Hoursr in hal af an time. 4sbcs First Quarter hit 5. 9 billion. It will contemplate share buybacks as and when appropriate. Anna edwards spoke with the banks cfo and asked whether 2017 will be the end of revenue decline. I have to say id be a happy man if i could close out 2017 right now. Revenued to see 4 growth over the course of 2017 and notwithstanding a very good start in the First Quarter. That is the guidance we are holding as we move into discussions with investors. Anna can i ask you about share buybacks . Were were some that disappointed to not see another. Last summer he talked, you said the ratio target of 12 . If youre about that you will contemplate returning cash. You are well above that. Why no cash right now . We have just finished a 1 billion buyback on the 12th of april. When you add to what we did last year, that is 3. 5 billion. I would not encourage investors to think we are going to do buybacks every quarter. Were very happy at 14. 4 . As we said, the happier last our, the end of the year, principal focus is taking our capital of putting it to work to grow businesses around the world. We are strongly focused on maintaining and delivering dividends to our shareholders. 0 billion. We paid well consider buybacks from time to time as appropriate. Billion. T finished 1 we will reflect and have the rest of the year develop. Anna you are taking a pause, wh ich i understand. Last time we spoke at last time you were talking to investors, you mentioned there is 8 billion that can be freed up from the u. S. Business. Help us to understand the return of scale for shareholders. Again, i think were making Good Progress in working through the restructuring of our u. S. Business. We completed 2016 with no objection from the Federal Reserve. We have just submitted submissions for 2017. Where again, we will look to dividend some of our surplus capital in the u. S. Back to a Holding Company and the u. K. And making that available for further deployment within the group and to shareholders. Right now the guidance we provided at the end of year is firm. Of hsbc. T was the cfo toncine india has set rules push struggling banks to combine with rivals. So, what does this mean for the countrys Banking Sector . Kathy hayes is with us from the Asian Development banking me eting. Hi, kathleen. Good morning. Yes, im joined by the woman who oft engineered the merger indias largest state bank, the state bank of india with five associate banks, creating the 50th largest bank in the world. Half a billion customers. Here, theo be joined first chair ever who has pulled off such a feat. Congratulations. Where do you go next . Are you contemplating anymore mergers this year . I dont think so. We need that much time to digest all that we have the first. It takes a little time to get everything in place. We are not looking at anymore mergers right now. Endingn your chair is in october. You came as a banking clerk at the age of 22. You worked from the bottom to the top. Byn a new chair is appointed the government, in the past this is meant that the new chair recognizes a lot of bad loans. Surprises, Quarterly Earnings surprises that investors do not like. Can you avoid this . I dont think there will be any surprises because currently the system is that the new person will also be one of the four mds who are currently in office and the bank. They also have been lifers with the bank and part and parcel of all the the decisions ive taken. So i dont think any surprises are expected when they take over. We have the next are careful about this in order to assure the market that whatever is being done is the right thing. I dont believe there will be any such issues when the new person takes over. Kathleen the reserve bank of india has come up with rules that will restrict weaker banks from lending and opening new branches. Many of indias banks are struggling with bad asset ratio s. How is this going to affect the Banking System, and what will it mean in terms of market share . Some say it might shift towards private banks. Explain about this new rule and how its going to affect banks and profitability and more. What has happened in india as something that has happened in many countries across the world. Why many of the Macro Economic indicators in india are perfectly in order and they point towards greater growth in the future. But it is a fact that there are certain systemic issues that have led to quite a bit of corporate nonperforming assets in the indian economy. In such a case, everywhere across the world, the government, the regulators, the banks and industry have come together in order to resolve the issue. I think the same is being thought about in indian right now. Finance minister indicated they would probably be coming with the ordinance to empower the regulator to take more action in order to resolve these bad assets. I think the moment these resolutions happen, you will see that there will be a positive turnaround in the Banking System. Plus, the credit growth. One good thing about the cycle in india this year, the nonperforming asset cycle in india this time round, is the fact that many of these nonperforming assets are working assets and the assets created whether they be things like feed plants or power plants or roads or whatever, many of these are actually very good quality. And salso required by the economy. As you see the Growth Numbers pick up, many of these will turn performing. So, that i think is one of the Better Things of the cycle this time. Athleen i want to ask specific question of something that has caught the eye of our banking team, from the talk about state run banks that are refusing to do repo operations. Doing this to boost their gains in the treasury market. Do you know why this is happening . I dont think we will see more of it. The repo market is a market where people will normally get, lend the securities. What happened i think, also, there was a lot of shorting in the market. Therefore, there were legislated not want to go ahead and lend. I think what needs to be done is there has to be more discipline on both sides. Both in respect of those bankers that are shorting the market. If they are doing it for shortterm speculative gains, then they need to avoid doing that. Whereas the lend us in the market also need to be able to go ahead and lend. Kathleen any advice to other women in the Banking Industry . Women in india or global Banking Industry. Sure. One thing only i would like to tell the women is that its not such a difficult job to manage the various you have to manage when you are a woman. If one is focused on it, it is more than likely that you will get where you want to get. Kathleen such a pleasure to be with you. Thank you so very much. She is the chair of the state make of india at the Asian Development bank meeting. Francine, back to you in london. Francine grat interview great interview. Up next, no fear of the fed. The u. S. Central bank maintains his outlook for gradual tightening as it brushes off the recent economic slowdown. This is bloomberg. You are watching bloomberg surveillance. Societe generale has settled a legal dispute with an Investment Authority and posted lowerthanexpected firstquarter income. It fell to 747 million euros. The bankme time, posted a rebound in its trading businesses while falling short of trends. Has reported firstquarter earnings that beat analyst estimates as oil prices climbed, boosting results from crude production. Profit adjusted more than doubled to 3. 75 billion. It helped validate the purchase of bg group, after some shareholders complained he paid too much. Esla has assured invested its model 3 sedan is on track. The carmaker said excluding some items, tesla lost 1. 33 a share, a bigger deficit than analysts estimated. Im absolute confident that itll occupy every segment. I dont jump the gun on the tesla semi truck. Well announced the unveiling later this year. Well, it will meet expectations. That is the Bloomberg Business flash. Tom . Good morning. Tom keene in new york city. Right now after a most interesting debate yesterday, it was a joy to be in washington and to see the twitter feed off that live moment of le pen and macron. We need an update as we moved to the final round of the french election. Joining us from paris,. Caroline, it was extraordinary to see that debate last night. The market tells me that mr. Macron won. Did he . Caroline at least according to the snap poll we had just after the bait. 62 of the 15 Million People who watch the debate last night said that Emmanuel Macron, the independent candidate, was more convincing than Marine Le Pen. Even if you dig into the details, even among the electorate of Marine Le Pen, 12 of those planning to vote for her said macron was more convincing. Tom what needs to be done within the final days of campaign . Whats the to do list for madame le pen. Macron, what does he not need to do as he goes to sunday . Caroline the report she had let the approach he had last night to remain calm to show he can govern was the right strategy according to the political strategy. Angry,le pen sounded sounded aggressive and sounded confused on many subjects, especially the subject of the euro. You know how important it is for the french. 