Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170424

First round of president ial elections in france. Been ringingua has as the news throughout the weekend. We see her in paris. I watched the special yesterday. The question i came back to was how could we get to a world where the two established parties in france did not even make it to the second round . Francine this is significant. There will be a lot of introspection and navelgazing today from the candidates who did not make it. There are two lines of thought. First is that france is ready to reform. They want growth and a more market friendly economy. That is why they voted for a 39yearold the wants to shake things up but is not too scary. How does that explain 40 of the votes going to extreme candidates, Marine Le Pen and jeanluc melenchon. There were four candidates. You can see the old school, the republicans almost had a clear win until january when we had Francois Fillon immersed in a scandal about paying his family without work being done. Macron won because he was the most palatable. Citizens were not really convinced with his project, but it was the favored amongst flawed candidates. David beyond the antiestablishment tone, what affects might this have Going Forward with legislation . Doesnt that make this difficult for either candidate, they will not have a majority in the parliament. Francine that is true. If you look at the markets, it is clear the markets trust the polls. The polls give a clear win to the Emmanuel Macron. 62 forst was around him. What youre talking about is what markets, the sophisticated markets will be looking at. How does he govern . If you look at macrons movement, it is not an established Political Party. At the moment he does not have establishment in parliament. We go to the legislative elections on june 11 and june 18. We are talking about how he can position himself to build a cabinet if he becomes president so he can govern. He can either govern alone, unlikely. Or it will have to be some kind of Coalition Never before seen in france. Jonathan how does the National Front continue to build on this movement that has gained significant omentum . Would it be to assume that this goes away after this . Francine it is unlikely to go away. We have Marine Le Pen not doing so great in the legislative elections. It depends on the campaign. It seems at the moment before politicalr five main parties will try to get votes for themselves. That means a collision is unlikely. Coalition is unlikely. Thank you for the strong reporting from paris. Alix joining us is david will Steven Wieting and james athey. Do you buy into the risk rally we are seeing today . Good morning. I think the risk rally is just relief. This is a question of pricing out the most extreme option, andh is madame le pen starting to look at the economic fundamentals, which have been Getting Better and better in the eurozone. Growth is tracking 2. 5 to 3 . Once you take out that Political Risk, it is inevitable we see a risk rally. The most interesting analysis to me is what mr. Macron can achieve without a Political Party behind him, the need for a coalition on a deal by deal basis and being susceptible to the parliamentary elections. That makes the picture less clear for the future of france. Alix across the board, goldman was the only one that was relatively more negative saying a macron victory was already priced in. Describe to us the sequence of events from the short term trend relief rally to the fundamentals justifying a big move into french equities. This is a significant risk that has been diverted. If either of the two extreme candidates had one in the first round, then germany would not have a Good Coalition party. Risk to the eurozone itself would be under greater question. Told calculus. At whole calculus. Discreet, argely be single day. The question begins, how does this affect Economic Growth in the long run . Do we have other political issues that will arise such as the italian elections in 2018. You have to have a longerterm perspective. You take out a significant risk that has been holding back markets. Jonathan what does it say that this question of redenomination risk keeps coming up and is unlikely to go away . It says the same thing it has said throughout the post crisis period. We are still dealing with the Monetary Union that is not fit to purpose. There are red lines in Northern Europe and southern europe. Until one of those groups of nations is prepared to cross that redline, you have a halfway house. Periodically when we start to see stress in the economy or financial markets, they can feed off of each other, and things can look messy in the short term. It is not a surprise that with a partially finished Monetary Union, we get these concerns. Jonathan when you look at the markets this morning, we have a big value already. If you have a longerterm horizon, do you accept this question will keep coming up and there will be volatility over the next several years . That is right. This has persisted for 18 years. If you look at the whole post unrestperiod, there was between 2008 and 2013. It does not need to come back to that extent. Look at italian elections in 2018, which may be a greater risk. This as a catalyst is disappearing. The severity of the stress you are likely to see from Political Risk is likely to go down for the remainder of the year. That will be priced out pretty fast. You have to go to other issues like the ecb. One of my questions is how well do International Markets find relief on this particular issue . Obviously it will be strong in france. The fact that the dollar can settle back, and how do emerging architect unsettled by this risk performed today . David what would you need to see, what indications make you conclude this could be more than a relief rally and longer trend in terms of Economic Growth . I am going to agree with stephen. We have already seen what happens when the u. S. And Federal Reserve started stepping away from the incredibly easy style of Monetary Policy we have become used to. Now that Political Risk has dissipated, markets begin to focus, and i will be focusing on what is next. Withave to look at the ecb growth and inflation where it is. Is their policy appropriate . We would look at the spreads we have been used to on european government assets, and they largely reflected the policy of the ecb and the flow aspect of that as opposed to anything to do with economic fundamentals. Now you get this push and pull. Economy is doing a lot better. If we start to see the ecb step away from easing purchases and start to see them normalize moves inhat means assets and the economy will not necessarily be in the same direction. In the u. S. We have seen higher yields and steeper curves, great for bank stocks, but is that great for the general economy . Alix both of you are sticking with us. Breaking news dealing with a potential merger. Bid forraised their akzonobel. We have learned they will review and consider the revised deal. They rejected it previously in march, saying it did not value the company well. The ceo wanted to look at splitting the company into. Now they will be reviewing it. Inathan coming up, we bring ian bremmer, Eurasia Group founder. Risk rally in europe. You are watching bloomberg. Jonathan we will hear from ecb president mario draghi on thursday. The path to Monetary Policy organization may be quicker than most economists anticipated. Revise guidance as early as june. Wieting,s is steven citi private bank, and james athey averaging asset management. Exiting thisof program, when do you anticipate those tweaks . How important will the political backdrop be . That is a good point. I dont expect the next ecb meeting this week to have a change on policy and Forward Guidance. It gets interesting from june on. How much they are cognizant of the parliamentary elections in france is difficult to say, but between june and september, i expect them to start steering is towardtapering us tapering policy. Jonathan the markets this morning reacting. The prudent action would be to wait for the second round. When you look at inflation data, that is what ecb is going to react to. Are they going to continue to wait . Steven i think the ecb took an approach where they did not argue there was a significant eurozone breakup risk. For them to go further in this direction, i dont think it happens as soon as april. That is timember, to think about how bond purchases are tapered at the end of this year. That will take place around the time of the italian elections. That could be trickier. For the short term performance of markets, this is far out there. For investors to understand you have a tremendous amount of central bank support in markets. This is one of the risks and the region you will have to live with and adjust away from. This will be very important. There is a big valuation gap between stocks and bonds. Bondsmentgrade corporate are among the richest in the world. Way from japan, this is a rich market because of the ecb. Discount. S you see a you have a volatile backdrop in normalizing policy. You do not have a rapid growth rate in the long run for europe. Is in favorion gap of resilient equities relevant to bonds. Alix do you agree with that . If i look at eurodollar, the euro was pretty stable as the dollar was moving at the end of the day. That implies it is held up by the expectation of ecb tapering. Of g10 bonds,cing looking at europe and the u. S. As well, they have struggled to take into account these changes in central bank policies. We have the fed talking about Balance Sheet unwind and the ecb as well. That feels like it should be felt through g10 Government Bonds. You get some protection by owning nominal assets with dividends. When they are yielding 35 basis points at the moment, that feels like a rich asset, which is facing the wrong direction even in centralf change bank policy and this global cyclical upswing. Alix that makes sense. Just ask the bond bears. That trade has not worked out. Do we need the ecb to get more aggressive or any repricing to happen . Monetary policy in the u. S. And eurozone will be asymmetric compared to easing. Balance sheets are not going back to 2008 levels. The whole way the economy works is not going back to 2008. There is no symmetry in putting in place a tightening that would threaten the economy in a serious way. To the extent the Economic Outlook is held hostage to Balance Sheet concerns, those will have to disappear. Central banks will have to hold large amounts of assets for a long time. It is the process through which they discovered how far they can