark, make a second deregulation means a lot of different things. But there is one point in which we have to be careful. Deregulation and market activities in liquidity must be looked at carefully. We should not forget 2004. In 2004 there was liquidity and deregulation and the next step was to thousand eight. I do not say that regulation is bad. But adaptation is needed. We have to be careful about what we do. I think that is more the european mindset. Jean is there something he would do to make it better . Deregulation or smarter regulation . Is the way we are regulated overtime. In europe, we have the specific case. We have made huge progress by creating the ssm. That was absolutely needed to go and to createders a banking market in europe. They do it, stepbystep and i hope they will continue. The understand deregulation by going back to the domestic no, that would be a pity. Lets keep it and lets move on. Francine we are talking about almost nothing else about President Trump. Expecting the markets to get more volatile . For over a year, markets have been good at absorbing use. In an efficient way. When we wenter through the italian referendum and the dutch elections and the markets areion, and calm and they listen. I think the markets could understand about what is happening. Francine what is your biggest concern for the markets . Redressing the Balance Sheet of the fed . We have talked about that for such a long time. Jean can i be positive . Francine yes. Jean the good news is the euro. Colleagues are the real winner of the elections in the netherlands and france is the euro. It is the support of the euro and the commitment to the euro. Focusing on the good news or bad news, but what does brexit mean for clearinghouse . Jean it is a big challenge. We need to be ready to serve clients and have protector. A sovereign question. Clearing is about sovereignty and about the quiddity. And it is clear that the and they provider capacity to enforce measures on clearinghouses is needed. Because they will supply liquidity. So i can understand that there are discussions. The bottom line will be liquidity. I the end of the day, what wish is a safe system that is not too costly. Otherwise, Asset Managers will pay for the risk of the system. Francine do you believe this will be one of the biggest financial capitals post brexit or will that go to paris or frankfurt or new york . Jean today, we dont know. We dont know. We need to see what is going to happen through the negotiations. There are many critical points. We know them well. But we dont have the answer. London. Ds on the eu and for the time being we have taken advantage of our position of. Eing quiet and calm. E are ready to serve clients the only point is that we need iow and we need to have do believe that london will remain as a functional place. London will remain a big place. Lemierre, thank you for your time. We have great interviews throughout the day. We have olli rehn, that is coming up next. Tom were covering it all here. We are linking politics to finance and investment. Here it is. If you go to the right side, here is the u. K. Real wages and narrowing into the negative rate and then you pick up the injury context. E stay with us, worldwide. This is bloomberg. Morning, everyone. On economics, finance and investing and trump and all of the news that is moving the markets. Lets go to a data check before we go to francine in russells. Futures at 13. Dow futures negative 1. 09. Even oil is taking a pause. Yields across the world are lower this morning. Let me go to the next screen. Let me get to screens. The fix is 11. 83, and elevated threeyear. In the swiss franc, those green numbers in the middle ought to be right. One basis point on yields this morning. Continuing our important interviews and brussels, here is francine. Francine thank you. I am pleased to be joined by olli rehn, the former european commissioner who is now a member of the bank of finland also, a professional football player. Which is what tom would want to talk to you about. Which you see as the state of europe . Is it more integration . Is there too much complacency in the market . Won, i the ugly things that could happen gone . Wewe have politically have Political Uncertainty while we see the economy strengthening. In fact, economic fundamentals are fairly strong. The eurozone has no growing since 2013. First at a modest rate of now at a longer rate. There is plenty of unused economy potential which speaks well for the future growth. Under the condition that Political Uncertainty will not derail this development. Francine as a central banker now, how should any central bank in europe and how should the Commission Deal with the Trump Administration . Given what we have heard . Olli we have a tradition that we do with all governments in the world as they are, including the u. S. Administration. We are not keen on going into detail and commenting. But for instance, we are concerned about how trade policies will evolve. They are very much in favor of economic openness. And at the same time, they are concerning the finance and regulation. It is important to finance the regulation. Because of the huge social and financesurse that the have created. Francine how should that go into thinking about central governors . Do they need to make sure that this is put in place in case there is something that is an easy with geopolitics . Or should they focus on growth inflation in europe . The European Central bank focuses extensively on the economic fundamentals. At the same time, well know that politics influence economics. And