Transcripts For BLOOMBERG Bloomberg Surveillance 20170525

Hildebrand, the vice chairman of blackrock, the Worlds Largest money manager. Then we have an exclusive with egyptian finance minister amr elgarhy. Stocks definitely higher, so they are gaining 0. 2 , dollar weakening, oil expanding gains. Our manus cranny on the ground in vienna. Eurodollar 1. 1243. Lets get to bloomberg first word news with nejra cehic. Nejra Police Investigating the manchester bomb attack have reportedly stop sharing information with the u. S. After leaks to the media. Gordon to the bbc, the decision over amid outrage information from the day brief appearing at the New York Times. Prima nasser theresa may will raise the subject with donald trump later today. Thees of violence across capital city of brasilia. Theviolence ratchets up pressure on the government. Opec and its allies are pleased to expand production cuts for another nine months after last years agreement failed to clear a Global Supply glut. We will be live from opec in vienna later in the show. The minutes from the latest said meaning will be on the cards. Most assume the appropriate tightening of Monetary Policy again. They also prove the gradual shrinking of the Balance Sheet. Players andunited management have expressed sympathy for those killed in the manchester bombing. A moment of silence was held in stockholm where the british team beat ajax 20 to claim the title. Shares of the company rose, which guarantees the teams position in the elite system. We know if we could get that win, it is manchester back in a good look. The city of manchester will but we havemaybe, just come to do our job. News 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Francine Donald Trumps demands to step up the fight against terrorism, help from nato partners. Becoming more engaged in the global fight against terror. He secured the wrath of an angry theresa may after intelligence was leaked to the u. S. Media. Lets go live to brussels and speak with chief washington correspondent Kevin Cirilli. E strong words from our british i like about the intelligence leak. Kevin absolutely. I justkevin spoke with a perspective, they report a cut of ties, so to speak between the u. S. U. K. Information sharing about the Manchester Attacks, the leaks coming out of the u. S. Intelligence community are security. G national they say the Intelligence Community leaks are trying to undermine the president , and there is no question at this being reported by the bbc just before the nato summit is clearly sending a signal about security. They say thethe mistrust right e skepticism that many of the european counterparts within the Nato Alliance have with the new incoming administration, francine. It is almostnow impossible because the story just came out, but do we have any understanding of where the leak is from or do we never and will we never find out . Now, the story is still very much evolving. You have to remember it is only 4 00 a. M. In the United States. Many lawmakers back in may states have not even woken up yet to this news. That said, it is the first unscripted moment, so to speak, a continuation from global events of the manchester terror attack likely influencing the president s First International trip. I can also tell you the president is set to meet with french president macron later today. The first meeting since the french president had been elected. Again, huge skepticism here in europe with this new administration really on display, and i can tell you that is in stark contrast from what we had reported an experience both in saudi arabia and israel. Withrael, the president Prime Minister Benjamin Netanyahu giving brief remarks to ease some criticisms that President Trump had received a meeting with russian officials at the white house, whether or not british officials will play ball in that regard remains to be seen, but what friendly for the bbc is reporting and the Public Statement coming from u. K. Officials does not seem like that will be the case. Francine certainly the mood or the at least the time has shifted. Kevin, President Trump also trying to crack down. Kevin could you repeat that . Francine the question was of course donald trump is also dealing with leaks back home, trying to crack down on those. Kevin yes, and in fact, i spoke with a former Administration Official or Campaign Official who is being investigated by the Intelligence Community and also by several congressional committees, including the u. S. Senate Intelligence Community. Paule like michael caputo, manafort, they are demanding that they be able to testify publicly and not privately. They feel like if they testify privately, they will not be able to get a fair sense a fair way to get their message out there, so to speak. A former fbi director james comey of course at the center of all this controversy, who President Trump fired, is set to testify before the u. S. Senate wants lawmakers return from a congressional recess. Work,ne kevin, great kevin is our chief washington correspondent, traveling with the president since late friday evening. Next, we will look at Monetary Policy. We will talk about the fed, what we heard last night. Looking forward to the European Central bank. Also, a very big focus on opec. Our manus cranny is on the ground. Opec and its allies seem to push to extend their production time for nine months, and that is giving a little bit of a boost market. Il lik you can see the brent and wti gaining a touch. This is bloomberg. Francine this is bloomberg surveillance. Lets get to the Bloomberg Business flash. Isra Deutsche Bank launching a query into hell billions of dollars moved out of the bank and into russia. The bank is still waiting for u. S. Properties to resolve a consequential investigation. Fined inas is being the u. S. For its involvement in eight manipulations scandal that has ensnared global banks over the last five years. At least one doesnt be in en bnp employees are involved. Continuing to bet against Chinese Companies listed in hong kong as he sees a pullback in credit that will send shockwaves. He told bloomberg he expects credit problems to reach breaking points. We see so much value destroyed that my firm believes that you cannot at some point, your past did not catch up with you. You just do not know when that will be for china. Nejra and that is the Bloomberg Business flash, francine. Francine thank you, nejra cehic. Rateatest of the fed hike is on the cards for next month. They plan that would gradually shrink the trillionanks 4. 5 Balance Sheet. Mario draghi wants to step up, any speculation that it might raise rates. The ecb president reaffirms the largest of the logic of the sequencing, arguing that the side effects will be a larger problem than those produced by asset purchases. Raghi suggests therefore there is no reason to deviate from the indications we have been insistently providing in the introductory statements to our press conferences. Francine right now, as we speak, we are getting breaking news news. You can see President Trump of rising at nato headquarters arriving at nato headquarters. You can see flags of all the nato countries. Out of hisbably first foreign trip like that will be proven to be more difficult. We know theresa may have tough questions for the president on possible intelligence leaking. Thatderstand from the bbc they will stop sharing information after what they understand is a leak of sensitive information. I believe it was pictures of the device that was used in the manchester arena, so we know there will be tensions on the. Sequencing,at the President Trump was in saudi, then israel, than rome, and he was greeted like a rock star. Nato will be a little bit different. Lets get more on Monetary Policy and more on donald froms first foreign visit Ian Shepherdson of pantheon macroeconomics. With a focus on what the central bank is doing, whether at some point there will be a risk reversal because they suddenly realize that maybe the economy is more in a fragile state . Ian it is an interesting question. I cannot think politics have made enough of a difference for the real world. We have a oneday big drop in the dow when we had the bushel prosecutor announced in the u. S. Into the russian activity. But we have recovered from that now. There is a bubble along the background. It probably will not change anything in a big way in the shortterm. Corporate earnings are pretty strong. March weakness and other numbers have rebounded, the fed said yesterday we need to raise rates again, so i think that is where the focus is. None of that is a big change because for the last few weeks, markets have expected the fed to move in june. Most people are not thinking about september or december at this point. I think the fed probably is. We are setting up a class may be at the next that meeting. But in the run up, not much happening. Francine why is that, ian . The market is concerned about what the feds next steps will do. Ian we have new information on the Balance Sheet yesterday, the that nearly all members agreed with pure think we will have a formal announcement maybe in september. At another that will replace raising Interest Rates as a primary tool the fed will use to try to stabilize the labor market. Interest rates will remain the main focus, yet the markets think they will do one in june and then more or less done. We have fed governors saying we will get at least one more rate hike after june, some of them including rosengren, saying he thinks they need to raise rates four times this year. I kind of thing people in the markets have put their hands over their ears and theyre saying, nope, not listening, and i think over the summer if we get a big gdp, maybe that refocuses his attention are now, it is june, and then we do not worry about things so much. Francine do you worry about the European Central bank . I also have a great chart. This to be the euro, the , evencys best year though we were talking about it breaking up a couple of weeks ago. Ian it is amazing how things change. Now its like ancient history. I do not think it is gone forever. Germany come in of the super tight market in germany is the best thing that could be happening to the euro zone raising inflation pressure, and that pressure is not building anywhere else in the eurozone. It is kind of rebalancing that inflation that germany investors which caused such a problem with germany was not relating. So the ecb, mario draghi trying to calm everybody down, so again, markets are relaxed about this. Looking ahead, some people say why are they triggering for a change in the story, and we are not really seeing one. Everything is going along happily until something changes. Francine Something Like what . Rate story interest changes. Rather bizarrely, given what we have seen over the last few years, there are probably fewer roadblocks in europe than in u. S. Than in the u. S. In the u. S. , we generally thinking in the next two months, rates will go crazy. Fewer roadblocks in the eurozone maybe and the ecb trying to calm everybody down. Whereas the fed come everyday is something different. Francine thank you so much, Ian Shepherdson, founder and chief economist at pantheon macroeconomics. Coming up next, we speak with the finance minister of egypt. Our exclusive interview is next. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua in london. Egypt is taking advantage of Lower Borrowing costs after economic policies earned the endorsement of the imf. Officials are struggling to rebuild an economy where inflation tops 20 . I am pleased to welcome the finest minister of egypt, tomorrow got a amr elgarhy. Congratulations on the bond sales. This is what we have been seeing last week. This is a chart normalizing them confidence . Sign of mr. Elgarhy basically, the economics Reform Program is , and more notably, imf, a wanted to stop a period very high budget deficits. We wanted to turn this into more progressive and more positive way of doing this, so we are starting to reduce our budget deficit gradually, and we are , anding the debt 10 to 8 more importantly reducing the primary deficit from 3. 