go, and that will create volatility. I dont think you see that that going back to massive bond selloffs to bring the Balance Sheet to a low level. The same thing goes for the ecb where would take much longer. Wieting, thank you for being with us today. James athey of Aberdeen Asset management, you are staying with us. The fallout from the French Election. We go through the results and what they mean for the future of the eurozone. Later, in bremmer will be with us. This is bloomberg. Jonathan markets are in risk on as theter macron emerges political favorite. Joining us is john micklethwait. Great to have you around the table. Lets talk about the significance that almost half of the electorate voted for either the extreme left or extreme right. What is the significance of that . John you have to be careful about declaring this business as usual. A lot of people voted for the extreme right or extreme left. There are still people who will come up to you and say probably they voted for le pen. It is not a hidden thing. Macron is not part of the old system. He has a completely new party. The socialist party with 6 . The two main parties are not part of the runoff. That would be like having a president ial runoff where there was not a republican or democrat in american terms. Jonathan no one was shy about saying they were going to vote for le pen. Point, the fact that these are not mainstream parties, how difficult is it going to be to govern . John macron faces to challenges, which is to win the next bit. You should be surprised if not shocked if brexit happens. Surprised but not shocked if trump wins. This is moving to the shocked level if le pen wins. She would have to win a big chunk of fillon support. Macron does not have a party yet. He has to win seats in the parliament. His answer has always been, i will win, and i will create a party around me. A i will organize the party, and it will work. David it seems the french electorate said we want change, fundamental change. There will not be a majority in parliament. The one clear loser was fillon. Llande. Approval ratings are pathetic. It is the sort of numbers extreme parties used to get and we never talked about them on programs like this. It is equivalent to democrats in Congress Getting four seats. It is hard to imagine a world where the main parties still dominate the assembly, and that will be the problem for macron. He has to get some new people in. The problem with getting new people is you always get a few oddballs because you dont have time to vet them. Those things happen. David in a year, he has twice as many people as in the socialist party. That is not bad. They tend not to be professional politicians. He has a wave of feelgood behind him. You would imagine in the equivalence of manhattan and paris, everyone is worldly. He has to find people, deputies s who will support his program. Jonathan when we discuss the future of europe, we usually discuss an important alliance. If you get scholz in germany going with macron, what does that alliance look like for europe . , wehe italians and spanish have the italian finance minister later today. The italians have problems in the financial system. The spanish are doing generally better. Europe has always done better france and germany, and the british are doing in the backseat. If you take him and macron, who is proeurope, you have the possibility of the eurozone on only integrating. Is francois this fillon, that was one of his great dreams. He would reform france, unite with germany, and you would have the eurozone that started to integrate and work well. You can only make the eurozone work because you dont need to put things to referendums in the same way you do if you try to put things through the European Union. Jonathan thank you. John micklethwait running us in new york city. Group founder, he is with us this morning. It is buy risk in the market. The dax hits an alltime high. Core Government Bonds on offer. E. Easuries up fiv you are watching bloomberg daybreak. I am jonathan ferro. All 19 Industry Groups pushing higher. This is what the bond market looks like. Up nine basis points. Points. Es up six basis French Market rally brings that spread in. Weakerr euro and japanese yen capturing that risk on sentiment. Many believe the nightmare risk will not materialize in the markets. France. Keep with macron and le pen won the first onnd, setting up a runoff may 7. Come to free the from our arrogant. Oliticians and policies i the candidate of the people. Rona snap poll shows mac would be le pen beat le pen. May isu. K. , theresa making a big for labour party voters. Platform calls for cap on Household Electricity prices. Toughite house is talking about including money for its controversial Mexican Border wall in a must past spending bill this week. White house officials said they dont know if President Trump would sign a bill without money for the wall. Democrats say they wont go for that. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. David we are told we will have a tax reform proposal, a new health care bill, and certainly no whether the government will shut down before the end of the week. We turn to our chief washington correspondent Kevin Cirilli. Take us through it. I am told that Health Care Policy is still going to thistially help shape final week before President Trumps of his first 100 days. The Freedom Caucus will have a meeting to begin seeing where they stand and whether or not they have the deal. David we all hear this 100 days thing is somewhat artificial although the president himself put out a contract with the american voter. How much of the feeling pressure right now . This is a report card of sorts. From a policy standpoint, it comes at a time in which polls indicate this president has historically low approval ratings. Hesident trump said friday will unveil a tax reform plan on wednesday, then Administration Officials and folks on capitol hill say we are not ready yet to unveil a full tax policy proposal plan. We could see the foundation of a tax plan on wednesday, but this is clearly getting to the administration. They want to put out momentum saturday, the 100th day in office come the same day as the white house correspondents dinner. David i dont remember a time when a president has said something this definitive and his staff was caught unaware. Budget, a a skinny twopage summary . Lawmakers have to pass some type of week this comes the same as the house release the plan to walk back to doddfrank. Then we hear just hours later that theres going to be a tax plan. Bit of stepping over themselves to say the least. From a broader perspective, they are trying to have at least some kind of legislative win. David it will be an exciting week. I want to ask you as an investor how do you celebrate the signal separate the signal from the noise . Thats a great question. I would like to know the answer myself. It is remarkably difficult, especially here in london, where you are getting bombarded with headlines from various parts of the white house in the cabinet. It is difficult. And we are trying to look through the noise. Expect some progress over the next 69 months on the tax agenda, potentially infrastructure. Now, that is how we are trying to analyze it. We see the markets can be disappointed, but markets have been relatively well behaved. To hold ontoable those procyclical come progrowth positions. Bank of america said tax the erasedead by markets. You agree with that statement . It looks like rates markets think so. I dont inc. It is dead at all. It is a rather simplistic i dontt that has think it is dead at all. It is a rather simplistic viewpoint that has been out there. I have to say i have been disappointed. What we were hearing from people like kevin brady, representing the house plan, suggested they could move quickly come and certainly that has proven not to be the case. You have to remember that trump was elected not with the huge majority, but a mandate to achieve these things. People have spent a bit of to opposecapital elections in 2018. It will be difficult for extremists in the Republican Party. Does that mean you want to short bonds, by cyclicals, by financials, industrials . That is still the trade . I think so. Absolutely. Positions and and flow, but we have been short treasuries throughout. Sweden has an incredibly steep yield curve, incredibly attractive to be longduration there. It doesnt feel like rates will you cang just yet, so inlong the swedish market anticipation of the continuation of growth we have seen so far, inflation at or above the Federal Reserve target. Hopefully something positive and supportive for the economy coming from trump in the white house. Turkey index rising to a record. That tells you what is happening in europe. A bunch of investors grappling with what will come from d. C. The Campaign Rhetoric that still exists is complicating their ability to make real policy. President tweets big tax reform, tax reduction, what are the staff saying to each other . David theyre saying, where is this plan . Alix is that enough for markets, or does it need to be a level of Corporate Taxes to continue the risk rally . David the markets were discouraged by the failure of health care. How would they react if you shut down the government . Unfortunate this is something we have had to become used to. Congress has not been functioning that efficiently. This is been going on for years. See. Ess in the treasury market we do see stress in the treasury market. As i say, this is not something which is specific to the situation. We have seen this under president obama, and until the Republican Party can clear up the conflicting views, it will be difficult to see big picture progress there. We appreciate your time. Jonathan coming up, the market gets its wish. Place, we take it to a u. K. , brexit, and theresa may. What does this mean for her new go station tactics. You are watching bloomberg. This is bloomberg daybreak. Coming up in the next hour, ian bremmer. This is bloomberg. To your Bloomberg Business flash. In dangero directors of being voted out by shareholders at tomorrows meeting. That is based on ballots counted so far. Many investors arent happy about how the board handled the bogus account scandal. Wall street is betting that seength and tmobile will revised talks on a blockbuster merger. According to people familiar with the matter, soft bank thinks the spectrum has been undervalued. One possibility is spinning off some spectrum into a separate company. A grim forecast for jack ma, warning that society should prepare for decades of pain as the internet