that is why your radar screen has to be wide and we have to follow developments have a potential impact. Francine what will europe look like in 510 years . Do we believe there will be a strong francogerman access . Pragmatist, a realist. I believe that what really matters is the real economy. And sustainable growth. Have had four years of economic growth. There is clearly a potential to reinforce this development and we could look at this in five or 10 years. Yeare that we work for a which will perform and will be capable of providing growth and sub creation . T is also the counter medicine francine we speak about this on a daily basis. Olli the Political Uncertainty that we saw during the crisis, we did experience a liking trend in productivity. We continue to invest and develop the continuity and to update our innovations. And at the same time, it is important that they will continue with economic reform is. And france, obviously, as well as italy. Were working on an important economic reform. To make stronger growth. Francine what is extremely important is that nordics largest bank how confident for thethat olli Senior Management it is a stable and predictable environment because we are part of the eurozone, banking union. The gamebody knows that provides a level playing field. With the banking union. Francine olli rehn, thank you for joining us today. Nowformer commissioner and a member on the board of the bank of finland. We are focusing today and actually, a lot of people here today are talking about President Trump that there is belief in europe that the markets are taking their strike because they have been through volatility before. Tom we will continue this discussion on market moves this morning but we want to make clear here on the memo that is reported by the New York Times some of it was read to the times reporter the memo is the uproar worldwide this morning, and unseen memo amid what is clearly quoted as a paper trail. Im not sure what that means but just to clarify. All are screaming to see a comey memo. We will discuss all of the news out of washington. What a good time to speak to christopher rookie speak to chris rupkey. This is bloomberg. Tom know, they will not let this go. This morning, the trump residency is in crisis. The james comeymichael flynn unseen memo stuns the markets. This morning, risk is off. Yields move and the dollar is weaker. Chair yellensge plans . Wheres the wage growth in america . In the United Kingdom, real wages are falling. Good morning, we live from the rose is in new york. In brussels. We finally are seeing the markets move. Francine you are talking about the ongoing saga with trump and the white house. And certainly in europe, a lot of people are talking about that. But i did have two interviews chairman who said that the markets are used to these kinds of things so he is expecting although we are seeing selloff markets to remain levelheaded and cool. Now with the news on washington, here is taylor riggs. Taylor another political crisis for trump. The question is, did he commit a crime in his first month in office . Be extended to more than just flights from europe. The Homeland Security departments as other regions are being considered as well. The u. S. Notssing to impose this band. The European Union has rejected upcoming brexit talks to take place in secret. They have set out how it will make the negotiating documents public every step of the way. That is contained in a drop Bloomberg News. Guiding principles for transparency. 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 lets look at the market. Huge moves in fixed income. We go right back to november 8. We will talk about that here in a bit. Is coming off. Go to the next screen. The vix is elevated. There is the big move in yields. Those are red numbers in the middle, they are not green. Bond, down to a 296 and even this moves off the trump news. An extraordinary shift off of yesterday. Francine this mirrors what you are saying. If you look at markets, overall, focus. S oil and top we understand that there may or may not be in opec meeting with focus onlot of geopolitics involved in this. Saudi arabia and russia are sticking together when it comes to production cuts. And beyond trunk economics, were seeing movement and it goes back to the haven risk. Tom let me show you the spread. We heard from a casserley 5 00 hour that even in china, the yields are signaling a lot of interesting data. Killing it in the telegraph overnight with a wrapup of chinese dynamics. U. S. Dynamic and what you need to know is one move down and one move down. Here is the enthusiasm with trump, deadly go, down we go. And were moving here through to the day of the election, just under one at your basis points. Rancine, as you typ brussels, are ok in note has been exhausting. Lets go back to washington and look at an important moment. This is a senator senator mccain and senator graham. Yesterday, here is the senator. If mr. Comey is alleging the president did something inappropriate, we hope you will tell us about it. I dont want to read a memo, i want to hear from him. We goo be clear here as to Kevin Cirilli in washington, no one has seen the memo. It was dictated to the New York Times. Where is the memo, kevin . The trump hotel . Kevin no one knows. That is what the white house is towson on. That there were members of congress us by two told me essentially that some members of the relative party and at the staffing level are beginning to lose confidence in the administration. Tom you know the white house better than anybody. I believe the name ivanka