I am Francine Lacqua in london. Lots to get through. Politics filtering through your currency markets. First things first. Lets check in on your markets. Stocks down with the stoxx 600 down 2 10 of a percent. The euro slipping with most currencies against the dollar after draghis dumbest done vish message. At can see japan, the yen 111. 07 and the south african rand extending losses to a second session after the president jacob zuma survived a bid to oust him. Your data, but lets get to the bloomberg first word news with nejra cehic. Nejra the president at the st. Louis fed said the jury is still out on if the Trump Administration will meet wall street expectations. Some bullard said at point, the honeymoon period will come to an end and washington will need to deliver on policy promises that have driven the stock market. James the business numbers shot up after the election was perceived the president was perceived as more probusiness than the previous administration, washington does have to deliver at some point and i think that is a concern theg forward, whether honeymoon period would end at some point and the reality of american politics would settle in. We will see if that happens or not. I think the jury is still out on all of that. Nejra in the u k, leaders of the two main Political Parties faced audience questions in a nevada last night. Jeremy corbyn outlined his vision for britains future outside the eu. Theresa may explained by she had initially opposed calling a general election. Europe withthreaten turning this country into a Corporate Tax haven with low tax, low wages and low investment. We want high wage, high investment, growing economy with good relations to our neighbors and with the rest of the world. [applause] after i became Prime Minister, i felt the most important thing for the country was the stability and getting on with triggering article 50 so we made sure we were delivering on that vote on brexit. After i became prime said i. T. Systems are up and running and it will be operating a full flight schedule at heathrow and gatwick after a Holiday Weekend of travel misery for thousands affected by the computer meltdown. Citigroup is estimating the chaos will cost 100 million euros. Japans jobless remit rate remained at the lowest in more than two decades, holding at 2. 8 . Asail sales beat estimation they rose in march. Household spending fell by 1. 4 . Has insisted alcohol was not involved in his. Arrest on suspicion of driving under the influence. That is after the 41yearold was booked and released in the town of jupiter. In a statement, he claimed he had an unexpected reaction to prescribe medications. He apologized to his family, friends and fans, saying he expects more from himself. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Im a rich this is bloomberg. Angela merkel is posting indias Prime Minister at the start of a sixday european tour. Merkel says she remains a committed transit plan to assist transatlantisist. More with don crawford who heads up european Bloomberg Government coverage. What will merkel be hoping to hear from mr. Modi today . Is hugely this visit symbolic. It is long planned, but just the optics of this coming on the back of the nato and g7 summits, it looks significant. She will be wanting to engage with modi on the usual business transactions, but i think crucially, she will be looking to press and on some of the geopolitical issues that we saw at the g7 and which will come up again at the g20 summit next month the beginning of july. Merkel is hosting. Climate change will be her number one issue. She doesnt want issue a india rolling back similar to the u. S. Threatening to. Sense, chinae us a arriving in germany as well. Countries keen to discuss threats to free trade. Seen increased diplomacy between berlin and china and india, with latin america as well. And with canada. All discussing free trade, their commitment. That would have seemed remarkable, even just a year ago. But now, these countries have to illustrate that they are likeminded on promoting free trade against protectionism. Again, it seems highly significant on the back of the g7 and we are going to hear a lot more in the runup at this trade againstg20 in hamburg whe it could be potentially explosive. Time, a at the same french president met with the russian president for the first time yesterday. This goes back to the alliance that Angela Merkel has with france. Is emerging very rapidly as a player. It wasit was very a remarkable moment during the nato summit on the blue carpet with all of the nato leaders and the u. S. President is in the center and macron went right over there along and feared towards merkel and braced her lastminute rather than shaking the hand of trump. Itdid do that as well, but is significant that we are looking at a realignment to make europe stronger. Francine alan, thank you so much. Alan crawford in berlin, in charge of european relations. Chief. Ring in the thank you both, for joining us. Old do we know about these alliances being redrawn and the impact this could have on the economies. If i may draw on one of the charts where you showed the main trading partners of germany. It is important keep in mind for germany in particular, obviously the world matters and we see that by reaching out to the world, the u. S. Matters. Arein trade, the europeans right, left and center. This is the most important region for germany and for france. That is the key thing to keep together and Everything Else comes on top of that. When talking about military alliances, there is obviously a different matter, but here we are seeing but they are losing from brexit, right . Lets say the u. K. Comes out a Single Market. It is the german exporters that have the most to lose. When you are the message from the germans, it is clear that what they want is a Good Relationship with britain, but not at any price. The eu remains the most important building block. It is very important. Francine julian, what do you make these are not lines being formed, it is like rethinking the global ties. Do you think it translates into the economy and trade . I think what Angela Merkel has been reinforcing his stronger ties with france. And the netherlands, as well. It is interesting where china comes on that chart. Amongste particularly the larger exporters is towards the market and i can assure export discussions will be had with Prime Minister modi about india as well. Germans areas where the would like to do more. I think she wants to build those ties. Politics, obviously she is facing an election and comments around Donald Trumps went, how well or not it she is going to be playing to the gallery to a degree. We have to take that on board. Francine what else do we take on board . Is the u. S. And unreliable partner for trade . Dont think so. In terms of economics, the u. S. Remains extremely important. Secondly, on geopolitics, crucial partn a for germany. We have to keep in mind there is an Election Company and playing to the gallery is part of it. The u. S. Will remain in important partner for germany i am convinced. Francine what do you make of the g7 . Body language, rhetoric . How does it translate into how you play the market . Nejra julian my comment around the g7 was it was interesting they saw obama the day before they saw trump. That probably didnt go down well with the u. S. President. The other point is donald trump is not obama, and he has a very different agenda and a different to these conferences and i think he europeans and other World Leaders have got to come to terms with. That. It is a settling in period. Secondly, over trade and the economies, German Economy is doing reasonably well. Other european economies less so. Hopen comes with a lot of in france and it is whether or not he can deliver. How he can form coalitions. Peter i have to go back to that comment. I am convinced macron will get the assembly behind him. When you look at what he has done, where the polls are, i incumbents. The question is if he can implement the stuff against the opposition. So, not only is the German Economy decent, the european economy is on the ascent and we have to see how strong it will be. A note called the european comeback story. Im sure that is how markets will play in the next six months. Francine you both stay with us. Lets get straight to the business flash with nejra cehic. Nejra ryanair has reported a 6 gain in annual earnings, net in 1. 3 billion euros in the end of march. We will be joined by the ceo at 1 40 p. M. U. K. Time. Fined regulated completed a review of flows linked to scandal hit 1mdb. Singapore said it was for breaches of antimoney laundering measurements and control lapses. Leading architect lord Norman Foster says brexit is a concern for his business. The man behind the worlds most iconic structures spoke to bloomberg. Norman it has introduced an element of uncertainty. That ismomentarily, inevitably reflected in projects stocks. The Bigger Picture is interconnected trade between nations. That is the longterm big picture. Nejra that is the Bloomberg Business flash. Francine the president of the st. Louis fed says the jury is still out on if the Trump Administration will meet wall street expectations. James bullard said at some point, the honeymoon period will come to an end and washington will need to deliver on policy promises that have driven the stock market higher. James the business numbers shot up after the election. The president was perceived as more business than the previous administration. Washington does have to deliver at some point and i think that is a concern going forward, whether the honeymoon period would end at some point and maybe the reality of american politics would settle in. We will see if that happens or not. I think the jury is still out on all of that. Francine lets bring in the chief officer at rathbone. Julian, lets kick it off with you. Do you think the Trump Administration will deliver on promises of taxjulian, lets kih you. Reforms and Infrastructure Spending and the rest . Julian they will deliver on some of those promises. The markets have probably gotten ahead of itself in terms of expectations of what might be achieved, particularly around regulations in the banking industry. Im not convinced that will be delivered as was set out. Industry. Think im not convinced that will be industry. Im not convinced that will be delivered as was set out. What i do think is there will be Infrastructure Spending, more private sector driven been driven by Government Spending, and i think there will spending, and i think there will be some tweaking of the tax system but in 2018, not 2017. Francine do you believe something will happen in 2017 . Peter we will see about 2017, but if i may, we have been of the opinion that the tax issue is the one that most likely will be tackled. Because the administration and much on theretty same page. Some of the other issues are more contentious. Particularly the tax issue, but the tax issue would be to with before the end of the year . Why is it taking so long . Peter you have seen the political wrangling. Important,ming is but the most important is that you see a move towards an agreement, whether in late 2017, early 2018, that is water under the bridge at the end of the day. Getting it done is the most important bid and there should be a decent chance. Francine we also heard from jim bullard, we play do some of that sound. He is one