disrupts the economy. He said changes in the education work with how to robots would soften the blow caused by automation. That is your Bloomberg Business flash. Market, ain the fx currency pair that captures the tale of two elections, one in primeited kingdom when minister may announced a snap election, and the roundtrip comes off the back of a surprise or not one at all that did not materialize, Emmanuel Macron getting into the second round of the french president ial election. James, great to have you. Lets talk about Emmanuel Macron. What kind of negotiations can Prime Minister may expect from one of those leaders . I wish i knew the answer to that. The markets best guess is that he will be a tough negotiator. We are hearing a lot of rhetoric out of both sides, and part of that it is a negotiating strategy. It would be unwise to negotiate themselves down to a minimum position, but macron is proeurope and will want to do what is best for europe, and if that means at the expense of the u. K. , so be it. We are not through the woods in terms of eurozone Economic Outlook. There are many problems ahead, many in france, so it will be difficult for either side to play too much hardball. I am hopeful we get a result that is good for everybody. Jonathan there is a part of the market that believes the snap election called for by private mr. May was risk positive here at do you share that view . That thist a believer is a massive boost for the soft brexit camp come if i can use that term. Constituencies the tories are likely to win in this general election are predominantly ones who voted to will, and therefore they likely need to represent their constituents, and that doesnt mean they will be able to disrupt the governments attempt to get a clean the brexit. Is aboutsitive move how oversold they were or rich they were looking. Hsbc saying they raise their cable call. In part because of dollar weakness, not necessarily because of sterling strength. What would be your call . Trend is something that was about policy diversions. Seeing over been the last 69 months is synchronized Global Recovery. The dollar has become an idiosyncratic call. Outperforms,ing that is not something we are positioning for, but we are positioning for strengthening against the aussie dollar and the euro. They are quite attractive positions to have on. Alix thank you so much. , watches tv online, interactive directly. Go to tv on your terminal and ask a guest a question. Send us a message during the show. This is bloomberg. Centralbig week for banks, politics, earnings, boj kicks off wednesday, we hear draghi on thursday, friday, the First Quarter gdp, not to mention a potential Government Shutdown. Joining us is michael mckee. I want to look to that q1 gdp reading, how weak . Really know. All the data have been weaker than expected. The atlanta fed gdp now number. 05 . I brought a chart that shows that First Quarter seasonal adjustment problem. Of those is a First Quarter weaker than expected, and people think there is some sort of seasonal adjustment problem with the First Quarter. The blue line matches up with the weakness we have seen. On the right side, the line does not give one a lot of hope. The fed said we understand this and will look through it. Jonathan how are they data dependent if they have to look through the data . They have a may meeting and will not do anything. They have until june. Alix you mentioned the new york now forecast, 2. 6 . Atlanta gdp now is geared towards exports, so that is a discrepancy. Theyre going to look at the actual data that come in. Revises up getting often, so they will want to look at that and see what happenings. ,he other interesting chart Interesting Data that comes in this week, durable goods orders, capital good ths. This is a proxy for fiscal spending. They are not spending. This is a moving average. This investment has been below zero and contracting. When will they start spending again . Iny have not seen them washington act. The money is still in their pockets. We will see if this changes on thursday. Jonathan is it starting to weaken . The philly fed, newark empire weaker. We will get the eye a some number for the country and see how that turns out in terms of whether or not companies are moving forward. Alix the philly fed talk about expenditure and tensions were high or even though other surveys fell off a cliff. Capital orders not showing it, but the intent is there. The intent is there because the Companies Think they will get something, especially in terms of tax reform. It will be a long time until we get anything. The confidence that came right after the election may prove to. E shortlived pce firstriday, core . Arter, 2. 0 so what can we expect on the inflation front. We are expecting inflation to continue to rise. Everybody at the fed thinks they are on track to get to the 2 number. Heavily influenced by housing and medical care. Everybody watches energy. To get back to your original note about central banks, the ecb had been watching inflation lower their, so thats one reason they are likely not to do anything this week. According toorever governor kuroda do. Jonathan do we begin to continue pricing in june . For thell be reality fed and ecb. If we get past the French Election in europe, the second round macron and markets are happy, growth has been a good story in europe, then the ecb may back off its tightening its easing bias and go to a neutral stance, setting them up for a change in policy later in the year. The fed will look at the data that comes in and the markets will be looking at that, and we may see the fed to something in june as well. Jonathan michael mckee, thank you very much. Lets get you some movers. The cac 40 having a huge move, banks a big part of that, socgen seeing its best day since august 2013, its highest level since 2008, overall a 9 gain. M a monday. Day is 24 billion. They will have to add 10 billion in debt. Bridge loans are lined up for this one. Halliburton come a good read on the oil community, boosting sales in north america. Its losses shrank. Halliburton also adding 2000 jobs in the First Quarter. Jonathan there we go. A big bid on futures, 214 on the dow, positive 27 points, coming up, we talked Political Risk , j. P. Morganer assetmanagement global head of equities. This is bloomberg. Jonathan the runoff for the french presidency. Expectations keeps elevated on wall street, tax reform and tax reduction announced a this wednesday. It means risk is back on. From new york city and our viewers worldwide, good morning. I am jonathan ferro. We will call it le squeeze, futures up, the euro as well. Alix im looking at the safety trades, dollaryen jumping higher, speaking to that risk asset. Yields backing up. Gold off 75 since midmarch. Oil continues up. 7 . Jonathan our top story is the first round of the president ial election as the country braces for a runoff between nationalism and globalism. Talk to me about how we are set up. But we are seeing is the globalization, to and it opposite views, is also the story of discontent with the policies of the past five years of the socialist president and the need for new nots, new people who have been part of the political elite before. The markets, they are making a move assuming that out ones on top top on round two. Pollsthe moment, the snap since yesterday show that Emmanuel Macron is very likely to take a big advantage against Marine Le Pen in the runoff. The polls we have show Emmanuel Macron winning the runoff with more than 60 of the vote. The challenge for Marine Le Pen will be to extend her base, and e need to she mad soften her view on the euro. Jonathan thank you. A risk on rally across europe, the euro best open on record, yields at their lowest in three months, bank stocks surging. Joining us is in bremmer and paul quincey. Do you favor what you see on the screen this morning or chase it and assume this continues . Start, a been a happy busy start, the busiest day of the year so far, but claims are coming down a little bit. Manyis the result investors were hoping for in the first round and most were expecting. I dont think investors put in a normal probability. Looking at the underlying from mentals. The story is pretty good and looks better in europe than we have seen in a long time. Jonathan the hedge funds called you tonight, this morning to talk about france . The story looks really good but nowhere near as good as the markets. The idea that you will get significant turnout, or close to the turnout you had yesterday, and a couple of weeks when the ,lectric will hear that macron its a win. First, there is not need for supporters to be out there, but particularly the far left will not be in favor of supporting an establishment candidate. That will be a problem. Even though Francois Fillon has said come out and be supportive. E will vote for macron a lot of the right wing will be uncomfortable as well, so i expect polls will narrow. Secondly, we have to watch how many people are really going to turn out. It will be more of a nailbiter than people think. Alix lets stress for to the parliamentary elections in june. What can we expect there . , both marine le have threeron members of parliament sitting. It shows you how much of an antiestablishment of this was in france. Macronich you have is a grind with great economic ideas, european integration ideas that the markets and Business Community would love, but the idea that he will be able to create a base, a legislative base, that would push any of this for to the agenda is virtually zero, and so , whichesuming a macron is reasonable though not a completely safe that, the idea that the french people have come together and we no longer have to worry. This election is telling you you have to worry about populism in france. In the same way it could have easily been no brexit vote, it could easily have been no trump vote in the United States, and then we would not be talking about this. ,e Pay Attention to outcomes not to the systemic underlying problems that will grow and eventually bite us, just as the way we have ignored climate change. Investor point of view, does that mean you consistently have to have a level of risk premium in your Asset Allocations . Where is that . Yes. Lets not forget the european equities have done nothing for a inade, cumulative return msci europe is roundabout nothing. There has been a long time that this has not been a great place to be. As tends to happen, assets get relatively attractively priced. You getting 15 times in your, higher in the u. S. Perhaps most importantly as we look at underlying fundamentals, they are pretty