trump and her husband have disappeared from the discourse. Are they involved . Kevin they have not been in the white house and in the west wing. The media. Ot been in but there is criticism with sean ander and its previous officials that have surrounded this of ministration. I can tell you there is a over howfrustration the white house has stepped all over itself in the past several weeks. Francine i dont how it works, does everybody in the fbi keep memos and can someone forced them to release that . Is there an investigation . Will there be a committee on this . Kevin if you look at legal , fbiry and precedents directors keeping memos is worth its weight in gold. Legally speaking, any type of literature from the fbi director does hold up in the court of law. So if there are more memos, this could be a trail, so to speak, of evidence that could be used in any legal proceeding, which is why this is temperamental this is detrimental to the white house. Right now, you only have the Intelligence Community investigation that we dont know about. Then you have the congressional investigation which is public but much more political and is being controlled by republicans. Francine i am in brussels where trump will come on wednesday. Sorry, a quick question there seems to be a lot of people here brussels believing that because of these leaked memos, allies will not want to share information with trump as freely as they did with previous president s. Are you hearing any response on that from the republicans . Kevin i havent heard a response but that does bring up a broader point. I would note that for the weeks, the white house of complaining the First International trip and now this is in the background as another controversy fuels a day in washington. Tom Kevin Cirilli, inky so much. Look for his interview with Senate Interview with the Senate Majority leader. This is a great joy. A congressman from the university of kalamazoo. Pete hoekstras district, when he was the congressman of the michigan and western district, 56 for the president. Secretary clinton. He is not only a republican but the former head of the house Intelligence Committee. Joined this morning what is your president need to do . What the president needs to do is, number one, he needs to address the allegations that have been made to him. And what the people in america need to do is step back and let the facts come. I spent 10 years working on the Intelligence Committee and what youll find is that 2448 hours after breaking news, the story looks a whole lot different than it did when the story broke. We saw that with the information that came out from the Washington Post. That story started to unravel. Lets see what starts to happen with the New York Times story as the administration has time to respond to the breaking story. Us wisdom here on what an Intelligence Committee study does versus a special prosecutor . Politicsd we go to the and avenue of capitol hill, versus a watergate pass . We are not anywhere close to the point where we have a watergate pass. It is outrageous anyone is comparing this to watergate. The only crimes of have been committed, even yesterday was people in the Intelligence Committee leaking highly sensitive or classified data. Those are the crimes that have been committed. The other ones are interpretations or allegations with note proof. Tom i get the idea and there are Certain Networks that are focused on the leakers. What is the history of going after leakers . Pete it has not been very good. During the obama administration, difficult to find and identify these leakers. On the Washington Post story earlier this week, because there were so few people actually in the room and so few conversations after the meeting, they may have a better opportunity to actually find this leaker there may have for others but no, it has been historically proven to be very difficult to find the leakers. Scenicme here with nashville, michigan. That guy, his farmer and his family, they voted for this president. Are they wavering today . Number one, im not sure they are following everything that is going on in washington, d. C. You think everyone in america is focused on what is going on in washington. But they are focused on you as a congressman no. Right now, they are getting ready for a great summer. They are getting ready for the tourism season. Theyre getting ready for the planting season. Theyre worried about what is happening with the automobile industry. What is happening with sales and inventory. They are worried about the economy and jobs and those kinds of things. On, living are going their lives. People in america dont revolve their lives around what is going on in washington many of them are looking at this and saying, this is what we voted for trump because washington doesnt work. Francine right. But the memos it leaks you are right, we do have to verify them, we dont know what happened but talk to me about thereputation and reputational damage. Two days before the president goes on his first foreign trip. This doesnt look good. How does you could break from that . Pete the rest of the world is looking at america and to seeing that we are dysfunctional. Over the last number of years, people said they would not states onwith united intelligence anymore. But a couple of things. People had wikileaks, continue to work with us on intelligence, even though we had one of the most massive leaks and intelligence in the history of the world. There were instances where previous in this menstruation where previous administrations inadvertently leaked information but it didnt stop