70 of the french people want france to stay in the euro, to stay in the european union. And the issue with Marine Le Pen last night, she failed to clarify her position on the euro. She said the french would be using the franc, but the euro would still be used in international transactions. And macron said, this was nonsense. He appear to as the detailed man, giving concrete measures. I guess that is what he needs to keep doing until sunday. Tom somehow i think it will be operatic to see them go at it to the sunday election. In paris, with the opera behind her. There is much more bloomberg surveillance all of television and radio today. For u. K. Banking, it is about the hong kong and shanghai banking corporation. Hsbc with some serious challenges ahead. But the good news of earnings today. We see europes biggest bank, they post a surprise increase in firstquarter profit. Mr. Gullivers plans, maybe they have finally come to some good. From new york and from london this morning, this is bloomberg. Francine good morning. This is bloomberg surveillance. We brought in tom keene an hour early because of that great interview he did yesterday. I was also following the fed special. What was the tone like . Was chairman bernanke a cautious . About this,s great the longer the interview, the more insight you get from any given guest. It was a penetrating interview with one of our great academics on not only fed theory. Ill tell you he kept circling back to the pressures that mr. Draghi faces. I said, what really gets your attention around the world and he went to europe and he said the challenges that mr. Draghi has are important and that he is doing the right thing. He loves the way mr. Draghi was most assertive a few years back. Thecine and you talk about administrations plans for tax cuts and how that comes in terms of the cycle for the economy. Lets have a listen to you and chairman bernanke he. We dont know who hes going to appoint. He could reappoint janet yellen would be solely from his perspective are reasonable sensible thing to do. She is highly competent. She has got the confidence of markets. But whoever is appointed, im sure will certainly work carefully with the rest of the fomc and there is a reason why there are so many people on the federal Marke Committee making those decisions and high quality staff that provides a lot of guidance. So, i dont think we are in a 1928 situation. I am very hopeful that they will appoint, if not janet yellen, they will appoint somebody strong and competent. Tom within the is a sharp debate within the Business Media and i would suggest that economics, im going to pick on gary cohn of the Trump Administration. Do you need to have a phd in economics to take the job . Paul volcker does not have a phd. He was very familiar with Monetary Policy and fed, having been in the system for a number of years. So, i think there is a range of skills you can have but you also have to be at least familiar with Monetary Policy and how it works and what some of the issues are. There are important technical components to it, but leadership is not constrained by a narrow set of skills. Theres i think different types of backgrounds that could create a good fed chair. It is important to know a lot about the Financial System. Tom what do you envision our vice chairman of regulation will do . This is a new position. Regular, it is not the romance of the fed that we cover at the bloomberg. What do you envision that job to be . It is a very important job. Because, as they say, personnels policy. Regulatory the structure is only moderately changed, the way its executed will matter a lot in practice. So, the people they have talked about our people who are highly qualified. Have had a lot of background in financial regulation. It is important to get somebody who will take seriously what we think we learned from the great crisis was that its not enough to be looking at individual banks and at individual components of the system. Somebody has to think hard about the stability of the system as a whole. That was something that really was brought home to us when the system as a whole went into shock in 2008. So, that person would have a very Important Role coordinating with other regulators, the fdic and other agencies, trying to make sure not only are banks stable but is the system at as a whole resilient for the next shock . Francine you can follow all of it online and on our social media platforms. Tom, i know you also did a fed special from washington, d. C. For me, one of the first time i remember, the fed were explicit. They said there is soft data but we are going to look through it because we want to hike. Tom there is a mystery to where we are right now to her tomorrow we will have the jobs report in the United States. Always important. I will be on this. I think this jobs data is more important than were seeing in months. Weve seen in months. Michael mckee thought it was a balance statement yesterday but it really dovetails at all the challenges every major nation is having right now. Matter, and what does the hard data say for the rest of the year . Francine i have a great chart showing the Balance Sheets of how boj compares to the fed. Up next, we also have five weeks on from the ousting of south africas finance minister, what does the future hold for the country . The governore to of south africas central bank. 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. Francine bloomberg surveillance. Lets get straight to the bloomberg first word news. Thank you. The u. S. Federal reserve has stuck to its outlook for gradual Monetary Policy tightening after leaving Interest Rates unchanged. Officials were unusually statementn their indicating a disappointing firstquarter were not knock them off their path to raise rates to more times this year. House republicans plan to vote today on their long stalled Obamacare Repeal measure. Given the continuing doubts about whether they have enough votes. The decision comes after several weeks of agonizing over how republicans would deliver on 7 years of promises to repeal obamacare as well pressure from the white house to hold the vote. In france, president ial candidates Marine Le Pen and Emmanuel Macron have clashed and their only headtohead tv debate ahead of sundays election. The nationalist leader pretrade her opponent as part of the global elite, a front of terrorists. Macron hit back by saying that Marine Le Pens strategy was a series of lies. Youve said it so often. Im the candidate of openness. Candidate ofhe closure, the closure of factories and the closure of stations, the closure of hospitals. The only thing you do not want to close are borders. This great fear. Who has been manipulating it since the beginning . Its you. Who plays with the fears of our citizens on terrorism . Its tyou. Great britain has nothing to do with us. It wasnt in thee and never has been. Usage as leaving the euro. I think that is a dangerous project you suggest leaving the euro. I think it is a dangerous project. Hsbc posted a surprise firstquarter profit after Stuart Gulliver stemmed the revenue decline. Adjusted pretax profit which excludes onetime items rose 12 5. 94 billion. Facebook executives have tried to temper investor exuberance about sales growth prospects. The Company Expects Revenue Growth to be down after it stopped increasing to avoid driving away users. That messageas overshadowed First Quarter sales the top estimates and a 17 jump in monthly users to 1. 94 billion. We track ads. Weve said that ad load is up from a few years ago. We have been able to do this by improving the quality and relevance of the ads. Were containing to focus on improving the ad quality and relevance. Global news 24 hours a day powered by 2600 journalists and analysts in 120 countries, this is bloomberg. Fran . Francine now, we are just getting breaking news over the last couple of minutes. This is pmi and this is services pmi. A firm beat for the month of april. Rising to 55. 8. We had estimated 54. 5. What it means is that pound is currently at 128. 83. Let me bring you over to bloomberg terminal to see what exactly pound has been doing over the last couple months. We had a couple of different data. Look at the regression. Hillary clark did this especially for tom, because he woke up earlier than usual to join us. We did see mixed data. Thances pmi better expected. Factory orders a little bit better than expected and other data more disappointing. Keep an eye on the pound and the assets that surrounds p ound. Lets introduce the global head of fx strategy and Morgan Stanley. Thank you for being so patient with us this morning. So glad we finally got you on air. Talk to me about your favorite currency pairing. I do not know whether what we heard from the fomc yesterday reinforced some of your conviction of what you need to buy in currencies right now. Isso, first, the u. S. Dollar going to increase for the further from here. When you look at the u. S. Dollar, we think it has a good 3 to go from here. The second big call, we make the point that dollaryen should rise significantly based on our convictions that global reflat ion is a big theme. Related to that, we have Inflation Expectations going up. And with that, the central bank, which is controlled its yield curve, means you will have lower real real yields in japan. So, that is working very well. Wen the third very high are bullish sterling. It is about that all parties involved in that have to avoid the cliff edge. Therefore, i think sterling has outside potential. Aere could be a bit of correction in the short term because of some data disappointing, but the british economy has done quite well. The fourth highest conviction trade is the australian dollar, which we believe is going to come on th under lasting selling pressure that has a lot to do with the leverage in the country. Its liability position being 60 of gdp. Tom im going to be in europe and i have got to make some money quickly. Can i make money in the Canadian Dollar right now . Finally, we have got a weaker canada dollar. Anne marie, bring up the chart. This is brent crude. As you know, we are finally getting down and testing this 50 level. A real move weaker in oil. Do you presume a weaker Canadian Dollar . Hans oil has certainly an impact as the Canadian Dollar. As the weakness of the Canadian Dollar, that was driven by the news coming out of one of the mortgage lenders. And when we are talking about oil, we have to think about canada as well as the significant share in shale production. You have very low entry costs. I think shale is a revolution to the oil market. The more traditional producer of oil, i think, that, the prospect of losses are significantly better than in the Canadian Dollar. Commodityg10 currencies, canada, norway, australia, new zealand. Canada is one of the better prospects. Francine stay there, please. We will get back to you. But we need to turn the spotlight on south africa. Five was ago, the ousting of the finance minister saw the rand plummet. Since then, fitch and s p have cut the nations debt to junk status. Yesterday we spoke to the new finest minister Marine Le Pen finance minister lesetja kganyago. South africa, our policy is the South African government