good. I saw a report from j. P. Morgan that included the phrase that right now europe is an engine for global growth. When did we hear anything like that last . Alix gdp is 5 though. Sure, but in terms of where things are now come it is a decent earnings story in europe. David compared to where they were. He start off from a lopez. We have dutch to bullet perhaps in france, that have not address the fundamental underlying issues. The economist over the weekend said the french labor vote is longer than the bible. Until they address those problems, we you have fundamental growth . We are now. Doubledigit earnings for the first time in six years. European profits, the same picture, start expecting doubledigit growth come and end up with a decline. This year it does feel like it will be a normal equity expense when earnings do grow. I dont want to underestimate against a of that background where european equities have been out of favor. The prices look pretty reasonable. David it is a good valuation play, good price, but to the fundamentals, will we get reform that most economists think have to happen in france . You are a corporate come you dont hear a good story, because longterm young people in france dont think there are opportunities for them. Long term, they are not developing productivity or understand what will make this market sustainable and happy over 12 electoral cycles. This is not a win. The process, the state of play of who was actually out there. The president with singledigit support . Fundamentally these countries, even if they are getting growth better now, they look very uncomfortable and terms of the future of liberal democratic capitalism. We all thought that was a presumption. Like whatut for a few mr. Macron stands for. Last night, they had the election. Are allr french media following him as if he is the next president. They see him at this upscale bistro celebrating. The average individual will be as turned off by that as the average american is by the Mainstream Media in the u. S. Jonathan you said he will win because he is inoffensive compared to everyone else. Talk to me about the scars of to financial crises on generations of youth in france, italy, greece, spain, and what it will mean for voting intentions for the next several decades. The europe we believed we had, the west we believed we had come open values, open borders, a sense of community, nations that could integrate people from all over the world to be a part of it is gone. If you cant address those things, those things will fall away. Future . K what is the who is developing the values for the next generations . Its hard to look at the United States and European Union be looking at china, india, emerging economies. That is a bad message to send to the next generation. If you thought there were World Leaders prepared to address it, but when you look at the u. S. , britain, france, you dont see that. Bumming us out on a monday. Ian bremmer you are sticking with us. Snapping a fiveday losing skid, breaking 50 a barrel per we will talk about fiscal breakeven and investment in the United States. This is bloomberg. 29g has resubmitted its billion dollars after a previous offer was rejected here it the countries that it will consider the new offer. Medical supplier becton to for 24 billion. It seems like everything is coming to a head as President Trump enters his 100th day in office. Kevin cirilli with this is, a possible with us is Kevin Cirilli come up shutdown, possible tax reform. Do we know what is more important . Kevin we dont. They want to avoid a Government Shutdown at all cost because comes one day before the 100 day marker of President Trump. Night, house Freedom Caucus members will discuss her Health Care Policy proposal. On wednesday, they will unveil some type of barebones tax plan. David i talked to Mick Mulvaney, he said the most likely thing on friday was a oneweek extinction and do these week to week government things into the summer. Is that being kicked around . Kevin it is. That could throw a political wrench into all of this. And tom perez will be rallying folks today on this lastminutey hijinks could pose a risk for them. This is a president who ran on the notion that he would make government more efficient. Thank you. We are joined by the chief global strategist at horizon investments. Still with this is ian bremmer of the Eurasia Group and j. P. Morgan asset management. A practical matter, sort out for us what is really going on. I went back and looked at Donald Trumps pledge to the American People about what he wanted to accomplish in his first 100 days, one of them is what he could do as president , the other is congress. He has not done that badly on the first. The second is nowhere. Alongdoesnt get particular well with his own party. The democrats are solidly where as the republicans have issues with paul ryan. Paul ryan has issues with the white house. That is one of the reasons the trump agenda has stalled on capitol hill. David there was a cold that said 96 of the people who voted for donald trump would vote for him again. By the way, they dont like the democrats even more than they dont like the republicans. An astonishing coal. Anytime you get 96 for anything, that almost defies credulity. It shows the trump bases very supportive. That is why there may be an element of hubris at the white house that they can dig their heels in on funding for a wall. I think that will backfire. There are republicans like paul ryan who wont go along. When it comes to tax cuts, drilling down to wednesday, is there an idea of how much they will be extended for . 10 years, two years, does that change the way people invest and save . They have anyieve idea. It is an improvisational. In the next 48 hours, they will come up with general principles, but i dont think they have decided on the details come all border adjustment tax, whether we will pay for this come on and on, and i doubt this big issues will be resolved on wednesday. Jonathan talk to me about the diminishing marginal returns on political rhetoric. He tweets, the market reacts, how long can i go on . The market is taking a nuanced and balanced view. We saw initial enthusiasm to these three themes between november and early january. Since then, markets have become more realistic, so it will be back and forth. Us the reality check of the prospect of significant tax reform and d. C. This is less italy and eglinton than the markets had assumed. Nothing moves in washington, but lets be clear, he is the least capable man who has been elected , three months in, nothing broken. That is awesome. Cant explode or break things and professionals are starting to come in. Tillerson is having a better week than he was a month ago, Michael Flynn is gone. You have mcmaster, listening to the generals. That is why the syria tax went well. He is one guy come of the administration is a big beast. The greater number of weeks we get under our belts when you let the machinery start to function, the more reduced the significant risks are that electing trump is a real problem with the country. David take us forward to friday at what are the odds they will shut down their own government . 40 . Y be the stronger possibility is there is another extension. We are good at kicking the can down the road in washington, and we may have onethree extensions before a deal gets cut. David thank you very much. Jonathan you will be sticking with us. Coming up, barclays u. S. Head of Asset Allocation joins us as we count you down to the market open in new york city. From new york, you are watching bloomberg. Jonathan alix still with us or our guest. Can you walk us to the next 72 hours . Is thebig dynamic here chinese knew that if push came to shove, the Obama Presidency would never consider military strikes against north korea and the chinese responded accordingly. This Chinese Government have nowhere near that level of certainty, and volatility, madman theory as nixon used to say, does move the chinese. Thehave seen them cut off air china flights directly to pyongyang and are considering tougher sanctions, a direct consequence of the Trump Administration using military intoric and some posturing the region to push the North Koreans around. Si sanctionsose to would threaten the regime . Absolutely not. What happens over the next 312 months . As they get closer to the considered redlines of the trump , miniaturization of technology will hit the u. S. With icbms, if you listen to what washington has been saying, we will hit these guys before they get to that point, but we also know trump has changed his mind many times on many issues. He might find out north korea is more complicated than he originally thought. Alix how do you factor that into Investment Strategy . Gold since march. P 75 sk premium . Ng a ri yes. Everywhere around the world, fundamentals are looking better, so everybody has to balance those parables, but we are still seeing Earnings Growth come through. Jonathan our foreign policy, the president has been a success at the u. N. , china taking on north korea. Is that a surprise to you . It is less of a success than people think. Allies feel closer to the u. S. Now than before . They are more unsettled. The reason trump will have success is not because of what he is doing is good, but because the United States remains the only world superpower. If your canada, you will take it. The australians . He hangs up on the president after half an hour. Example are looking at the u. S. Relationship saying this is a disaster and we will move in another directions. Southeast asians, the same thing. If you want to grade trump so far on foreign policy, beep us, plus, c minus. Jonathan ian bremmer come alwa ys appreciate your time. Coming up, imagine being this guy and having no idea what the price of crude will be in the next few years. From new york, this is bloomberg. Did you know slow internet can actually hold your business back . Say goodbye to slow downloads, slow backups, slow everything. Comcast business offers blazing fast and reliable internet thats over 6 times faster than slow internet from the phone company. Say hello to internet speeds up to 250 mbps. And add phone and tv for only 34. 90 more a month. Call today. Comcast business. Built for business. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Buy risk. Buy, futures up big time. We are higher by four percentage after Marine Le Pen will head off with Emmanuel Macron. The nightmare risk unlikely to materialize for markets. Core Government Bonds, yields up , 2. 