cooperation between us. , when youind is that had obama having problems with the Israeli Government that didnt stop intelligence cooperation. The people at the Grassroots Level go to work every day and they work and they cooperate to make sure that we and our allies stay safe and secure. You could make an argument that people, if theyre going to stop cooperating with us,. Operating with us because we have so many leaks within our own Intelligence Community. Francine right. So you dont think this will have an impact . Inl they be more cautious sharing intelligence with the president . Hurtthis hurt does it the fight against terrorism . Pete we havent even establish that the president compromise information. You are sitting in brussels. Thatnk they will recognize donald trump is the president of the United States of america. Politicsembroiled in back here in the united rates. And there may be questions about how effective he will be at governing. Ihey do recognize that would think that they would recognize that there are issues that do need to be dealt with with this president and this administration that benefits all of us, whether it is National Security or the fight against isis. Security in the middle east. We need to focus on those things. They cannot be focusing on politics. Focused ono be policies as well because we own need that. Much, peteyou so hoekstra. Think you for your work with the Intelligence Committees on the hill. Coming up, a conversation with Henry Kaufman. He will join us with his years at the salomon brothers. Henry kaufman on Lessons Learned in 2017. This is bloomberg. Tom this is bloomberg surveillance. I am in new york. Chris rupkey is with us right now. Who links the fixed income market. Bring up the charge, as you can. This is the chart that we featured the day after the election with the rollover. This is rolling over like inflation is rolling over and the swiss twentyyear is rolling over. Buys everything rolling over . Chris the spread is driven by fed policy and expectations. Wee had to rate hikes have a two rate hikes which is why it is flattening. It stalled at 100 basis points but if they are really going to move the fed funds rate up to 1. 5 , it will narrow. Tom this is great. We have been distracted by the world of Kevin Cirilli that i havent asked a fed question in four days. Do we go past june . Sure. I want them to move more quickly. Tom do think that could happen . Chris i think so. We are short of the target but the Unemployment Rate is so low evenit is telling people, people they should raise rates. Tom i want to get this in. We have the United Kingdom today. Chris rupkey is saying at the table to raise rates but are we going to get to the point where we get to negative real wages because inflation comes up faster and wages are going up . This is really working my tricep right here, i dont know what this is called. Whatever it is working it right here. Chris companies are productive and they dont hand out greater compensation that easy. So maybe the labor market has wagesght further because have gotten boosted. Tom did you see how companies did you see how chris rupkey said companies are lean and gain . I am not lean and mean. Lets see how the markets are moving off the trumpcomey memo. The yields come in. That one should be read. A lower yield this morning. The dollar is weaker as well. Francine lacqua is in brussels and i am tom keene new york. Stay with us. This is bloomberg. Tom this is the only chart that matters. For those of you in london radio, it is a chart about london and the United Kingdom and wages. I dont care, this is what we will be talking about through the year. Down we go. Lousy wage growth. In britain. Up we go, real wage growth. Tohave just descended down negative real wage growth in the United Kingdom. Do you feel this in london . Francine this is probably the biggest concern. There are two points. This is something that Governor Carney talked about. Also see why we have snap elections in the u. K. The president may have done the Prime Minister may have done a have chelation to make sure we are back with chris rupkey. How do you look at union growth . The pound is down but inflation is up and wage growth is not following. Chris it is like wages have not caught up to inflation. Inflation went up and companies didnt give workers greater wages. I was struck that brexit was last june but the Unemployment Rate in britain is quite low. So that is the primary indicator of economic weakness. But unemployment is not going higher. Tom with all of the plugins that we have, all of the maybes and the whatifs. What is the comfortable level of inflation right now . I understand this is a different situation and u. S. But do we bring down the appropriate level of inflation . Chris some people think that there would be flexibility but this will be wrote as a buying power of the dollars in your wallet. I mean, it is for anything has the fed kept rates at zero since 2008, i have lost 10 of any cash that i had in the bank due to inflation. We are going up to 3 . Everything will max out at 3 . It is kind of boring. Chrisid you see how rupkey gave me the level but he didnt give me the date . Boy, does he know what he is doing. In the next hour, coming up, we are thrilled to bring you Henry Kaufman. Legendary on wall street. He has written a book that is short, sweet and brutal. Up, Henry Kaufman. This is bloomberg. The shows about to start how do i look . Like a bald penguin. [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Wise, calm. They listen. Understandkets can what is happening and i think