6 this year. We are putting together a Program Aiding the condition that we were held into a more positive direction. Francine i will ask you a little bit about some of the what in just a second, but is the question you that most by International Investors . Would ask me about a specific plan or about terrorism . Mr. Elgarhy the most important thing that was hampering the economy from moving ahead in a positive way was the situation of foreign currency in the country. Rate that ishange putting a lot of pressure on the country, and we had disparity between the official price and the market price. The decision to float the country the currency was very important in the sense that thele who see appropriateness in that perspective invested a great deal. The second thing is, procedures on the ground in terms of affecting investment and how we really deal with the procedures that have taken place and all of this investors can face. That and will do our utmost in order to tract investors to the country. Francine how much is covered . Havelgarhy basically we 11 billion, and we have 3 billion only, and together with our situation back in january with rates were at a half billion dollars, that amounts to 24 billion on the books. Is more important issue here the amount of demand on the 10year and the 30year, and that is a great vote of confidence in the economy form problem. Francine so how many more bonds are you planning to sell in the coming year . Mr. Elgarhy enough for now, at least next for the markets for nine months, it could be the Second Quarter of the calendar , between april and may come if we decide to come back again. Francine wind you expect an ipo with some of the staterun staterun banks . Mr. Elgarhy we expect between three and five companies to come from the governor government part. Francine can you tell us the name of the compaies . Mr. Elgarhy there are companies that have authority been announced, and oil company, a bank, and more who take this to the market in the next two years. Francine how much are you expecting to raise those . Mr. Elgarhy we are talking more or less around 10 billion to 15 billion combined. Francine minister, i know you really laid out of course some of what you are trying to achieve, and it is very clear that the forefront of this is trying to plug the deficit. Does that mean you will have additional taxes increasing going overseas, and when do you expect those to take over . Mr. Elgarhy no, no more increasing taxes. 14 thing we have is 13 to nothing will come out as additional fees except for maybe Certain Industries that need to streamline their operations in certain ways, but nothing in terms of more additional tax base in the coming months, no. Someine summer saying are saying Electricity Subsidy cuts are possible. Would you delay these cuts to give people a little bit of breathing room . Mr. Elgarhy from one perspective, inflation on an annual basis is high. On a month over month basis, it is going down. We intend this to continue. For the subsidy is this is a by theat is preset government since 2014 to deal with the subsidy in a more efficient way because we face sometimes or we faced in the last 15 years a way of getting subsidies, a way that is very harming to the company and the people as well. That is why the ecb was there with the subsidy issue in a more efficient way, and we need to ensure it. Francine can you give me a timeline . Winner the subsidy cuts . Mr. Elgarhy it has yet to be decided on the timing. Francine it could be six months, nine months, or could you delay mr. Elgarhy things are being discovered, it is a number of things that the country has to look at and the government has to look at the number of issues and how we can do with this, how we can ensure the social protection program, pushing people from the impact of any economic Reform Program that we are docked in adopting. What you think of mr. Trump coming to the middle east and stopping in saudi arabia in his first warned visit . Does it translate into a little bit more hope for the region . Mr. Elgarhy we hope so. In a visit to the United States with the president , last month, positiva very visit, and we believe that more positive relationship will emerge from that situation, and we hope it will continue in terms of political and economic to be in ap positive tone and in a positive direction in comparison to the last 15 years. Francine minister, thank you very much, amr elgarhy, the finance minister of egypt. Nejra police have stopped sharing information to the u. S. After leaks. Isme minister theresa may expected to raise the issue with donald trump at the nato summit later today. To extend the production cuts for another nine months after last years agreement failed to deliver price recovery. We will be crossing live to the opec meeting. The minutes from the latest fed meeting indicator rate hike is still in the cards. They also backed a plan that would shrink the Central Banks 4. 5 trillion Balance Sheet. Demonstrations against the brazilian president michel temer have been exploded into seas of violence across brasilia. Protesters clashed repeatedly with police. The violence ratchets up the pressure on temer. Playershester united and management have expressed their sympathy for those killed in the manchester bombing. A moment of silence was held before last nights europa le ague game. Shares in the company rose following the victory that guarantees uniteds place in the Championship League next season. We had to do a job tonight and we knew if we got that win, it puts manchester back in the race. Of manchester will be happier maybe. Job. E just come to do our nejra global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. Francine getting breaking news out of the u. K. Touch below. A has been revised downward to 2 . This is for the First Quarter. I do not know if we have a pound chart. There it is. The revision is very similar, 0. 2 , instead of 0. 3 . Opec ministers are just about to meet. At the same time President Trump is at nato meeting with allies. We know theresa may will ask him leakaise u. S. Terror concerns with donald trump. Manchester police have cut ties with the u. S. The imf reckons the World Economy will expand by 3. 5 this year. We will get back to that because there is a lot going on. Im going to hand it over to you in vienna as the ministers of started talking. Foreign language] and express [reporters shouting questions] we considered yesterday all options. From six months to nine months to 12 months. With further deepening the cause of necessary. We look at contingencies, but our changes and events beyond what is the base case. Also, supply from Member States being on the surprising side. And we found out that nine months with the same level of production that our member countries have been producing at certain option to do the trick. In fact, we would do it in six months, but then we would have a the firstuild in quarter that could undo what we have done. So we went for the safe bet of nine months. Having said this, the market is variable. Are you most concerned about the shale, your excellency . Shale is an important variable, but we dont believe it is going to use derail or affect what we are doing. The market is big enough to absorb the expected production in shale in 2017. Youve had 95 the saudis have had to fill in that gap. Well, i think, if we look at the total numbers. It is very, very impressive. In april we are above 102 . In may, my discussions and early reports, i think we are going to do even better than we did in april. Admittedly, there are couple of countries russia, i understand now is above 300,000. I invite you to go and talk to the minister. We finally caught up. Ur colleagues o slackave picked up the that have existed from others. The expectations is that everyone will carry their own weight. Do you have libya and measure. Nigeria. Libya and nigeria are under very difficult internal circumstances. These are brotherly states. We have a lot of sympathy. We want them to recover. In all aspects with their economical being. Until they reach just lie you ke you said for iran. To give them a chance to catch up to their presanction levels. The same with libya and nigeria. Manus how difficult has it been to get consensus . We do have consensus. My job, i have to admit, there their easy. There is great solidarity. I think everyone appreciates this collective action. So, ive been visiting countries talking to fellow ministers. Iraq is iraq is very enthusiastic. It is a Founding Member of opec. His excellency the Prime Minister was very friirm in assuring me that iraq is going to be in the forefront and supporting opec. Groupings of opec and nonopec. Their compliance levels have improved. And will continue at this level throughout the nine months. Thank you. Manus ok, the cameras is movingmanus cranny around the room. This is the first chance to speak with opec ministers. Alfalih was saying that there is broad consensus manus we are going to try to talk to the iraqi minister saying that compliance from iraq is very good. Lets try and listen into the iraqi minister. Ok, it looks as if iraq is tied up. Lets get to iran. The next on our the agenda. Come with me. Bloomberg news. A quick question. I just spoke to the secretarygeneral, he says there is consensus for nine months. Are you part of that . Yes. For nine months, six months, both acceptable for iran. We have no difficulty. We are here to send a strong message to the market that we are very series, serious to have a staple market. Theto, for benefit of consumers and producers. Manus will the market rebalance by the end of the year . Ive heard many stories. Give me your version. Opec is necessary. We can extent, develop production based on the decision. It seems it can control the situation and to reach us to the target price that we have in our mind. We know iran has vast reserved and is keen to get technology into iran. And has aspirations to produce 3 million more barrels a day. How long before iran can rampup to 4 million and beyond . After the new election that we had, now we are in a more powerful position for continuing our policies and strategies in oil markets. Many contractsd for increasing the production. Manus what can your production get to, your excellency, in the near term . Our production is very, capacity production is close to 4 Million Barrels only oil. Do you have any concerns about the more manus ok, francine, so, that is the latest from the iranians. Want to quickly go to iraq. Stay with me. Minister, bloomberg news. [inaudible] what does it take to get 12 months . Well, the 12 months is just in a proposal and the nine months proposal. 