of the most dovish do we needhow much to listen to a lot of these fed president s coming out to figure out when the next rate hike is . Julian the june hike is pretty baked in. The futures market last week was around 78 for a hike in june. The debate is, do we have one or two hikes left this year, and do we have more than three in the next 12 months . Suggestingy, we are one hike further this year and then probably two the following year. When i would also say is despite the better than expected gdp number last week, the economy in the states is probably around trend if not that and not much better. Consequently, we will see the fed air on the side of caution. Francine you agree with that, peter . If you look at what happens Inflation Expectations, weakened market expression expectations on the forward expectation of policy. Peter two points. We are slightly more optimistic than julian and one points we have been making, the u. S. Economy has been around or slightly above trend even before the new administration came in. Therefore, given where unemployment is, the fed can move Interest Rates up slightly. The second point, precisely what you said. Sometimes, the longer end of the curve is reacting. Is Inflation Expectations drop and since the last hike, equity markets were more subdued, the long end of the bond market was more subdued. We will have to watch that because that is a great indicator of how the market is taking it. We will have to see we think there is a good chance this might reverse. The longer end of the curve can go up a bit. Francine what would make it reverse . Is it something on tax or designee to come from the fiscal side . Peter neither of the two. Any of the two would be helping but what we should be watching out for is how the wages are developing. For the last 12 months, we have had a increase in which development that has petered out a little. We think the forwardlooking indicators we look at our indicating which pressure remains a part of the u. S. Economy. If that turns out to be right, we will see a reversal of that. But wages are the underlying strength of the waiver wager market labor market. Francine thank you, both stay with us. Expansion plan. Ryanair in plans to buy more boeing jets. Water from the companys cfo. This is bloomberg. Watching you are bloomberg surveillance. N plans to expel me accelerate european expansion. They are working to take advantage of regional competitors dealing with financial problems and want to reduce reliance on certain u. K. Market. Affairs are still under pressure because of low fuel prices. To needs to be large capacity in the market, that came in over the last 12 months from the middle east and africa. That is still in the market. If capacity goes out, we will we see sterling on a year by year basis, weaker than last year before the brexit referendum. We see difficult comps on that for a number of months. More, bloombergs aviation reporter joins us. So, how successful was last year for ryanair and how much is it hurting them . It is typical to measure demand versus impact on currency and how much currency is influencing demand. For ryanair, their biggest concern is what happens whether the u. K. Stays in the agreement, there is no axis between the eu and the u. K. In terms of performance last year, 56 increase in net ome, that is Slower Growth i think it was 40 last year they boasted and the last two years ramping up their net income profit growth. Not that they would were necessarily disappointed, but the guidance was a little under. Francine how many new jets did they want to buy . Through 2019be 10 and what they are saying to boeing, if you have any gaps in your delivery schedule, we will take those on, 2, 3, maybe a few more. Not huge, but enough to push out competitors. Francine British Airways was the story dominating travel over the last weekend. Due to disruptions. He saw twitter, ryanair poking fun. We know what happened in terms of what caused the descriptions . Then it is still not entirely clear. Ba saying there was a power surge at a data center. It might be heathrow, which had taken a while to bring it back up and running. They are going to launch an investigation into what happened. So they can get the details. It is not clear, but it comes into the context of the restructuring of British Airways to make it better able to compete with the likes of ryanair. Francine think you so much. Bloombergs indication reporter there. Until the u. K. Go election, we talk about the conservative party pound and euro. 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. Bloomberg surveillance. He starts a four nation tour of your. Has talked with Angela Merkel focusing on trade between the two countries. The visit comes after the german leader signaled his store ties between europe and the u. S. Can no longer be relied upon. The st. Louisof fed the jury is still out on whether the Trump Administration will meet wall street expectations. Point the some honeymoon will come to an end and washington will need to deliver on the promises. The president was perceived as more probusiness than previous administration. Washington does have to deliver at some point. I think that is a concern going forward, whether the honeymoon would end at some time. Maybe the reality is going to settle in. We will see if it happens or not. I think the jury is still out on British Airways says their i. T. Systems are back up and running and it will be operating a full flight schedule today. That comes after a Holiday Weekend of travel misery as thousands of passengers were affected. Citigroup estimates it will cost the airline 100 million euros. The swedish economy slowed at the start of the year and exports declined. Gross domestic roddick expanded by 0. 4 in the first quarter, half the estimated growth rate. Tiger woods has insisted that alcohol was not involved in his arrest on suspicion of driving under the influence. He was booked and released by police. He claims he had an unexpected reaction to prescribed medication. He apologized to his family and friends saying he expects more from himself. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. Francine . Francine just more than a week until the u. K. General election. Leaders faced questions in a televised debate last night. Theresa Mays Conservative Party now has a nine point lead over the labour party. Its a gap that is narrowed since the start of the campaign. Both may and Jeremy Corbyn outline their visions for brexit. We wont threaten europe with a Corporate Tax haven with low taxes and low wages. Brexit. We want high wage, high end basement growing economy with good relations with our neighbors. After i became Prime Minister, i felt the most important thing for the country was stability and getting on with triggering article 50 so we made sure we would deliver on that vote on brexit. Lets bring in our guests. Lets kick off with you. When you look at the debate that interviews, are you surprised the polls, the conservatives are not winning by a landslide . At whereen you look the polls were when they call the election, it was difficult to see them widening even further. Im not that surprised at the narrowing of it. Im looking at markets and trying to determine what happens for markets. The gap that is still there should he significant enough to have an impact on the market. At this point in time, im not that worried about the decline the gap. Somethingthere is ive been trying to figure out and this is basically what bloomberg tracks in terms of the number of seats they have more than the others. This has fluctuated quite a lot. What does theresa may need in term of seats . Does she need a big majority to make sure she has full control . Looking at your slide there, you can see that obviously she was hopeful for a substantial majority. Its no grades rise as we discussed that it down slightly. I think she needs a sensible majority larger than shes got. She doesnt want to be held hostage by the right wing of her party. What does that mean for the market . I think the market will feel reasonably confident about the negotiations. Majority,s a sensible was sensible . Between 30 and 60 seats. There will be pressure on her for longterm interest. Francine is it important for you the tories win with a big majority so they are comfortably in control to negotiate . You have european saying they want to negotiate out of the open which is the last thing the u. K. Government wants to do. Peter what i think is negotiate important is neither wing of the party can put so much pressure on her to hold a deal hostage. I think that is what the market is worried about. Proposedlook at the crop of them peas that might be coming in, there is a sense that the party is going to be a little bit more euro skip the skeptic. Whether its a foregone conclusion that a large majority means an easier brexit, that remains to be seen. She will have more freedom. Francine where does the pound go from here . Reasons,or a number of when you look at it, we have to look at what the economy is going. It implies we might be going up at some point. We doubt that. When you look at where policy might be going, current government doesnt seem to be loosening the policy very much, you have to see where the negotiations are going and they are probably going to be difficult. Francine do you agree with that . This is basically the onemonth volatility of pound dollar. This is the average and yellow. Julian i dont think i would totally agree. The pound has been pretty volatile. As the brexit negotiation start and its shuffled forward. She has agreed to a midjune start. , we say greater than six to 12 months. Francine interesting. Thats a little bit of a consensus on set. Come, we need to get more on that. Tradethe trump stance on influence the ecb stimulus plan . We will discuss that next. This is bloomberg. Francine lets get straight to the markets. The u. S. Will be back on board a little bit later. Investors digesting mayor draghis comment to the European Parliament yesterday. We are looking ahead to the fed meeting. We are little bit lower today. Shares are trading in london and werent because of the bank holiday. In madrid, shares fell 2. 8 . Shares in london were down by 4. 