will not rush one way or another. Francine that was the bmp chairman bnp chairman speaking to me earlier. Almost a week until President Trump comes here. In the corridors, a lot of chatter is on the latest news from President Trump and the white house and what it means for the market. There saying theyr start to get used to it. Tom isnt it the one massive victory lap for bnp . Are they anyone bank that has not been damaged and scarred the one bank that has not been damaged and scarred . Francine it is healthier, twoever, t questions. Customers . Gain the and when you look at whether the u. S. Deregulated, that may put the banks on the back foot. Tom very good. Dubbed futures 90. S p futures 11 with markets on the move. Worldwide this morning to the first word news on washington, here is taylor riggs. Taylor it is another political crisis for President Trump. Fbi director james comey wrote a memo about a conversation with the president say he has been to drop the investigation into michael flynn. That is according to a person who was given a copy of the memo. The contents of the memo have been confirmed by a number of news organizations, although the memo itself has not yet surfaced. Democrats 80 president s request say the president s request could be an impeachable offense. Sticking with washington, protests over a visit by turkeys president turned violent. Ighting broke out the armenian regularly demonstrate the call to attention of the massacre of their people. Jeremy corbyn is fighting to stay leader of the labour party. Shall labor will probably win about 30 of the vote on june 8. His supporters say that will be evenenough to hang on if theresa mays conservatives win 50 . 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. Tom thank you so much. It is a great common feature of dr. Kissinger and dr. Kaufman. Both led nazi germany and the impending german troops over the horizon. Secretary kissinger went on to diplomacy. You saw him in the office the other day with President Trump. Henry kaufman went on to a storied career on wall street. Pe age of 80 and holding, a new book out. If you are part of global wall these 151 pages will give you reference back to mr. Reston. He was a hero in our household. What did he get right, and what did he get wrong, dr. Kaufman . Henry what he got right is there should be a greater Management Structure in a very big organization. What he got wrong, from my perspective, is that Financial Institutions should have only limited entrepreneurial drive. They have to balance that out with their fiduciary responsibilities, which he could not manage correctly. Tom he was a learning curve. Many others as well. You were kneedeep in this. What was the number one mistake in the servitude of bankers that got us into this unholy 2007 mess . Henry they could no manage risks correctly. They could manage a very complex Financial Institution and still come out with reasonable behavior, good performance, and satisfy all of their constituents. That is what they got wrong. Tom that would be called the black swans out there. Once in a generation, a black swan seems to wander by every number of years. The present value of our financial history. What do you mean by that . Henry well, one of the great problems which we have today is that most leaders in Financial Institutions and even business organizations have limited Historical Perspective. The Historical Perspective goes back to the day they entered the business world, but they have forgotten what has happened in the past and the things that were done right, particularly the things that were done wrong. They have not learned those lessons. Tom this is so important. What a joy to have chris rupkey with us. You are in the trenches of what dr. Calhoun is talkin kaufman ig about. Are you any smarter now . Chris i dont know. He wasrying to think if dr. Doom or dr. Gloom, but your newsletter back in the day was very much everyone wanted his research. He did a lot of interesting analysis in investment flows, incorporations, big funds. It was quite well the. Tom i never liked the dr. Doom idea. I think it is unfair. Nevertheless, you are right. Chris you are always thinking inflation was exploding. Tom if you were writing today on tectonic shifts, it would be tectonic shifts in china. We are seeing china fall apart financially. If you are writing a memo this morning on china, what would you write . Henry i am not a chinese expert, but i would say the first issue is Financial Institutions of the size that china has are difficult to manage. They are complex. We have limited information on what is going on in those institutions. They are partly governmentally controlled and partly privately controlled, and that is not a very good mix. Tom you and i have been at the Economic Club of new york and have seen the body language of the q a. Vice chairman fisher was really physical about our accommodative space. Are we accommodative . Henry i think we are reasonably accommodative. It is understandable considering the extraordinary circumstances we are in. We are in this situation today that is unprecedented. We are in a situation where we cannot go back to the period of 20 years ago, 30 years ago, or 40 years ago. A new structure is evolving and has not fully evolved. Tom thank you so much. Let me frame this book for you. 161 pages. This is your airplane read if you are on global wall street because it is people based as Henry Kaufman has been throughout his career. Thanks to our wonderful guests on surveillance. There,e bit of numbers but they are migrating up. A big 6 . That is on the edge