are fit by the African National congress. There will be various voices outside that framework that will speak. And those voices dont reflects the opinions of government. Francine on the central bank, and our report, south Africa Central Bank says the nation posted a high risk of further downgrades to its Credit Rating which made lead to higher borrowing costs. Im please dispute to the governor of the South African central bank. Governor, great to speak with you. Thank you for joining us. Are you worried and do you believe that moodys will downgrade your country to junk like other ratings agencies have done in the last couple weeks . Cantanyago well, you speculate on what rating agencies are going to be doing. I think what is important is that moodys what are the effects of, that could lead to them cutting south africas rating . We are engaging with them. We dont believe that the issues they have raised are insurmountable. We believe that the things they have raised are within the control of South Africans. They have given us time to say ont, they would put us review and would be making a decision in three months. I think that getting into this data, its important to reemphasize south africas credit strength. That weve got very strong institutions. A proud history a very prudent t management. The change of the team at the government has not affected the commitment to prudent it Macro Economic management. Yesterday, i think what you guys interview the minister of finance, you could hear that re commitment. Ard from the just he new finance minister. Governor, have you had to raise or will you have to raise its Inflation Expectations because of the removal of the previous finance minister . Mr. Kganyago what we were faced with is we had a function for the Exchange Rate. Our fountain for the Exchange Rate is higher than what we have. The assumption it is built into our inflation forecast is currency that is weaker than what we currently have at the moment. That tells you that the inflation outlook is not going to change as a result of the gyrations that we saw in the Foreign Exchange markets. Inflation expectations is driven by other factors. Into the previous meeting, we also stated there are factors that are actually impacting positively on inflation, putting downward pressure on inflation. Crude prices continue to surprise. And part of it has to do that we had a very good rain and very good crop year. Francine you do not think Inflation Expectations will change. What about Monetary Policy . On march 30, the bank was saying you may have reached the end of the rate increase cycle. Are you 100 sure this is still the case . Mr. Kganyago two quick things, tohink youve got distinguish between Inflation Expectations and our own forecast of inflation. Inflation expectations using a number of different indicators, one of which is breakeven inflation which has come down. And the second one has to do with Inflation Expectations that are bubbling around the upper end of our inflation targeting i think that what we have seen is the extent of the Political Uncertainty we had in south africa has impacted on the Exchange Rate. Into Inflation Expectations. Ecr own for this, our for ast will be back within the target this coming quarter. That we will remain within target for the next two years. That is for as long as the variables remain as we had recently seen. Francine understood. What does it mean for your rate hiking cycle . Is that over, like you said . Mr. Kganyago well, what we spelled out very clearly is that we think that we could be coming to the end of our hiking cycle. But even then, i think that what we need to do begin with is a market that will hike itself. It does not mean that you are entering a cutting cycle. I think a lot of market commentators are running ahead of themselves with respect to that. Inflation we forecast will be well within our target. Theit will be 5. 5 following year. With all the forecast, there are risks to that forecast but where people are getting the notion that we are coming close to the end of the hiking cycle could suggest that a rate cut cycle is about to begin. I dont know where that comes from. Francine do you think markets are running ahead of themselves. Explain what it would take, what would be the catalyst for a rate cut. Mr. Kganyago i missed you that. Francine what i was trying to get from you. You said markets may be getting ahead of themselves. Please explain to us what it would take, using the word catalyst, if theres a specific catalyst you would look at to cut rates. Not a know, we are central bank that targets Interest Rates. We are a central bank that targets inflation. To rates are just a tool assist us to arrive at our inflation targets. We wcould consider revisiting our if inflation returns within the target, and stays within the target on a sustained basis. Any that if there are external shocks to the inflation environment that we would still be within the target or if we fall outside of the target, it is not by a big margin. Francine thank is so much. One of our favorite interviews to have on surveillance. The governor of the south African Reserve bank. Stay with surveillance. Well talk syria and sochi. The leaders of russia and turkey meet. More to come from tom and i. This is bloomberg. Francine im Francine Lacqua in london. Welcome to bloomberg surveillance. U. S. House republicans say they have enough votes to pass the measure. Repeal th decision to hold a voteei today comes after several weeks of agonizing. Lets get thoughts from an associate fellow at Chatham House. Thank you both for joining us. Dollar doessee what from here. I do not know whether it is linked on what President Trump can pass to the house or a purely reflation trade. You hear me . Hans right. Ahead. E go the line is bad. Is asso, the view we take the u. S. Economy was in a much stronger state at election day. When we talk about the Political Risk related to the the United States, i would say in the United States you have a lot of you have to think about the Capital Expenditures situation, the Capital Stock in america is at a low level. The ratio between labor and capital has been rising for some time. That suggest we are now in a situation where we may have to increase our Capital Stock factory labor is going to see an increase in its price. When you look at the curve in the United States, that suggest, in combination with better profitability in the United States, higher wages. And that could mean that capex is going to pick up. That is a good thing. A lot of that was already in place before donald trump came to office. Tom within the conversation of day yesterday,ed the Economic Data will see in the next 48 hours, in my conversation with chairman bernanke the linkage of the Financial Stability into the dollar. Lets look at the dollar with his stability. This is the bloomberg dxy index. The green is that surge in Dollar Strength from two years ago. Do you agree with chairman bernanke that the has dairy about the Balance Sheet, this worry, that worry, that it is all over done, and that janet yellen is driving us towards a good Financial Stability . S i think that the financial conditions in the United States are going to stay supported. You just have to go into one exercise. Somebody were to come to you on the first of december, you would have predicted a rate hike in december, a rate hike in march. And the fed considering cutting the Balance Sheet. What would you recommend . They would recommend dollar long, and equity markets declining and bearish on the credit. We have to ask the question, what this prevents the market from going into that direction. I think there is a new source of liquidity coming up in the United States and this new source has to do with banking regulation and better bank Balance Sheets. Our view at Morgan Stanley is the excess of capital in the Banking Industry of 120. We know that banks multiply money but at least 10 times. That means you have a significant boost of global liquidity conditions from that side. That is positive. I think if he wanted to have a guidance in the marketplace, it looks to me like 20042006, the fed was hiking. Emerging markets continued to rally. I think that is a guidance to take. Francine they do so much. Were talking politics. We talk about armtwisting. This seems to be a do or die vote for the gop when it comes to repealing obamacare. Will President Trump the able to push it through . This is the 10 million question. The votess set to come up at 10 a. M. To me, it does not seem like an obvious win at all. This is a brinkmanship move. It is a make or break for paul ryan and for President Trump. He has made this is ongoing key concern, his key legislative item. It is critical for him to help fund his propose reforms to the tax reform proposal. And, of course, the move in this reform bill is really with respect to preexisting conditions, and the compromises to put more money into trying to cover some of the costs. The democrats are very unhappy with the proposal. The last i looked at a number of are very much undecided. They must have some knowledge to make them competent enough to take this to a a vote. I think we have to watch this space. I do not think it is obvious it will get passed easily today. Tom i agree. That was the tension we saw in washington yesterday. I was sitting with the connors made from little rock, arkansas and next to me. A congressman next to me. He had his whip count paper next to him. I wanted to see that. You know this is a physical business. How will they strongarm those moderates to come over and get those key final votes to get this past . What is the bait . Is it just cold, hard cash . The bait might also be this alleged idea it is going to go through. If you want to be on the losing side of a vote that is going to be successful, it is very bad press for the Republican Party for the sense of whether or not this congress can work with the president. There are a lot of things this Congress Wants to do, especially the republicans. If you think it is going to go through, you jump on the bandwagon. It is hard to see quite what the those is the on that for who are reluctant to support that could be a plan that puts americans in a bad position with