30 on the 10 year, and capturing that turn and risk sentiment, a stronger point. A full percentage that is the story the markets. News elsewhere, here is emma chandra. U. S. , the white house talking tough about including money for its Mexican Border wall and a mustpass spending bill this week, making the Government Shutdown more likely. White house Officials Say they dont know if President Trump would sign a spending bill without money for the wall. Democrats say they wont go for it. Maysminister Theresa Conservative Party is making a bid for labour party voters. Part of the platform would put a cap on household and electricity prices. In france, Marine Le Pens far right National Front is as aking Emmanuel Macron candidate of oligarchs and banking lobbies. Marine le pen and Emmanuel Macron received the most votes, the runoff may 7, and macron is a heavy favorite. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am emma chandra. From parisoining us now, the state of play over the last 24 hours and how we set up and how the next two weeks will proceed . With Emmanuel Macron leading the first round, followed by Marine Le Pen, the challenge for Emmanuel Macron is to make the next two weeks attainable and make sure people go photo in the runoff, because even though polls show Emmanuel Macron is likely to win in the runoff, we can also say the chances of , onee le pen to be elected number last night, 7. 5 million french people voted for her. Say 50 abstention rate, she only needs 4 million votes to be elected. Jonathan we appreciate your time. What will marry her draghi think on thursday as he weighs in for the ecb. Be quickeron may than economist anticipated. Most say mario draghi will revise Forward Guidance in june, six months sooner than an earlier paul. Joining us is Bloomberg Intelligence euroarea economist. For the ecb, the prudent response would be to wait until the second round, if they clear the political hurdle, what is next . Good news what happen yesterday. The ecb can take france out of the worry box. It looks clear from the polls that macron will be the next french president , so now they can focus on the Economic Outlook. The latest soft data out of the eurozone, outlook is looking much better. We will wait for gdp figures next week for confirmation, but for now, the ecb does not need to do much. Jonathan everyone is waiting for core inflation to go up. In the meantime, questioning the sequencing of the removal of accommodation and whether ford guidance will change. Saying no it is not. Investors are saying it is will. It will. How did those two things reconcile . This weeks meeting will not be a eventful. There will be no new macroeconomic forecast. The june meeting will be more interesting is a lot of people expect ford guidance to be changed, maybe the balance of risk . We believe september would be the best timing. Draghi is looking for 2 in the confidence and around 2 , but the criteria is not filled now. Alix how accepted is policy normalization in europe for the markets . It is seen as something a long way away. We are seeing exceptionally low levels of policy rates and bond yields. We could go a long way before we start to change the fact that compared to income, equities around the world look cheap. In europe, they look extraordinary cheap. Europe, that across to low prices, higher prices in the and market, it is extraordinary difference that will take a long time to go way. Alix what happened to spreads, bunds. Ries, oats, where do we end up if we see synchronized Global Recovery . There is an awful long way to go. We have not finished with the french political process yet. We cant take policy out of the picture yet. Eventually we get back to levels that are more normal, its just they are a long way away. David i understand mario draghi would assume pass in this meeting, but he cant. Him. Yone going to believe doesnt he have to say risks are more balanced . There has been the debate around this. The chief economist at the ecb, some pratt, said there is on the downside. Mario draghi had to reverse the two rate hikes of his predecessor in 2011, so he knows the risk of moving too quickly, hiking rates to quickly, so he will probably be more patient. He still has a majority of the governing council behind him. David put aside weather moving say thekly, simply to risks are balanced is not seem dramatic. That will with the markets react to the balance of risk . In some ways, markets would like to see higher rates. Equity investors tend to believe that higher rates and moving away from this quite miss crisis atmosphere we have been ,n for several years since 2008 and our work shows in the early days with Interest Rates going up from low levels, stock prices do just fine, so stock markets are taking it as confirmation that the good news in the Economic Data which is after earningsong in europe, profits growing, i think he would see Interest Rates higher as a confirmation that was happening. Not expecting too much change in the shortterm. Jonathan banks are the epicenter of the squeeze. To get behind the banks, they need higher rates . It is part of it. We think europe is getting towards the end of that. Higher rates will help. U. S. ,siness models in the First Quarter earnings pretty strong. It is a number of different things, but step one is removing , reducing the level of Political Risks. The hikes and how mario draghi has reverse some of them. He steps down 2019. The real issue is whether or not we can believe these economic earnings numbers we are seeing. If we can, a little more cannot make that much difference. Alix who has the power in the Central Bank World . Is it really mario draghi . Is that what it will take to get money coming out of the u. S. Into europe . He is still one of the most powerful men in europe. Policydes whether ecb and where it is heading next. You see it in the reflation trade, markets reacting to politics. The french politics is not going away, even with the secondround coverage you have parliamentary elections and elections in september, so this is not over. Political risk is Something Likely to keep driving the markets. Thank you very much for joining us. What will have a meaningful rise in yields in the , it has to be the ecb. You have to see money flowing, otherwise, game over. They are holding it down. It is no question. Qatar coming up, the finance minister joining us. Where is it going . This is bloomberg. This is bloomberg. Parker,p, Keith Barclays head of u. S. Allocations. And now to your Bloomberg Business flash. Wells fargo directors in danger of feeding voted out at tomorrows annual meeting. That is based on ballots counted so far. Unhappy overs are how the board handled last years bogus account scandal. Create a Hotel Real Estate Investment Trusts with a 7 billion enterprise for you. It has agreed to buy the owner u. S. And canada with the market cap of 4. 2 billion. Jimmy choo has put itself up for sale. The company will conduct a review of Strategic Options to maximize failure to shareholders and is seeking offers. The share price has rebounded to a level consistently above its 2014 ipo. That is your Bloomberg Business flash. Alix it is one of the biggest Sovereign Wealth Funds in the world Qatar Investment authority has 335 billion to invest, 35 billion to the u. S. , so where is it going . Joining us now is Ali Sharif Al emadi, qatar finance minister. Can you give us some specifics . Would do 35ment billion in the next five years. Thanr, we have done more 24 billion, mainly investing in real estate, technology, health care, and some infrastructure. We have 40 to go. We will focus on the u. S. Conomy and cities it is a winwin situation force and will create some jobs in the will be real focus estate, technology, and health care. We will look forward to investing in infrastructure. Alix a couple of questions. You are opening an office in silicon valley. Can you help us understand where in technology and how you will invest . Twoe just opened our office days in new york city back. Businessur expanding is to have another office on the west coast. Silicon valley will be a great city for having such office there and will focus on technology, especially startups and private equity. Alix you are looking for smaller startups . We are looking across the board for value. How much is related to an infrastructure plan from President Trump or fiscal stimulus allocated differently . Inwhen we put the numbers 2013, there was more discussion of the 1 trillion investment in infrastructure. We like what we see in the u. S. , and we will look forward to doing more things on the infrastructure side. Jonathan do you think of investments as a typical Portfolio Manager or the way some governments would foreign aid to wield influence in a certain region . Our Sovereign Wealth Fund is purely commercial driven. We go where we will have value, goes with Asset Allocation, diversification, currencies. We see here. We performed very well in the last two years, and hopefully that will continue. Jonathan in a market like today, risk on, risk off, heidi find that diversification . Its not about the shortterm strategy. Did in europet we and other parts the world, our investments are longterm holdings. Flip quickhere to gains. We are happy with the gains of the last 34 months and will continue. David when you are putting that sort of money to work how do you avoid reinventing the wheel . You look at large Venture Capital firms and look to partner with them as they go through those startups . Most of our investment is through partnership with people. Best reale of the estate investments in washington, dc. And it is one of the best projects we have. We have a very Good American partner, and this is the way we would like to see investment in the u. S. Your strategy for oil prices, the Financial Report reporting than the left investments help to diversify, can you confirm that . Standyou look at where we and oil prices as a budget, it 50 to 52ith 45, is average. Manage with much lower oil prices. We are comfortable where we see oil prices. We are expecting a minimum deficit, but if Oil Prices Remain in this range, we are close to our breakeven point. Alix some say your fiscal legit budgeten is 51 breakeven is 51 . Our budget is Public Investment projects, which is related to our vision 2030 and 2022 world cup. If you take the operating budget , its 30 billion. If you tell me what you need to than 70. It is less alix the rhetoric in the oil world is you will have more volatility. That volatility cant be good for a budget and trying to invest. Not 100 oil exporter. We are mainly an lng exporter. Pricelatility on the oil is a little bit. Underweight. Six out of seven