of the home depot performance. Target with some guidance looks pretty good. We will continue with chris rupkey. From brussels, from new york am a this is bloomberg. From new york, this is bloomberg. This is bloomberg surveillance. Lets get to Bloomberg Business flash. Apple may be responding to increased competition from microsoft. The company will announce an update to its laptop lineup at it Developers Conference next month. There will be three new apple laptops. Microsoft has just introduced what many consider its first real laptop, one that is seen as a rival to the apple macbook air. Boeing has delivered its first lane to its largest customer. The plane was handed over in seattle to an indonesiabased company. Went through development and flight testing month ahead of schedule. Giants china, internet are ready to supply evidence the online spending keeps defying the slowdown in the economy. Betterthanexpected 55 quarter surge in revenue. Alibaba likely to post strong Sales Numbers this week. The Biggest Online gaming company, alibaba dominates shopping. That is the Bloomberg Business flash. Tom thank you so much. We continue our discussion of the trumpcomey note. The note was not seen by the New York Times. Someone with perspective on how the machinery of capitol hill works is john. He is the head of u. S. Practice area under senator mcconnell of kentucky he is the head of u. S. Practice. He was under senator mcconnell of kentucky. What do people i senator mcconnell do . Right now thehink key thing is what you said, point out the facts, figure out what happened, what is out there, what is in these james comey memos, and what do they say about the president s behavior . Until the facts come out and we know what happened, you will see a bit of a muted response, although you will start to see more signs of concern about a president s behavior with the fbi director. Tom i hear everyone talking. What is the best venue or vehicle to see the facts come out . Remember sam and howard baker and the blackandwhite of john dean in the early 1970s. Is that the most efficient way to do this, or is there a better path . Jon i think you will see the memos either released behind closed doors to congress and the discussion between the fbi and discussions between fbi director comey and members of congress behind closed doors. I dont think you will see a lot of this happen in the public venue just yet. There may be increased calls for a public venue. In particular, you will hear more republicans talk about forming an independent commission to look at exactly what went on between russia and the United States during the election and now between trump and comey after the inauguration. Tom what is your prescription for 1600 pennsylvania avenue . What do they need to do to assist their beleaguered president . Jon they need to come out with all caps. They need to apologize that the president did wrong. There is still room for the president to recover from this. He is inexperienced. Republicans are willing to give him the benefit of the doubt. Right now, he has some leeway, but the more this drags on, the more excuses they make, the harder it will be for republicans to continue to stand by this guy. Francine what happens next . I dont know whether we have seen anything like this before. Does it automatically go to a committee, or what the trigger is for this case being investigated . Jon theire is no real president for this precedent for this. They have a lot of experience with oversight. Republicans in congress have a lot of of experience with oversight from the obama years, but there is no precedent for copies investigating the president of their own party for possible illegal activities. I think that is what this will turn into. This will take some time. They would need to get the facts straight. They will need to get the facts out. They will need to determine do they want a special prosecutor . Do they want to create a commission . Will there be a Bipartisan Group of congressmen looking into this . Are thee and senate preferred venues for the house leaders and senate leaders, but as more evidence starts to come out, they will be more pressure on them to do something beyond that. Francine what will be the Republican Partys and white houses immediate main concern . The credibility of the president on the National Stage or the support that will be missing from his base . I dont know how they view it. Jon i am sure this will break through with the base, really. If you look at previous accusations against the president , Donald Trumps Approval Ratings with Republican Voters and trump voters remains incredibly high. This is a guy that has weathered a lot of controversy that would have destroyed any other politician, so i dont think the bases any concern right now. I think their concern right now is making sure the allies in congress have the right message factsderstand thatheir and that nothing damaging comes out against the president. Askedent trump allegedly his staff to clear the room and had a private discussion with comey so nobody inside the white house knows what is going on either. I think they want to know the facts as well. Tom just summarize here quickly the Eurasia Group take on what is american foreignpolicy, whether it is dr. Brummer or yourself. Do we have a Foreign Policy right now . Jon yes, america first. Americas interest. What we do not know is what that is. They apply the principle different ways in different situations. With china right now, it is against north korea. In the middle east, it is stopping terrorism. Europe right now is the benign