Transcripts For BLOOMBERG Bloomberg Surveillance 20170424 :

from your. you also have some figures. mark: we have some german business confidence data crossing the bloomberg terminal. the latest survey, the business 112.9 was the figure, up from the prior month. and above the economist estimates of 112.4. german business confidence is increasing the expectations of the components of that. expectation was for a figure of 105.9. the german economy is in good shape. as is the euro zone economy. as we approach the ecb meeting on thursday, it is all about the first round of the french residential election. look at the cac 40 today, 4% higher, the biggest gain since august 2015. we are at the highest level since april 2015. the euro rising as much as 2% since december 2015, to the highest since november. 108.50 seven. the yield on the french 10-year is down by 10 basis points, and earlier fell as much as 11 basis points, to the lowest since january. proof that appetite for riskier assets -- we have gold falling 1% today, sinking the most in more than seven weeks. investors returning to riskier assets on speculation progrowth centrist macron will be france's next president. you so much.nk let's go to the bloomberg first word news. here is nejra cehic. president xie jinping has called for restraint on north korea in a phone call with donald trump. the u.s. and japan have begun joint naval drills in the region, and trump also spoke to his japanese under par, shinzo abe, over the weekend. xi urged all parties to avoid actions that might exacerbate tensions, according to cctv. the white house said it will offer up an outline of its task -- it's report this week, but specifics might not be ready until june. million he told his 28 twitter followers that a big tax reduction will be announced on monday. mick mulvaney says the full plan will not be ready for a couple of months. the selloff in chinese stocks has deepened, with the shanghai composite slumping the most in four months amid concern authorities are to get tougher on leveraged trading. late fridayr said it will strengthen a crackdown on irregularities in mental sector, echoing comments by the securities watchdog just days of earlier. mourning societies should prepare for decades of pain as technology disrupts the economy. he said the world must change education systems and establish how to work with robots to help soften the blow caused by automation and the internet economy. theresa may is conservative a cap onproposing household gas and electricity prices, as part of its platform for the june 8 u.k. election. the move is similar to a measure by ed miliband before the 2015 election. shares in u.k. energy suppliers are down sharply this morning. miliband's successor, jeremy corbyn, has set out his vision for britain if he becomes prime minister. corbyn: i want to see a very different country. i am it up with the way in which 6 million people do not have a living wage, in which a million people do not know what their wage is going to be from one week to another, in which there are increasing numbers of homeless people, and there are people with some -- with middle income jobs his children cannot get homes, cannot get housing, and cannot get on the career ladder because they are so saddled with student debt. powered byal news 120 600 journalists and analysts in with 120 countries. i am there. this is bloomberg. thank you so much. for the first time in modern political history, both establishment parties in france have been eliminated in the first round of the french presidential election. therist emmanuel macron won vote, setting up a runoff with marine le pen, who gained about 21.5%. the result triggered a relief rally on global markets, with the euro jumping the most in months, and stocks rising sharply across europe. french banks are up sharply this morning. aters in france will make final choice between radically different visions of the country's future in the next round, two weeks from now. let's get the latest with caroline connan, who has been covering the campaign from its beginning. great coverage yesterday. i know you were at the interior ministry has the polls were coming in. polls are not giving ma-- now win two weeksa from now. is that a given, or good things change? caroline: the danger would be if people do not show up in the and you would assume emmanuel macron will be the winner against marine le pen. yesterday, poll showing emmanuel macron will probably win against marine le pen by around 68% versus 32%. higher thee difference, the bigger the chances for marine le pen. .he beat her record she obtained about 7.5 million votes. a 60% participation rate, which would be unusual, that means she only needs about 4 million votes in order to win in the runoff. francine: i am looking at the differences in the numbers between, for example, the french presidential election, as far as 60 years back, and the brexit referendum. to 80%.ually 70% caroline: yesterday, the ulcers were wrong in terms of the of stanchion. we expected 30% abstention and only had about 20% abstention, which was in the average of the past residential election. francine: caroline connan joining me at maison blanche. it is a beautiful day here in paris. let's get to are you will -- to our guest in london. the market seems to be rallying. it seems like the market has now as the president macron next president of france. can anything still happen, or is it a done deal? >> certainly, the market is taking it as a done deal. look at the probabilities, it seems highly unlikely, unless we get a real shock event, which cannot be ruled out, that is pretty unlikely. i think the markets are taking it as read that we have macron as the next president, but then the debate turns to, how effective will he be? having checked out the mainstream political parties, you are in a situation where -- how effectively will he be able to govern? how will his reform program be effective? those are material questions over the longer term. .hat is the longer term the more immediate safe haven, we have seen this morning. the june legislative elections, there are parties that have not faced these sorts of hurdles before. let's put some hard figures on it. the euro went across 109, up 2%. we are a 10 basis point decline in 10 year yields. known, has as it is come in by about 18 basis points. rising today. how much of a risk rally is there to go from today's level? i would argue not a great deal. what you have done is price out a tail risk. to sit there and conclude that there is going to be wholesale further spread compression kind of ignores the good, old-fashioned fundamentals going on in the background. you just pointed out the ifr data and how well it is performing. the concept of the ecb support, and potential tapering, later in the year, or signaling tapering later in the year -- those are perhaps more relevant for the medium-term prospects from here, and do not argue we're going to see an ongoing compression and risk at this point in time. but charles, for example, mario draghi or members of the european central bank macron, look at whether if you becomes french president, get support or some kind of coalition. when did they start tapering? charles: what plans to put in place in france are going to be highly informative to the ecb decision over the longer term. the reality is over the next few months, most of this will be to do with confidence. if you look in the u.s. for example, where donald trump got elected, a lot of market moves were lot of the dynamics confidence related, rather than real economy related. foray get a confidence band the french leader in the next couple of months. but if we do see a big reform program, generally, the costs you some growth and some upside. it is going to be a fine balancing act. i think ultimately, in the broader eurozone, the data are good. and i think there is a case for itsecb to start unwinding program, on a very slow basis initially, but from q3 this year. it will start to signal that heading into next year. mark: what would you recommend today? charles: i think the most obvious trade to me is actually -- i would think we have higher yields,lds -- bund particularly at the long end. there will be some steepening, particularly at the back end of the german curve, over the next three to six months. what i look for a lot of spread compression in europe this month? i would say no. you still have second round risk and the execution risk, with respect to the french reform program, or potential reform program. that does not particularly argue for a much tighter spread at this point in time. i think elsewhere, perhaps the equity rally could have more legs, given that that has probably been quite suppressed, particularly in the financial sector. european financials can do quite well, on a credit basis. broadly speaking, a lot of it now depends more on, do we see the followthrough in terms of economics? what happens with the u.s. tax plan? when does the ecb start to signal that it is stepping off. diebel staysrles with us. let's get to the bloomberg business flash. says ceofargeholcim eric olson will leave the company in july. the world's largest cement maker did not immediately name his successor, but said the chairman will oversee the transition and the interim ceo. the resignation comes amid growing controversy about the handling of operations at a plant in syria. the company said it was not responsible for the wrongdoing. toshiba says it is spinning off four in-house companies into separate units -- infrastructure, energy, storage devices and industrial solutions businesses will become independent operations. toshiba is looking to spin off its profitable flash memory chip business to recover from multibillion-dollar losses at its westinghouse u.k. unit. two of the biggest health-care suppliers plan to combine. one has agreed to buy the other $424 million. -- $24 billion. it will offer everything from syringe is to infection prevention technology. luxury footwear brand jimmy choo has put a for-sale sign over the business, but the london-based company, which is undergoing strategic review, says it has not received any approaches yet. the sale is being brokered by bank of america, merrill lynch, and citi. it has a market capitalization of more than 37 million pounds. that is the business flash. francine: thank you some much. with outlooks counted from the first round of voting, france is set for a runoff between two very different visions of the country's future. but how will he a 55% of french voters whose candidate did not make it to the top to choose between independent emmanuel macron and the national front's marine le pen. i'm joined by a member of parliament, a prominent supporter of francois fillon. great to have