5 . Claim scrambling to explain why this computer outage could lead to stranded passengers. A full schedule is due to resume today. Are estimated at about 100 billion euros. The image damage could be even greater as they have no idea how it all happened, which is causing criticism of the costcutting program. Thats all i can tell you on that front. Sterling is interesting. This is from a market live piece. He says pound dollar could be setting up for a swoon. Its a 10 Day Moving Average that declines versus the 21 Day Moving Average. Markets do the same as they did when this happened before in 600 pointthere was a slide after confirmation of the averages crossing bearish lee. This is the beginning of a similar cycle. He said this could extend to levels below 125. On friday, the level of sterling dropped 1 , the most in four months. The gap between the tories and the labour party shrunk to 5 . That is reflective in this wonderful chart. The conservative Party Majority index, that would imply a majority of 40. That was after the two leaders to part in the debate, it was a separate interview process. Chart. E i love that that is my chart of the hour. Verio draghi become the latest figure to tell the u. S. That it might he headed down the wrong path on trade. The ecb president touted the recovery and said the key risks are from external factors, in particular americas neoprotectionist stance. Theypeated his view that need monetary stimulus to read so store stable inflation. Need financing conditions which are themselves dependent on a fairly substantial amount of monetary accommodation. Francine lets bring in julian. Mr. Draghi went on to say he believes an extraordinary amount of Monetary Policy support is still needed what does that mean . First of all, Interest Rates are going to stay very low. At the end of the year, qe is not going to disappear. We will probably get stimulation later on. What the market is focusing on a lot, what does it mean for forward guidance. Everything we heard from a number of these figures is the key part of their forward guidance, particularly the sequencing of qe is going to stay there. I think its the right approach. Julian i think the message is clear from draghi that not much is going to change and people should expect a slow withdrawal from qe and a move into the early part of 2018. We sort of said earlier that the european economies are very mixed and they may be on the upturn, but they are still not that strong. Giving is thatis stimulus is still required to get that going. We need to see more of a pickup in inflation and growth generally rebounding. Francine what im surprised about is 10 days ago they said the euro is to cheap. That is a problem because of the ecb and that impacts german surpluses. Peter i think they are schizophrenic about this. Exports, thats a healthy economy. Its pretty robust. There is nothing wrong with the German Economy. That was more a political comment that an economic one. Francine do you worry that we might see an election sooner than january . Peter the elections are going to come anyway. Whether they are in september or december, in my opinion it doesnt really matter all that much. Maybe the leader it is, the economy is picking up. In and thehelp her great scheme of things, i dont think that matters. When you look at the european economies, france is picking up and germany strong. The one that stands out as not performing well is italy. I am worried about italy. Francine how do you play the market . To stay away from italian stocks . Julian we are not investing in italy. I think we are taking the view that italy has a long road to recovery. Politics aside, the banking situation worries me the most. Francine are you talking about the banking situation . Peter it is a worry. It looks better than it used to. One of the big problems if the economy comes, the mpl situation will get better. It seems to be that there is more political consensus. I am using very cautious words. If i may make one further comment, for european markets in general, i am very mystic and the reason is the economy is clearly picking up. Inflation pressure is not there. The Interest Rates and the policy stands will be release. I think thats a very positive act drop for european markets. Francine do you agree . Julian a lot of money has flowed into europe in the last six months. I suspect you could well see people look again around the world and find better opportunities elsewhere. The u. K. Looks quite interesting after the election. Francine one of the differing views we heard on set today was your pounds. Julian im not a currency expert. Moregoing to appreciate north of 130. Francine you think it could go lower . Peter the risk is to the downside. I would add on to the comment i made earlier, we need to see in 12 months time how the u. K. Economy is doing. We certainly think there is a possible risk, particularly on the consumption side of things. The u. K. Economy is going to take a hit. Francine thank you so much for joining us this morning. Buildings and brexit. On the u. K. Decision to leave the eu. That interview is coming up next. This is bloomberg. Francine its get straight to the Bloomberg Business flash. Ryanair has reported a 6 gain in annual earnings. It increased to 1. 3 2 billion euros. We will be joined by the ryanair ceo at 1 40 p. M. U. K. Time. Singapore has find Credit Suisse and united overseas banks 1. 2 million u. S. Dollars. They completed a review of a scandal that malaysian state investment companies. Penalties were for breaches of antimoney laundering requirements and controlled assets. They have success a legal challenge by activists shareholder. Are under nod they removing the ceo. That strengthen the dutch makers hand in rebuffing takeover talks. Thats the Bloomberg Business flash. He is responsible for some of the most iconic structures such as apples new headquarters in california. I spoke to him earlier and asked which project was his favorite. Norman perhaps the one building moredoes in a way take boxes is the reich stag. Its a symbol of democracy. Its about public space. Its about making democracy transparent. Its a manifesto in terms of energy. It incorporates works of art by artists from around the world. It has become a symbol of the nation and the city. Campuse the apple received rave reviews. Do you prefer doing that to a building . Itsan the apple campus has roots in the 1960s, demonstrating and predicting that buildings that can breathe, that can work with nature can reduce the dependence on energy and can reduce pollution and can be effective in terms of combating climate change. That is a philosophy that can find its way into buildings like apple, buildings that work with the climate and are cleaner and fresher and healthier is buildings. Thats very important for the occupants in terms of lifestyle. What will your Foundation Focus on . Norman an Education Program about targeting future generations and encouraging the different disciplines to focus on critical issues, climate change, issues of the city. Francine do you worry about exit . Norman i worry about brexit. Its against everything i believed then as he european. It has happened. Its a democratic decision. Such, i think you make the best of every challenge, you try to turn the challenge into an opportunity. Francine will it hurt architects and the Construction Business . Norman the process of globalization, of trade between nations is unstoppable. Sense, the Bigger Picture is much more important. That was Norman Foster speaking to me earlier on. Lets check in your data before going to new york. The euro is slipping with most currencies against the dollar after mariota that was norman fr speaking to me earlier on. Draghis message to European Parliament yesterday. Investors are trying to assess costs. We will have that exclusive interview. European shares are down. I wanted to show you south africa. You can see that. It has extended some of the losses after the president there survived a bid by some members of his party to oust him. The other stock i want to show you is the British Airways company. That is iag. They had an epic meltdown over a busy holiday. More public outrage of an industry infamous for its costcutting and Customer Service and whether that leaves management and a vulnerable position. Ofare fullservice reviews flights at heathrow and gatwick and bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. This is bloomberg. Francine the Transatlantic Relations falter. Is the future of trade to the east . The st. Louis fed president says the u. S. Administration needs to make good on the promises that have driven stock markets to record highs. Narrowing,lls theresa may and the conservative campaign against complacency. Is the predicted landslide victory no longer in the cards . This is bloomberg surveillance. Tom keene is in new york. Happy tuesday. Both of us were off on monday. Draghi give a very interesting speech. Mr. Trump is back at the white house. Tom i thought the news flow out of europe was remarkable. We will talk about the u. K. Election one week from thursday, but everybody is back in washington, including kevin. It will be an interesting four Day Work Week nationwide. Francine absolutely. We will get more on that, but first, lets get to the bloomberg first word news. Are aer in the u. K. , we little more than one week away from the election and Prime Minister theresa may is battling thenst alternate party. Jeremy parkin cannot be trusted to navigate Jeremy Corbyn cannot be trusted to navigate. May has backed down over social care and health insurance. In baghdad, the Islamic State is claiming responsibility for a deadly car bomb attack. At least 15 people were killed and 24 people wounded at the explosion. The attack came just days into the holy month of ramadan. The dictator of panama, who was ousted in a u. S. Invasion, has died. Manuel noriega was considered a u. S. Ally. Later, the u. S. Accused him of having ties to drug traffickers and having one of his opponents killed. He was arrested when the u. S. Invaded in 1989. He was 83. Tiger woods says medication, not alcohol, led to his arrest for driving under the influence. He was arrested not far from his home in jupiter, florida. He spent four hours in jail before being released. He has not played golf for four months and he underwent an operation on his back. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. This is bloomberg. Tom thank you. How about the equities bonds. A little bit of movement here. We are record high on the s p 500. The euro comes in, the curve flattening further. 94. 18 is what it is. Per barelow 50 rel. The euroyen, 123. 60. A stronger yen, a weaker euro. G,am watching the eurosterlin which i do not get, but everybody tells me to watch the eurosterling, not the sterlingdollar. Francine i am also watching out for this today because the euroarea Economic Confidence is following for the first time this year. That figure came in three minutes ago. We are seeing weaker readings and the retail sector. This will feed into conversations that the ecb will have. Yesterday draghi gave an important speech to parliament, saying he was dovish. Investors are trying to assess a ptath for higher u. S. Borrowing costs. I picked up on the south african 13. 