respect to the cost of their health care are having any coverage at all. It seems to be another one of these moves that is more tactical than strategic, but with high consequences. Francine how to the currency markets view this vote . Is it the ultimate test on how much sawway the president has over the house . Lets eight goes through, does the dollar rally . Hans so, that will dependent how the market does. Actou would get the repeal getting through, people would get more optimistic on the reform momentum, the u. S. Dollar positive. The contextthis in of what is happened in the last 100 days. The Trump Administration disappointed, the activity they took to get through the legislation. That means they have to improve on that site. We know the repeal act failed they believe in a small state. They ask to deliver a small state via tax reform and then you have the impact on that voting behavior. Lets wait the vote is going to tell a next few days. If it is getting through, i think it is going to be a positive for the dollar. Tom thank you so much. We greatly value your perspective. We need to say a special thanks to lesley from Chatham House for her perspective. Let me tell you folks what were going to be seeing in the next couple of days. On washington today in this key house vote for our global audience, i cant convey enough how emotional this vote is for all americans on the dea th of obamacare and perhaps the first look towards trumpcare. Dont forget there is a senate in the way of the passing of that legislation. We move onto the jobs are for tomorrow and then sunday, parisne and i will be in for the coverage of the french election. Moving on to monday in paris. A week in london as we begin to focus on the United Kingdom election. All the market reaction, including oil, weaker. Coming up in our next hour, from ubs. This is bloomberg. Rancine the fight for france. The only headtohead tv debate. Can they close a 20 polling gap before sunday . Brushing off the recent economic lowdown and shares jump as ropes biggest bank boosts profits. Were seeing quite a lot of market movement. We have to talk about your ben bernanke interview yesterday. We have quite a huge swing when it comes to iron ore. Tom well do that in our data check. Lets not forget this historic vote. It may occur in washington today. I thought leslie was wonderful on that. The healthcare vote is without question the number one story in america this morning. Francine yeah. Leslie is back with us in another 10 minutes. First lets get to the bloomberg first review. We are starting with that in washington. The high stakes test for house republicans. They plan to vote today on their layed plan to repeal obama care though there are doubts that there are enough votes to pass it. It would boost funding for people with preexisting conditions. Today President Trump will sign an executive order that lets churches engage in politics ithout risking their tax status. And le between macron pen produced a lot of angry exchanges. 63 of those surveyed said macron won the debate. The regulator complained the swiss banks actions contributed doing. Rong this is bloomberg. Francine . Tom . Tom thanks so much. Looking at france, germany. Equities bonds, currencies, commodities. A steeper yield curve. I cant even frame a 46 handle yet. The equity markets, dow yesterday, green on the screen. 10. 51. Im watching canada as well. 1. 3720. May be that should be a little bit weaker. Francine we have a similar data check. I wanted to show you the overall Bloomberg European indices. Gaining 0. 3 . I think were looking at some of the basic resources as well. A little bit of pressure today. I wanted to mention pounds. We had some better than expected figures. The u. K. Economy with that Services Strength and then you can see crude oil. Youre looking at brent. Nymex is 47 points. Tom the bid erodes away. How about the conversation with ben bernanke yesterday, the specificity of the present and broader global sense of the lack of productivity. Major thanks to Michael Mckee for emphasizing the need to speak to the chairman about this incredible greenspan moment of great productivity. Up we go, with a miracle to the late 1980s and 1990s. Here is where we are. This is true of every major nation. Down we go and the challenge of the lack of First Quarter si and productivity in Global Markets here. Francine this is my chart. What im looking at is an index that Hillary Clark doesnt look at often. This is a bench mark that looks at global stress. The anxiety in the markets. This is not the vicks index. He a vicks index. This i would imagine these do with the french elections and the fact that maybe, maybe, lets wait until monday morning but for the moment markets seem make ron ming mr. Becomes the french tom i thought the chart, hillary trying to get to the game of thrones series. Aybe thats what that show is. Over kings landing. Francine were covering the french elections together. Watch out for this. You want to be allowed to travel. The dollar holding gains. Treasury yelleds ticked higher after the fed stuck to its outlook for gradual Monetary Policy tightening. Copper leading the plunge in industrial metals. House republicans plan to vote today on their long stalled obama care repeal measure. Oining us is leslie. And lets welcome isabel from Blackrock Investment strategy strategists. I know we were talking about the health care. How important this just to show the markets, actually the world that President Trump has congress a little bit on his side . Can we go as far as intimidation or saying this is make or break for him . I would say this is make or break. He lost in a significant way. Having to pull that from a vote. All of america was watching and of course the world. He is saying they have the votes. It is unclear to me whether the votes are there to get this through. They have made some changes with respect to preexisting conditions that could leave a lot of americans without coverage, with more expensive coverage and a number of republicans have been on the fence and undecided. They are playing a game of saying they have the votes and that they are going to take it to a vote around 10 00 this morning washington, d. C. Time. It is not yet clear. The worst thing you could argue would be for them to pull the vote again and have a replay of what happened in the first major vote that President Trump tried to get through congress. This is very important in terms of funding his proposal for tax reform and dee the Republican Party showing it can make this Congress Work with the president and that legislation will move forward during these first four years as we come up through midterm. Very important. Something americans feel passionately about. Francine of course. I have heard it from both ways. The market will look at it as a real test as to whether tax reform can be pushed through. Have heard the market also have a bit of truth. The healthcare bill is not significant in terms of its impact on the economy. What is important is if it passes it will clear the way to move through tax reform. That is the big one. Is there going to be fiscal stimulus and structural change in the economy that can boost growth in a sustainable way. It is really more in terms of can we move the agenda to tax reform or not just yet . Tom what is the thing that we should focus on in tax reform . When you look at all the analysis corporate or personal income tax, which is the more important topic to make an effect on the American Economy . Well, you could argue number one in interprets of cyclical perspective, the big question is there going to be a stimulus or not, meaning is this tax cut going to be fully funded or not . Most people seem to expect that will not be the case. It doesnt matter tremendously where it comes from, that will give a shortterm boost to the economy. The more important question is can you really get a sustainable boost to growth as the Administration Says it wants to deliver . And there you could argue there is more to be gained from the Corporate Tax and it has a lot f problems that need fixing. And scope for productivity gains, if you can improve the Corporate Tax structure and definitely now, there is a lot of firms that have an effective tax rate which is murder in the third much higher than for the large one and if you reduce rate, that will give them a boost compared to others. It is also true that in some system current tax encourages hoarding of profits offshear. Offshore. That can give a long time boost the the u. S. Economy. Tom the backdrop of this, a french distwrax the election. What are you looking for as we stagger to june . Im trike trying to get to this weekend. Help me with the analysis of this United Kingdom election. Of course we cant really talk about the elections. There is an election so we have to be careful about how we talk about the election. Maybe i should be careful. They dont have a united position on the election. We give individual analysis. I think youre right to suggest implicitly that whatever happens in france will have a Ripple Effect in the u. K. Elections and germany as well when get to the autumn. It is very important to watch this particular space, the contours over the u. K. Election are different. So far what we know, the data that were seeing suggests that this is clearly going in one direction well known to all of us. Perhaps we shouldnt say more. Francine we know we can talk about voter turnout. We have a little bit little bit of breaking news. The u. K. s prince phillips, the husband over the queen said he will sees public engagements this year. This is the latest from Buckingham Palace. This is what we know so far. Well be back with isabel as were showing you pictures of Buckingham Palace. I think those are live. Prince philip Just Announced he is ceasing public engagements this year. This is bloomberg. This is bloomberg surveillance. It was a surprised increase in irst quarter profits for hsbc. Earnings rose 12 . Bloomberg spoke with hsbcs c. F. O. I would be a happy santa ana i could call 2017 now. We have seen 3 to 4 Revenue Growth over 2017. A very good start in the First Quarter. Thats the guidance that we are holding for the market over the course of the next few