you on the program. thanks for coming on. give me a sense of whether you now think there is no chance marine le pen becomes president. i keep being told she may be the first choice for certain people, but would not be the second choice of anyone else. >> most of the other participants in the election actually asked supporters to vote in favor of emmanuel macron. electoratesof our -- this is legitimate. i understand people who do not want to vote in favor of a candidate or a platform they will not support. program ofng the marine le pen and emmanuel , i have the analysis that -- there is a vote of comparison. i think it will be the vote of many. think manyo you people will abstain? if you have low turnout or abstention, that might play to marine le pen's hand. >> an election can always be lost. we have to keep that in mind. one cannot say today that it is sure emmanuel macron will be elected. thei do believe he has got first round of the election, and most supporters of other candidates will vote in favor of him. attention maybe high. marine le pen has more margin with other candidates as well. the obvious favorite of the second round is emmanuel macron. francine: if we see emmanuel macron being president, what does it tell us about what happens in june? , daschle youry party forming coalition with him? >> we believe we can get good results in the parliamentary election. we are presently with a political system with the socialist party, with a low score in the presidential election, but doing well in the country. melenchon got a very good result in the election. they will have good results in the parliamentary election as well. we have the macron people. we have our own candidate. nobody can guess the result of the parliamentary election today. francine: do you worry france's ungovernable, even if you have a president who wins by a big margin in the second round? unless he has support in parliament, how does he get anything done? you may elect a president of the united states who may have difficulties with congress as well. leading think we are toward a coalition way of working. discussions will have to be shared between president and parliament, if the president, which is very likely, does not hold a solid majority in parliament. francine: the whole platform of francois fillon was for change, to reform this country, that you believe is at the moment not working properly. >> the differences are sound. -- macron's program on economics are not as solid as ours. marine le pen -- we are obviously much nearer macron than le pen on that issue. but there are differences, for example, concerning labor laws. about other issues values, the sort of society we framen france, the way we and assert french identity -- the differences between emmanuel macron and our side are rather important. it does not mean there is no way to find a majority for a particular legislation in parliament. i think that can be found. but it does not indicate obviously there should be a coalition. francine: thank you so much for joining us. supporter fillon there. mark, i want to hand it back to you. i know we have some great guests coming up. we will look at what, but at what an emmanuel macron residency means for the markets and the banks. when mario draghi change the ecb's guidance earlier than expected and take a faster route toward tightening? ♪ francine: -- mark: mario draghi may take a faster route to monetary policy normalization than previously thought. rates or asset purchases are expected at thursday's meeting. most respondents to the bloomberg survey say the ecb president will revise forward guidance as early as june, sooner than him an earlier poll. economists also reduced estimates for how long it will take to taper qe. the head of rates at aviva investment -- a huge sigh of relief at the ecb meeting this week? charles: absolutely. no fires to put out this week. need to tweak a forward guidance? or should they just wait until after the second round, and then beyond? charles: you cannot really signal the all clear until the all clear has occurred. you need to get the second round out of the way. the data have been running strong. there is a case, potentially, for the ecb to be faster in terms of its withdrawal of support. if you listen to the comments, the most recent comments from draghi were, we cannot yet conclude that inflation has sustained. they do not really believe yet that although it is working so far, that they have created it on a sustainable basis. they want to see more evidence that it is really ingrained, that this momentum is sustainable. mark: i we going to see that push through into core inflation? we know the headline came down last week. above that 60.7 where it has been for a long time? charles: which is away from the emergency level. they want to see core 1%, and starting to drift higher, before they think it is a stable. they also want this close to 2%. i would not be surprised if -- they do not mind an overshoot a little bit. they could definitely claim victory and have a destination to roll back on policy. i think we should not get ahead of ourselves. it is coming. and based on the data we have got right now, the ecb is not going to do it at this meeting. as i was saying earlier, i think that the reason people are pushing for it so hard is because the outright levels in particularly the german debt curve -- the yields offered are so extreme that people think they have to correct, they have to correct now. and they will. they will normalize. but it is going to take longer than people will like. the ecb is being patient. todoes not want to have start rolling back on support, and see the inflation numbers roll over again, and have to reinflate again. it wants to make sure that the policy has worked, that there is momentum behind it, it is sustainable. once we have seen all of that, they will feel more confidence in believing they should rollback. thecine: the tape -- mark: tapering begins when, early next year? charles: arguably, you could say they have already taken in. they deny it, but they have slowed the pace of spending. they are not going to hard stop. at some point, announce an extension of qe. mark: that will lead to something else, possibly. charles: a dovish taper or if hawkish extension, whatever way you want to phrase it. they will start declining by around 10 a month, probably, so that by the middle of next year, you are pretty much run off. mark: up next, treasury secretary steve mnuchin calls the imf outlook for the u.s. a little conservative. the president signals a big tax announcement. in the trump trade make a comeback? ♪ mark: i am mark barton in london. here is nejra cehic. anda: emmanuel macron marine le pen have topped the first round of the presidential election. the result triggered a runoff on may 7 between two radically different visions of the country's future. macron, an independent, had 23.8%, and national front leader le pen had 21.5 percent. a snap poll suggests macron will defeat le pen by more than 20 percentage points in the second round. the result triggered a relief rally on global markets, with the euro jumping the most in a month and stocks rising strongly across europe. the selloff in chinese stocks has deepened, with the shanghai composite deepening the most in three months amid concerns regulators will get tougher on leveraged trading. the government said it will strengthen a crackdown on irregularities, echoing a securities watchdog days earlier. jack markell alibaba is warning society should prepare for decades of pain as technology disrupts the economy. change the world must education systems and establishment to work with robots to help soften the blow caused by automation and the internet economy. theresa may's conservative party is proposing a cap on household gas and electricity prices as part of its campaign for the june 8 election. the move is similar to a proposal made by labor party leader ed miliband before the 2016 election. shares in u.k. energy suppliers are down sharply this morning. meanwhile, miliband's successor, jeremy corbyn, has set out his vision if he becomes prime minister. corbyn: i want to see a very different country. withangry, if not fed up, a country in which a million people cannot on a living wage, do not know their wage from one week to another. who aree people apparently secure in middle income jobs, whose children cannot get homes, can i get housing, and cannot get on the career ladder because they are so saddled with student debt. nejra: global list on a four hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. mark: treasury secretary steve mnuchin has called the imf outlook for the u.s. economy a little conservative. he repeated the trump administration goal of getting to 3% growth. he spoke in a conversation with christine lagarde during the spring meetings in washington. steve: i think the u.s. economy is well positioned for growth. we have been in a period, post financial crisis, where we have been at suboptimal growth. orbelieve we can get to 3% more sustainable economic growth, and the difference between that and 1.8% for the u.s. economy is quite significant. growth fork economic the united states is good for the world economies as well. that is really our priority. housemeanwhile, the white says it will offer an outline of its tax reform plan this week. the specifics may not be ready until june. over the weekend, president millionlling his 28 twitter followers a big tax reduction will be announced on wednesday. budget director mick mulvaney saying the full plan will not be ready for another month. so much to discuss. let's start with the tax plan. the market eager for details. the trump trade seems to be running out of steam a little bit. do we need meat on the bones? charles: absolutely. the key question is, how much physical extraction are we talking about? key question so far has always been around the border tax adjustment. that was where a lot of the meteor bits of the tax cut or the tax reform package that was being proposed -- that is where the funding came from. as it stands, the signaling that we have seen with suggest that -- brian'st be border tax adjustment plan may not be part of this tax package. the question is, how budget neutral are the proposals going to be? -- moreare more on that or less budget neutrality type concepts, the actual stimulus in the u.s. economy is not going to be that much. we are keeping in mind that the u.s. economy is doing quite well all by itself and does not necessarily need a strong physical match at this point in time. arguably, you could be waiting for a potential slowdown in the economic outlook to instigate your fiscal stimulus. 