9 months. S we fully support this proposal. Manus will the market rebalance by the end of the year . All studies and prediction indicate the market will be in nine months. Manus in terms of this meeting, has it been a good consensusbuilding meeting for all of you . I think so, yes, definitely. Manus thank you very much, minister. So, thats they;re about to close the doors here. I think thats as much as we can get you at this juncture, fran. Im off to do a little bit more chasing. Take care. Francine great job, manus. I know from having done it, it is the most difficult job in the business. We heard from the iranian and the iraqi minister and the saudi oil minister. Saying broadly there is consensus. Well have to look at how the production cuts are extended by nine months. Im pleased to welcome phillip hildebrand, the vice chairman of blackrock. More than 5 trillion in assets. Lways, always a pleasure to speak to on bloomberg surveillance. How does the world field compared to six months ago . Whether it is know growth or oil or inflation, but are we confident the trend is upward . Yes, not only does it feel better than six months ago but it feels frankly better than in a long, long time. I think this is a whether it is growth period of global expansion. We have the kind of rapid acceleration phase behind us but are now in a sustained expansion phase. Its very important it is synchronized. If you look at the number of countries growing above potential, it is very, very high. I would say close to 90 of all economies worldwide are growing about potential. So, thats very good news. Francine was the biggest risk . Geopolitics, brexit or something happening between the u. S. And the south the in china sea or whether it is Monetary Policy. Something goes wrong that there is another temper tantrum because it is not telegraphed when Balance Sheets starts thinking. Shrinking. That could be a risk but the reality is that is very unlikely. Both the Federal Reserve, the ecb and Market Participants are prepared. We have seen this movie before. I do not really expect that to be a major problem. The biggest risk, as always, would be of something goes wrong at the core of the Global Economy, namely the u. S. Thats not new. I do think at the moment, were looking at a very favorable look from our perspective. Francine what is your take on europe . Besturo is having its performance despite is talking about it breaking up since was about. Six months ago. Into that bought story. Europe is looking much better than most people expect. I was looking at your surveys and only three out of 54 economists expect growth to be above 2 in europe. That shows you there is still upside potential. I think europe is probably the best position part of the Global Economy right now for all kinds of reasons, the Political Center has held up. I think there is a real opportunity and that is the curz for friends to realign herself with germany. If the new president can initiate the type of reforms that are needed for that realignment, i think that we are essentially going back to a period where you have a strong core, shoulder to shoulder, Franco German alliance, which will make everything much easier. Im hopeful on the european story. Francine this would be streamlining of decisionmaking. With a deal with the banks effectively . Well, there is many things to do but i think the preconditions for all of those things, including strengthening the integration, we can come back to what that means, but i think the preconditions for all of that is really for france to reform the French Economy primarily by the way of the market. That is the key, the key impediment to closer cooperation between france and germany. And germany, rightly, has become skeptical of the ability of france to do that. I think we have a new situation, a reset possibility. And that will change, friendly, everything in europe it is succeeds incron for the reforming the labor market, i think that opens the door to a very different outlook on europe. Francine when we know if he is able to do that, two years or does it depend on the process, coming up in june . It does depend on that. Im optimistic he will have a working majority in parliament. A given at this point. Then the question will be, what does he do . I suspect and i think rightly so he will focus immediately on the labor market as the key part of this kind of new agenda that will then open up all kinds of new possibilities for germany. You have to remember between 2000 42014, for 10 years, the private sector in france produced net not a single new job. Thats a devastating statistic. It is at the root of the significant diversions between france and germany over the last decade which has been devastating for Franco German relations and devastating for europe. If that can be reversed, if the labor markets can be fixed, i think we are looking potentially, i dont want to overdo it, but we are looking at the possibility of a golden decade for europe. Francine that is pretty optimistic. Talk to me about how they can do with nonperforming loans . Should it still be up to individual countries . We know how we are not going to be able to do with it, namely through Additional Capital injections. I think that is going to be very difficult, given the new regulations. It is also important to point out this is not a problem throughout the eurozone. It is really a problem in the particularly in italy. The intel in government has taken a number of measures that should facilitate the Italian Government has taken a number of measures to facilitate the absorption of npls. There is huge potential if one can take further steps to accelerate the process, then i think you could see a step change in italian growth. That is going to be very important because as Interest Rates begin to normalize and rise, it is very important for italian growth to stay above nominal growth long term Interest Rates in order to continue or reach that same ability. Heres, i think its, if t anything the Italian Government can do to accelerate the it would bef npls, an additional driver of growth in europe. Francine philip hill a brand, thank you so much. He stay with us or he is the vice chairman for back rock lacblackrock. We have plenty more from the nato meeting. We have some traveling press with President Trump. We understand Prime Minister theresa may will raise some very british concerns, big concerns over leaks of intelligence related to the manchester terror attack with President Trump. Our sources are trying to track it down. We will have plenty more on it. This is bloomberg. Francine this is bloomberg surveillance. In a month the u. K. And e. U. Will sit down to untangle relationship that has existed for 40 years. They have a lot to negotiate. Lets focus on what it means for their economies and the Financial Services sector. With me today is the vicechairman of blackrock. Philipp hildebrand, what do you make of these brexit negotiations . The campaign has been suspended because of the Manchester Attack. What can we infer about what the government wants and what is is trying to play to mystically . Domestically . Not very much is the honest answer. It is very unlikely to have a deal that is done at the end of two years. So, the markets will very quickly focus on the question of transition period. Newith any kind of regulation regimes, when i think of basel iii, you always have a transition period. I think the markets will begin to focus on that. Fundamentally, i do not think things have really changed in the following sense that the the of deal that emerges, future arrangement will fundamentally dependent extent to which the u. K. Government wants to go in what they call their own red line. Which are really two things full control over immigration and the European Court of justice. You know, the story remains the same. That is the fundamental question. If they stay really hard on these two issues, it is going to be a very hard exit. In a sense, that is what it comes down to at the most basic level. Francine i do not know if they have a priority list. Where do you think Financial Services is on that priority list . Does it even make it in the top five or top 10 . I cant answer that question. That is fundamentally both an economical, i suspect, mostly a political question. The market will adjust. The one thing i can say with nevedence is one should assumer, no politician should assume that anything that is what it is today is a given. Markets are incredibly flexible in adapting to new circumstances. You know, markets will adapt if we end up having a very hard brexit, the notion that it is impossible to imagine a big change in terms of the city relocation to europe is a false subject. It is true that london has an external an extraordinary chose, we want to stay here. It is also true if a hard situation emerges where you cannot serve your clients from here, then you have to a depth and Financial Institutions will adapt. Francine do you think london will keep the clearing businesses . Again, crucial to keep them here, but impossible to know given the tough talks. The clearing is a complicated matter, and most people frank we do not understand what it is. I would give you a very simple answer. I do not see any possibility that in the long term the directlythat is associated with the conduct of Monetary Policy would reside outside of the eurozone. I think thats a, thats a starting point we should all be clear on. Aspects ofany other clearing that do not really impact directly the transmission process of Monetary Policy. We will see think much more flexibility. But any parts of the clearing mechanisms that are directly associated with the transmission process of Monetary Policy, i can see the ecb or indeed, any European Authority allowing that to take place outside of the jurisdiction of the currencies. So, this will be a very complex discussion. I think there will be some ot relatedy, b ut n to the parts that are associated with Monetary Policy. Francine is there a capital youre sitting at the moment that would take the crown of london . Or would it be spread out . No. I suspect, like most things in europe, what we will see is that there is not one location that will win, so to speak but we will see institutions falling following their clients all over europe. I suspect well see movement in a number of capitals on the continent. So much. Thank you vicechairman of blackrock, the worlds biggest asset manager, stays with us. Tom keene joins me out of new york. We will be discussing President Trump. And also have an exclusive interview with the London Stock Exchange ceo. Well be asking him about clearinghouses. 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. Francine looking for direction. Saudi arabias oil minister sees even deeper opec and nonopec cuts made. Theresa may expected to issue a tough message to President Trump over u. S. Intelligence leaks. The fed leaves a june rate hike in play despite concerns over muted inflation. Good morning, everyone. This is bloomberg surveillance. Im Francine Lacqua. Tom keene is in new york. We have a lot to get to today. A moment of silence at the top of the next hour on manchester. Francine im really looking forward to doing all of that, the moment of silence, which we will also respectively respectfully honor. Here is taylor. Condemnedlice have u. S. Officials for leaking intelligence related to the manchester suicide bombing. Police have stopped sharing information with the u. S. American officials were criticized for leaking details on the attack to the u. S. News media. The nato summit is the first four President Trump in the wake of the manchester bombing. His demands to step up the fight against terrorism are likely to get a sympathetic hearing from nato leaders. The president has criticized the alliance in the past and he wants member nations to spend more of their budgets on defense. Opec and its allies are expected to make a final decision on whether to extend Oil Production cutbacks to next march. Saudi arabia supports the move. One problem for opec, more u. S. Output. Shale output may be close to its most maximum output. Shale is an important variable, but we dont believe it is going to significantly derail or affect what we are doing. The market is big enough to absorb the expected production in shale in 2017. Taylor oil climbed to a fiveweek high today. Back in washington, the Health Care Plan approved by Washington