stadiums have been awarded for the world cup. Surelan is to make monthsing is ready 1218 before the world cup. David as you compete in the investment market, do you have an advantage because you can move fast with relatively little bureaucracy. I have spoke to those who say they go offshore to Sovereign Wealth Funds because its hard to get it from Institutional Investors in the United States. We move fast. The major point is we look at things longerterm than others. We look at transaction and dont think people look at the volatility and risk. We look at where we are investing and where we are doing our business. Experience, we performed very well in these markets. Jonathan can you rule out coming back to the bond market . We are very much comfortable and i dont think so. Alix thank you very much. It is a pleasure to get your perspective. Ali sharif al emadi, thank you for joining us. If you have a bloomberg terminal, check out tv and interact with us directly. Go to tv on your terminal. You can even ask a guest a question. We did that. You send it in, and we asked. This is bloomberg. Jonathan high hopes for this earnings season, projecting doubledigit growth for the First Time Since 2014. Three of the top performers report results this week, amazon, microsoft, alphabet. The expectations for these guys, how high . Pretty big. Expectations are high for earnings, most in because we want to see continuation of strength we have seen, but specifically in tech, Financial Companies and technology, both according to bloomberg estimates racing for doubledigit yearoveryear Earnings Growth, 17 on financials, 16 for tech companies, so big expectations based off average analyst estimates. The. The financials with a poster child for the trump trade. What is tech all about, what is fueling the optimism . Is ame would argue there cyclical shift in markets, whether or not the economy continues to improve. I think they are a sleeper sector. If there is repatriation, you will have a Companies Use that here. Cant forget there are a lot of guys that have the president s in terms of the tech industry, and he will be listening to them and communicating with him. Growth in the u. S. Will be a big part of it too. Alix is that good or bad when you wind up reporting expectations are high, the risk on trade is happening. The expectations game is important. That is what earnings trade on. From the banks, we have seen some reticence on behalf of investors when they look at these companies, take Goldman Sachs for example, that does not meet their expectations. Their shares moved pretty big, almost 4 . The companys they want to make sure earnings beats, revenue beats, so a high bar to be crossed. Always appreciate your time. Good to see you. Coming up in the next hour, barclays u. S. Head of Asset Allocation joins us from new york city as we count you down. Viewers worldwide, you are watching bloomberg. Jonathan le squeeze dominates markets, risk on rally with Emmanuel Macron coming up on top. Trump says big tax reduction announced the wednesday. Doubledigit Earnings Growth back for the s p 500, analyst projecting the biggest gain since 2014. From new york city, from our Global Headquarters for our viewers worldwide, you are watching bloomberg. Here is the squeeze. Dow, positivehe 25 on the s p, big bid on equities in europe, all sectors in the green. We switch out the boards, bonds on offer. From the nine at states as well, yields up for basis points, treasuries up 10 on bunds, weaker yen, stronger euro in the fx market. Alix it is banks leading the charge. In europe, a monster rally, but spreading in the u. S. Citigroup up over 2 . A potential m a deal yet again. Up 17 , becton paying a premium of 19 , adding 10 million in debt. This is a medical services company, catheters, medical tubing. 1 billion in revenue from china. M a, akzo potential nobel is considering the third attempt of a deal by ppg companies, the bid at 28. 8 billion. Ppg saying this is the last invitation and will present a significant breakup fee as the ceo offers to split off the company and pay a special dividend. Thank you. In france, the epicenter of todays risk rally, Emmanuel Macron will faceoff against Marine Le Pen for the french presidency next month. Our the latest is correspondent from paris. Talk to me about the next two weeks. We are starting to get some details from Marine Le Pen and. Mmanuel macron Marine Le Pen will be on National Television tonight and tomorrow, then do her first rally in nice. Emmanuel macron is gathering his troops today to decide on what will happen how he will manage like we saw inrt 2002 when Marine Le Pens father was in the runoff. Chirac had, jacque warned against le pen. Jonathan some novelty around these polls. We believe them again. Talk to me about how important it will be for the second round as well. The snap polls at the moment show clear advantage for , probably more than 60 for the independent candidate, 30 to 35 for Marine Le Pen. Marine le pen still suffers from this glass ceiling. French people are opposed to france leaving the eu and the euro. Jonathan the first rally sparked by the elections now risk on. The 10 year and france at the lowest level in 10 months. Egg rallied for a bank stocks in europe as well. A big rally for banks stocks in europe as well. Do you fade the rally or chase the momentum. You enjoy this one. It is real. Europe has reacted correctly. The good news is now in the market, and we know the ecb, i think they will take a breather on thursday and push this one out to june. Do want a wall or a Government Shutdown . That will be tough for the market this week. Come wednesday, thursday, how will you feel when the president might have to make a big decision on saturday morning. Jonathan youre grappling with politics and trying to make sense of this. How do you do with that . You have to stick with it and believe in good things. Alix i believe in good things. We are making it great again. Some political harmony globally, europe, a reunification postbrexit. That is a good thing. Japan probably goes after the ecb. We know what the fed is doing. We are seeing a dealmaker in the white house. Has much as you can be concerned about monday, i think everything will be fine again. He will be focused on getting his tax reform through. I shouldnt say the ultimate dealmaker will blink saturday, but i dont think we get to that point. David you cant avoid talking about donald trump. We will talk about him shortly, but not right now. We want to talk about europe. Given your concerns about washington, is a time to invest in europe . I am positive the euro. Time the fed raises rates, a change in rhetoric, the wording in june, tapering discussions in september match prospective fed hikes, so that is why the euro is as stable as it is. As you look forward, the euro could be closer to 115, and a lot of people are still stuck with that parity view. As we shift, we will see of focus on the ecb. Schultz has started to lose favor in germany, so you induct with a macron situation with merkel, its probably very positive. The person who were not like that is theresa may. She may have to go for soft brexit as they might play hardball. Overall, i feel positive on europe. David there are positive Economic Indicators in europe and france, but one number youth unemployment in frances over 20 , 10 overall. Is there any prospect of that getting reformed under macron . I dont know. One hopes that he does. If i could twist to that reply come i would say the market and the voters in france said they were not going to get it under , so i le pen or fillon think the french are hoping for the better through macron. Outt out trying to work whether another candidate could come through, and i compared macron to trudeau. People are saying you need less 60 girls trying to work out the future of the world when the millennials someone closer to their age. Thats why i came to the view on tuesday that it would be macron who would win this one. For them, hope is the answer, but is it the definitive answer . I dont know. Jonathan does it matter about youth unemployment when you are making an investment thesis for europe . Does any of that matter when you can buy german cyclical with that revenue stream coming from abroad to play that proxy story . Who cares. It is coldhearted. Frankly, i dont care. From the people we talked to, that is not high on their list, although socially it should be. We are seeing genuine hope. Around junedistance with brexit come and now it feels like it is coming back. We also have china steadily getting on with the job and trying to settle their own economy down. It just looks better on a global basis. It all looks very good. Have got people like President Trump who will upset us, but we have discussed this before. If you can forget the tweeps and by the tweet dips, you can make money. Lets talk about that. What is confusing is the euro. Higher, butt gap up now we are treading water. Youre not seeing push through when it comes to equities in europe. It is not rising anymore per we are just holding that level. A we going to fade or hold this rally . Feel is you have to buy dips. Isnt master of pushing that boat out. You will probably see details around a tax holiday on wednesday. That is very bullish for dollar, although i dont think youll see anything on vat. You start to see more optimism around the fed in terms of them moving in june, so you have the ecb and the u. S. Matching each other, and that means a stable euro, however you are still seeing the base rising every time, and thats why the break will come on the upside, 111. When does that happen . Closer to may or june. Alix good stuff. You are sticking with us. Coming up, why the s p still has 7 to run, that is what keith parker will be telling us here at his target is 2500. That is ahead. This is bloomberg. Surprisednt trump everyone, apparently including his own staff, when he said he would have his tax plan by wednesday. Joining us now is our chief washington correspondent Kevin Cirilli. We getting a tax plan are not on wednesday . Afternoon,riday and seanuchin and spicer are briefing reporters on a series of executive orders and memos about walking back key parts of the dodd frank financial law. President trump walks across the street literally to go sign these executive orders, and on the way back tells reporters there will be a tax plan on wednesday. That caught everybody off guard. Going to be some type of skeleton tax plan released wednesday come up at the bottom line is that it is unclear whether or not this administration will weigh in on the controversial elements