3% realistic? steve mnuchin clearly thinks it is. charles: i think that is probably trying to push the u.s. has its natural growth at this point in time. to get the u.s. running at 3% ignores how the economy has evolved. it is not the 1960's anymore. the nature of the economy, the nature of the population demographics, all the structural shifts, we think, mean the growth rate is closer to 2.5% them up toward 3%. on that basis, if they are trying to get to 3%, can they do it? yes, by a big this goal thension, but that is not bond market. the 10 year chart. we have been stuck at 2.6, 2.2 since november. moreed is not going two times, the market is telling us. charles: that is embedding probably that the market thinks the fed is going to more times. funds rate is not going to be as high as the federer for testing. if you think of it from a conventional economic point of view, the long and will always discount the fed funds rate's first, and then the front end catches up. if this sticky nature, somewhere isween 2.5% -- that suggesting were the fed funds could get to. that is the stopping point for fed funds. mark: you think it is roughly 2.5%? charles: that is what the bond market believe, and is trying to tell you. unless we do get this big push from mnuchin and an expansion in , i thinkl outlook probably the yield curves for the year are more or less in line. mark: a week ago, we were at 50%. june, yes or no? charles: personally, i think no. but i certainly think we will see two more moves this year. i think likely september and december. if we see the probability go about 75%, it is more likely it will happen. but i personally think that is the data swings. francine: -- mark: probabilities can move on a dime. charles stays with us. stay with surveillance. plenty coming up today. the latest on the u.k. general election, as the conservative party looks to broaden its appeal. jeremy corbyn sets out labor's vision for government, next. plus, chinese president xi tries to calm tensions on the korean peninsula, and the u.s. and japan begin ebola exercises. -- begin naval exercises. ♪ mark: let's get a check on the markets. here is narrow. she is still standing. nejra: it is risk on. a broad-based rally across european stocks. the stops -- stoxx 600 up 1.7%. 3.7%.ro stocks 50 up francis cac 40 at almost two-year high. european stocks have risen the most since september. and germany's dax index rising the most since june 2016. onthe fx space, most focus the euro, up 1.2%. we did see it go as high as 109.37 in sunday's session. it hit a five-month high. interestingly have seen a bid for some of these nordic currencies. in terms of norway, that is risk on, being an oil commodity currency. with the swedish and danish krone, some people have said this is about some concerns about a breakup of the e.u. easing back just a little bit. space,fixed income broadly, we are seeing yields lower in france and the periphery moving higher, on the german bund 10-year, the gilt 10-year, treasury 10 years rising. gold down. euro-dollar.t euro-yen is where we saw a jump of 3% in sunday's trade. that has come down a bit, up 2.4% on euro-yen. we're seeing it unwinding, the bearish positions, if you look at one month risk reversals on euro-dollar and euro-yen. this catches the second round of the french presidential election. i would not say, looking at these options, that the positioning is neutral, but certainly less bearish than it was before we got that result from the first round. spread,at the lat bond we have seen a tightening in the spread of more than 18 basis points. .e are now at 49 basis points francis 10-year gilts has hit a three-month low in the session, down nine or 10 basis points. the 10-year bund yields up nine basis points. this yield spread at its lowest since january. finally, a look ahead to other things. gold sinking the most in seven weeks. that is about risk on. the bloomberg dollar index trading at its lowest level since the u.s. election, even though the dollar is gaining against the yen. it is losing against most other currencies. attention turning somewhat to u.s. political risks this week. we are seeing the dollar and gold moving in tandem, falling. mark: theresa may's conservative party proposing a cap on household gas and electricity prices. that is part of its campaign platform for the june election. a move similar to a proposal made by former labor party leader ed miliband book or the 2015 election. in energy suppliers are down sharply this morning on that news. meanwhile, a new study from deloitte shows consumer confidence weakening in the first quarter. households the most pessimistic on their finances in more than two years. separately, a property website says london house prices posted the largest annual drop in almost eight years in april, as buyers shun the capital central area. still with us, charles people -- diebel. comrez putting the tories on 50% support for the first time since 1991. is the risks to the economy? clearly much better, but the consumer confidence data, the retail sales data -- is that the big risk for the conservative -- may's hopess of a bigger majority? charles: the polls are telling you something, such as the magnitude of difference. it is hard to see her not winning. but the timing is significant. they have pulled this election and a time when you are coming off a relatively good economic performance. a lot of the brexit fears never materialized. and although they may yet be to come, you are in a situation where things look reasonably good at this point in time. now, or six months from the economic picture might not be anything like as rosie, and your chances in an election would not be as good. that explains the timing. there is some concern that confidence is at risk. think about it another way as well. if we do have a longer timeframe to negotiate the brexit, that should help sterling. it should help the imbalances. we might see a change in yields as well. we have seen a bit of reaction this morning. we should start to see higher base rates. mark: the targets for the 10-year, where are we, 1.35? charles: i think by the end of the year we could be in the 1.60, 1.70 area, 40 basis points. that is largely on the confidence issue. --hink for the concept of that we do enter a longer negotiation period, that settles on a reasonable or a moderate brexit deal, rather than the extremes. mark: sterling, does it stay around these levels? another leg up? charles: we are constructive on sterling at the moment. we think it should move toward the 1.32.5, maybe 135. broadly speaking, it is in this big range. there is the euro on the other side. it comes back to the tax package. if there is a big question of the u.s. economy, we may need to see higher rates are higher yields, and that would lessen our target. for the time being -- mark: that saw the number of 100. does that majority give made more confidence more at home to face both extremes for parties, means her mandate from the people -- what about the e.u. side of the equation? does anything change? are they still going to want to make the u.k. an example? charles: the idea of making them an example, i think, is slightly miss founded. honest, the e.u., it is in their vested interests also to have a reasonable deal. they are not going to want the u.k. to benefit massively from having left the e.u., but equally, they do not have a vested interest in punishing the u.k. ,opefully, cooler heads prevail and we end up with a reasonably solid and well negotiated deal that allows economic prosperity. what would a macron victory mean for brexit negotiations? that is out there, but hold that thought. we will come back to that. charles stays with us. up next, exercise caution. xi are just trump to show constraint over north korea. the u.s. and japan begin naval drills. korean peninsular tensions. ♪ mark: i am mark barton in london. here is nejra cehic. nejra: ceo eric olson will leave the world's largest cement maker in july. he did not immediately name his successor. the chairman will oversee the transition and the interim ceo. the resignation comes amid growing controversy about the past handling of operations at a plant in were-torn syria. the company said olson was not responsible for the wrongdoing. toshiba said it is spinning off in-house companies into separate units -- the infrastructure, energy, storage devices, and industrial solutions businesses. toshiba is looking to sell off its profitable flash memory chip business to recover from multibillion-dollar losses at its westinghouse u.k. unit. two of the world's biggest health care suppliers plan to combine. one has agreed to buy the other $424 billion. the deal will create a powerhouse that could offer customers everything from syringe is to infection prevention technology. brand jimmy choo has a for sale sign over the business. the london-based company, undergoing a strategic review, says it has not received any approaches yet. the sale is being brokered by bank of america, merrill lynch, and citi, with a market capitalization of 637 million pounds. chinese president xi restraints called for on north korea in a phone call with donald trump. the u.s. and japan have begun joint naval drills in the region. spoke to shinzo abe over the weekend. the japanese prime minister made clear his support for america's stance on north korea. prime minister abe: japan-u.s. bilateral talks were just held over the phone, and i had an in-depth exchange of opinion on the north korean situation with president trump. i conveyed to president trump that i highly value his stance of putting all options on the table, both in words and in action. charles fromwith aviva. we were talking about tell risks and those big geopolitical risks , with syria, north korea. charles: very hard to trade, to be honest with you. obviously, korea has come into the headlines over the past couple of weeks. it is something that stops fixed income focused -- focusing on fundamentals, if you like. we get drawn into this "something might happen." you cannot position, because it is very much a tale risk. one hopes that cooler heads prevail and you get a sensible, non-extreme outcome. but the outcomes are so binary that they are impossible to predict. there is a lot going on in asia, and particularly in china. imbalances, they have definitely taken a foot off the fiscal stimulus. lot into theting a economy last year. they have stepped back. they are clearly trying to curb some of the imbalances in the chinese economy. that is a difficult thing to do. so far, they have gotten away with it. but it does feel a little bit like unstable equilibrium. we if that is the case, could see potentially a sharper slowdown in china, which would reverberate around the rest of the world. mark: the big central-bank meaning aside from the ecb this week is the boj. this is the japanese