days. Societe generale has paid a billion dollars to settle a dispute with a an Investment Authority. It led to a surprise drop in socgens First Quarter profit. They deny that the payment made was a bribe to secure investment deals. Tesla ensuring they are on track to begin production. The c. E. O. Is burning through cash to bring the car to market. The model 3 will be their most affordable car and production is expected to start in july. And thats your Bloomberg Business flash. Tom . Francine . Francine thank you so much. Series of lies. These are words mack ron used to describe his rival macron used to describe le pen. She fired back saying macron represented the catalyst elite. You have said it so often. Im the candidate of openness. Well, no, you the candidate of closure. The closure of factories and maternity wards and police stations and hospitals. The only thing you dont want to close are borders. Is cine joining us now isabel. I was hooked. The i watched it all. It was quite riveting. What will the french actually choose on . It seems like that favored macron as more poised. Will it change the polling . Sa f the people who Million People audience, 62 convincing s more that le pen. Punch line after punch line, macron accusing le pen of lies, of being stupid, of being a parasite and of course le pen trying to fight back with her own punch line saying that macron was from a part of french that she called the invaders and said that france will be run by a woman. It will be her or referring to the supposed dependent of macron to germany. Body languageting seeing them face to face. Did the left watch this debate . The left of course watched we should mention the candidate who had 19 of the vote in the first round. In fact in the same poll that we had last night, 2 3 of voters said macron was most convincing as well. Francine so good, i might go and watch it back although a lot of french said there was too much mud slinging. On the back of that debate, people said macron was able to look president ial and be stronger than le pen, markets moved a little bit. Are you not worried that a macron presidency is priced in too much and we havent vote yet . Right. I think a lot will depend on the margin of victory. Margin of in if victory was priced in. If it is a 6 win or higher, you could see 60 win or higher, there could be another leg up. It is going to determine whether he can implement the policies he has campaigned on or not. Traditionally the president ial election gives the party of the president some momentum. The larger his margin, the more likely he will get the majority that allows him to govern. A lot is priced in but not entirely and definitely not too much. Francine thank you so much. Isabel stays with us for the hour. Well be bringing you special coverage of the french president ial election. Tom and i will bring you that on sunday and then get on to monday. Up next, we talk a little bit more about banks and look at what European Banks can do. Will they merge or not . This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. Tom keene is in new york. Were on the bloomberg tv and london radio. Lets get on to banks and talk about hsbc. They reported some earnings today. Europes biggest lender and they posted a surprise increase in First Quarter profits after they stopped a revenue decline. Ets bring in steven morrison. It looks like hsbc have finally managed to arrest the falling revenue under Stuart Gulliver. Investors have responded well to the news. What we didnt see is whether they will buy back more stock which has helped push the shares about 45 in the last year. It is broadly good news which is not always the case these days. Francine what does it tell us about all the people at the top . They have been getting flak over the last couple of years . First of all, there is going to be a lot of leadership change at hsbc. They have a new chairman, mark tucker coming in in october and they will get a new c. E. O. When Stuart Gulliver said he is going to retire. This is their last full year in charge. It will actually show fruit before they exit. With regards with brecks it, we had more commentary. It is going to be a turbulent time for the u. K. Economy but they have not started moving the 1,000 they planned to from london to paris. With the way negotiations were going, it didnt seem executives were positive on a good deal for the u. K. Tom within our global audience, where does hsbc fit in . Are they a too big to fail bank . Are they a dominant European Bank . Are they still pigeon holed and competing with standards chartered . I dont have a clue. Help me, steven. One of the globally significant institutions. Among European Banks is become more prom nations capital. Their Investment Bank outperformed everyone but Morgan Stanley and b. N. P. When you compare that with barclays, it is looking healthier. I dont know the exact figures but it is multiples. Once they faced their own problems, they are not the existential crisis that Standard Chartered has been facing. They are doing very good and a good windo to look into activity in asia as well where they make most of their money. Francine thank you. Were back with isabel from blackrock. Coming up we speak with mark of u. B. S. This is bloomberg. Tom terrific news today. Away from what we do in economics, finance and investment. It is remarkable the story of philip and elizabeth. We dont need to make much of it now with the news that Prince Philip at 96 will step away from duties but it is remarkable. I believe she fell in love with the young lad when she was 13 years old. It is literally a storybook relationship and he was the real deal in the navy. He was one of these elites who did not mail it in including some significant war duty. He wasnt doing photo ops in england during the war. He was really out there now. Prince philip on the tour of duty since 1952. Francine he is obvious a patron president and from what we understand is he will continue to be associated with Buckingham Palace but no longer attend engagements. I used to see him around on the london circuits. He was around not only there for the photo ops. He turned 96. Thats partly why. He is going to retire from these duties. Tom i love how some of the family call themselves the mountain baton windsors. Now on this busy day, here is taylor riggs. House republicans have been promising for several years to repeal obama care and today they will get a chance to vote on their replacement plan. Party leaders say they have enough votes to approve it but there are some doubts about that. It would add men to pay for people with preexisting conditions. The house has passed a bill that would avert a government shutdown. President trump plans to sign the bill even though the democrats were able to defeat most of his wish lists including money for a wall along the mexican border. The New York Times says a proposal is one of the more detailed yet in the several year long civil war. Peace keeping troops would be used to separate Syrian Rebels from government forces. Global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. This is bloomberg. Tom thank you so much. There was a broader conversation yesterday with the chairman, chairman bernanke over the Federal Reserve. Ffs part of it was in the present, in the now. In the bank of japan, the bank of england and the e. C. B. And the Federal Reserve system. Here is chairman bernanke. The fed has released a lot of simulations or projections on what they think they will do. It depends on where they decide to end up. I think it is four or five years to get down to a sustainable level. Tom chairman bernanke. What a wonderful conversation. Francine, you know the chart. I think youre the one that first showed it to me. This is bank of japan in red. He e. C. B. In blue. This is the Balance Sheet to g. D. P. Here is the nirvana that everybody wants to get back to. He didnt minutes any words. Calm down was his he didnt minceany words. Calm down was his basic theme. Francine that is my favorite chart of the year, if not decade. Market participants. I want to hear the thoughts of isabel in a second. We talk about geopolitics and politics. You need to be on top of that chart. Because thats how you get burned. Our next guest is a global c. E. O. For Global Wealth management. If we had a dollar for every instandpoint for flation or market elation, it would help us y to treat the worlds headlineitis. Lets bring mark and still with us is isabel from blackrock. I love your notes and colorful writing. Talk to us about what you think the market is getting wrong. Are we jumping at shadows or not pricing in enough risk . Well, forgive me for the dig at journalism but three data points on the political end obviously dont add up to an economic forecast. And i think that is the point. That while this Political Data as you said, it is so interesting and so critical perhaps for the longterm, but for the shorter term and particularly that medium term, we still have to keep our focus on global growth, the earnings, how they are coming in and what the Central Banks are doing. That has proven to be the best way to navigate portfolios through a challenging period. Francine you may have a point, mark. The problem is that what people dont want to do is misthe canary in the coal mine which happened before the financial crisis. I dont know if it is three data points or things that you would at to show stress in the markets before the whole market latched on to it . Yeah, i think that there are certainly many warning screens that we look at and some of them are still the same ones that were there before the crisis and some of them are different. Obviously one of the things that i think is different from before the crisis is that corporate Balance Sheets are so flush with cash. Their leverage is relatively low compared to the crisis seasoned another thing we see in our Wealth Management business across the globe is that clients never really return to equitys with the gusto that they had before the crisis. So those are two of the things that we looked a, obviously there is others. Tom you have a great window into the flows and confidence of investors. Thats right where i wanted to go. Mark, is there any belief in apple, am