0775. These are expanding losses for a second session. Tom it is a four Day Work Week in the United States. Lets look at a picture back to world war ii. This is simple. It is the savings rate compared to income. This is income after taxes and for decades, we were at 10 up to the 70s, and then something happened and down we go. Here is the financial crisis, august of 2007, and we come back to where we were in the 1990s, but nowhere back to here. What is the difference . I suggest it is the aggregate taxes. Not this tax or that, but the summation of taxes is the reason for the dip in savings among individuals in america. Francine a great chart. I cannot write on my chart. This is a very different chart, showing durations from 2016. This is a new metric on your bloomberg terminal. This is how the bloomberg applies the conservative Party Majority, a tracker for the 2017 election. It is on june 8. We are just one week away. This is in terms of the concerns of the House Majority seats. This is important because it shows the bigger majority. This is when teresa called the election. She thought this was a landslide victory. At the time, she had a 20 point lead. Because is important depending on the majority she gets, if she wins, she could discuss differently with brussels. And if she gets a smaller majority, it is different. Extreme implications for brexit. We will get to brexit, but first, James Bullard said the central bank should not be thinking in terms of major increases in the policy rate. Speaking with bloomberg in tokyo, the nonvoting member of the fomc said at some point, the honeymoon period for stocks will come to an end, and washington will need to deliver on the policy expectations that have driven the stock market higher he had this to say on the inflationary trend, tom. The idea that the economy is going faster than the trend, and this will push up inflation, i dont think it is matching up with the numbers we are actually seeing. For the hour guest is Nandini Ramakrishnan. We had jim bullard, who was very clearly pointing to inflation, pointing to what we see in the five year forward. He says, the markets do not believe what the fed wants to believe. You are saying closer and closer a matching up, at least in the near terms. Looking at march as an example, we started the month with no probability for an Interest Rate hike. Now we have the number four 100 for that month. There is something to be said for the nearterm communication tools the fed has. They have been using them wisely and from our jpmorgan view, there are at least two more hikes this year. Francine one in june . One in june, and one in september or december. Here, weegin our week have been off for three days. What are the correlations in the market now . How tight are equities, bonds, currencies, and commodities . It is very regional dependent. We have so Many Political risks. Italy started the week are quite badly. The pound is at the mercy of the polling data and brexit discussions, but in general, the equity market is going higher. Fixed income market should not do as well as the equity market this year, given the higher Interest Rate environment and reflation going on. While the reflation trend has paused, we see inflation getting stronger, causing weakness in the bond market throughout. Tom are you just assuming the inflation fade we have had recently gives way . When do i see inflation lift . A couple things. We expect the oil price to remain at this level, given the recent discussions from opec. While they were not as supportive of the oil price in the near term, they are cutting and we expect oil prices to go higher in the five to 10 range. Secondly, looking at other inflation numbers. While there is some weakness, we do see wage growth picking up in the u. S. Given the tightness of the labor market and some of the policies of the Trump Administration. While we dont see the same big 2 , wefrom the 0 to can expect stable year on year cpi numbers coming out throughout this year and the next. Francine what would make you change her mind . Is this just inflation and wage growth . Inflation comes from fiscal spending and higher wage growth. All of that feeds into the cpi numbers. Quite a lot would have to happen for us to raise our expectations to four hikes. We do expect two, and that is on the path of what the fomc has been saying. Next year though, if inflation picks up quite a bit, we could see a little further, maybe four rate hikes. But it is so data dependent. Tom Nandini Ramakrishnan with us. Coming up in this hour, a really important book. A lot of people talking about the vacuum in American Foreign policy. He is the professor of vacuum international relations. Graham allison will join us in a bit. Stay with us. This is bloomberg. Francine this is bloomberg surveillance. Lets get the Bloomberg Business flash. Annual earnings grew 6 at europes Biggest Discount airline ryanair. The airline projects an 8 rise in profit. They have cut costs to undercut rivals. Airfare should is because the rivals are cutting back on capacity. Shares of British Airways parent ieg fell the most in seven months today. B. A. Says they will run full flight scheduled in london after it weakened outage affected 75,000 passengers. B. A. Said there is no evidence the problem was caused by a cyber attack. This will cost the Airline Close to 130 million. Economic sentiment in the euro area fell in may for the first time this year, but the measure for Consumer Sentiment remains close to the highest level in a decade. The decline was led by weaker readings in the services and retail sectors. That was the Bloomberg Business flash. Francine Prime Minister theresa may and Jeremy Corbyn faced questioning last night. May faced to scrutiny on her social care policy dubbed by some as a dementia tax. During the program, the Prime Minister explains the decision to call for the general election in the first place. I said there would be a general election and after i became Prime Minister, i felt the most important thing to the country was stability and getting on with triggering article 50, so we made sure we were delivering on that boat on brexit on that vote on brexit. Us, nandiniill with ramakrishnan. So, what exactly did we learn yesterday . That theresa may did not perform as well as people hoped she would . I think people were worried about her camp yesterday and she did not do too badly. She is not at her best in the situation where she is being questioned slightly off the cuff. It is not her natural comfort zone. I think the verdict is she did ok. She is perhaps not as good as David Cameron was. She is not as spontaneous. I think the damage was done when she was asked about social care. This is not going away, though now they are trying to bring it back to brexit and the tragic events in manchester. The social care issue, the dementia tax, is still coming back. Francine a couple weeks ago there were 20 Percentage Points as the difference. Now it has narrowed. Could anyone become Prime Minister . What these polls show is the shift. That is something we cannot ignore. That is something the tories will be wearing about. They will try to hammer her on these ideas of a strong and stable government. That is why social care was so bad for theresa may. If your message is going to be, i stick to my guns, and then you revert your decisions, that it is a problem. Jeremy corbyn did pretty well, i thought, last night. He came across as quite goodhumored. There was a sticking point. He is not great at answering concrete issues or bringing up numbers. That i thought he came across pretty well. Tom what is the turnout going to be . I was therefore brexit and the entire nation was still. I do not feel that for june 8. M i wrong . I think people are a little bit election worn out. Speaking of myself. That is one of the big fears of the tories, that a lot of people will think, whatever happens, theresa may will be Prime Minister. So, why bother voting . That is something they are trying to push against. That is why you are hearing a corbyn,his about jeremy it was trying to be portrayed as a supporter of the ira, and painting may as, this is your least worst option, almost. Tom svenja, what happens on june 9 . Well, we get a reshuffle. If theresa may does win the election, which polls still consistently show she will, we will get a reshuffle very quickly. The expectation so far is not massive change. So, we will get a few new fa ces, perhaps, but at the moment, the expectations are that the big players remain. Francine the markets need to watch out for this, right . The bigger the majority, if she does remain Prime Minister, the more power she has to negotiate without having to go back to her party every time. Exactly, and that is why we are watching this closely because the hard or softness of brexit depends on her majority. When we think of the potential results, a weaker pound could come with a higher majority. That means more stringent negotiation policies, and a l abor victory could result in higher Interest Rates, given the amount of Government Spending and borrowing that could happen. As we have seen in the last 12 months, sterling fx directly the ftse 100 activity. There is a lot at stake here, u. K. The u. K. Portfolio or focused assets. Francine on june 19, they start negotiating. I was quite shocked by a story you wrote. That negotiations on that could go quite badly, or turn ugly . This has been one of the most contentious issues. There is no expectation that britain will turn around. We are not talking about this level. What ar we are talking about is the eu demand that they are still subject to scrutiny and these rights will apply to them after brexit. Tatre at this tit for negotiation. The tories are trying to make the brexit negotiations of the center of the election. Talking about the eu as the big bad wolf will be a favorite strategy. Tom theyre a good. Very good. Svenja odonnell, thank you very much. Fromg up in our next hour, columbia business school, charles calomiris. Also from charles calomiris, exactly where and when does inflation show up. This is bloomberg. Francine this is bloomberg surveillance. This is tom and francine from new york and london. Italian gdp numbers have ticked higher as the nation seems to be edging towards early elections. A vote could be called in the autumn. Lets get back to Nandini Ramakrishnan. Nandini, i know italy is one of your top risks. Is it because an election could come sooner and something ugly could come out of it . I notice a boring answer, but it is both. If i were to put focus on one thing, it would be the politics. I know there is a lot of skepticism in italy. Only about half of the italians on the street support the euro, and that is lower than germany, the netherlands, and elsewhere. The fast bet, given the elections, is it could be earlier than anticipated. That is a lot on the table, in terms of a possible referendum, and with a country that has the most debt, leaving the single currency in the Single Market could be devastating. I think there is a deadline of this week or early next week to recapitalize to go to the venetian banks. How crucial is this . They are not done withb they are not done with bail ins. And i think focusing on the npls has been a serious priority. As this come to the level where we are confident without italian financials . Not yet. We are still not stowing defective valuations from asset allocations. Tom within this exercise, given what a nation will do, and right now we are talking about italy, can you purchase euro blue chips . You can. That is the great thing about european stocks. Revenues come from different parts of the world and they have different operating models. A Scandinavian Bank will have different roe than an italian bank. We do like european equities. That would be one of our top recommendations for this year, and for the current theme. Again, with a slight pinch of salt, you are not diving straight into italian financials until the bad books are sorted out. We do like european equities and for the first time in five years , earnings expectations have increased as the year has come to may and june, rather than falling. Francine Nandini Ramakrishnan there, from j. P. Morgan asset management. These are live pictures, i believe out of germany. The indian Prime Minister with the german chancellor, jointly in berlin. That is coming up very soon. They will talk trade and climate. Then, tomorrow, Angela Merkel speaks with the chinese premier. This is all the more important because it comes two days after the g7. It was very clear yesterday after looking at rhetoric from german politicians and Angela Merkel herself, she said, given brexit and the Trump Administration, europe needs to forge its own path ahead, maybe looking east. It is time for the Bloomberg Business flash, a look at some of the biggest business stories in the news. Good morning, everyone tom good morning, everyone. A quieter day workweek for us. Any of us worked yesterday, including nejra cehic. She has our first word news. Nejra there is a report that White House Senior Adviser Jared Kushner has been advised to lay low. Says that kushner is said to have pursued a secret back channel before President Trump was inaugurated. James bullard says at some Point Washington will have to deliver on policy expectations that have driven the stock market higher. Now,rump selection he says there is a concern whether that will happen. He also repeated his you that Interest Rates are close to where they should be. Fromthink we are not far an appropriate rate for the u. S. Economy that will keep inflation not too far from target and the labor market performing well. So what i disagree with is the idea we have to go to hundred basis points higher in order to get to some neutral rate. Nejra he is on the dovish ended the fed specter of and did not vote on the federal open Market Committee this year. Italy is moving toward earlier elections. Theyre considering a system similar to germanys, with a 5 cut out the smaller parties. Renzi isime minister among those pushing for earlier elections. He is seeking a come back in the referendum that led to his resignation in december. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Tom thank you. Lets spend a few minutes on the Current White House soap opera. Ands hertling is in london he has been observing the latest news, which was about 9 00 last it sounds like a movie to me, except this isnt funny. What are you focused on within the trump soap opera this tuesday . James there is a lot to focus on because we do not really know that much. Two pieces of information i have been curious to know is what where mr. Kushners motivations and meeting with these russians and in requesting that Communication System that was set up to avoid u. S. Monitoring . We could take them at face value or we can the assumptions, the possibilities are either he did not really know if you was getting into or he did know. The other piece of information is the source of this information. Coming aretion the leaks from within the white house, which would suggest a much greater infighting there may have been led to believe . Up doing allard was commencement speaker, are we on that timeline only shorter time length . James this is going to drag on for quite some time. I do not have any doubt. Pressureiny little fact, no pressure i can see from capitol hill to get to the bottom of anything. There are isolated voices calling for investigations, most are democrats, but this is going to drag on for some time without political pressure from the president s own party. Francine who is leading the russian probe . There are various committees, but this could drag on three couldntix months, it go longer . James sure. I think the Intelligence Committee certainly, and the special counsel, who i am not sure has truly begun to drilling. To drill in. There will be lots of leaks and occasional eruptions. Tom thank you, james hertling. This is a treat. It is a book coming out now that has made a huge impact all in all. It made a huge impact right now, and wed for war, appreciate his attendance this morning. I went to go into the book in two sections. The first, the president. If President Trump was to be destined for war, to read destined for war, what would you want him to takeaway . Good question. Im not sure he reads books all the way through. He would probably take away two points, first, the condition we find ourselves in today, in which a rising China Threatens to displace a ruling u. S. , creates huge structural stress int creates danger, even war. Secondly, that war isnt inevitable. Wars have occurred frequently and they were unnecessary wars, but only if we learned the lessons of history can we escape the traps of history. Tom one of the great phrases you have is not make America Great again, it is make china great again. How are the chinese doing . Graham this past week in the wall street journal, there was an argument by jason furman, obamas economic advisor, saying it is fanciful to imagine the u. S. Is growing at much more than 2 a year. Trump said we would correct the percent. The slowdown in the chinese economy is 6 . In china grows at three times the rate of the u. S. Tom sounds like firm in mathematics. Douglas macarthur and general stillwell, two names that said, no, we have to look east. I we any smarter now that we were that ignorant in the 1940s and 1950s about china . Graham i think we are still in fantasyland with respect to china. Most people do not realize what has happened. They had an economy that did not amount to anything and has grown as large as we are. They are tracked to be 50 larger by 2024. The country we looked down on is now becoming a serious player everywhere. We do not yet quite have the picture. Was mynder of singapore tutor on this and they kept saying, americans need to wake up. China is going to be the biggest player in the history of the world. You are going to learn to adjust and adapt. Francine you could argue donald trump is adjusting to it. Are folks saying, i want to make America Great again, and china can have the superpower kind of statute around the world and he is ok with it. Graham i think you can see multiple strands in donald trump. In this book, i talk about lucidity strap. He wrote about the classical greeks. When a rising power threatens to displace a ruling power, bad stuff happens. In this case, the ruling power, the u. S. , donald trump is an expression of what the philosopher would call the ruling power syndrome, that is fearful of a china that has been is having greater impact on our lives every day. Trump in part is saying, make America Great by diminishing china. If you look at the campaign, china was the target. He seems to be adapting and to some extent with respect to that. You see in relationship between the u. S. And china, especially in the things trump says, this feeling that, wait a minute, there cannot be another big, powerful player that is going to have that much impact on us, but i think we will see how he manages to adapt and adjust. Korea, the test case, i think is not optimistic. Professor ist alluding to is a rising power threatens to displace a ruling one and the likely outcome is war, unless america is getting up its seats willingly. Ago, we had a chinau. S. Trade deal with a symbolic reversal of the antitrade, antireversal platform. The fact that the trade deal was struck on different elements of industry, whether it was finance credit does show us there are relationships the trump ininistration is focusing on order to work with china, so there will be disruptions when chinas growing at 6 and the u. S. Is trying to hold onto nearly 2 growth but that will happen over time and we do not expected a the disruption of markets given the dynamic. Francine thank you. Nandini ramakrishnan stays with us. This is the picture out of germany. We have Prime Minister modi meeting with Angela Merkel. Theyre giving getting a joint presser in berlin. India is ael saying reliable partner on many major part theres major projects. Over the weekend, we saw that frosty relationship between donald trump and Angela Merkel. This is bloomberg. Surveillanceomberg and you can see some light shots, it is a live News Conference with the prime byister india, being flanked Angela Merkel, saying india is a reliable partner of many major projects. She is hosting the Prime Minister of india today and mr. Modi goes on to spain and france. We are joined by bloombergs government reporter project on a hill Patrick Donahue. Do we have a sense of what Angela Merkel wants from the Prime Minister of india . Patrick shes meeting the indian Prime Minister today and the next two days, the chinese Prime Minister. She is setting up or her to 20 summit next month or g20 summit next month. As we have seen from this past weekend, she will have a hard time getting everybody on the same page with donald trump in the room. You saw her comments on sunday about reliability in the u. S. There is a certain amount of frustration there with the american government, and she is being pretty articulate the bad it, more than she would be otherwise. Tom there was an uproar over the weekend over her comments on the meetings that nato and with mr. Trump. How did it play in the german press . Patrick it hit big. I was in the beer tent as well in munich, and she was at a rally for her the very and political alleys. Or the very end clinical allies. And she was7 frustrated. She said that the talks about the paris accords, trump marketing on board was unsatisfactory and that was blunt for her. And she made mention of reliability, which was a big deal when you are talking about germanys closest allies since the war. Francine thank you, Patrick Donahue from berlin, and now back with Nandini Ramakrishnan and graham allison. At angelahen you look merkel trying to move the Prime Minister of india to invest more, do we care for the markets or is this geopolitics at last . Nandrini this is one of the times you do care about how much germany can take advantage of the global realm of trade. Germany stands differently from the u. S. , ep and france in terms of and france in terms of investing. That relationship with other virginie manufacturers, like india, is going to be important when both are going to be talking about players disrupting the current winners. These are countries outside the u. S. Agreement that are trying to make a new step of trade, which will be important for markets. I do not expect the dax to be moved based on just these comments, but over time, you expected to become more globally oriented in germany. Francine how should g7 play into the mind of investors . Nandrini victims take a moment it does take a moment to see how trade will play out. Global trade has plateaued massively since 2008. And you hear positive news out a g7 conversations, that is good sign for emerging markets, but in terms of market movers, it is hard to pinpoint one thing out of g7 that will change. Tom with us again, graham allison, a few questions and then i want to talk about destined for war. Had ato David Eisenhower distinction on world war ii. He only spoke allies, allies, allies. Is nato still a group of allies or is it six and one over three and four . Still eisenhowers dream . Graham nato is the greatest alliance in history. Foundation. In the postcold war world. Period,e postcold war there was confusion and particularly, after this past week they encountered with President Trump and Angela Merkel, chancellor merkels proposition eight you are no longer reliable and im going to have to think about how we take our faith in their own hands, these are big statements. Tom you write up as others, the great illusion, which was the dilution of an illusion wrapped around world war i. What is a great illusion right now, and what is President Trumps great dilution . Graham great illusion . Graham i think americans in general is that great power war is obsolete. That it has been so long. Tom it has just been so long. Graham you and i are talking on the side, basically americans know so little history that the idea that great powers could be killing each other in the millions is just, forget about it. Tom we will continue