Republicans House Republicans would increase the number of uninsured americans by 23 million. Global news 24 hours per day powered by more than 2600 journalists and analysts. This is bloomberg. Tom thanks so much. I love going on in china. A lot going on in china. Dow futures up 76 the bloomberg. Curve flattening still in place. Lets go to the next green as we can. The euro back stronger. There is the dow showing equity markets resilient. If you look at all of the global news flow, it is stunning, the dlink a jim equities de linkage of equities. Profit, profit, profit. At the bottom is the lead story on china and the dynamics on china of more than a twostandard deviation move. This goes with really interesting dynamics in china. Francine i like that data check. It is very similar to what im looking at. The one thing i would add is the germanu. S. Yield. I would also focus on oil. Oil is weakening a touch. It is practically unchanged. Saudi seemed to rule out deeper opec cuts. Look out for opec. If we dont have an extension of production cuts, that may be a sign that markets will be a little more concerned about the future. Tom, geopolitics really at the forefront as we now also have some questions about intelligence sharing after the Manchester Attacks, between the u. K. And the u. S. The dollar ticking lower after fed minutes showed various members suggesting inflation remains muted. Membersthis, most judged it would soon be appropriate to tighten policy again. This most likely refers to the next meeting on 214 and a comes after the philadelphia june 14 and it comes after the Philadelphia Fed president called a june rate hike a distinct possibility. Do you think Monetary Policy is now steady as they go . Under the markets look at it day in and day out, but munication seems pretty clear. I think thats right. Fundamentally, Monetary Policy is heading in the same direction differentt speed and positions in the cycle, but we no longer have an environment where we have divergence. Irectionally that is important for the underlying market sentiment. It is very important in the mediumterm. That is the key driver of what shapes markets. Monetary policy is no longer diverging and heading imminently in the same direction. Francine what is the biggest trend over . We are seeing large amounts of assets creeping back up. That has the potential of shifting bull market. We are in a reflationary environment finally. It has taken much longer than anybody what have expected. Perhaps ken rogoff predicted it would take 79 years, but very few central bankers would have expected it to take a decade and we are now firmly in a global reflationary environment. It is a gradual cycle. The process is advancing slowly. Central banks will be prudent in normalizing. Tom good morning. Tom keene in new york. Let me talk to you about this dilemma. I believe all the textbooks that you and i studied said that Central Banks are a reactive force, maybe the Swiss National bank has been the best ever of being a legitimate expost shop. The whole idea of a central bank trying to get out front of the debate and that is by definition an impossibility . Philipp i dont think it is an impossibility. In this environment, particularly when you change direction, it is very clear to communicate clearly with Financial Markets. We saw with the taper tantrum what can happen when that does not work smoothly. It is clear to me that Central Banks have learned. I expect this to go fairly smoothly in europe not least because we have had the experience of the taper tantrum and the fed. And we have time. We have a very strong president of the ecb in place. He has laid out the path directionally. There is Forward Guidance for the rest of the year. It is clear that a regime shift is approaching, the market knows that. You can see that in the way that the market behaves, in yield curves, in currencies. Everybody is poised for this gradual change in europe. Tom let me bring up a bloomberg today. It works better right now. This is threemonth chinese. It is one indication from the beginning of the crisis, the blue circle and up we go. There have been routine issues of liquidity or what ubs calls market oddities within china. Link right now china and chair yellen. How are they dovetailed together . Financial dynamics of china with the Central Banks of the world . Philipp china is part of a broader story of global synchronized growth. Must 90 of all economies are currently growing above trend. This is very important. China will have to go to regime shift, as well, where we will see some slowing down as the inevitable part of the restructuring and the reforms, particularly in stateowned enterprises. Some of the volatility that you see in the Chinese Market is in anticipation of that moment. I dont think we will see Much Movement on the policy front until the next party congress. It is also clear to Financial Markets that we are going to need to see some slowing down in china as the inevitable, almost the mechanical flipside of the state enterprise reform. I would put to you that if we did not see a slowdown over the , that224 months in china would frankly be a bad sign because it would suggest that they rely continuously purely on credit expansion rather than on reform. Francine thank you so much. We will come back to philipp hildebrand, who will be with us for the next half hour. A warm welcome to all of our viewers across the world, but also our radio listeners. What we are seeing is a massive rally, thousands or what look to be thousands of people in front of the Brandenburg Gate in berlin. This is former president barack obama with Angela Merkel to celebrate the 500th anniversary of the reformation. A lot has been set on this. Going on at the exact same time is the nato meeting with President Trump and we are expecting President Trump to demand stepping up the fight against terrorism and that is set to resonate with his nato counterparts. Former president barack obama and President Trump over in brussels. We will have plenty more throughout the day. Up next, we will be talking out about brexit and we will be talking to the ceo of the London Stock Exchange. Francine this is bloomberg surveillance. Tom and francine from london and new york. Industry representatives considering the future of Financial Markets and the future of london. Anne edwards joins us with a very special guest from the event. Anna thank you so much. I would go straight to our guest, the ceo of the London Stock Exchange. He joins me here. Last 45spent the minutes talking about opportunities and concerns around brexit and things facing the city. One of your concerns is the cost going up for businesses. That that cost is fully understood on the other side of the channel . Mr. Rolet first of all, lets remember that the Largest European Companies at the moment are in full electoral cycles. Some of the rhetoric tends to exceed reality on the ground. What we have sought to highlight and the benefits, of course, a global Financial Services that are offered not just by the way to eubased investors, pensioners, and corporations, but global issuers and financial Market Participants is just that, the benefit of global citizenship. It was decided that clearing should stand at the heart of the worlds Financial Services. I think that the efficiencies that come and the risk reduction, the risk elimination that comes from centralized clearing in the worlds overthecounter derivatives market, the largest financial asset class, is fully understand understood in europe, including by the commission, whose recent proposal was quite balanced and offered several ways forward including shared regulation, which is a framework we already operate between. Anna and you are mindful of the costs this imposes on people who want to do this business . Issue because of the business you operate. Are you already losing any business because of concerns that euro clearing will be forcibly moved from london to the eurozone . Mr. Rolet not at all. Flows are actually increasing. I would say several things. Case, it is not an Economic System or a regulatory case. The political case that has been made by some to extract out of the Global Engine that is in london, it is cleared by the london clearinghouse, which clears a must 95 of the worlds overthecounter derivatives come the political case that has been made does not fully comprehend the increase in Systemic Risk that is mathematically verifiable, that would result from extracting from this global pool the euro denominated pool pertaining to eubased institutions, which by the way only represents 7 of the total. You would end up and this is important to understand the very small fragmented pool, Systemic Risk would be increased because risk would be shared between far fewer entities. Anna there are some in europe who think the risk they dont want to bear, having all of this euro clearing taking place not directly supervised by the eu, they say they cannot necessarily rely on lines between the banks relying without controls. Mr. Rolet this is clearing out infrastructure around the world. Lets go back to that point. It is an important point. If the eu were 60 ofristically the total flows, eu flows only represent 28 of total flows and only a quarter of that 28 originates from the eu if the eu were to extract somehow through regulation, which i would have to agree to, and in the absence of a determined Regulatory Framework there is a debate as to whether it should be the ecb that regulates this business or the National Central if the eu were to somehow separate this, you would l liquid,th a very i ar more costly based on very rigorous analysis this would cost in the region of 20 billion euros per year in an additional margin of cost anna you have been writing about that quite a lot recently. Can ask you another question about the future, the opportunities . Do you see big opportunities in saudi arabia where you have just been with the Prime Minister . To maket im not going any comment about that. I want to make one last point about the clearing and it is an important one. If the eu, from some political , were toe or priority decide to create an isolated, d smallerd, illiqui pool of euro denominated clearing flow, it would also, in our view, do lasting damage to the European Union and eurozone members. Of course, protectionism cuts both ways. That would be the end of the euro as a global reserve currency. To your other point, we have seen amazing growth. I think our numbers have shown that. More than ever, exchanges like the London Stock Exchange understand the need for diverse forces of Capital Raising for the benefit of small companies, startups, scale ups. Attractive as a global i feel platform. Thats all i will say on that platform. Anna thank you very much, xavier rolet, the ceo of the London Stock Exchange. Tom anna edwards, thank you so much. Coming up in our next hour, on the linkage of the equity markets into our economics of the day. This is bloomberg. Good morning, everyone. Francine lacqua in london, im tom keene in new york. With us, mr. Hildebrand from blackrock. Philipp, i want to bring up the central bank chart of the moment. This is the statement of capitalism back to the depression. This is the standard force 500. This is beyond elegant. The answer is from the lower left to the upper right. I would suggest we are getting a little bit of help from Central Banks now. What is the influence of Central Banks on moving assets higher . Philipp tom, im impressed by this chart. You must have gotten up early this morning to prepare that one. [laughter] philipp if you overlay the moving averages of growth, you would see a fairly similar picture. Equity markets reflect growth. The job of Central Banks has been to