rket, in zodge, is there any real commitment to growing cash flows . Well, i think there are a couple of different strains of optimism and pessimism out there. I think francine hit on paying one, i want to avoid a large, negative fall. That is swerm some of certainly with some of our clients around the world. What we saw this year in 2017 to, a little bit is there was a little bit of crisis fatigue among the investors as many of the dire predictions hasnt panned out and perhaps there was a bit more optimism that came through in First Quarter. Thats one angle to this. And then a second one is what will happen with the United States because as we have talked about, were not sure how policy would work out, but certainly there is hope that some of the things that the Trump Administration could do around taxes or deregulation could proadvise or infrastructure, could provide further stimulus not just for the United States but for maybe parts of the world. Tom the dax in germany gave us a 21 down market here a few years back. Do we remember when we last had a bear market . Is that just gone from our u. B. S. Collective memory . I dont think that is the case at all. Certainly with our clients. With the wealthiest investors around the woled. One of the things that you see is they continue to maintain a proportion of their holdings in cash that they did not keep before the financial crisis. So we dont see that in the data. Despite what we may feel around, you know, new highs in the nasdaq this quarter. Francine isabel, what do you see in the data . Well, that corporates are healthy. Definitely thats what we have seen in the earnings, the reporting season. So we too are quite bullish about equities and we believe that the Risk Appetite hasnt come back to anywhere where it was before the crisis. We definitely share that view that there is a lot more scape to float back into equities. Francine can you very much. Mark and isabel both staying. Coming up in the next hour of bloomberg surveillance, we tom said heer would be wearing sneakers or trainers today. Well look under the desk to see if that is true. Francine this is bloomberg surveillance. Francine and tom from london and new york. Were live on radio in london and of course bloomberg tv worldwide. Extending their biggest daily plunge this year after a slowdown in chinese Manufacturing Sector and concern ver a stronger dollar. Tumbled in shanghai. Lets get more with mark, the lobal c. E. O. For Global Wealth management and isabel with blackrock. Whats your main worry on china . Is it the fact that the growth may not be as strong or demand may not be as strong or that they could be looking at a financial crisis and were not realizing it . I think it depends on the time horizon. As far as the latest p. M. I. Numbers are concerned, were not worried. Growth was an unsustainable pace at the start of the year and if anything were happy to see it slow down a little bit to a more sustainable pace and we think that is consistent with avoiding a hard landing down the road. We do see a lot of debt in the chinese economy and thats definitely a worry. That is a worry more for the medium to longterm i would say but what is very important is that this strong growth that we are seeing so far this year has allowed the central bank and the financial regulators to really start cracking down on rampant credit growth, bubbles in the Financial Sector and that is very positive. Thats exactly what they need to be doing. Everything that has been happening now is reducing risk rather than the opposite. Francine mark, when you look at regulation, one of the things we were exploring yesterday, when you reduce regulation too much it becomes more lacks. How much more capital outflows is china going to see . I think certainly this issue of capital control is the way that china has managed to keep the fx reserve where is they are. There have been increased regular nation that area. But also some of the measures to support the economy with Infrastructure Investment and some of the measures taken around the Housing Market over the previous two year did bear have continued to bear fruit in 2017 and i completely agree this is has in a way given china the confidence that the economy is Strong Enough that they can put in some measures to reign in some of the growth and perhaps introduce a concept that has not existed in Chinese Markets for a long time, which is moral hazard. Bankruptcies or issues around the debt side are in a strange way a sign of confidence in the economy that they can withstand those kind of things. Tom my conversation with chairman bernanke, deals with a concept of financial repression. Are we in financial repression or is this really about just getting used to lower rates that are not going away . Well, i think it is a bit of both and i think both chairman greenspan and bernanke have spoken about this. When you look at the world today, you can say yes, there is a lot of savings out there and that lowers, you know, that lowers potential returns because there is a lot of money chasing yields out there. But on the other hand, there is financial repression and particularly when you look to the negative breaks in europe. I believe this is an important story and also why central bank action, particularly fed action is so important to the global economy. The further the fed moves away from zero, the sooner that europe and other places can get off of this negative rate train which i think would give great deal of support to Global Confidence and also help with financials. Francine isabel, some of i guess, the negative yielding bonds have started to turn positive. So what how should the markets interpret that and how much or how do you start pricing dressing of the Balance Sheet . Clearly this is right now just an issue for the fed. I think the other Central Banks are still quite far from even thinking about that. Grnk the fed standpoint, what they seem to have indicated is they dont look at the Balance Sheet normalizeation Monetary Policy. They are going to keep using the fed rate as their Monetary Policy tool. From a market standpoint, what is very important is that they gradual redictable and manner, they are very clear what is their end point and how they are going to unwind the components of this Balance Sheet is clear. And they stand ready to correct for the consequences if it turned out that markets reacted in an unexpected way like we saw with the tantrum back in 2013. Thats how we would look at it. Francine talking about the temper tantrum, what are the chance of a temper tantrum, it seems the fed and all Central Banks brought their a game to communications. Clearly the communications since the beginning of the regime has improved dramatically. That gives markets some confidence around this. For me, you know, you can keep your pants up with a belt. You can keep your pants up with suspenders, you can keep your pants up with a belt and us is pernsd, to mix a metaphor, this Monetary Policy and the Balance Sheet side are two sides of the same coin. As long it is a fed maintains its communication around being data dependent and this perception that they will be do what it takes to keep on track, having both tools is not necessarily a bad thing for markets. Francine great analogy. If you had the right sized trousers then you dont need suspenders. If youre a bloomberg users, this is what you do. Go on to tv and you can see the great analogies and isabels great insight and you can ask us a question directly and do that by clicking on the button june neath the video screen. This is bloomberg. This is bloomberg surveillance. He Worlds Largest air maker posted earnings. Led by corona brands. The numbers were helped by cost cutting. Royal dutch shell posted First Quarter profits that beat estimates. A rise in oil prices boosted results. Some shareholders complained the company spent too much at a time when oil prices were falling. Shares of facebook are lower in premarket trading. They warned that Revenue Growth will fall after it limbs the number of ads that it will show on users news feeds. First Quarter Sales beat estimates. The number of users rose 17 . Francine, tom . Tom thank you so much. Really appreciate it. Chairman bernanke, this is one idea we talked about. Important speech 15 years ago at e 90th birthday of the acclaimed milton friedman. All conversations circled back to his book, the courage to act. It is about the financial crisis. Here is chairman bernanke with an update on where we were and where we are now one of the lesson we took from the financial crisis in 2008 was the Financial System is a critical input to the economy as a whole. You cant let it collapse because it will bring down the rest of the economy. That is something we learned with the benefit of hindsight seeing what happened in 1930. Tom you mentioned hsbc and the good quarter they had. What bernanke is really known for is the study of the depression and his respect for the need for strong banking. It is a single distinction of its Academic Work and he was adamant about that yesterday that the financial transmission mechanism is absolutely critical and it aint there in europe right now. Tom no, it is not there for a number of reasons. If you speak to a lot of the bankers beneath their breaths, they probably wouldnt say that outloud. They blame regulation. They say they are there to prevent the next financial risis. Lets get thoughts from isabel of blackrock. Were trying to explore the idea that where the next black swan is coming from is something we may not even have seen before. Are we reading things wrong and how do you look at data . By definition, if it is a black swan, if i could say just on this bernanke comment, a key lesson of the crisis was not to let the banks collapse. They did better than that in the u. S. They made sure they cleaned up their Balance Sheets quickly and recapitalized them so they would be fit and proper to support Economic Growth again. Thats what didnt happen in europe. Thats why we have this transmission problem right now. I dont think too many people are saying we need to roll back regulation. Im not hearing that at all. For the reasons youre seeing, we do need a sound Financial System. The question is more