with professor allison. August to talk about, particularly on his focus on china. Maybe north korea, as well. Francine we will also be back with Nandini Ramakrishnan. We will have more from Prime Minister modi and Angela Merkel giving a joint press conference in berlin. In the meantime, you can follow tom and i on tv. You can go back and listen to some of the great interviews, and if you have a question for nandini, go to the bottom of the video screen and ask the guest a question. Tell us what you want asked and some of the things we were talking about one hour ago, this is bloomberg. Bloomberg surveillance in london and new york. I am tom keene with Francine Lacqua. With us today, graham allison. Congratulations on your review by robert d kaplan. He said nice things about your book. Graham i was glad. Tom you had this nature of you today in the wall street journal and we are thrilled you are with us. Heres the book, destined for war, graham allison, another Great International relations book. He called me up and i said, destined for vacuum and that did not work. I wanted to go destined for vacuum and he said, war will sell more copies. The word of the moment is vacuum. There is a vacuum in foreign policy. How do we build the vacuum or do you assume china will fill it . Graham i think there is a vacuum. We are having difficulty finding accordance in the world. I am trying to help us get clear about one. We have a primary access in Global Politics today, the competition between the u. S. And china. Hina has risen from nowhere when Ronald Reagan became president , china was 10 the size of the u. S. , by 2014, roughly equal and on the path to become larger. It comes up as a substructure of International Politics and i think if we get her hand around that piece in the risks that that entails, even risks of great powered war, which people cannot imagine, we cannot see how the other pieces fit. , orher it is india, germany any other part of the world. Francine bandini, how did nandini, does this translate into possibly trade wars as geopolitics become more tangible and may be terrorists get put up . Nandrini the big question is the larger story of the past few years and not decades with the rebalancing of china shifting from more of an investment led to manufacturing to focus is on the consumption side. That plays out to the stopper pro is you have focusing on new china, ecommerce, this sort of side where we are not building china up to compete with the u. S. But that is what we are talking about him taking them a step further to this consumer oriented economy. Francine donald trump has scaled back on that, does it depend on his ability to pass things to congress, i. E. Health care and Infrastructure Spending . Nandrini certainly. Those are things we can watch and how the Trump Administration gets through those proposed policies. A few months ago, such a offerent language was out washington and the Trump Administration regarding china and that is a symbolic change and maybe there is a step back on this antiglobalization and focusing on where drew the profits come from and what relationships are important . We take that as a sign that this antitrade rhetoric will not be seen through all the way. Thecine when you look at multifacets, talking about a possible war and graham allisons book, but it trenches into barriers but it translates into barriers being put up tom . We go back to a bit of nostalgia, which is a pivot. Are we still privity . Paham are we still ivoting . Graham the u. S. And china are on a seesaw. As we argue about in the pivot, we would put our right foot on our left foot, all of the time, the seesaw was lifting both feet off the ground. Tom we are honored you are with us today. Folks, grahamar, allison. Read the recap and wall street journal, which is really kind. Nandini ramakrishnan, thank you so much. Coming up, the conversation with Robert Kaplan of the Federal Reserve bank system. We will do that tomorrow in the 8 00 hour. This is bloomberg. It is job stay this friday. M a holiday. We will learn about inflation and bill wages, dachshund real wages. And real wages. , his Team Reportedly the trump team would like to tweets thisethe morning. Everyone. Ng, this is bloomberg surveillance, live from our World Headquarters in new york. ,haking her head at london Francine Lacqua, help me with Jeremy Corbyn. All of a sudden, it is a race in england . Francine i do want to get to some headlines we have from Angela Merkel. Lets say big gap is narrowing between the conservative and labor. It seems the conservatives still have momentum but they are weak and anything can change. At the moment, a five point to six point lead. Angela merkel speaking live in berlin with Prime Minister monte, Angela Merkel saying transatlantic ties are important. She also says india has a lot of close ties with merkel and i think this is probably a direct mount president donald trump. May be without take a golf cart to the photo shoot. Nejra francine was talking about the narrowing polls in the u. K. A little more than one week before the election. One poll shows conservatives with a 20 point lead over labor that has slipped to five points. May argues that Jeremy Corbyn cannot be trusted to navigate in brexit negotiations. State isd, islamic claiming responsibility for a deadly car bomb attack. At least 15 people were killed and 24 wounded in the midnight explosion outside of Popular Ice Cream shop. Daysmes it came 12 after ramadan. Countrys dictator, kim john nunn, is said to have overseen yesterdays launch. Japan says the missile may have slashed down in an economic zone. The dictator panama, who was ousted, has died. He ran the country from 1983 to 1989 as onnd was once and was once considered a u. S. Ally. Was arrested when the u. S. Invaded in 1989 and spent 22 years in u. S. And french prisons. He was 83. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Tom thanks. Equities, currencies and commodities. Loads of Economic Data. Record high in the s and p and nasdaq. Flattening. Clatter yield curve flatter yield curve. Our next grain, there is dow almost to record highs. 123. Yen was a stronger yen over the last two days versus the euro. , as prancing tells me, is a big deal. Francine it is a big deal because we had disappointed big years. I am looking at eurodollar, but it is europound we have to look at. 111. 08, the town in continuing to over performance traders digest in early election. Tom what has changed in america . We have all the imagery of the nation from memorial day. This is composed to disposable income. Disposable income is after taxes. Here we are saving 10 back to the beginning of the korean war after world war ii. Then down we go in this gorgeous are. Heres the fun gorgeous arc. Form of stasis, but it is an interesting chart of the nonsaving of households and individuals in america. That is a chart we do not look at enough. Daybreak will have done. Francine i am also looking forward to the election on june 8 in the u. K. And the polls are changing. This is a new bloomberg metric. This is what we are looking at. When theresat is may actually called the election with a 20 point lead and now pointf a 45 point four 25 point lead. The market believes theresa may will be Prime Minister june 9. Tom thank you. He is back in washington, Kevin Cirilli, our chief washington correspondent, after an extended trip with the president. My experience on security clearances is they can disappear in a blink. What is the risk mr. Kushner will lose these ever valuable security clearances . Kevin i was speaking with a white house source yesterday, who told me essentially mr. Kushners prominence within the administration is still significant. Nowe are investigations going on, and they are causing the president , not to rethink, realigned and there is frustration about the ongoing stories, similar to what we saw it reince prevents with ryans previous hunt, the probe into russian interference in the 2016 election is deadly serious and standing there is such that the only limit to investigative power is the president s authority to societies of direct and firing buyer him. Republicans recognize that trump has made dangerous enemies by spending the Intelligence Committee. Kevin, can the president that mr. Moeller aside and do it quickly . Kevin republicans on the hill tommy they are pleased with the president s First International trip. They view it as a success, but points, he hass significant enemies within the Intelligence Community but to unts points, he has significant enemies within the Intelligence Community. They set up a war room to start responding to these acts within the white house. Lets see if it works. Francine what do we know about the timeline of this question probe . Do sources tell you can take three months, six months or longer . Kevin they wanted to happen fast. The white house once it to happen today, to get this concluded, but as you know, these investigations operate in what thee paradigm for white house ones are what anyone wants. I think there is a growing consensus we should get these answers within the next couple of months. That has been the rug around washington, but they do not have the deadline on when they have to release them. Tom Kevin Cirilli, thank you. Joining us now on any number of topics on financial is a financial professor at columbia university. He has out a new book. It is a brilliant, short essay on reforming Financial Regulation. We will dive into that. Back, we have not learned that much. Have we learned that much . It depends on who we is the academic literature has learned a lot about Financial Regulation. Over the last nine years, we have surgery are on the wrong track and what we have done is a flop. If you ask me on whether the average american has learned it, i think there is a disconnect. Part of what i am trying to do with this book, and the recent it is short, is im trying to bridge the disconnect. Tom the basic idea is james dimon has a higher a gazillion people to do doddfrank and compliance. What are all those people doing . Charles many are doing with compliance issues. A lot are doing a new function of Financial Regulation, which is law enforcement. The u. S. Government had a great idea, instead of the u. S. Paying for lawenforcement, why not require banks to do it for free . That means the Bank Stockholders are paying for it, that the burden isnt just on jpmorgan and chase. It is on the Smaller Banks because they cannot afford it. That is one of the bigger, new areas of costs, but the bigger problem in regulation i go through in the book is it isnt working. For all the costs we are creating, we are not getting anything for it. Furthermore, the new approach toward regulation is a process that is contrary to the rule of law. The combination of a cost, no outcome, and threatening the rule of law with these new processes is really a powerful negative one. Francine give me a sense of what we know about their forms the Trump Administration once. W wants. Happen at a that will this point . Charles i do not know what they want. I know that they have stated intent to question regulation, i think that is a good thing. I also know who was working in the Trump Administration who know something about Financial Regulation and that is encouraging. They are named to do not cure reported. That you do not they are names you do not get reported. And aave good people general orientation for questioning