of this, including the border adjustment tax. Said fridaymulvaney they had not decided. Truthfully, we have not decided on the border tax. At the same time, they seem to be backing off the notion that it has to be revenue neutral. It seems they are willing to borrow money. Is if the ultra conservatives and tea party are able to get on board. They have seemingly signaled that they might not the going for comprehensive tax reform, just Corporate Tax reform. That would send a clear signal within the congress. The first hearings are underway. On a separate note on doddfrank, the House Financial Services committee will hold the first hearing on wednesday, so all of this is moving relatively quickly, but there does not seem to be much of a game plan in terms of executing the strategy. David thank you so much. Still with us is paul richards. You wanted to talk about donald trump in washington. This is the time. How do investors look at fiscal reform under the Trump Administration . Watched Steven Mnuchin and trumps tape isat strong. I thought Steven Mnuchin gave a brief press conference. The market popped up. I think wednesday is too soon, and if we were to see Corporate Tax reform discuss, that would not be enough. The market is comfortable with the 18th take an outcome of that need to see the middle class included in this. We need to see the continuing resolution, the primary focus this week, and next week tax reform, but we will take what we can get on wednesday. It wont take the markets focus away from the deadline on friday. David the continuing resolution is what they need to keep the , there seems to be a dispute about whether they will fund the wall or not. What if they are simply kicking the can down the road. Again, Mick Mulvaney said that was the most likely alternative. We have seen this in the. Ast, but there is a timeline this is a government meant to work. The reason we rallied in november was the house was on the same side as the president. If it doesnt work on Something Like this, but usually after the failure of health care, the market would not like it. We might get a weeks grace, but no longer. Comes to health care, they are saying they need to get health care done to have fundamental tax reform and affects how big the tax reform could be. Do we need to get through Health Care First . The problem is those of become the bargaining tool for the president versus his wall. In that situation, i would not want to be in the president s shoes on that debate. It will be easy to say no to a wall. Blame each other on who owns health care, but if we were to see a Government Shutdown on the weekend, at the end of the day, the republicans might end up owning health care, and that would not be a good situation. Price this. As to it wont do it today. There is too much euphoria around europe, but by thursday morning, this becomes a market focus. Past, itpe and the doesnt mean the market corrects. It just stalls. Then you await the outcome. Alix alix in 2013, the market rallied. Its like you have this huge package, and the market and probably the president wants to get everyone in a room and say lets do a deal. Welcome to washington. This is the key. The present is realizing that is not how it works. Deals are not done around the board table, and that frustration could show through thursday are friday. There will be a lot of tweeting this week. Is then where difficulty, the Republican Party or the democrats . The republicans took on obama for eight years and the Democratic Leaders have said we will take on the oval office for the next four or however many years. This to me is why it could be david onte decider thursday. Put this all together and come up with what your base case is. Gdp growth is what the markets are looking for. What sort of gdp growth you think we can get and how dependent is it on fundamental tax reform . In a couple of weeks, is tax reform going to be a reality . I would say yes. Will we have a government working and not shut down . I would say yes. I think compromise will be found, and then the market will say that is fabulous, europe is working well, the world is working well, the fed raises june, andpectively in that therefore will take the gdp expected around 1. 2 on friday for First Quarter, the market says we are probably headed towards 3 gdp on an annualized basis come and that is good stuff. They look at europe, and that looks positive, and suddenly everyone says our valuations are too high. Of people soldot stocks concerned about france. What you do today, or in two weeks when washington looks good . You dont stand in the way of momentum like this. If the trump rally does not connect, it stalls and consolidates come and that is a great thing to do i do get a correction or a consolidation. Ishink the consolidation assigned the market rallied remains a real and linear and i would not stand in the way of it. Again, i am an optimist. Jonathan the optimist is sticking with this. Three of the biggest dames in names in the nasdaq report thursday. Barclays head of u. S. Allocations tells us why the rally is just getting started. Futures up big time. This is bloomberg. Alix futures pointing to a by 187 pointse up on the dow. You are the optimist. What do you do today . You buy. Alix you dont fade this. You get in there. A week ago, a lot of people started selling and got concerned on france. Say,ome back in today and how can i ignore this rally. Banks are uppean 5 to 6 today. Stabilization factor that comes out of france, you no longer have a 10 year u. S. Treasury at two. 20. It is testing 2. 30, and that is good for the market. Stable dollar, stable equities in europe. Alix do see more shorts in the treasury market . They were rolled up a lot, particular the fiveyear. You are no longer worried about 2 . When you take french risk out of the way, you begin thinking about what is the range on the 10 year in the u. S. , and that is realistically 2. 20 to 2. 60 . You have to be selling treasuries in this market. What would you fade, core Government Bond markets on offer, the euro firmer, European Bank stocks surging . Into therld was going again a week ago, i would be fading that when. The yen trade is back on. Even with the boj this week. I dont think you need that safe haven. You dont need gold in your portfolio. I never understand why people rush to gold anyway. You no longer have to worry to 45. L at 40 50 isbeen saying that the new 40. Tohink oil is headed back 55. Jonathan there is the famous quote, if people from mars or watching us on earth digging gold out of the ground, putting it in a hole, putting fences around it and standing there with guns, they would scratch their heads. Shouldle that own gold look at their gold. Alix i know the gold bugs. You will never convince me on gold. Cashhan coming up, the open in york city, futures up big, 191 on the dow, 24 on the s p. You are watching bloomberg. With xfinity x1. Family time is awesome show me the radio disney music awards. Just say it and see it with the x1 voice remote. And you can catch up on all the rdma buzz. With artist interviews. Past performances. And more available now on xfinity on demand. Xfinity the future of awesome. And to find out how to catch exclusive videos featuring rdma host jordan fisher. And the ardy goes to. Watch Disney Channel presents the 2017 rdmas. April 30th on Disney Channel. In the market this morning, lets get you up to speed. Futures are up 193 on the dow. 24 points on the s p 500, up big time in europe as well. The sentiment improves, tail , getting into the second round, it comes on top in the third. From the previous close on record, believe it or not, in last nightsession. 99,dollar index, down by and treasuries are up, the yield basis points by five or 6 30. Treasuries very much on offer this morning. Up to speed on the open is alix steel. The nasdaq in particular up 59 points, a record intraday and record closing high for the nasdaq. You are seeing a 1 move in the dow jones, it hit highs in the session in the fucose futures market as we get into the open. Totally risk on, the vest the vix 24 . This is your earnings for today. Earnings beat estimates, digital he digital gaming, and that helped the company weaker revenues in asia. Better revenue here and better sales in the u. S. And they have not adjusted price to compete with market share. An interesting tidbit. Because ofssed tissue sales falling 3 . Its sales growth forecast as well. The selloff in bond market, European Banks having a monster day. Citigroup leading the way, 50 of revenues out of the u. S. , a big breather in the relief we are seeing this morning. Jonathan thank you. U. S. Head of assets, bank of America Merrill lynch. Tonew it with the risk off that has come out of europe. It is there but at a magnitude a whole lot smaller. Why . Been saying the biggest disconnect between valuations and economic earnings trend was really in europe and the removal the downside case today, you are seeing that pop and as for as investors, i think what were seeing a relative equities by 3 and you is equities 1 , is a line in little bit less than what we have seen recently. I agree 100 . European european markets coming under a little pressure, u. S. Markets were more flat. So i think it is much more european centric. A lot of people talking about the money that went into europe. Do we assume the money begins to bleed through europe and the sacrifice of some of the valuations in the u. S. . , the rally is underweight and short covering, were seeing that today. Your point, 100 billion came out of your equity fund last year. I think the runway has much further to go. It morewe would pair first with japan and modest underweight in the u. S. A note out last week that said you were reducing exposure because of the rest the risk. We are still in an awkward stage where data is showing some signs of fading and softening. At the same time, the fiscal and the u. S. Could be the upside risk. We have to position for the downside case in case u. S. Reducingsappoints, so some cyclical exposure but a moderate tilt still because that benefits the most. We are seeing today with rates and banks, quite significantly. A huge rally underway. What do you do . Up 25 points and by the end of the day, like two . Been on theve sidelines for the last couple of weeks and there has been nervousness about what would happen in the political environment in europe. You are seeing earnings globally moving in the right direction. Are in therkets right direction and in the u. S. , it is actually the laggards here. You are seeing more, analysts revising estimates down instead of up. Powerful they