yield curve. ago,ellow line was a month and the green line is today. last week. kuroda francine did a great interview. he said we will remain accommodative. if they were going to tweak it, what would come first when it comes to their policy? coming less dovish? charles: to be honest, i think a lot depends on dollar-yen. if dollar-yen remains in the 105, 115 range, i think they are relatively sanguine. if the yield start to go down through 100, that would pose a significant threat to a lot of the objectives. that is when i think you would probably see qe expanded once again. for the time being, the markets appear quite happy not to really challenge this yield curve control. they have had one or two run-ins with the bank of japan. bank of japan stepped in. the market has sort of taken on a relatively sanguine basis. that is just the way it is going to be. problem, really, is, how successful are they going to be at generating inflation conditions? the jury is still out. i do not think, as yet, you have beaten the deflation theme in japan, and thereby, maybe not for the next few months, but certainly, if we reach more of a plateau next year with outlook, because we do not get a fiscal boost, potentially, things start to roll over a bit in japan, and you maybe see more from the bank of japan in terms of further stimulus. mark: when it comes to tighter policy, the fed is obviously in the process of the ecb next, and the boj last. is that the order? charles: i would say so, largely because it is just more entrenched. if you could set your currency rate where you wanted to, you could achieve a lot of these policy objectives much quicker. but no one wants to be labeled a currency manipulator these days. saw with the risk on, risk off, the problem with dollar-yen, and the yen in protect her, is if there are any risk concerns globally, everyone piles into the yen. whilst there are uncertainties, it poses japanese policymakers with a particularly interesting conundrum. mark: 114 is the level on the back of the french election. -- avivaiebel, 11 investors. the results of the french election, first round. francine lacqua will be joined by tom keene. ♪ francine: tankan futures are up an enormous 25 points this morning. cap futures are up. the curve is steepening. getting down to 21,000. -- how important is this? the two-year searches? a less negative healed. this is it all. this is the safe haven indicator. if you look at the german benchmark index, it is searching from 2.9%. it is a risk back on. it seems to be what the markets like the most. it seems like macron, the centrist and left and who market , will actually get the presidency. and it seems to be a lot more confidence in the polls. polls to predict this and make the markets a little more reassured. this is the trans-german spread. it is easier for me to do it in new york than it is for her overlooking the river and the apple tower in the double espresso world -- it is probably a triple espresso. you can see this massive movement. here's to worry about the election. here's the sigh of relief. this is a huge move almost back to normal on the france-germany 10-year spread. francine? francine: as you say, the relief rally spread across european asset classes after macron for the second round of france's election. what will this mean when we have the runoff? pollster says macron will defeat -30 2%.le pen, 68% he struck an upbeat tone. that ilike to say realize what my responsibility is. and if i am full of joy, i also know what leads and i will carry on with optimism and into csn. -- and enthusiasm. with us now is -- thank you for being with us. it is extremely important, now that we know who will face each other in the second round -- how will macron govern? how will he do on the crucial june legislative cycle? >> and was like to say that we know and he will go for project-based solutions. and he will certainly tie in the right-wing party. but he took two presidents down. two extreme parties. so we don't really know how he intends to govern. be anknow there will essential amount of govern ability. he will have to also make sure to bessues the market able to reform france. the markets are reacting because -- the problem now is how france can rise to the challenge of reform and making sure we control the difference. francine: let me ask you what this means. struggling to understand is that one out of four french people voted for marine le pen each means is an anti-euro sentiment. what does that mean for policy going forward? >> markets definitely seemed relieved. we avoided the scenario of having melenchon and marine le pen. be rightly, this will with the polls for the second round. they show macron will ahead. it is an surprisingly, the euro has appreciated, not by much. the marketact that was already long euro. we believe the market will begin focusing on the ecb. the fed will be hiking at the same time. but it is relatively mixed. we actually like both the euro and the dollar against the yen. francine: healthy -- tom: helped me with a map of france. they did a great job of this. what is important to me is that madame this cream color, le pen's support down south here -- where does she get the marginal vote? if she will get single digit in she pick up any ability to pick up above 30% or 40% more to get to the above 50%? >> if you look at the map, there are two france's. there is the france of sailors and the france of peasants. has much ink she the pipeline, for two reasons. most of the traditional mainstream candidates have been calling for a pro macron vote. there is only one candidate, melenchon, who saw officially for the vote. first, the reflation, the idea that the purchasing power was at the center of the canada program, and they also look into the euro sentiment. how that could make up more than 30% of the vote. because it is clearly a rally and there is no possibility today that any of the rhetoric that she has been activated using the anti-globalism rhetoric could gel between now and the runoff. francine: this is something that is clear. even if marine le pen was the first choice, it is unlikely she will be the second choice of a french citizen who didn't vote for her in the first round. wojcicki is turn out. how important is it that melenchon hasn't said, ok, i throw my weight behind macron? does he have enough support? when you look at the absolute numbers, the shocker was the 8 million votes. melenchon is behind with 6 million votes, almost. so i think the turnout will be crucial to the election. everybody hasy been trying to find out to make sure their party doesn't vote that way in the second round of the election. she will have to make 80 billion to win the presidency which is unheard of. it will be possible, even with a good turnout. elected: if macron gets and has to form a government, we have to wait on what prime minister he puts in charge and it is the logistics of the election. do markets care about all that? i think now, the market the presidency. i would be apprised if we see further move in the euro-dollar. it is very unlikely at this point for macron to lose the second round. so i think we could see most of the market move in this state. will be driven by data and central banks. going back to a normal market. and what is interesting is that the trump tax reform will be shaping the euro-dollar in the coming months. francine: we will talk about the possible axis that is franco german on the right. thank you so much. we will be back with ludovic subran. here were a lot of the politicians come to drink and talk politics. i wonder if this is where the next president will be decided. we will be back with one of the most famous pr's in here. this is bloomberg. ♪ francine: -- tom: good morning. markets advance. it is a major risk on the field. futures are up 196 points. let me turn to the bloomberg terminal. i have a bloomberg terminal -- how cool is that? u.s. futures are up. the euro topped out at the 1.09. karen, thank you for doing this chart. this is the synthetic euro, including the inverted deutsche mark. go, over the left side. i'm going to do this in red. here is the end of 1998 in red. here is the weak euro. a preshow. this is the strength of the euro, which harms the exports. and then we get a long-term rollover here. and here is the recent trend. let me zoom in on this. we can do this on the bloomberg. on the synthetic euro, you can see the markdown to a weaker euro. let me go to the data. equities, bonds, currencies, all correlated and moving. oil with the $49 handle. somebody sent me he will this week that said, do you sleep with bloomberg? no, but i do sleep with my makeup on. here is the risk going up. 1.09, a stronger euro. i want to mention deconstructed eco-data. the color is wrong, that should be green, up a solid 10 basis points on the yield this morning, that is a massive move on the german two-year yield. francine is in paris. we have wonderful guests. eric chaney will join us. we look forward to speaking with him. that at 6:00. from new york and paris, after the french election, this is bloomberg. ♪ francine: it is a "bloomberg surveillance" special. i am here in paris. it feels like we have been live for 24 hours. we have gotten at least 3.5 hours of sleep. the markets reacted positively to the vote yesterday in france. what is this mean for the ecb? what does it mean for mario draghi? ecb responses say the president will revise forward guidance as early as june, six months sooner. let's get back to ludovic subran . in london. is thanos the polls are right. and i guess that is significant. a largee seems to be amount of the population that is euro skeptic. if you are mario draghi, do you start talking about tapering? ludovic: no, you don't. you don't. -- [indiscernible] the idea that is isn't done yet. francine: i know that you want to look at the markets. like to look at the dax, i'm trying to get this chart up. up, if you put? it is a chart of german optimism. the single most important thing i heard last week in washington when taylor riggs commented on europe car sales. forget about the gloom and the world coming to the end, they are moving bmw -- this is the index and it is getting out to 2006 optimism, the green circle. let's dovetail this with what we have observed in the last 24 hours. what a pleasure for us to talk to mohamed el-erian. round doesn't signal the end of the anti-establishment phenomenon. all of the uncertainty in france must have been lifted. "some form of cohabitation, a government made up of a president of one party and a prime minister from another will have to emerge, which is far from a straightforward proposition." here with the idea of a coalition government in france? is france ready for that? ludovic: i think it is. will do things