be aggressive since the crisis to allow us to escape out of this deflation risk or potential deflation trap and that has now succeeded. We are now in a reflationary phase. It must be one of the shorter term moving averages and you can see that inflection point, it looks like it, on that chart. Central banking has deployed various measures because the crisis was so deep, the shock was so deep, it had to go much further than lowering Interest Rates, including into purchases of assets. Pushing asset Prices Higher was part of the transmission mechanism. The reason that was needed was because the risk of a was so greattrack because the financial crisis was so deep. Tom very good. Philipp hildebrand with us from blackrock. Talk abouth more to on International Relations and on manchester. Conversation that we are really looking forward to, this is wrapped around the national one minute of silence we will see in the United Kingdom today. Coming up, the backdrop of market turmoil in china wrapped around a risk on feel off the fed minutes yesterday. Futures up 7. Dow futures up 75. We are also watching a stronger recent resistance. Stay with us. This is bloomberg. Francine bloomberg surveillance. You can see the chancellor Angela Merkel speaking as she is joined by the former u. S. President , barack obama. They are discussing democracy. There is very tight security in front of Brandenburg Gate. People have gathered in berlin to hear and listen to the former president , barack obama in his first speaking event since leaving the white house in january. They are talking about how to tackle terrorism. A little bit ironic they chose to do this today and President Donald Trump is on his first visit also to brussels at the heart of europe to talk with nato allies. You can see mr. Trump shaking s with we understand they will go into a closed meeting to discuss how they can tackle terrorism. We understand better there is still that lunch off the record between the president of the United States of america and the newly elected president of france, emmanuel macron. Lets get straight to the bloomberg first word news. Taylor british Prime Minister theresa may is concerned the u. S. Is leaking intelligence information on the manchester bombing. She will bring it up today with President Trump at the nato meeting in brussels. The bbc says police have stopped sharing information with the u. S. There is another report about how russia tried to meddle in last years u. S. Election. Top russian officials discussed how to influence donald trump through his campaign advisers. The New York Times cites current and former american officials familiar with the information. The russian confirmation focused on Paul Manafort and Michael Flynn who was a then trump advisor. Are expectedallies to make a final decision whether to extend Oil Production cutbacks to next march. Saudi arabia and russia support the move in an attempt to boost prices. Bloomberg spoke with nigerias oil minister. I support the ninemonth strategy. Move andee how prices how the reserves are holding up. The 12month agenda is a conversation is a longer type extension. Taylor u. S. Oil production is at the highest level since august 2015. Global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you so much. Every president ial trip has its surprises within the surprise of the president s trip is the tragedy in manchester. I saw a live feed of the terror news. This is sir in blair ian blair. I am afraid manchester reminds me of exactly what happened after 77 win the United States published a complete picture of the way the bombs had been made up. E have the same protest it is a different world and now operates in ates sense of how they published things. In brussels is Kevin Cirilli. What will be the president s response to a furious Prime Minister may today . Kevin washington just waking up, but i have spoken directly with two political advisers to President Trumps political orb and they both tell me they feel this only underscores the criticism of the Intelligence Communitys leakage and how it undermines the president and National Security. This all comes criticism of at n which several investigations as well as senate and house investigations into the president and the leaks surrounding it are ongoing. President trump set to meet at the nato summit and we are getting word he just concluded and is still in meetings with European Union leadership. Tom another idea here which i know francine has touched upon is i find it absolutely amazing that president obama is meeting with chancellor merkel in berlin as President Trump tries to act president ial in brussels. Is the trump team shocked, removed, or do they not care that president obama is getting face time in berlin . Kevin publicly, they have been tightlipped. Privately, there is murmurs this is disappointing on behalf of the former president to be doing such, particularly to be engaging in such an overt political discussion while the president is making his first trip as president on foreign soil. The top political lieutenant from the administration are currently gathering with e. U. Officials. He is accompanied by gary cohn and general h. R. Mcmaster and deena powell who have been with him throughout all of this trip. As you said it, the manchester a shadowally casting and influencing directly the president s first trip. Francine how much do they spend time talking about the leaks back home . President trump is also trying to cut back on leaks back in washington. That i have to be candid essentially this has been the most scripted President Trump has been since he has taken the white house. He has not at all done any unpredictable unpredictable political moments. The reception in saudi arabia and israel is very different than the reception we have seen here. In israel, Prime Minister netanyahu providing some cover saying the information sharing is terrific. U. K. Officials seemingly are not taking that approach. Francine thank you so much. Kevin cirilli in brussels has been traveling with the president since last friday. Joining us now is robin niblett. Still with us is philipp hildebrand. Welcome to the program and thank you for sticking around. What do you make of President Trumps trip so far . Is it a success or a success so far as long as he does not come home to more leaks . Robin i think so far it has to be deemed a success. He is out of the washington hothouse and he has taken himself out of the washington hothouse by not taking this attack mode. He has been more scrimped scripted. Stability more generally is welcome. I think the european part of the visit will be a bit more complicated. We have seen the optics of this admittedly long planned former president obama trip to germany and how that could trigger, given i think obama is that touch point always for President Trump, that is who he is comparing himself to. So far, i think the trip is good. Francine President Trump has looked president ial in his first foreign trip, does that give him a little more Political Capital at home to go through the reforms that he needs tax that he needs tax, health care . Core of theis the Global Economy. We saw what happened when things go wrong in the u. S. It is important he succeeds. Any sense of stability on the policy front would further reinforce this very positive environment we talked about earlier. About want to talk manchester and what you perceive. Not only you, but your experts on the theology of the United Kingdom. I was thunderstruck in the essay by trump advisor sebastian, he has been hugely controversial within the United States. He says, basically go after the dsstors and their bastar and there are many shades about what to do about terror. Robin this is one of the most difficult challenges out there. It is one that is embedded throughout europe and reminds us that the United Kingdom is very much a european nation in the sense that we have second and Third Generation young people in many cases who are disconnected or isolated from their societies. They are very small minorities and what we are finding is a group that has worked out not how to necessarily send terrorists over, but in many case how to groom young men, although maybe women as well, to becoming agents for destruction. There is no military solution. Go after the bastards which ones . I think the response in manchester has been dignified, appropriate. This will be a longterm challenge. It requires a greater level of between Police Forces and local communities across the United Kingdom. This is not going to be fixed by emotive grandstanding. Tom i noticed last night within the american site diced people are you experts in what a society does about this. How do you get these identified people that want to do evil things to good people . Robin it has been 12 years since a major sized terrorist attack in the United Kingdom. It is very difficult to stop selfstarters like we had in the attack recently outside the houses of parliament. This is clearly a more planned attack that has infrastructure around it and the u. K. Has felt it did well in trying to manage those up to time. You will never be failsafe. The u. K. Has been high alert that an attack is likely for the past three years. There are so many weak points around europes periphery. You might be focusing on the syrian community, the afghan community, it is almost impossible to block it all the way through. Tom one final question to you if we could and what i would spoke speak to is the dirth of Economic Growth. You have spoken of the idea of a convergence of better economies. Can we get back to the Economic Growth that diminishes the desperation of these terrorists . To some extent, yes i think we are probably underestimating the Global Growth dynamic. I would warn against excessive optimism for a simple reason that structurally we will fight headwinds. We have an aging population in most economies and very high debt levels. We also see problems around productivity that may improve over time. Levels and debt demographics are such that we are in a very strong cyclical upswing. I think we should also realize that this window will be limited in time and we also probably wont get back to the golden age in terms of growth we would have seen. Any growth from here, particularly if it is synchronized or in europe where it is needed, will be helpful in terms of social and political issues. Tom mr. Hildebrand, thank you so much, he is with blackrock. We will continue with robin niblett. Thank you for those important comments on manchester. Much more on economic finance investment on bloomberg surveillance today including a conversation with a congressman from alabama, he is fired up about the return of the president to the United States. Look for that in the 9 00 hour. This is bloomberg. Francine this is bloomberg surveillance. U. K. D to focus on the in an effort to return to normal after the Manchester Attack, british leaders will resume National Campaigning for the june 8 election. Theresa may will also return from the g7 summit in italy a day earlier than planned. We are with robin niblett. The news has been incredible and a lot of it has been sad over the last two days. What does this mean for the june 8 election . Robin it is looking very difficult to project. I remember tragically after the stabbing death of joe coxe right at the height of the referendum ,ote that took place last year people thought to this is going to turn, this is going to solidify the vote or provide the drive that was needed. As far as we can tell, as tragic as that was, joe was so revered, it did not affect, the election. Here we are going to get back to business as usual. It does strengthened the hand of theresa may as Prime Minister because she has a