how long can you keep going with a chronically sick Banking System like were seeing in some European Countries and what is that going to do to the economy once Interest Rates start going up again and you know, in europe, in particular, you still have these sovereign banking and everything is sustainable when the e. C. B. Is sitting on Interest Rates. What happens when it normizes and can we have a problem there if we havent sorted out this problem . Francine how big is the problem . The italian Banking System takes time. It is painful. But it is being cleared. Is it just not fast enough or are they taking the wrong steps . It has been painfully strong and not much progress has happened. It is not getting worse and that is a step forward but it is not enough. It is going to take another six years at the current pace to get back to a reasonable level. Do you want to keep the economy choked of credit for six years . You can but that is not a great idea. Especially when you have a large debt burden that requires much higher growth to be sustainable once Interest Rates go up. That is the key for europe. One way to ease this would be to have the banks operate on a tom isabel, im going to have to jump in here. Im so sorry. We look forward to seeing you in london here in a week. Coming up, if you dont believe in growth in the american onomy, we will get an update on trum pinch an g. D. P. Well do that next. Tom in washington, this time for real. A vote ryan may have had on the death of obamacare. After the debate of two president ial candidates in france, markets speak this morning. The francegermany spread shows less financial fear as the market tilts away from le pen and towards macron. And the big continues to slip away on oil, crude tests 49 a barrel. We arerg surveillance, live from our World Headquarters in new york. I am tom keene with Francine Lacqua. We welcome you on Bloomberg Television and in london on digital radio. London radio, are we heading towards tee time . Francine tee time as people had to Buckingham Palace. , a significantd move. Better than i expected. Figures in the economy are stronger. We look at dollars. Back,commodities on the disappointing figures from china. Significant news flow today. Tom right here in new york city to give you your briefing with our first word news is taylor riggs. In washington, a highstakes test for house republicans. They plan to vote on their delayed plan to repeal obamacare even though there are still doubts whether there are enough votes to pass. A new provision was added to attract moderate republicans that would boost funding for people with preexisting conditions. The bill faces an uncertain future in the senate. President trump is prepared to ease political restrictions on religious groups. He will sign an executive order that will give churches greater leeway to engage in politics without risking their taxexempt status. Leaders have complained that a decadesold provision restricts their prespeech. Their free speech. In france, three days to go before the president ial runoff election. A debate last night between independent and manual and far right candidate Marine Le Pen heated exchanges. 50 of those surveys think macron won. Credit suisse paid to settle regular claims involving in sales. Sales improper the regulator claimed the swiss banks action contributed to the collapse of three Corporate Credit unions. Deniedsuisse wrongdoings. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you so much. You mentioned the francegermany spread. Currencies,nds, commodities, a snappy live in the s p 500 and the dow futures up near 21,000. Oil, a west texas intermediate. Canada, weakening over the last two weeks, really holding a bid here this morning. Crude at 50 or 47. 50. 47. We are on watch for european oil. Francine i am looking at wti but it is significant to look at oil. Overall, im looking at currencies, which drives the story. European stocks are opening higher today. Weve had some encouraging earnings reports. Mean that the economy in europe is a little bit on the mend and we saw the dollar reversing some of the gains after a policy meeting. Why wee topped, which is did have the resources index. 1. 2894. D, you can see tom ive got to look at iron ore. Thank you for mentioning that. This is a global chart. Even though it is just about americans. This is american productivity. Spoke to chairman bernanke he. Esterday about this surge this is the greenspan surge. Productivityrican a lift in productivity. This is the topic, the dearth in productivity. Francine this is what i have. A fear index. But it is global stress. It is an anxiety from Global Markets. It is probably one of my favorite charts of the week. You can see it is kind of back to levels at 2014 so it is there is the trump fear of dating and then the french politics fear a baking as well. Tom right now we need to get an update with the 10 stories this morning. There is only one in washington. Joining us is kevins our chief washington correspondent. It was really something, the immediacy of it yesterday to sit with the congressman from arkansas and see right next to me, folded in half, a tally sheet of the votes in congress. Where he went now are we right now . Do they have the votes . Kevin publicly they are unsure but privately, they feel they do. You are seeing the likelihood of a vote scheduled for later today to pass some health care reform. It is an 8 billion fiveyear increase to preexisting conditions, easing concerns for moderates and the part of this plan. But at the end of the day the plan could change once it reaches the senate. Tom it was an uproar the last time around that the Congressional Budget Office had not scored the legislature. Delusionnot even the that they would do that right now. Why are we passing a bill or getting a process started without a score from cbo . And without anyone including Kevin Cirilli seeing the document . Kevin politics. I see politics driving the policy here especially when President Trump himself is working the phones on this as well as his chief of staff, tonce priebus, calling staff wrangle votes. Yesterday we heard from representative billy long, a firstterm republican who has found himself caught up in the middle of this. What he said was essentially that he didnt mean to get caught up in all of this. Way has really been a new of negotiation in terms of how the administration is reaching out to congress. It caught a lot of folks off guard. Francine how close will it be . Is it impossible to call . If kevin it goes to the floor it will likely succeed kevin simply because speaker ryan has said consistently that he will not do it unless he has enough votes but i do think it will be close. It is also putting a lot of pressure on moderates up for reelection in 2018. As unpopular as obamacare is with the base of the Republican Party, there are central points in this, including preexisting conditions clause, as well as other clauses that remain incredibly popular to folks in swing states. Tom Kevin Cirilli, thank you so much. You will be busy today. I can also predict that everyone leans forward for masri qamar Global Strategies Komal Srikumar Global Strategies. He has been accurate about nonfrumpy in subpar nontrumpian subpar gdp. For the fourth year in a row, finally, after a First Quarter of miserable Economic Performance with the certitude that things are going to be better, you have always pushed against it. Why will he not get to 3 Economic Growth . I agree that the Second Quarter, you are going to have a snapback from the 0. 7 in the First Quarter. It is also, in the last many years, typically happening that the Second Quarter has been stronger than the First Quarter. What i find difficult to upset to accept is you have a 3 plus growth taking place in 2017 because we dont have the prospect of quick passage of tax reforms, Even Health Care depends on how the vote goes today in the house and what happens in the senate subsequently. It is so difficult to get things past that the stimulus on infrastructure, the cuts on personal or corporate, are going to be difficult to achieve. That is the reason for pessimism on the growth front. Tom everyone talks about an aggregate macroeconomy. In my conversation with chairman bernanke yesterday, he touched on the vibrant citybased america and then we talk about bill in South Carolina where it isnt happening. How do we get to 3 gdp if a good hunk of america is not prospering . That is a great question. I watched your interview and i think the part where you discussed with chairman bernanke he about the two americans is illustrative. But if you go behind it, the americas are divided in terms of whether people invested in the equity market and got the benefit of the higher income groups and probably the ones that bill in South Carolina were wage earners looking for weight is increase and that did not happen. Or keep youro save money in the bank account, you got zero all these years and that i think accentuates the difference between the two americas. I looked at the socalled gini coefficient on income inequality and that increased significantly from 2009 to 2016. Francine this is one of the things that we have started to explore on surveillance. Wereer the Central Banks all this cheap money for quick liquidity did this great divide in the u. S. And the u. K. And europe. But this mandate is to stabilize folks on inflation. As i imagine, they are more worried about the Balance Sheet instead of inequality. Youre absolutely right. Chairman bernanke he told him yesterday that if you were to get people at the lower income groups to come up the ladder, you need more education. You need more training. On the other hand, the fed is not equipped to do that. I would like to have seen the fed say this is not our job, we are not going to do it, rather than ramped up the Balance Sheet because they could not give education to that poor person on the other side of the income side. Tom you will stay with us with much to talk about. A terrific news flow. Any number of things to speak of. On global wall street, we are thrilled to bring you bill mcnabb from a small mutual funds shop, vanguard group. They dont make money on fees. This is just not going to work. Concept 20 years ago. Bill mcnabb in the 6 00 hour coming up shortly. Here is paris, the upper house. The opera house next, Carolyn Cowan from paris. This is bloomberg. This is bloomberg surveillance. I am taylor riggs. Lets get the Bloomberg Business flash. A surprise increase firstquarter profit for hsbc. The ceo was able to extend the revenue decline. Earnings growth, 12 . I have to say, not being the thesis, i would be happy if i could call 2017 right now but i think we guided at the end of the year to see 3. 