are very for the environment. That is the last forever we need here in terms of we had the the market, then really subdued volatility here. Lets see what tax reform does. Whatever they decide to deliver, it will not he a Straight Line up. A lot of volatility will come back into the market. The president says it will come wednesday. I do not know what led the announcement of the big tax reduction. What do you need to see to continue the kind of sentiment that has begun monday morning . Concrete evidence that what it is and how quickly it will move forward, investors have rightly now thought that we will potentially get it through towards the end of the year and potentially next year. The trump trade has softened up a little bit. You have to remember the last time we have seen competence of tax reform was 1986. It took two years. To needed a bipartisan gain push through. Oh most failed several times. The most likely scenario is you get a watereddown version of the blueprint, but we need some advancements on tax reform in order to get the market to continue to move forward. Will not get at a time soon, so where does the ncreased demand come from . Where does the demand come from . To marks point, corporate earnings are going up and corporates to have more profits to spend. To your point, i think the fist it is the key drive are of markets, whether rates and equities and you need that to prolong and accelerate. We tend to focus on the Corporate Tax cuts. Between personal income tax cuts , as the consumer in the United States . Middle to the lower end as contemplating, may not be, but in terms of what is affecting markets, the Corporate Tax cut is a direct to corporate and that is why it is such a part of the equity story. Alix potential doubledigit Earnings Growth. Although in the right hand side 10 since 2014. You mentioned other areas having significant exposure. Have . Do you have to we are looking for 3 this quarter. The largest we have seen in about five years, you are seeing good topline growth and good bottom line as well. Is you seeeaway analysts come in extremely excited about are the and they march to those down down down. This is the first time you are seeing analysts revise their. Rowth expectations alix industrials, they have good earnings but will that be enough . We know markets are expensive here. Is why we see investors moving more toward emerging markets and europe to get the cheaper valuations. The positive trend we are seeing, it is a nice backdrop to help ring a baseline to the elevated market. We know markets do not end because of valuations. , still havetation. Ot really seen it kind of plateaued and steadied out. Where is the actual money being put to work . The money is in both bonds and equities, which is normal. Waiting for a great rotation, you might wait a while as relative equity allocations reach quite a bit higher. You will start to see money creep into europe in a big way and fromcouple weeks, u. S. Catalyst perspective, i think a fiscal package will deliver significant him interest at the expensive rates. What would it be . Risk a dust riskadjusted right now. In the markets, 10 minutes in, lets get you up to speed. Equities are up by over 200 points, the cash open on the dow, switch up the board, very quickly. Treasuries on offer, yields up by five basis points, 230 on the u. S. 10 year. You are watching bloomberg. Next coming up in the hour, president and chairman, she joins our very own alix steel. Alix the dow jones up by over 200 points, the sectors really beating, financials, industrials, tech, materials, all up. All right. Here, what has the value . I think financials have a tremendous by here. We will have less regulation, if you think the economy will jumpstart, the bank had a fantastic q1 earnings so far. Strategies,buyback and energy here has been on its hindlegs but energy, if you energy back to the energy crisis, we think it will continue to move higher throughout the course of the next two months. Live ups not going to to 65, if you are taking the exposure off, would you be more negative on energy . We compare energy versus material to take the risk off. Materials have been historically the worst performer as we have the risk around inventory d berated and significantly, we are seeing dividend yields as a hold value so we do like energy over materials against this backdrop. Story. Was the big a lot of the socalled trump trades, softened up. Materials, a lot of excess capacity there. Overall, when you look at the trump trade related to infrastructure, and enormous move in the pes relative to the market with little followthrough from earnings. They have been pricing a lot of that and they pulled back a bit. Financials are part of the market that is relatively attractive with the trump trade. When you think of the trump toward theskew it things that are easier for the white house to get done, is that all you are thinking about it . Yes, first and foremost. You need tax return tax reform to come first. In fairness, it has not happened yet. Fall, 200 billion in this years budget versus a 1 trillion number. Would you feel differently about materials . In terms of the way we are playing it, we like industrials versus tech where tech is not a big beneficiary of lower tax given the profits held abroad. Whereis a long runway investment in the u. S. Was 19. 5 . Profite corporate covering the potential for increased fiscal spending. I am curious about tech. If you look at microsoft, amazon, alphabet, you call them all tech. They are different businesses. An advertising business, how can you group them together . Dont different factors affect them very differently . , a significant rerating in the likes of microsoft, a group that is different from what we saw 10 or 20 years ago. As bigot think they have a tailwind from the infrastructure, more so fiscal trade. Tech has shown a solid trend so far with earnings. You have seen topline and bottom line with a fiveyear high here it will continue to see positive momentum as well. Will will you be steering a way from in the cycle . Staples, utilities. You think about the focus on utilities, if you look at the yield in telecom, it is above that of utilities. The payout ratios are lower, which is positive, and utilities are trading more in line with 17. 5 or so. Better offers you a evaluation for better yield. Stingley from utilities and staples, trends in staples have not been sent not been spectacular. We still have the 10 trading under 2. 3 . We like staying away from discretionary, the slowdown in ther market momentum plus rise in rates, albeit gradually, had the consumer. We do Like Health Care and telecom or utilities do not benefit much at all from potential tax plan. Thanks so much. Great to get your perspective. Great to see you guys. , watch us online, click on our charts and interact with us directly. The nasdaq hit another record high. This is bloomberg. Fdr was the first president to talk about his first 100 and office, but President Trump talked about a contract with the american voter, what he tried to get done by this coming saturday. Here for an early review, marty, how is he doing . Some things, he is doing well. On his replacement on the supreme court, he got that through, though they had to change the rules to do it. He has basically kept his promise to his base. Is still very much with him. He has not been able to reach outside of the base. Are good and some things are not. They had a rock you start but things seem to calm down a little bit. Health care was something he said he could get done right away. He stumbled on that. Is it likely to bring it back this week . Not one you have a budget deadline of this friday. Congress is not technically back. The senate gets back tonight but the house not until tomorrow. It is four days they have to get the budget deal past. If you want to get obamacare repealed and replaced and get a wall Funding Agreement done, it is daunting. Downect this to go right to the wire friday night. To actually provide the analysis and execute accordingly . We know there are a lot of positions unfilled in the administration. Steve mnuchin has been working very hard to put meat around the bone of tax reform. This wednesday, we get the broad outlines of broad principles of the tax package. Do not expect specifics on wednesday. Where it is now that in june, you may get the actual package, and dont forget paul ryan has a lot to say about what is in that package and he just got back to washington today. Dont expect anything until june is the word we are hearing. Traffic cop, given his agenda, you need jim baker and leon panetta. Who is the first two could step forward and be managing this . Penceis interesting mike should cut short his chip to spend a little more time on trumps domestic agenda. I dont know whether mike pence is the guy to do that. It seems there are multiple cops trying to get this done. The house and senate leadership, previous in the white house, it is not clear. This is the call donald trump will have to make. Governmentt a shutdown if he holds out for the wall funding. That is the security of the United States of america according to him and for him to say democrats do not want them to be safe, isnt that the battle right there . Yes, but he is also a dealmaker and claims he is able to make compromises to get broad pencils done. Of enhancing Border Security with jones and personnel as a way he can claim he is moving toward securing the border without specific funding for the wall. As the clock ticks to word friday, it may get more compelling to trump the dealmaker. Maybe not calling it a wall, how about that . Great to have you. Have special coverage of President Trumps first 100 days live later this week, special guests including Alan Greenspan and friday, the former majority leader tom will be with us. I am actually off. Have fun . A tweet just came up on my screen. Deputy assistant secretary how are you getting this done . It is the only way, those are you still have the underlying risk. The risk comes out of the market. Emmanuel macron comes out on top. You are watching bloomberg. Figures is 10 of 1 a. M. In new york. I am vonnie quinn. Mark i am mark barton. Vonnie we take you from new york to london and cover stories paris and. And beijing. Here at the top stories we are following. A global rally is underway as macron is the french president ial frontrunner. U. S. Markets higher. We also look at the chances for Marine Le Pen to pull off a reexamine what is next for chinas bank. Tenure bond digitally regulatory high. Vonnie and budget talks intensify as trump pushes house republicans