very Strong Security background agenda. This has been obviously a failure at one level of u. K. Intelligence. I think the more interesting note was how the conservatives took the local elections. They are often a big measure of what is going to happen in the general election. They won those. Francine what does that tell you behind citizens embracing brexit . Theresa may is seen as a stable leader for is it that more people if there was a second referendum would vote or brexit then last year . Robin the polling seems to have shown a straight a slight strengthening. You might get a smidge more people voting leave then remain. The more interesting polling is that at least half of those people who voted remain think it is all over and they just want to get the best yield from britain. They do not regret their vote, but at least half of that 48 are now just on to getting on with it. The resist movement if you want to call it is down probably 23 percent. Very young people and very mobilized people, but it is not a big factor anymore. People want to get on and they see theresa may probably the majority of the people, who will deliver a sensible brexit. Francine that is what i wanted to ask next. It is unclear when you look at the markets what they are seeing. If theresa may wins with a landslide, doesnt mean there is a harder brexit or a softer brexit . Robin my read is that she has to be careful of too large a victory. You have changed the weight of peoples attitude to the e. U. Within parliament. The majority and the majority most ofntarians those coming in, local counselors and people from local parties are much more probrexit. If negotiations got tough, you may find you have majority groups that thought that find lets walk away and take the cliff edge. I think she would love a big majority. I would say good for the u. K. For a decent brexit. 6090 would be great. You so much. Nk the numberst with and what it would mean past the general election and what it would mean or brexit. If you have more questions, go. To tv francine this is bloomberg surveillance. At the opec meeting has emerged from the famous press ground. Well done, i am no that i know it was not easy. You spoke to the minister of saudi arabia. The kingpin in this deal said there was an easy solidarity. What does it take to shift to the market . Look at the price of oil, we are dying. Youve got the live data, . 63 give or take. There is a discussion about the exit strategy. Look is what is happening to ecb and the fed, this is what the issue is. Neither ninemonth extension is faced in the case. Markets isin the that they have not dealt with the issue, which is what happens in nine months when we go to expiry. Ease ind very much at terms of the message he wanted to send. Is an important variable, but we do not believe it is going to significantly derail or affect what we are doing. The market is big and up big enough to absorb the expected increase production in shale in 2017. Shale just keeps coming back more aggressive and with an ability to impact the market. He rcep he is saying we are heavily cognizant of what is going on with shale. Dont forget, theyve got an ipo next year and a need the price of oil to be above 50. Nigeria, 50 is its store. 60 is just optimism. Francine that is the milliondollar question. We also try to get find out whether that is part of their thinking whether they want to squeeze them out. For the moment, it is wait and see. Manus cranny, thank you so much. He will be at the opec conference and will bring us any breaking news from that. Very quickly we hear from the president of the European Council who was with donald trump a little bit early on. He says we have agreed on many areas with donald trump. It is very clear that the first foreign trip of President Trump. As changed in tone slightly yesterday he was at the vatican in rome and today he meets with his nato allies. Tom very good. Robin niblett with us with chatham house. I want to go to nato. Meet with mr. L trump in an hour or so. How strong is nato in the french meet with the United States . Robin i think with the United Kingdom pulling out of the European Union, nato becomes that much more important to the United States. On theed to focus both e. U. Relationship and the nato relationship because it is all very easy to do a trip to the middle east, reteam up with countries that are takers from the United States. In europe, youve got very uneasy politically. People are very critical of donald trump in the election. He is saying i have been stronger than you thought i was going to be on russia and i am no longer saying nato is obsolete. Mike pence said we need a forward presence. He is saying i need you to back me on the fight against isis and spending to 2 . Tom thank you for your comments on manchester. Santosnext hour, gabriel of jpmorgan. This is bloomberg. This morning, the fed signals a dovish tone as china moves stronger. Beijing can beijings financial house of cards stay standing . United kingdom outrage over u. S. Leaks about manchester. Across all of the United Kingdom, a moment of silence. Let us listen to the silence. [bell ringing] tom of course, mr. Corbyn shaking hands with firefighters. This is near london. How is this different from what you experienced 12 years ago . Francine this feels different attack on had the paris and the brussels attacks and we are trying to figure out if maybe it is part of the same network. I would venture to say it feels different because people are hurt, but it is also something we have grown a little bit more accustomed to. The minutes silence was held in remembrance of all those who lost their lives at the Manchester Concert suicide bombing. It also marks the nations solidarity with those injured in the blast as well as others affected by this atrocity and flags will remain at half mast on government buildings until today. It is significant and goes to show that a lot of our countries and our allies need to fight together to go to the root of the problem. Certainly one of the items of discussion today with the Prime Minister of the United Kingdom and the president of the United States. Right now to our first word news and your briefing for the morning. Taylor the nato summit is the first for President Trump in the wake of the manchester bombing. His demand to step up the tight against terrorism are likely to get a sympathetic hearing from other nato leaders. The president has criticized the alliance in the past and he wants member nations to spend more of their budget on defense. And allies are expected to make a final decision whether to extend Oil Production cutbacks to next march. Body arabia and russia support the move saudi arabia and russia support the move. Shale oil may be close to maximum production. Bloomberg spoke with Saudi Arabias Energy minister. Shale is an important variable, but we do not believe it is going to significantly derail or affect what we are doing. The market is big enough to absorb the expected increased production in shale in 2017. Taylor oil climbed to a fiveweek high today. The Health Care Plan approved by House Republicans would increase the number of uninsured americans i 23 million. The Congressional Budget Office says the obamacare replacement bill would reduce the deficit by 119 billion over 10 years. That is less than the deficit reduction in in an earlier version of the measure. Global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you so much. Let me look at the data. I want to get through this quickly. Futures green on the screen. This is off the fed minutes yesterday, but some of the china debt activity. Anay here, the vix is extraordinary 9. 89. Governor santos Gabriela Santos will join us. Two deviations strengthening this morning. I would link the china Market Dynamics somewhat into what chair yellen is speaking. I would to wti. This is the story of the day or the story of the moment because we are seeing a lot of swings between gains and losses as opec and their allies seem to be poised in their deal to extend output. We really need a statement from opec to explain what it means. Euro is edging higher and european stocks are struggling for direction in what is a holiday in the many countries today. Tom two weeks ago i would be certain to speak about nato with Kevin Cirilli in brussels. It is a somber moment in a changed dialogue in brussels over terrorism. Mr. Trump is not beloved in europe. Will they listen to his strong statement on doing something about terror . Kevin the administration believes that they will, but President Trumps methods message to nato allies is they need to pay their fair share in order to strengthen the 28nationstate alliance. Tillersonof state rex speaking with reporters yesterday echoing that same criticism. All of this being overshadowed by the Manchester Attack and now this bbc bombshell report that Manchester Police have stopped sharing intelligence with the United States because of frustration over Intelligence Leaks from the United States and media outlets. Tom mr. Trump will meet with mr. Mccrone macron. France had to learn about heightened intelligence off their efforts with belgium. How can mr. Macron meet with mr. Trump on terrorism . What will that dialogue be like . That discussion is ongoing and it comes as the president is set to meet with European Union officials. It is worth noting that the president making that trip to the nato headquarters, a headquarters that opened quite frankly just following the brexit vote as a show of all solidarity as it was interpreted publicly for the European Union after the u. K. Voted to leave. Very ongoing this simply because the bilateral trade agreements seemingly would somehow be connected to these terrorism discussions. Francine we are just hearing or that heom donald tusk gave President Trump a message of western values and human rights. How will that be received by the president . Kevin it also comes on the heels of the pope and the president s meeting with the pope in which pope francis gave the president a book on attractions. Protections. It is a very different response than what i reported on in saudi arabia and israel where both governments and the locals were much more receptive to President Trump. A very different feel in europe where there is deep skepticism about this president and his administration. Francine if the president continues to look president ial like he did in israel and saudi arabia, if he manages to pull it off without any hitches today at nato and also at the g7 in sicily, does he have more Political Capital to spend back home when it comes to actually getting deals done . Health care, infrastructure, tax reform . Kevin great point because all of this it is worth noting the president released his Budget Proposal earlier this week. A scripted trip for President Trump. I have spoken with three trump political respondents and all of them noting that this is an opportunity for President Trump to underscore his criticism that u. S. Intelligence leaks are hurting National Security interest. Tom Kevin Cirilli, thank you so much from russells this morning brussels this morning. Us now on this strange linkage of our International Relations and economic into investment is Gabriela Santos with jpmorgan. I want to show you a chart with is a bit off script. This is three months paper in china and weve got a spike up to two standard deviations on a trend back to the gloom of 2011. What is the measurement away from equities and the measure of instability in the Global Market right now when you look at shortterm paper . Gabriela when we think about the Global Economy, we are feeling much more comfortable than we have in about years. China, i think there is an intriguing dynamic towing on. Tom is it liquidity or some financial dynamic . Gabriela what we are seeing is an attempt to fight titan financial tighten financial conditions. They are trying to deal with some of the bubbles, some of the and engineer a mini cycle slow down into the second half of the year in a controlled fashion. To us as investors, that is a positive. Francine when do you see that changing . The trend you were just describing, i do not know if there is risk out there or the trend becoming better, but talk us through how you would view how that could change . Gabriela when i think about china i think about two time frames. There is the longterm china , ank timeframe deceleration and a transition in growth and within that, every year we see many cycles. Moments when the Chinese Government stepped into the gas saddle and we see accelerations and moments when they step off and financial tighten positions and we see a slowdown. The market is taking this in stride and understanding this is a mini cycle slow down. Tom the mother of all bull francine, please. Francine we are getting breaking news ahead of opec. Opec has agreed to extend the output cuts for nine months according to a delegate. I dont know if we have the price of oil. I know it was in my data check. This the market will take with a sigh of relief because we also heard from the saudi minister of energy that they will not extend cuts or will not take the brunt of it. It needs to be full Cooperation Amongst opec. They have extended up cuts for nine months. 