differently. and i think it will be the first time that when a president is that is he has a party not his maturity but the programs are converging when it --es to econ, the tween what econ, between but francois fillon had. i'm not really worried. -- when they go low, we go high. the french are very proud of this. to show there is a way out. we chose trudeau over trump. an easy win there for macron? is it the labor? is it labor costs which make it expensive for outside companies to come here? or is it pure tax reform? does it need to happen quickly so people don't pay too much on dividends? ludovic: both are a poor take. -- both are a priority. there has been a marshall plan for lifelong learning and also trying to lower the hiring and some ofisincentives for the companies. we need to look at these companies by reducing the corporate tax. and i think this is the big win in the short-term to make it more palatable. we are seeing live images of marine le pen. she gave a speech yesterday and they finished by singing the french national anthem. is there anything that she can do since there is a rally at the moment, to win votes? ludovic: she will unite the anti-globalization front. it is still very present. close to 40% of the french electorate. and her political strategy going forward will be to make sure that people will unite behind her . ludovic subran, thank you so much for joining us. we see marine le pen begin her campaign there. eric chaney is with us. we are really looking forward to that. this is bloomberg. ♪ tom: good morning. this is "bloomberg surveillance." futures are up almost 200 points and u.s. futures are up 26 points as well. you see that correlated across all the asset classes. here is taylor riggs. taylor: starting in france -- voters will select between two radically different visions. acron and marine le pen won first round of the election. >> the time has come to free our of arrogante politicians and policies. our destiny is the people. taylor: eestnet snap poll released last night shows that .ac will beat marine le pen thes the first time where republican and socialist parties were limited in the first round. in the u k, it will be the last week had the bank of england for charlotte hogg. she had failed to notify the boe that her brother works at barclays. no replacement has been named. the secretary general of the united nations says there is no end in sight for the conflict in syria. he spoke to bloomberg at the meeting in washington. >> it is of vital interest for all in the conflict. the lives ofing their citizens everywhere in the world in danger. said that syria fighting creates instability which increase the risk of terrorism. in washington, the white house is pressing the house to vote on a replacement for obamacare. i haven't announced a date for a vote. conservatives and moderates are working on a compromise. the first attempt was withdrawn without a vote when it was clear it wouldn't pass. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much. we're back in paris. pen and macron winning the french election. this is after they checked the outcome of the poll, what this means is that because she is facing macron, it looks like has a clearg of red win for macron. i had a pretty colorful economist yesterday, a professor, and he told me that at this point, macron will win versus a ghost. richard attias. one of the most famous businessmen and pr gurus in france and europe. the interview i'm looking forward to most today. what we find out yesterday? are the polls right? will macron have enough were to govern? is france deeply changing? these are candidates that came out of nowhere. richard: you have 41% of french people who supported two exitdates who are ready to , to make -- i would say -- a big decision. and this is concerning. we should not forget that. there the wind of macron in first round, we should not of melenchon% plus marine le% plus of pen. this is concerning because it is showing that you have so many people in france, like countries all over the world, who are frustrated and you want a real change. the second message is that france is ready for a revolution. and by the way, this is the name of the program of macron. a positive resolution. -- itird lesson is that was unusual and unexpected -- the french people are ready to coming fromwho is nowhere. and this is more the american dream. this is more the american dream and many didn't think others didn't think, that this could happen in france. francine: is this out of conviction? can he muster enough support independently or through a coalition? or is this because none of the other candidates were palatable? richard: the french people are fed up. this has been going on for months and years. and they really wanted a change in the political landscape. at the french party were not promoting the young generation of politicians. and suddenly you have a young man, 39-year-old, coming from the private sector with 22 years in politics, who was pushed by two or three mentors to be a deputy secretary who took an amazing opportunity to become the minister of finance of the economy because his predecessor designed -- his predecessor resigned. so macron has a fantastic start. the lighting in the sky has helped him. a fortuitous which is important. francine: but what does that guardian angel do for him? a good he could have platform for a reform but if he can't govern in the country could be worse off in five years? that is the one million euro question. what will happen in the next two months? because he will have to designate a government. no choice. you have no clue who will be about the next prime minister. the center.e from it could come from the private sector. everything is possible. they arevery day, making quite interesting and surprising decisions. and he is now surrounded by people so diverse -- diversity macron.tant for gender equality is important for macron. so we don't really know who could be the next prime minister. but what will happen in june? and the election congress and parliament will happen? -- in france, we elect a president. support aeally only party. and this is what happened yesterday. we'll see what happens on may 7. it is definitely macron, probably the potential winner. but we don't know what will happen. especially with the tv debates, that will be interesting to watch. in a very unpredictable area. morning from new york city. i look forward to seeing you in two weeks. help me here with a little bit of history, which you are an expert at. if we migrate from charles de gaulle -- did the fifth republic died yesterday? richard: definitely, it is a huge transformation. i would say that we are definitely writing a new chapter in french politics. no question. and i would say that maybe yes, it died. but the problem is not that it just died, we need to build a new era. so i don't know if the next president will be ready to move. if he will write a new constitution? want the really deep-seated transformation in the political french system, we need to go to the new chapter. and macron is ready for that. tom: a very important statement they are. help me with what charles de gaulle did. making a strong executive branch. suggest france needs a more american or british like legislative branch of power? just after 1848? believe we need to go back. we usually look forward. we definitely need change. we definitely need the change. we need to be ready for the coalition. we need to be ready for being inclusive. we should have a more inclusive political system. we should talk to the private sector leaders. should talk to the youth. we should involve more use. we should not ignore the 3 million people, the plus people who are jobless and unemployed who are making it exchange. the people who are questioning about the future of europe. these people need to have a voice. the education system in france is not appropriate anymore, at all. so many business models have to change. because my personal conviction, i think, and this is why it not surprised by macron becoming what is becoming. francine: you are certain of french people want this? these are great ideas that you mentioned. but when you look at economics, france manufacturers thanks that is the same quality of spain but pays for them a lot more? see frustration each week if he tries to get it done? traditiont is quite a to have strife. at the same time, we need reform. this is not negotiable. we have been saying this for years. we cannot continue with the system which is obsolete. that there are global consequences that there are ngos and the real message coming forward is when france will become business friendly. when france will become attractive? there is so much talent in france. it is becoming a stagnant nation . the tax has to be reformed. the education system is not big challenges with robotics and artificial intelligence. we're not ready for that. francine: something that is significant is that macron is giving us interviews in english which is the first for any candidate. my: i spent any weekend on rosetta stone so i might be able to catch up with you. francineontinue with overlooking the eiffel tower on a perfect morning. it is 32 degrees in new york. coming up later, and toward treatment. a timely discussion. the secretary defense matters and the state of u.s. defense. from paris and new york, with markets on the move, futures up 26. this is bloomberg. ♪ francine: it is "bloomberg surveillance." tom keene is in new york. i am in paris. a 24 hours -- feels like 72 hours of coverage on the french presidential election. we know do have two candidates. macron versus marine le pen. we are overlooking the eiffel tower. we have talked a little bit with -- about the reforms needed. does this mean this is the end of the old-school way of doing politics in france? we now need to focus on the european union. exit.e implications for simon kennedy has had no sleep since june 23 of last year. he is onset in london. congratulations on the great piece today. -- that theresa may may have an even tougher time. aboutch do we understand how friends will negotiate? was the most pro-european of the candidates. he gave us an indication saying he would be tough on the turkish. his argument being that he wants to persuade the people in france you might want to leave the -- the support marine le pen got suggest there is skepticism in france just as in the u.k. but macron has talked at not getting the british any advantage. the customs exist on both sides of the channel. swapping those back. and also talking about coaxing bankers and academics back from bridget to france. so someone who is very european. that is likely to be reflected in the talks. francine: this is something that we have been trying to figure out. whether