neglect. Some efforts to rebalance the trade deficits we have with some surplus countries like germany. Tom thank you so much. Appreciate it. Of course, his previous work with senator mcconnell. We will come back with chris rupkey and tie into economics all that we see in washington. Tv available to those on at your desk. Click on them, bring them over, its the only charts from our team and steal the charts from our team. This is bloomberg. What do i see it market consolidation. Yes, you are right. I do not see many operations. There is some market consolidation, which is quite visible. Francine that was the bnp chairman speaking to me earlier. I feel like every banking i talkew i now do, about consolidation. That banks are becoming more profitable, this could be a possibility in the next. Tom we are not on the shared dilution watch, are we . They dont need to raise cash, do they . Francine they dont. They are one of the healthiest banks and one of the strongest european banks, but when i was speaking to the chairman, i was maybe expecting him to say he was aggressively ready to take market share from Deutsche Bank, from some of the banks that are restructuring, but he was very diplomatic on that issue. Tom thank you so much in brussels this morning. I am not sure if she is in london tomorrow. They will tell me at 3 00 a. M. Tomorrow here. Right now, i know he is in washington. David westin knows that when the nation is in crisis, you speak to someone from georgia tech. Tell us about the guy from georgia tech. David exactly. David purdue is the senator from georgia, and he is a staunch supporter of President Trump. The only person in all of congress that has been a fortune 500 company. We want to talk to him about what is going on with tax reform and other things on the agenda, but mr. Trump and mr. Comey have had other ideas. We will start out with the we have to go to a select committee . Republicans to the and democrats from the house and senate. Tom very good. David westin, thank you so much. Lets wrap up the Market Reaction now. Lets try to get away from the festivities of washington, the distraction, with chris. I am sort of out of breath. We have forgotten what i normal is within our discourse . Is the yearandahalf vector in place to higher yields . Or do you have a doubt about where that vector was or is going . Chris i think we are still looking for higher yields. Even a staunch down like chicago fed president evans is saying the market, they dont have the right view. They dont realize that we are going to 3 on the fed funds rate. That is the path. The market thinks it is only 2 or something. I think we are still in play here. These rate hikes driving out, right . Nothing until june 14 so it is a long time to wait. Tom you write one of the most spirited memos on the street. It has the Interest Rate in it. Is this what we all know . Does it seem to be too american . There is a huge body of america way that is not true. They are virtually in recession. The president was elected office energy. Can you do your economics given the two americas of 2020 . Chris we say that is something that congress should address. If you think people are not trained properly or they have parttime work but they want fulltime work, economics profession does not me as a forecast, i dont have a lot to say about that. All i can tell you is this is the tightest labor market since tom agency the helpwanted signs. Is chair yellen the Senate Central banker to the world, specifically china . We are beginning to see an upset financially in china. Chris i dont know. Going so gradually that i dont know if it is going to disturb emerging markets. The fed, the idea was cannot lift rates or the dollar will strengthen and ruin everything, but we have gotten away from that. Rates are excited to go up, and the dollar is no longer appreciated. Tom i looked at your work over the years as sort of centrist, middle of the pack. Do you have an outlier call now . Chris i am kind of with trump economics. Is not really fashionable right now. People think growth of only 2 . Tom do you have the memo . Do you have the comey memo . Chris i cant tell you. I have to check with compliance first. Thank you. Tom you are a supporter of trump. Chris may be state and local government, maybe federal Government Spending potentially could add half a percentage point to get us up to 3 . It is not impossible. Us, andis rupkey with we will continue on radio. All markets moving today. Dollar weaker confounding the dollar strength. Look at that euro. Wow. 11110. Stronge 1. 1110. Euro. Er euroyen not participating, but there are some interesting dynamics there. 1. 1110 euro. It has been an extraordinary day on radio. Will be with us, and we will have much more from washington. I am sorry. It was derek jeters new york on monday. It is still derek jeters new york. This is bloomberg. D. C. Bombshell. President reportedly asking fbi director james comey to drop the investigation into michael flynn. Congress takes action. Republican chairman of the House Oversight committee demands the fbi turn over records of communication between trump and comey. The dollar gives up its trump bump. You. Y happy wednesday to welcome to bloomberg daybreak. It is wednesday, may 17. Jonathan ferro is on assignment. David westin is live from capitol hill today , the perfect day to be there. David as you know, we came here to talk about tax reform, but mr. Comey and President Trump had other ideas. We have a good lineup of democrats and republicans, congressmen and senators coming up. Reform talk about tax with republican dell