1 commodity. Co it is a little bit unclear, i just had to bring it up quickly. You see this very nice intraday tenet here. Much lower price on crude and this is a massive sign a little dampening. We will come back and look at the trigonometry of health care in america. Cannot stand obamacare and he cannot stand trumpcare. Michael cannon on the scoring of the cbo. This is bloomberg. This is bloomberg surveillance. I am taylor riggs. Taylor Deutsche Bank may be close to settling a Federal Reserve investigation how to into billions of dollars moving from the bank into russia. People familiar say a deal could be announced in coming weeks. The question is how hard the u. S. Thus this Justice Department could come down on Deutsche Bank. Investigating how the bank helped clients billions of dollars out of russia. Ticketmaster is trying to make friends with young sports fans by embracing a competitor. The giant that has all but monopolized the market will make Tickets Available through game time. That is a mobile only to get app that is beloved by younger customers. Ticketmaster says it wants to fish where the fish are. Tom it will be a theme for us all through the day, let me take you back to may 4. This is michael cannon, the health care expert, not in love with obamacare or trumpcare. Republicans emerged with a bill that does not repeal the provisions of obamacare. Republicans do not want their renegingnow they are on their promise to repeal. Francine lacqua and tom keene love to sell ads. Nice shot, michael. What will you write for the Cato Institute today on the scoring observe yesterday afternoon . Michael i have a post going up soone cato at liberty blog that explains the cbo score shows republicans have lost their minds. It shows that the house bill enrollees abamacare 20 premium increase in the Election Year and another 5 increase right before election day. Those are the 2019 premiums that, right before election day. It would give voters reason to throw republicans out. They are passing this bill that gives voters a reason to throw them out. At the same time, it would basically destroying any hope of securing longterm coverage for people who develop expensive illnesses. Tom i believe i believe i saw yesterday another part in the state of misery lost all lost all theirri health care. Are they going to be overcome by Regional Health care events . Michael i think so. Youve got east tennessee were the last insurer said they are out of the exchange in december so 43,000 people who would have secure coverage if congress had never passed obamacare, they will have nothing now. If you do full repeal, premiums will come down for some people by as much as 80 90 and people who develop expensive conditions will have secure coverage. Those people will be able to buy coverage in states from job to job and if you replace obamacare with the right reforms, states will have the in ability and flexibility to cover people with preexisting conditions and more people will be able to buy secure, portable coverage that prevents them from getting a preexisting condition. This bill does not do that. It pretends to repeal obamacare but also gives higher premiums and less secure coverage. Francine what is this actually mean that the house will come back with a new bill and there will be another vote . Michael the bill has already passed the house and now it will move to the senate. The senate will decide whether it will follow the houses lead or try to keep the promise it made to voters and the promise that sent elected republicans to congress and put President Trump in the white house, the promise to repeal obamacare in full and replace it with Health Savings accounts and other market reforms that bring down the cost of health care because there is nothing in obamacare or the house bill that does that. They just subsidized. Tom we continue with mr. Cannon on Bloomberg Radio with david gura. We will do that in a bit. Coming up, from alabama we saw on what we saw yesterday from cbo. The pass for his republican party, mr. Brooks of alabama. This is bloomberg. Francine breaking news from the u. K. Prime minister. Theresa may speaking saying she will tell President Trump that sharing information shared information must remain secure. This is after we already understood she would confront President Trump over u. S. Media leaks. Lets change in focus on the fed. Saying inflation is needed and others saying it is prudent to wait. Discuss despite this, most members judged it would be appropriate to tighten again. But get back to Gabriela Santos. Thank you so much for staying with us. What do you make of what we heard and found out from the fed yesterday . Gabriela i read the minutes yesterday as business as usual. They did note the slowdown in consumption and overall Economic Growth in the First Quarter and also some surprisingly weak inflation figures. Most numbers were overall willing to overlook both of to me itets and signaled they are willing to continue with their plan for this year as well as Balance Sheet reduction toward the end of the year as well. Francine does that mean the market has telegraphed and absorbed the communication in a rightful way . Gabriela i think it has. I think the market understands this is a very gradual, data dependent said and in the minutes, the fed noted that Market Participants had anticipated the expectation of Balance Sheet reduction and that the market had been able to absorb that. There is a comfort that there will not be a reinvestment taper tantrum, lets say. I think that is business as usual for the fed and as a result we should see bond yields continue to move up later this year. Tom what is awaiting within the equity spirit of said action fed action versus earnings and revenue . Gabriela i think the markets view of the fed has changed a bit. I think the view used to be a good. Fed was i think the equity market actually reacts well when the fed does business as usual because that is assigned when the economy is doing well in earnings can continue to move up. Tom it will be interesting to see to go to june. A superb article across bloomberg on what we observed yesterday in the world of fed. This is the conversation of the day on the Disruptive Force of china. Donaldstress time strazheim will join us on the reality and the myths of chinas Financial System. I am tom keene in new york. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Tom london this morning, a John Constable painting. Anduld say the river thames looks we are coming to london, francine. What a contrast thank you to lor camera team. Anthony, thank you. From london and new york, a stunning contrast. Taylor riggs prater taylor british Prime Minister theresa may is concerned the u. S. Is leaking intelligence information on the manchester bombing. She will bring it up today with President Trump at the nato meeting in brussels. British police say the leaks to the media were a breach of trust. They will now stop sharing information to the u. S. There is another report about how russia tried to meddle in last years u. S. Elections. Top russian officials influenced discussed how to influence donald trump through his campaign advisers. The russians russians confirmation conversation focused on Paul Manafort and Michael Flynn. In montana, the republican candidate for congress in this weeks special election has been charged with assaulting a reporter. Witnesses told police he grabbed a reporter by the neck and slantin to the ground. Polls closed and slammed him to the ground. Global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you so much. For those with concerns of china, this is without question our interview of the day. Donald straszheim has been on the china watch for decades. Also, Gabriela Santos of j. P. Morgan Asset Management who has been who has been at too many straszheim meetings as well. The goal the liquidity worries with china and the overall Banking System and financial worries of china. Which is it or is it a mix that has your attention . Donald like always, i think it is a mix. They are concerned about liquidity always near the end of a quarter. That is typically what happens. They also have this broader andern of excess leverage it is not so much the excess leverage as it is the Rule Breakers and the rule benders who are injecting too much risk in the system. Tom all of us here have studied ian functions and it has to do with the mother of all. Onstraint Economic Growth is it 6 or 7 or does stress heim have a number that is a lot lower and a cause for concern . Mr. Straszheim it is not a constant. It will be declining. Tom where is your tip point . Mr. Straszheim there is no tip point. Force growth and 6 productivity. 