financial services will have to leave london and wherewith they move to? do you believe that a macron presidency would attract bankers out of london into paris? simon: he said as much. during that trip, he visited with theresa may. that the summer analysis we talked about suggesting this is a good result for theresa may -- it is more likely it will create a stable environment in europe. if macron wins the presidency. ultimately, a good grexit deal beds stability on the eu to generated and marine le pen would generate some turmoil and push brexit down the list of priorities. so that is good news for theresa may. macron has made it clear that he will be trying to lower bankers and academics from london. there are a lot of french people in the city of london and macron has told them he is out to appeal to them to come back to france. that suggests another reason to be harsh on the british in the brexit talks. there,e: simon kennedy thank you so much. we're getting breaking news from the latest poll. this is one of the pollsters that is putting some of the figures out. in her latest poll, they see macron defeating marine le pen 61%-30 9%. that came out in the last couple of minutes. let's get back to richard attias. i don't know why i pronounce it differently -- it is the same thing. only look at what happened me that thet struck german foreign minister and the people close to angela merkel -- they were the first people to tweet or congratulate macron. get back ineeds to the game when it comes to politics? achard: i think macron is european union support her. he will be a fighter of putting france back on the table. very strongly. he will to whatever is possible to bring back the french ex-pats who went to belgium and the united kingdom. be -- andhink he will i think you will be followed and supportive. and if he is able to implement a to reduce taxes, this is crucial. from breaks down the taxes more on parto be would see a lot of ex-pats who went to london, entrepreneurs, who will come back. this is why he was so successful during all of his trips to promote his program in the u.k. .nd new york in new york, i think, if he is not mistaken, this is where he got the most important support from french voters. plus in new york or in the state of new york. that is quite interesting. tohe knows that he will have be always in the same vote with germany. no choice. but i think that if macron is elected, we will not just see a standalone germany leading the european union. it will be france and germany. supportedquite well by the current minister of finance in germany. and i think they will together france and the european union. you will not just have the sole low of germany. a situation where theresa may find another to side in europe. tom: thank you so much for being with us. i know it is near new. how about this? -- 369his down with the euros a bottle. welcome to paris. richard attias, thank you so much. your tv , you can see his important statement on a important statement on a need for a new constitution. i click on tv and out comes a gorgeous synthetic euro chart. we will do the math. tattoo ofnado has a the synthetic euro on her arm. stay with us. this is bloomberg. ♪ francine: "bloomberg surveillance on the road. we are covering the french election. i am underneath the eiffel tower and i don't get to say that every day. let's get final thoughts with richard attias. richard, by example, we are right here. and beneath the eiffel tower, you can see the russian church. what we need to figure out is if macron does win, the latest poll puts him at 61% in the second round, what kind of foreign policy will be put in place to work with trump and putin? richard: he has no choice. he will have to deal with the russians and trump. and i think what we expect is to have a strong foreign minister. which is also a very important position. the most important is the economy of finance. a very important job. francine: how does he create a cabinet that gets support? election, here the will have to put -- my personal feeling -- to put a minister with a lot of experience on foreign policy. is in trouble,ld as you know. we are in a situation where we have to deal with north korea, syria and france is trying to have a lot of impact on syria. trump is aggressive on trying to be involved in the middle east process and france cannot be on the side. risk --ce also has to africa. which is also important. he will have to be involved. richard attias, thank you so much for your comments today, particularly on the need for a new constitution. we'll continue our coverage from paris and new york. coming up, eric chaney on the new france. ♪ tom: it is not the france of charles de gaulle. the fifth republic, macron and marine le pen, they go to a may 7 vote. u.s. futures this morning surge. the euro as well. the german two-year is less negative. give you positive analysis on what is next. and there are many great questions for 2000 20 and beyond as we consider the new political rules. that morning, this is "bloomberg surveillance." we are live from new york. in paris, francine lacqua enjoying the view of the eiffel tower. i was thunderstruck by what richard attias said 20 minutes ago about a need for a new constitution in france. that would be seismic, wouldn't it? francine: it would be. but it may also capture the mood that a lot of french people have. there are two words of caution with that. a lot of people didn't vote for the 39-year-old relatively unknown macron. he doesn't even have a party -- he says he has a movement. also significant is that if you look at the polls yesterday, they seem to be very accurate. look atlook like if you the extremes, marine le pen makes it to the second round and melenchon has 42% of the vote. that is not insignificant. 42% of french voters voted for the extreme right or extreme left. tom: we have a great set of conversations coming up from paris and new york on the future of europe. kevin cirilli will join us as well on the weekend that the president enjoyed. right now, we enjoyed the first news. taylor: starting in the u.s., the white house is talking tough about including money for the controversial mexican border wall in a bill this week. it could make a government shutdown at the end of the week more likely. white house officials say they don't know if trump would sign a spending without the money for the wall. has promised news about his tax plan on wednesday but the complete proposal would be ready until june. that onhe says wednesday, the administration will outline some of the ideas that likes and doesn't like on tax reform. theresa may's conservative party is making a bid for labour party voters. the platform for the june 8 asp and calls for electricity prices, an issue used by the labour party in the last election. in london, home ice is posted the biggest and drop in a tears. according to a property website, the average asking price fell 1.5% this month. haveexpensive homes fallen. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. thank you so much. let's look at the markets. equities, bonds, currencies, commodities. s&p futures are up 26. the dow futures are up 199 points. 21,000n't get back to but it is an indication on where removed. on the next screen, we see the currency dynamic. a huge move there -- 3.32 points on the vix. german two-year should be green. that is a much higher negative yield. that is a less negative yield. 10 basis point move. an indication of confidence in europe. francine: this is what i'm looking at. it is definitely risk back on. i'm looking at the euro. a little bit higher at the moment. -- i'm are in a pretty not sure i would say a good mood -- but they are optimistic about the future. aftere the taxes higher french banks. this might be after they priced in the possibility of a french breakup. in the cac 40 and french banks, there is the hope that macron -- we are seeing live pictures of him leaving his house now to his headquarters -- the hope that macron will also reform the tax system in france. and we're seeing a lot of indications of dividends priced in today is what we see financials higher. we are seeing live pictures still of macron. poll, look at every largely touted to become the next french president. leaving his house at the moment to make his way to the headquarters. -- we areting from waiting for macron. we are waiting for the possible next french president to leave go to hisand headquarters. with almost all of the votes counted, this is what we know. france is set for a runoff between two very different visions for the country's future. macron and marine le pen head to the election on may 7 and the new poll sees macron defeating the national front later by 61% to 39%. joining us now is eric chaney. the former chief economist. he has that many previous lives. they give for joining us. what do you think will be his top iparty? is there any doubt that macron is the next president of france? if there is no doubt, what will he tackle first? think we can already call for a victory although in all likelihood he is the next president. there are very strong interests against him. and i'm thinking of russia in particular. so you never know. there may be something totally unexpected. the main case scenario is that macron wins. and then he has to with the parliamentarian elections without congress supporting him -- it will be difficult for him his reform program. that will be his top priority. but i suppose that among other things that macron said he wants to do, the top iparty is to start reforming the labor market. france is a country where 10% of the population is unemployed and the population is not happy at all with its jobs. and that is going to be be top priority for anybody wanting to reform the country. francine: weat -- see macron greeting the crowd. do you think he did a good speech yesterday? totook a lot of time for him come out. he seemed very presidential. does that make other parties want to work with him or did he strike a wrong tone? eric: it is subjective that i thought he was very different from anything i have heard since 1964. the first election i checked when i was a kid. because he did not attack his opponent. he didn't even mention her. he said he wanted to gather people. to change the country. it seems to me that he has a very good start in terms of the big difference from the others. not being from a party on the right or left but telling people that we have problems and why don't we sit together to try to solve the problems? a very pragmatic approach that we haven't seen before. francine: you believe this country is ready for labor reform? is with spain for similar manufacturing products? in 2007, the market was ready for the reform. the unions did not want to reform so there