the costbenefit of regulation, but i do not think they have enunciated with the are going. The thought leadership is coming from in the house. Francine do you think they will stick with International Agreements . And this talk instilled fear in the International Ceos and the banking world that they would step out and things like that , with a stick with the agreement of go at it alone . Charles the agreements and not bonding in the sense that fossil is a conspiracy to do little. The fear ceos is we might get regulation that is meaningful and that is what we need. It is almost irrelevant because it is designed not to be binding. Bank executivele would throw you out of the office with this book. Why do they hate this book . Im sure youre asking tom they had taken regulations, they agree with it, and you say they are wrong, why . Charles for themselves, they may not be wrong. Them. Not very costly for secondly, on the overhead costs, it is a big advantage. Small banks cannot compete with them. I am not saying theyre not paying for a lot of regulations, they are, what have adjusted to it and they have seen bearish entries that have been official to the large banks. I think that is part of the reason you see the ceos be more cooperative. Charless columb alomiris, thank you. This is bloomberg. Nejra Economic Sentiment fell in may, still the measure executive and Consumer Sentiment remained close to its highest level. The decline was led by weaker readings and retail sectors. Francine thank you. We are getting news out of the u. K. Let me see what we can see from Nicola Sturgeon. Isthe moment, this interesting when you look at the latest polls, because when theresa may calls for june the eighth, it is clear she was not only leading by 20 points, however, what a difference. She has had a tough time. Yesterday, she was up and the lead now is five points. The Scottish Party has gained some of this uncertainty. Tom lots of manifestoes. There are manifestoes in europe. Who knows what the manifesto will be here. Francine it is not sinister in the u. K. That is a great shortstop for the cubs. Joining us in new york, lomiris, how is the citi index doing . Have surprised every going to be . I think people have overstated some of the data, where one of the biggest drops in the first part of that most recent decline was the cpi number coming in shy, relative to expectations. Basically, we have talked about a price war. It wasnt really a real change in economic expectation. Tom what does chair yellen think about this . Tobias, give us a briefing on how your equity world moves into chair yellens world . We are sitting near record highs across almost every index, but sentiment is broad. It is a nice technical term. Model, and foreign etfs are still negative, so people are not thrilled with markets. We have a whole list of excuses ranging from trump, to earnings that will take out, i have a list of 12 or 15 items they will site regularly, so they have not jumped in on this. Francine what will it take for them to jump in on this . Is there one catalyst . End up you typically having market schemes going up and eventually pull people in. It is usually some sort of capitulation the they are missing out which they call from omo. Francine what do they need to look at in medication . We spoke to James Bullard and the field better about the fed raising Interest Rates and they feel better about the fed raising Interest Rates. Is that a reason for more buy . Tors to tobias i would say they are Different Things and listening to some of the Bank Executives talk about week lending activity. Example, aat for senior loan officer tends to lead loan activity by six quarters, so we are about to ner in theor second half and that would be part of what gets the fed onesided gets the fed more excited. Francine we will be back with them. Daybreak, a conversation about the fate of the airline industry. A funny tweet over the weekend. This is bloomberg. Tom good morning. Francine lacqua and tom keene. Is here. Calomiris i want to take a moment on your number one question from wall street, which is why breakup by big banks, diminish them, and dampen them . Bring up the chart here. This is a true story of two big to fail. Jpmorgan and wells fargo doing better than good and citigroup and bank of america struggling. Do we need to get bigger banks to compete internationally . Be nice if they were wellmanaged banks with a good strategy, so i think that is what your graph illustrates. Just being a big bank doesnt guarantee anything. There are successful and less successful strategies. Tom should we limit their deposits to 10 corporate a constraint on the size of bank of america . No. I wrote a paper on that. Tom i know, that is what i am asking. It makes no sense because deposits are competing, if at all, in the small to graphical areas. Whether you constrain a bank to 10 or 20 deposit share doesnt affect competition much. It is really big useless restriction it is a useless restriction. We need to worry about making competition real through policies and local markets, especially local lending and deposit markets. That has nothing to do with nationwide caps on total deposits. Francine tobias, what do you make of it . Talk me the book, do you by any wall street at the moment . Given regulatory changes, they will come up and run top than anybody else. Tobias retail banks will probably come out best, but i think a lot of investors have focused on the banks in the collect trump trade in the trump trade. That has been far more important to the performance of the banks. Com so if you layer the shape of the old curve against regional banks were broadly finance shows on the yield, the actual figure yield, you will find stocks have been more affected eye that than anything else. We had a huge run coming off of february last year. It picked up further postelection. I do not think it is because of the Capital Requirements at the moment. Francine where do you see that yield curve going from here . Tobias our sense is it is probably moving higher. An economist would say more than 2. 6 to 2. 7 area and are strategists would say we could get close to the percent. To 3 . E tom if i could bring up the chart, here we have the date of the election. We have shown this millions of times. Nowhere near recession feel, but how does a guy like you take a vanilla spread like this, they being fading, and for that into equity market valuations . The bond market does not live in the back. They live in a world wide environments, where you are getting. 4 in bund yields, the treasury looks attractive globally. To a great degree, that is what you seen the marketplace. Most of the stock i look at is Senior Loan Officers data. Called that suggests economic strength going forward. All of that suggests economic strength going forward. Tom he will be back on a tuesday. This is bloomberg. Tuesday. S Francine Lacqua in london. United kingdome and United States. We will go through that for you with our first word news. Here is nejra cehic. Nejra we are starting on politics. Jared kushner has been advised to lay low in the wake of those russia related media stories. Nbc news sites a source familiar with the white house, saying he may have seat a secret that channel to the common before President Trump was inaugurated. James bullard says washington will have to deliver on the policy expectations that have driven the stock market higher. He tells Bloomberg Donald trump selection made many to anticipate there would be change in Corporate Taxes and he says there is a concern whether that will happen and he repeated his you Interest Rates are close to her they should be. I think we are not far from an appropriate rate for the us economy that will keep inflation not too far from target and the labor market performing well, so what i disagree with is the idea we have to go 200 basis points higher in order to get to some sort of neutral rate. He does not votes on the open Market Committee this year. Italian stocks and bonds have been moving toward early elections, the nations biggest parties are considering a system similar to germanys, with a 5 cut out of smaller parties. That could eliminate the need to schedule elections in 2018. Prime minister renzi is pushing for earlier collections, seeking for a comeback that led to his resignation. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am nejra cehic. Francine thank you. The Scottish National party has released its manifesto. Leader Nicola Sturgeon has already flagged the possibility of the Progressive Alliance in the unlikely event developed leads to parliament this comes theresa may and parliament. This comes as theresa may and explains her decision to call it general election in the first place. After i became Prime Minister, i felt the most important thing for the country was the stability and getting on with triggering the article 50 so he made sure we were delivering on that boat on brexit. Isncine joining us bloombergs government reporter. And still with us, charles w. Calomiris and citigroup chief equity strategist, thank you for joining us. It is amazing when you look at the last three weeks to four weeks. Theresa may had a 20 point lead. we have got to be wary of jumping the gun and conclusions because polls got it wrong in 2015. We had a close race between David Cameron and David Cameron won. We have had a lot of momentum, and there is a feeling they are starting to think, ok, we need to get back on message because the problem with that message is it is strong, unstable, but it has been wavering on social care and the election fronts because this is a Prime Minister who repeatedly said she would not calling earlier election and here we go. Francine what are they voting on . Is it personality and summit be it a brexitd or is vote . Theyre hoping it is a leadership votes. Brexit is one of the big issues around that because she sort of symbolizes the push toward brexit. Yn are not sure where corb stands on that. Labor is trying to push policies. Corbyn is coming across as perhaps not the greatest leader. He has affected his gun and that seems to be paying off with voters. Terror attacks come have they changed the dialogue as a good to june 8 . The problem is we do not know how that impacts people. If you would have asked me one week ago, my assumption would may, they theresa seem to favor the incumbents, but so far, it seems stuff us come before social care, policy wavering, but last week, it was a bit of an odd week for polls. Tom is there a geography that will decide this . When you look at the map of the United Kingdom, do you have a place you are watching or is it to diffuse . Svenja absolutely. The private fitting the conservatives carried out was geographically targeted and locally based. That told them they would win. I think the big plays here are considering the north and midlands. Traditionally, labor voting areas. That is exactly what theresa may is focusing on here. That is who she is trying to go for. That message there is going across. Tom i am election exhausted here as we go nation to nation. Svenja odonnell and charles w. Calomiris, it seems ages ago, we were younger and searching for economic growth. We are still searching. All the political links that she is talking about in the United Kingdom about i want my fair share of growth, it isnt fair, is it . Charles the search for growth is the reason conservatives won the last election. 