10 years from now, it will be 3 . Tom how can the leverage in the debt we are reading about that we do not know about, how can glideustain given that path toward a developed economy Economic Growth . It doesnt work. Mr. Straszheim they will never be rich like the west is rich. Productivity gains are already slowing rapidly and the labor force decline came earlier than the other developed economies. Francine talk to me a little bit about financial crisis stemming from china. How likely is it . A also have nonperforming lows. Do they have a good handle of how to deal with this . Mr. Straszheim i think they actually can handle this reasonably well. There is a lot that is opaque that we do not know and i think Everybody Knows that we dont know. They probably do not know, but their focus is going to be, i think longterm to gradually reduce the leverage, not abruptly, that is the mistake i think people are making now who are getting so worried. The leverage. Uce they are addicted to debt. If they bring the debt down sharply, the growth comes down sharply. That is exactly what they are going to try to avoid. Francine this goes back to why what moodys cited in their yesterday. He how does china deal with that . I guess letting a little bit of steam out of the engine without causing a panic on the international stage. Mr. Straszheim they do this as carefully as they can. ,hey dont want it to be abrupt but they dont want it to remain where it is. Last yearrowth this was 10 . The year before it was 14 and the year before that, 16 . Tom so they are doing a dampening function of debt. I get it. I want to go back to the lagrangian function of lack of growth. A cash always caused by infusion. How far are they from a bailout by printing money or using their government wealth to bail out their Financial System . Mr. Straszheim not close. Tom why not . Why cant they just clear the market . Mr. Straszheim they are much more continuous, not discontinuous in all the things they do. Excuse me, 2017 is their political sElection Year as was our Election Year last year. They did a lot of stimulus this year that is already in place. Tom gabriela, you are listening to this clinic with mr. Straszheim here. Lets get basic. What is the opportunity for investors given the turmoil in chinas Financial System . Gabriela i think the opportunity for investors is this managed slowdown and managed transition. We have written a positive note investing markets associated stability in Commodity Prices and currencies. Opportunity ise this positive backdrop for emerging markets at a moment when a lot of investors rarely have any exposure to that area world. Francine howdy make the difference between brazil and Something Else . There seems to be political wor. Risk and if you look at parallels between south africa where they are talking about a possible something happening to the president and brazil, it looks very different to other countries where politically it seems more stable. Gabriella the external environment is part of the story for emerging markets and it inps to have stability currencies. We also needed on the domestic front and this is where it varies country by country. For brazil, it is about the need for a lot of reforms on the fiscal side as well as the competitive side of the market. The way i look at development in brazil last week is that has been put on the back burner because of the political instability. Tom what is the unexpected for china right now . Along theres got to be an unexpected that keeps Don Straszheim up at night. Mr. Straszheim i worry about two cities. And washington, not about beijing. I think something external is a big of bigger risk to china than something internal is to china. Tom this has been hugely valuable. Thank you so much. He will join david gura and myself on Bloomberg Radio in a bit. Coming up, Mohamed Elerian on some of the constraints out there. York withn, from new Kevin Cirilli with the president in brussels, this is bloomberg. Taylor this is bloomberg surveillance. Morgan stanley has become a substantial shareholder in hong kongs noble group according to the struggling commodities trader. Noble group is battling for survivor after more than two years of losses, asset sales, and Credit Rating downgrades. China expected factory in open expects its factory in china the end of next year. The Company Expects to deliver close to 200 planes in china this year. Within two decades, china is likely to overtake the u. S. As the largest market for air travel. That is your Bloomberg Business flash. Francine thank you so much. Opec has extended Oil Production cuts for nine more months according to a delegate. This after last years landmark agreement failed to achieve a sustained price recovery. Manus cranny is at the opec ting and he spoke to many when they all meet, it is never an easy task. Talk to us about what the mood is like. They seem to have an agreement. Will it be enough . S they think they have gone down this safer road and that is to do ninemonth expansion. Or the saudi minister went to iraq the other day to make sure iraq was on board. They have seemed to come to this consensus around nine months as a safe option. ,f you look at the brent market what disappointed the market this morning was the fact that they have not an exit strategy. Do we have an option for a threemonth extension as the russians should just it . Suggested . There is a certain exoneration of pressure at the moment. If they do a ninemonth deal and maybe three months at the end, what could it do to price . Note back totic 60. Today it is about 64 in brent. Lets see what happens and it will be confirmed in nine months. If there is consensus around 12 months we will see what gives. Months, 60ast six seems to be optimistic. All Oil Ministers were as easy, accessible, and optimistic. Iraq needs to get on board to be caught we caught up with him this morning. He says he is on board in terms says the he Energy Minister saying we are going to hit that. Can we balance the fiveyear average by christmas . Take it away. Francine very quickly, did they say anything about shale . I know it is a tricky such subject. It doesnt all have to do with opec production, it has to do with what the guys in the u. S. Do because it can turn on the tap very quickly. Shale lets define what is. Boston consulting joined me this morning. Drop in terms of the cost of production and they have the ability to double production. The findwhat shale is of the aggressive define what shale is it defines the market. I have one other opinion that shale this may be a baseball thing, seventhinning almost at the top of the tom i cant stand it, very good. Manus cranny, congratulations on your interview. We are going to do this in irish green just for manus. Here is brent crude over the last 2. 5 days. Decline andlid 1. 8 what is really important is we rebound a sinodal absolutely textbook and in the last 15 minutes, a rebound down. Minutia. S some of the how important are these bn a meetings weston market is up vienna meetings . Is the message being controlled . For anyone getting their head around why are we here and why is anyone in this room and why are we worried about the nuances this is a man trying brethrena tribe of together saying we need to sustain. The details absolutely matter. They are all on board for nine months. They have not said what they will do, this is a fed ecb issue. Of Gabriela Santos with us jpmorgan. I have been asking this question this week. He did Big Oil Companies seem almost disassociated from vienn a . From opec, nonopec, russia . Gabriella i think what we are looking for and what Energy Companies are looking for is stability in oil price and i think we have gotten that. It is not about whether we returned to 70 or 100 oil, but having visibility about a floor in oil. It is encouraging we seem to have gotten that around 50. Downthey brought expenses as the price of oil has come down. Is it a mother of all opportunities if they can actually use cash over the next 36 months to do what companies do . Gabriella absolutely. It is surprising that Energy Companies are the worst performing when you have these positive dynamics of stability in oil prices and reduction in expensive expenses. I would say it is a very interesting opportunity francine do you see oil trading in this range . I have it between 25 and 55. There is another line of thought that says its opec cannot stabilize as it is now trying to, theyve actually opened the to 40d put oil at 35 to squeeze shale producers out. Think they are trying to remove some supply and also leaving that question mark regarding what happens after that through to the fact that there is still a question mark about where it could go leave some shale producers on the sideline. Acts a perfect balancing between communication and leaving things up to the imagination. Tom that will be interesting to see. The houston oilers gave it up almost 20 years ago. Our alix steel is in houston, the land of the oilers are what used to be and at an Important Energy conference, looking at the anna in houston. What do they see vienna in houston. What do they see . Alix i decided to come to houston to measure what is going on with shale and what their reaction will be. We will be talking to players who are deep in the industry. Does everything from tax advice to strategic advice for the oil industry. They will have good insight into what they do today with that count and where they see production coming. We will also be seeing with david rock and charlie, he puts billions of dollars to work in shale plays and particularly in he is going to the eagle furred. He sees a lot of potential in the market and this place, right here in houston is one of the issues opec is contending with. They say they like shale and they need it, but this place is key to why they cannot make inventories come down. Tom issues alix steel, thank yoo much from houston. You can watch tv including the beautiful alix steel and migrate over to a story, bring up the previous interview, the brilliance of Gabriela Santos and you can steal the chart from me. It does not get better than that. Tom bloomberg surveillance. We were going to do a u. S. Equities chart, the single best chart we rip up the script on her brazil. This is brazil to the dollar. Here is the massive railing, that is the biggest mistake i ever made. Long, strong brazil through the 1990s in the last decade. 4 ande are in agony up at up ago weekend. With us is Gabriela Santos who grew up in brazil. This time is different. What is different in brazil this time in protest . Gabriela what i would say is interesting about the chart is not so much that the currency was rallying, but that it was rallying on Commodity Prices. When that stopped, a lot of the Economic Issues became apparent and that is why the currency started depreciating. Tom how serious is the protest you see . Thisela what is different time is that there is this expectation from investors as well as brazilians that there would be some risk bite hear from respite here from political instability. Unfortunately, as we see on the screen, there is a lot of instability in the population and in the political front and that makes were arms difficult over the reforms difficult before the election next year. See the do you president actually stepping down and if he isnt stepping down, will he be forced down . Gabriela he has been saying so far that he will not resign and that he will fight allegations against him. What i think in terms of the market wouldat the prefer is the removal of that Political Uncertainty and the actual continuation of reforms throughout the rest of this year. However we get there whether through resignation which could be the shortest way, that is how i think the market will react. The continuation of the reform agenda. Thecine it seems that mood is of concern of who would come after president temer. Gabriela if he does resign, the speaker of the house takes over. Then we could have either indirect or direct elections for the remainder of the term. That is still a big question mark. What a lot of the finance and economic professionals are trying to reassure investors is the continuation of reforms regardless of what happens. If we look at the currency, there is still some skepticism. Tom thank you so much. Gabriela santos will continue with us on Bloomberg Radio in a bit. The dynamics really in oil with 49 texas almost down to a handle. I would single out renminbi. That is a huge move. Stronger renminbi is china with it sees instability within their markets. Our Kevin Cirilli with the president in brussels and alix steel in houston on oil with bloomberg . This is bloomberg. Jonathan opec looks to stabilize the oil market, lining up an extension to production cuts. Chair yellen has a plan. Make the fed boring again. Nato tot trump calls on step up the fight against terrorism. Prime minister may calls on trump to keep intelligence secure. In new york city, this is bloomberg daybreak. Im Jonathan Ferro alongside david westin. In houston, texas, alix steel. What are you up to in texas . Alix how much can shale grow . What will actually restrain shale production . Im going to get to the bottom of the story here in houston. I will be talking to regina mayor. She has her hands in the energy market