was no reform. in 2007ountry was ready and i still think the country is ready for that. but there will be a strong opposition coming from all of those who believe that if you put a fence around france, the country would be better off -- which of course, is not true. if macron is smart enough to negotiate with everyone, he will probably not managed to do that big of a hold on the labor market but to do enough to start a dynamic -- employment in france. tom: eric chaney, wonderful to be with you this morning. let me bring up a map of france. this is the wonderful work of the new york times who did a great job today. the light cream color is marine le pen. melenchon is in purple. in light blue. i want to go to the polarization of paris. marine le pen doesn't exist in the map of paris. are we headed towards where france will need a new government? a six republic? a new constitution? well, the map is fascinating. on top of what you just said -- by the way, good morning. if you look at the map, the western part of france voted macron and the eastern part of voted for marine le pen. at the heart of the country which voted for marine le pen or is on the seaside voted marine le pen. regarding the big cities -- is what you said is true for paris and lyon. it is indeed a sign of a deep divide in the country. between those who are involved in a vibrant economy and those who are left aside. i don't think you need to change anything the fed. but you do need to change the idiots --of the structure of the economy. the left three group? i talked with francine in aboutgton three days ago the path from -- excuse me -- through chirac and mitterrand. how does the left adopt and adjust? to some extent, we're back to the 1960's where there were four parties. .he far left is now melenchon not very different. then you have the center which is larger than it used to be which is macron. and then you have the right, which is still there. got almost 20% of the vote and then you have the far right, which is a new thing also around what he percent. -- also around 20%. the country now will not be governed by either the left or the right. but by a moving coalition in the center. i don't think macron can have a single majority to implement his platform. you will need a majority for the labor market reform, probably a pensiont one for the gary reform. for example. so that'll be something more dynamic than what we have seen. aney ine: eric will sit with us. to one of we speak the most famous frenchman in brussels. this is bloomberg. ♪ taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. two of the world's largest health-care suppliers are combining. billion in cash and stocks. that represents a 5% premium of the closing price on friday. doctors and hospitals are under pressure to consolidate operations to get prices down. in switzerland, the ceo of overgeholcim has resigned the dealings in syria. the company says he believed in july. they made payments to keep a cement factory operating in syria. but the money may have ended up in the islamic state. that is your bloomberg business flash. tom: thank you. joining us now is julia coronado. been at a she has huge french bank. and eric chaney joins us. julia coronado, let me go with you, your thoughts on the french election and what it means for financial france? julia: it tells us a couple of things. one is that the polls are not always wrong. maybe we can trust the polls on the second round prediction. and also, we are seeing a backlash to the backlash on continental europe. there was a populist backlash and then voters rejected that. tom: ring up the chart. we have shown this many times. exceptionalism of the economic growth. here we are back to 1980. and france can't get it done. the giant of french growth theory on it yesterday. what do we need to jumpstart growth in the new france? all, francefirst of needs to free up the labor market. you cannot have a vibrant economy with so many people desperate to get a job and those who have a job being afraid of losing their jobs, even if it is a fantasy fear. that is not good for companies. second, you need to have much more freedom for companies themselves. the only way to grow faster is to innovate more. innovate, yout to expect to make money from that. is the system in france punishing those who want to be successful. this has to be reformed in that. over not in one day, but five years, it should be possible. francine: what you make of what the market is going through. are they discounting the fact that 40% did vote for an extreme candidate? that we don't know exactly how macron, if you becomes president, will govern? eric: before the election, the market was pricing the probability of around 20% of madame le pen winning the election and france leaving the european union. i now, the probability has fallen to around 5%. you never know, but that is a rational assessment. so for the market to remove the risk and you see in the german yield curve, the two-year was up . which is normal because everybody wanted to be in the short german chicory. this is not the spread between france and germany shrinking. all of that makes sense. wouldn't say the market is expecting stronger growth. that will be highly linked to -- linked tof be the result of the national election. whether macron can implement national reform or not, the market has not yet priced for that. tom: eric chaney in paris, think you so much. continue with julia coronado about dollar dynamics and the euro, as well. later this morning, dr. bremmer will join us on the outcome in the 8:00 hour. this is bloomberg. ♪ tom: this morning from paris and new york, i am tom keene. this is the vice president arriving in hawaii. aroundst did the old lei the neck thing. no doubt a very tired mike pence. now we go to our chief washington correspondent who loves to vacation in hawaii. [laughter] foreign policy is always a distraction in this administration. here is the distraction. what a mess on health care and tax reform. which of those should i focus on this morning? kevin: the sources i'm talking about say that tomorrow night, the house freedom caucus will gather to talk about health care. this is going to be a top priority. and also, top senators will discussith trump to north korea. so this is all coming a couple of days before april 28 when the government has to pass a partial government funding bill to keep the government open. tom: whose fault is it if the government shuts down? kevin: i think the republicans will take a hefty portion of the blame, should there be a government shutdown. i think many folks in the administration don't think there will be one. i have control of the white house. they have control of the house and the senate. they have the majority. that said, democrats are united. tom: one quick question. the white house correspondents dinner -- will you be the comedian this year? kevin: i will be there but it is one day before i got suns baptism so that i will be there. -- it is one day before my godson's baptism so i will be there. herea coronado is with us again. where is the train? we are not the train? enginewe are not the driving the train. there is no looming cloud on the horizon that nor is it the vibrant cyclical recovery that may be is entering into. china has been the driver for global growth and still is. and what we're seeing is that china has good momentum. tom: mike beebe at the imf meetings i stole from mohamed el-erian. the unknown unknowns. to me, it is the unknown alones. everybody felt alone because the u.s. wasn't there. is that accurate? make america great again and forget about everybody else? fora: it makes it hard people to form expectations. but so far we have not seen a lot of productivity coming out of washington and not some of the worst-case outcomes in terms of the trade policies that people were worried about. so there is a cautious relief on that front. but a tremendous amount of uncertainty about how he will handle any number of issues. timecode the first month of the second quarter looms. do you buy into the idea that a lousy first quarter -- jump to 3% plus growth in the second quarter? usual that is the cyclical swing. we know there are issues compounded this year by a warm winter that pulled forward construction hiring but leaves you with less utility spending for consumers. so that leaves strong hiring and it will reverse in the second quarter. andook through that noise net and net -- tom: we will see. we need more data. we continue with julia coronado. , the eup later commissioner with francine lacqua in paris. worldwide, this is bloomberg. ♪ francine: is this "bloomberg surveillance." this isis is -- "bloomberg surveillance." i am underneath the iphone tower tower in -- eiffel paris. if you look at the markets, the euro is up. equities are up. there are hopes and mental macron willmanuel be able to reform france and pushed through taxation reforms. ,om: helping with the analysis is macron this morning the new president of france? francine: i would say it would take something big to make marine le pen win. if you look at the polls, there is an added layer of conflict. he is winning in the second round by 62%. the counter argument is that anything could happen in two weeks. say there is a scandal or a big attack, those would be the things that would change the numbers. tom: let's bring up the data again. this shows paris in the middle with macron doing well there. that little red dot toward the english channel, there is no blue. le pen cannot do it in the cities. the divisions of the country are just extraordinary. what did we learn about fillon? i don't see a lot of light blue on that map. francine: no. if you look at the overall percentage, it is 19%. he is one of the big candidates that was going to win in a landslide before the scandals started coming out in general. party, the republican and establishment party, they will have to regroup and rethink. they will have to decide whether this was a problem with the ordidate that was flawed whether it is more of a problem with the party. the party is considered too old. tom: very good. important conversations to come from paris. here is taylor riggs. taylor: this will be the last week of the bank of england's deputy governor who announced her resignation last month. notify the boe that her brother works for a bank that boe partially regulates. the secretary chair of the u.n. says there is no end in sight for the conflict in syria. interestsn the vital of all the nations to end this conflict. they're putting the lives of their citizens everywhere in the world in danger. taylor: the syria fight increases instability, which increases the risk of terrorism. the white house is still pressing the house to vote on a replacement for obamacare. republican leaders have not announced a date for a vote. moderates are working on a compromise with conservatives. the first bill was withdrawn without a vote. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. all you need to know is if you go over $50 billion, it is a merger monday. merger, syringes, catheters, all those things that make you go ouch. ppg goeslist of 8% as +++ ppg prepares to commit to the significant reverse break out fee. they go to $29 billion. this is critical. this really goes to the french dynamic. ppg will not relocate akzonobel's production plants in europe to the u.s. that is a big deal. let me do our single best chart with julia. we will go back to the u.s. economy. unemployment is a lot better now, under 5%. here is labor force participation. it is not going down like it used to. this is not a good story. when do we see that vibrancy? >> the total labor force participation rate maps two things, the retirement of baby boomers driving things down on a trend. recoverynice cyclical in the last two years of prime age workers. giving the cyclical nature of the labor market, there is room for improvement. he was the first one saying we are going to war .0. do you buy that line of thought -- going to 4.0. do you buy that line of thought? >> it could be. if we get some rebounding among primate workers, that will temper that. when iat does it mean tell you that we have help-wanted signs. everyone tells me we are miserable on labor. all i hear is help-wanted. >> the labor market is tightening up. it is tightening across sectors and regions. it is much more broad-based. we are seeing cap it increases in wage growth -- tepid increases in wage growth. people are more secure in their jobs. they see better prospects out there. francine: what we really need in the u.s. is for ceos to start investing. are they confident enough in the future to say i will open a new plant in ohio or minnesota? >> no. there is a lot of uncertainty. i am on the board of the national association of business economics. we released our quarterly survey. we are seeing a lot of weight and see on the parts of ceos and businesses. they want to see what happens on policy. they want to see consumers starting to spend more. this is where the late cycle dynamic kicks in. consumers are pretty content with a moderate pace of spending. that leaves us with a moderate pace of capex. i don't think we will see double-digit investment growth and time soon. francine: what will it take for that investment to kickstart? does it start with tax reform and then go on to something bigger? >> if we got significant fundamental tax reform or a significant infrastructure spending package, that would be something that could kickstart investment in a meaningful way. that is not something i see as a baseline likely outcome. we will probably get some kind of tax cut. increasingly it looks like it will be smaller. it will be a tax cut, not fundamental tax reform. i think we are not likely to see that soon in the u.s. tom: you mentioned the national rate before. people flock exams trying to do these plug-ins of newtonian functions into simple algebra. do you have a guess of confidence of what normal economic growth is? theeekend put together building blocks, which is population growth and productivity growth. tom: that is not a pretty picture. >> it is not. it is what it is. we are aging as a society. productivity has been sluggish. we are not seeing those policies come forward. tom: very good. we will continue with macro policy perspectives. coming up, an important discussion on energy. qatar's finance minister. from paris in new york, this is bloomberg. ♪ ♪ >> this is "bloomberg surveillance." let's get to the business flash. revisedsubmitted a takeover bid for akzonobel. they value them at almost $29 billion. akzonobel rejected a previous offer. ppg is confident in the new offer. wall street is betting that sprint and t-mobile will revise talks on a blockbuster merger. sprint's parents think there are other ways to increase shareholder value. beenireless spectrum has undervalued, one possibility is spinning off that spectrum into a separate company. a rather grim forecast from alibaba's chairman jack ma. ma says the world must change the education system and establish how to work with robots to soften the blow caused by automation. that is your bloomberg business flash. tom: thank you. this is deutsche bank. idea of the trend since 2007 all of the german bank. i know bnp paribas has done better. do these people need a macron victory? finance, too big to fail, how badly do they need macron to become the next president? >> i think there is important that there is stability in europe. breakup risk would be extremely damaging to the banking system. it is a huge relief to the financial sector that we are seeing this morning. we have a likelihood of a more moderate outcome, even if it is not particularly productive. the worst-case outcomes are avoided. you can continue to operate. let me also introduce our guest from paris, he is from an important think tank in paris. thank you for joining us. do the french want radical change? was it a candidate who seemed cleaner and less extreme than something is happening in france. the two most of those candidates in the first round. uscine: you're telling this is a massive shift in politics. the agenda of to emmanuel macron, and if you look to the policy positions, he wants that france should look ahead to the global economy. he wants press to be more flexible with tray. thatast in the proposition yes, emmanuel macron will lead the french economy to be much more in line with the eu and the rest of the world. francine: you are one of the most cautious guests we had on today. others have said of course macron will be present. you will not find someone who will vote for marine le pen in the second round. why are you cautious? >> you never know with an election. every sign indicates a manual macron should not only win the election, but we don't know who is going to abstain. follow what the republican party is asking them to do, which is the vote for macron? that election was for them. it was fillon that cost them the victory. of jean-luc melenchon will abstain. we know maybe half of them could abstain. i'm not saying marine le pen can win the election. it is unlikely. macronhe big victory for could be closer than expected. tom: help me with the new legislature in france. is it going to be a strong executive branch coalition, or is it going to be a mix to have the presidency and national assembly work together? >> this is the big question, which is macron has two weeks between the two rounds to convince france he can get a majority. macron is looking at is much more of a coalition, part of the left and right. between new deputies, the two rounds, we should pay attention to the left and right. macron would obviously like to get a majority, absolute majority. it is unlikely we will get an absolute majority on his deputies. it is more likely to be a project of coalitions. i mean depending on the project, depending on the policies, he could get support from the left or right. tom: thank you. cautres with us this morning. we will continue. in conversation -- pierr muska vinci e moscovici. worldwide this monday. this is bloomberg. ♪ ♪ tom: "bloomberg surveillance" this morning. right now, bloomberg daybreak: europe what do you have? david: we had him on a short while ago. he said france was the election to watch. we are through the first round. we will look at the aftermath. we may talk about north korea with that u.s. aircraft carrier group offshore. that is coming up. francine: thank you. david westin. we caught up with him in washington on friday. is one of the most famous and popular french in brussels. thank you for joining us. a quick comment. how surprised were you by the outcome? there is no recognizable party in the second round of the french national elections. is a shock. in 2002.ady happened this time i was not surprised. we have a clear choice between a pro-european candidate and the anti-eu marine le pen. you, she will be defeated. she is not going to be the next president of france. i think macron meets the strongest possible support because we need populism to get back. i would like him to have a large victory. i will bring him mindful support -- my full support as a frenchman and european. those in favor of open societies, open economies, strong europe, and a society , and is closed, xenophobic anti-your game. meanine: what does macron for negotiations with the u.k. on brexit and with germany? macron has been the economic advisor for fillon. he is a pro-european. i imagine he will have the intention to make strong deepening the economic and monetary union. he is in favor of franco and german working. need credible strength from france. brexit, i think it will be part of this discussion. as a man who thinks this needs to be clear, clean, and orderly and to lead to a friendly relationship between the u.k. and eu. yetsecond round, he is not the president of france. marine le pen must be defeated. everyone must stay mobilized. never play before the moment of the results. you are exactly like emmanuel macron, a minister of the economy and finance. what does this second round mean for the socialist party, your party? the socialist voters are still there. they exist. they did not disappear. they split. some of them voted for knowledge enchon, the far left candidate. ed for hamon. that time to rebuild social democratic party. center to have a strong left and strong center right. there is a minor crisis in the socialist party. there is a lot of work to get back to a situation where we have a socialist party capable of proposing strong reforms to still be pro-european and to be in touch with those who feel they need solidarity, those who feel removed from globalization. we need to do that. i say that as a french social democrat. francine: thank you so much for your time. i know you are on a tight schedule. thank you for giving us a little of your time. that was pierre moscovici. advancingackdrop, teachers, s&p futures up 27. dow futures up over 200. weaker yen. we continue. are -- this is bloomberg. ♪ ♪ vonnie: -- jonathan: therefore markets is unlikely to materialize. says big tax reform and tax reduction will be announced wednesday. risk is on. french bonds recovery. the euro climbs to a november high. good morning. i am jonathan ferro alongside david westin and alix steel. risk,rkets this morning, buy. the euro is firmer. core government bonds selling off. alix: where they are buying, they are buying peripheries and france. rally, dollar-yen off of highs on the session. crude is getting a bit as risk

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