1981, they pioneered and they did another study showing their paper was right, which is when growth gets low enough, loaders shift from favoring redistribution toward favoring growth. A lot of what is propelling the conservative big threes recently in the u. K. Has been slow growth and the question is, can she deliver on it . Tom you mentioned the late, melzer. Metzler dr. Explain what he did. Charles he was one of the great late 20th andthe early 21stcentury. He did a lot of Different Things. The study i mentioned was a revolutionary study in the theory of political economy. He was one of the people wh o what causedle over inflation in the 1970s and 1980s and permanently changed, ng with elton friedman, along with milton friedman, change the battle lines of how we think of inflation and was caused byt Monetary Policy. He also was a major force for reform of the imf and the little bank, which i think were still a work in progress, but his membership on that was important. Francine charles, do we need to measure things differently, whether inflation, growth, but giving the ever changing evolution and we all have our phones with us all the time and there is a sharing economy, do need to rethink how in the get inflation . Charles im not sure we need to radically rethink it, but i have to agree that many economists have been arguing inflation is not very accurately measured right now. Others,in feldstein to from marti feldsteinn from Martin Feldstein to others, it has been revolutionary that it is hard to make quality adjustments when thinking about what we are getting as a level of good. Tom that is really important. I know it a bundle is this weekend and it is slime and more slime. Spend you odonnell, svenja odonnell, thank you. We will continue with the conversation with kaplan. Nikhilthis is bloomberg. This is bloomberg surveillance. I am grand seeing i am Francine Lacqua in london. Tom keene is in new york. Jon, i know you have a great guest talking about airlines today. Will be talking about the theoretical and physical side. The theoretical side through which we will talk about the Transatlantic Alliance and if we had looked fractured on that point. On physical, from london to new york, very challenging if you are flying over the weekend. We will talk to a man that may benefit from it. We will talk about his plans for transatlantic flights and whether they can dominate ba on the shortfall aspect for his this class chapters. Tom Jonathan Ferro excuse me, go ahead. Francine i was going to say they were pulling those countries on twitter. There was this bad thrown back to great britain. It was funny saying it is the computer that is not working, i wonder if they think within europe they can gain market shares. Jonathan we will bring that up and throw it back out to michael oleary. British airways is trying to terrorize themselves may be. We would talk about that, as well. Francine Jonathan Ferro there, with daybreak in 15 minutes from now. Now, tobias is sitting right there and he knows this chart cold. We are showing standard imports, 500 slope monitors, a depression in the 30s over on the left and kisses, some circles of they are moving averages which showed that you mend the gloom. We have that showed that gloom and doom. What is wrong with buy and hold . Tobias in this week to a performance world, that is a problem. Coldof traditional buy professionals have held back and they have not dissipated in this market since 2009. They have missed this more than tripling of the market. Tom what does that mean for the mood of the market into the summer and autumn . Tobias i think there is a potential for surprise because they are already worried about a host of issues, including elections abroad, which is what we were worried about one month or three months ago, but they have moved from the netherlands to france, and at think investors continue to find things to worry about, which is not the textbook environment. Tom which do you like best . Tobias financial and energy. Investors of kind of abandoned them. you believe in the price ok, we will come back. We are giving you a tuesday briefing. A lot of Economic Data this week. Follow tv. , have a bloomberg tv you can come over here and you can click and bring right back a previous break with a charge bonus round. You can steal the chart, as well. This is bloomberg. This is bloomberg surveillance. Lets get the Bloomberg Business flash. In germany, ranks have said that early retirement offers to employees. The offer includes a 34,000 sweetener. Ammerce bank wants to cut large number of jobs over the next years. The London Stock Exchange group, the price 685 million. Akzonobel has a stronger hand in takeover talks. They avoided a legal challenge from Elliott Management aimed at removing their chairman. Elliott has been pushing them to engage in talks with ppg industries. They have projected all three offers. That is the Bloomberg Business flash. Tom how about a report right now . I am looking at euro, maybe more than anything, yen comes in stronger, churning your a little the euro10 days ago, was stronger and it is time for 125 downo take it from to 123. 85. Look at eurosterling for american viewers. It is a little strange, that is how francine things about people every day. Francine every day, minute and hour. We have a donald trump tweet saying we have early, about 6 40, we have a massive trade deficit with gemini, plus, they pay far less than they should on nato deficit with gemini. Plus, they pay far less than they should on nato. We did hear that g7 did not have the best of relationships with gemini, but the german chancellor just yesterday saying , who oncemitted stronger ties with the u. S. But written to her warning that a reliable relationship with the u. S. May be a thing of the past. It is something we need to take care of and because shares because there is an underlying concern there about relationships, not only with the u. S. And europe but with gemini. Tom for our glut with germany. Tom we have huge comments of the comments of Angela Merkel, as well. Respond when a nonsophisticated, like the president says, oh, no, we have a trade deficit with country a, we are going to die. How do you respond . That is a good question. Trade deficits do not necessarily mean very much. Guide is the problem we are having now in our discussions. Trade deficits can because by the fact that your country as attractive as a place of people to invest. Trade deficits do not necessarily mean there was an uneven Playing Field in terms of exports and imports. Tom one of the common features of stigmas of columbia or calom iris of columbia is you all agree on free trade. How free is our trade right now, transatlantic . Charles i would say that globally, i am not able to say it specifically on transatlantic, but globally, i would say that the Trump Administration is fried to push his right to push on freeing up trade with china. I think he has pulled back from this sort of heavy emphasis on nafta renegotiation. They will be some tweaking but not much else. You are seeing a recognition that we are in a pretty good status quo in terms of free trade with the exception of wanting to improve things on the margin in nafta and a lot in terms of effective fair deal with china. I think now is the time because of chinas economic weakness we should be pushing on that issue, so i agree with the president about that. Francine tobias, what is your take on trade deficits . This seeds were sown with peter navarro. He was going after germany and china, does he have a point that if it were germany on its own, then the euro would be higher . Think a lot of people feel that way that the germans had taken advantage of some of the problems in europe to be more competitive with the currency side are you i hear this from a lot of investors. When im concerned about is the rhetoric and this kind of bad guy and good guy. Ire andt raises the everybody involved and it isnt the best environment for negotiating. I grew up in canada, so im used to the trade between countries and canadians have been far more reliant on the u. S. Given it is a large neighbor to the south. China has got its own unique factors. There has not been a level Playing Field in terms of American Companies working in china. Europe is far better but there is an ongoing concern. Is very depressed euro that is causing unfair advantages . That is something that should be discussed. A tweet should not be fired both ways across the atlantic. The alliance is too important. Francine at the same time, we heard Angela Merkel 10 days ago saying that she thought that ecb policy is wrong at the moment and that led to a surplus because of the weaker euro. I do not know whether germany once a weaker euro and it benefits them, but maybe they want Something Else because they are concerned about inflation. Tobias they are supposed to be independent authorities. I do not care for does President Trump on one side and Angela Merkel on the other. They should let the Central Banks do their jobs and not that involved and not get involved there. Tom we are going to do this because it is tuesday and everybody got lots of sleep. 100 billion is wrestling the revenue of bmw. The rest of europe is 11 . The americas are 7 of revenues and china rounded up. 20is 3 in revenues, something percent of their revenues is foreign. In your face is the multinational of these companies that president s and Prime Ministers just ignore. , if i ama lot of that understanding what the numbers mean, is produced in the United States. Tom yes. Charles tom bmw is not the bad guy. Charles i agree. Also, it is hard to fall to germany for having high productivity growth. Tom is the currency induced . No, it is trying to find a middle ground. Draghi is trying to target currency for the eurozone and germany and the netherlands have high productivity growth, so they will be favored with that currency. Tom is the next tweet from the president going to be germany is a currency manipulator . The ecb sets the exchange rate, not germany. The point of the ecb is pursuing a policy that is targeted for the eurozone in germany happens to be the high productivity growth country within the eurozone. Tom gentlemen, thank you so much. Charles w. Calomiris, out with a new book on Financial Regulation. And tobias, noting that there are no canadian teams in the stanley cup. Tomorrow, this is going to be fun, a conversation with the dallas fed president , Robert Kaplan. There is a little bit to talk about, not only on central banking and economics, but central banking and that world of finance. Stay with Bloomberg Radio and television all day, particularly with washington, where Kevin Cirilli will have reports drop the day. This is bloomberg. Jonathan the Transatlantic Alliance comes out of a long weekend. Federal reserve official says the jury is out on whether d. C. Policy can meet the optimistic expectations in Market Pricing and ecb president mario draghi worries about the socalled neoprotectionist stance in the United States and reaffirms his commitment to stimulus. From new york city, good morning. A warm welcome to bloomberg alongside david westin. Alix steel is away today. Lets get to the markets this tuesday morning. Here is the board for you. Treasuries, yields stuck in a tyke tight range. Features a little bit softer after weeks of gains. We are down by about 0. 15 . Lets get you up to speed on the headlines outside the business wo