4 percent growth over the course of 2017 and notwithstanding a good start in the First Quarter. That as we move into discussions with the fed over the next few days. Ceo, hsbc has as gone out of a countries and a muslim hundred businesses. U. K. Has paid to settle bribery disputes with the lithium investment. The french bank denies that a payment made to a businessman was a bribe to secure investment deals. Tesla is ensuring investors that on track to begin production, in an attempt to mitigate concerns that elon musk is burning through too much cash to bring them to market. They reported a bigger First Quarter lost than expected. The model three will be teslas most affordable car and production is expected to start in july. That is your Bloomberg Business flash. Francine thank you so much taylor. Now, a series of lies. Those are the words of Emmanuel Macron to describe the performance of his rival Marine Le Pen in a headtohead debate last night. He criticized her plans to replace the euro and insisted she was lying to her supporters. The National Front leader fired k, saying she represented he represented a capitalist elite. Youve said im the candidate of openness, but no. You are the candidate of closure. The closure of factories, the hospitals, the only thing you dont want to close our borders. Will not bee i want divided. To make this happen we will need to leave a system that you. Duced you are the coproduction of the system you are denouncing. You are its parasite. Francine joining us now from paris is the bloombergs caroline callan. Caroline . Carolyn cowan. , when you look at what we had 63 of the people who watched the debate think that Emmanuel Macron was more convincing. Even among the electorate of Marine Le Pen, 12 thought macron was more convincing. One that point for him, only a very short majority, 55 , thought he was in touch with ordinary people. Tom give us an update on this odd way of abstaining from vote. I would suggest it is different than any other nation, certainly the United States. What is the research on who and how many just wont show up . Traditionally, 80 of the electorate in france goes towards president ial elections now with this runoff being very particular, where you dont have the attention could be higher. More than 30 could potentially happen on sunday. Now, the higher the attention is, that could actually benefit Marine Le Pen. According to bloomberg intelligence, macron would still win if there is a 50 abstention rate but the gap between the two would be much more. Tom look forward to seeing you on saturday or even into sunday as well. Letssrikumar with us, go right to your theory of a struggle for Economic Growth. There is a populism in paris that we have been seeing in nation after nation. When does this end . Do you have any sense of a populous thing or are you see it as being structural . When it isll you going to end but it is not going to end anytime soon. Is a done deal. You have Emmanuel Macron winning on sunday. But the issue is he is not going to have a Parliamentary Party to back him up. Francine he is going to have a minority majority like President Trump. In france they call it cohabitation and it is difficult to get anything past. Then you go onto italy which has elections in early 2018 and there, populism is rising. The reason it is taking place and this goes back to your discussion on what creates a divide between the rich and the poor that is taking place in the aftermath of the financial crisis of 2008. We have not had that crisis truly end for the lower income groups in several developed countries. That is the problem. Francine first of all, the parallels with trump, trump controls both houses. We are talking about Emmanuel Macron not being able to get enough support. And surely, that would depend on how he does on sunday. He wins by a landslide, then it is much more likely that he could actually have a majority to govern with. Come june. I am assuming that he will be somewhere in the 60 plus block come sunday but even if you do that, and once he starts to take measures to make the labor market more flexible, when he decides to cut down the social burden on businesses to help them grow faster, all the things that are necessary from france to get back to a higher growth rate, more closely comparable to what germany has achieved in the last 15 years, is going to be a tussle. Germany could achieve that. In france, it is going to be difficult. Majority, has a big the Parliamentary Support for him, the tough measures he has to implement, are going to take a lot of Political Support and he may not have it. Francine that is a fair point. Thank you so much. Global strategy president stays with us. We will bring you special coverage of the french president ial election runoff. This sunday, tom and i will be live from paris. This is bloomberg. This is bloomberg surveillance. In london, Francine Lacqua. In new york, tom keene. Ures in china have limited have plunged to limit down on investor concerns. This means that they have plunged the most and we almost had them being stopped because they reached the limit. What this means is they sank into a bear market last month. Supplies are rising just as chinas mills go through a. Demand. Period for this is not an overall selloff but it is it they really particular thing that happened in china which may make markets worry about a possible selloff. Tom lets dazzle everyone with iron ore and the deeper market in copper. This is american copper. Iron or out of china, francine flagged this to me. Up we go with a small iron ore bull market and then down we go with a huge plunge. It truly is iron or off a cliff. Through the magic of the bloomberg professional service, we can dazzle you with a second chart. This is actually how we make the sausage here. Up comes copper and what is really important here are those three lower highs. Two coming off the recent peak in february. That is a distressing technical statement on dr. Copper. Francine i like that a lot. That is something we need to give an eye on very close. Tom there we are on two charts on the metals and they are on the move. That is for a global audience. We will put those charts out on tv and radio go. This is maybe the interview of the day. Bill mcnabb on the massive active passive debate. He is with vanguard. 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. Prove our trade relationships, but broadly speaking, i think the United States are irreversibly integrated into the global economy. There is really no way we would want to undo that. We could try to improve the relationship. We can be better for people who were displaced or disrupted by trade but we certainly dont want to end our global role. Tom he minced no words. No surprise but it has to be stated. In defense ofnke a nonzero sum of america, he was delicate he was judicious in his criticism of the theme of the Trump Administration but nevertheless, he cut right to the lecturing like you would at stanford or princeton. He said free trade works. Francine he was very outspoken. Very engaged in the interview. It is clear, you also have it when you speak to mario draghi or the former central bank governors. They would rather talk about Central Banks away from the one they had control of. It is just a nicety. He talked a lot about these. Tom one way to see that interview is out at apple podcast. Our team for scrambling to do a special podcast on itunes. To every, she listens surveillance podcast with our first word news. Here is taylor riggs. House republicans have been promising to repeal obamacare and today they will get a chance to vote on their replacement plan. Party leaders say they have enough votes to approve the measure and sent it to the senate even though there are some doubts about that. A new amendment has won the support of moderate republicans and would pay for people with preexisting conditions. In capitol hill the house has passed a spending bill that would avert a government shutdown. The senate is likely to pass the measure today. President trump plans to sign the bill even though democrats were able to defeat host of his wish list including money for a wall along the mexican border. Weve been speaking with Nobel Laureate Joseph Stiglitz and he weighed in on the french election. I think the protectionist measures being taken or argued for by trump, le pen, are likely to lead to slower Economic Growth and more inequality. Inclusive measures. They are exclusion. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in 120 countries. I am taylor riggs. This is bloomberg. Tom whatever your spot on global wall street, this is the interview of the day. The buy side is in cements in him is tomorrow right now. Not john it is bogle. The legendary founder of vanguard. It is one William Mcnabb who and took for mr. Bogle over for vanguard as a giant of index funds. Everyone is going after you. Recapitulate why passive funds are taking active management to the cleaner. A reallyk it is more high cost versus low cost and i think what you are seeing is lowcost is winning. It is winning both with indexing being the purest form of it but it is also winning in the active space. Look at flows into active funds. They are going into lowercost funds. Better. Ormance is you get to keep your return if you are an investor. This is going to continue. Tom this is an important question. Is your success at the margin due to janet yellen . If we have a great distortion of Interest Rates, does that skewed moneymanagement towards the passive space . If we get through rate normalization, it is not game over but at the margin, does it skew back to active management . Mr. Mcnabb i put that ive heard that argument put forth. The data doesnt support it. Look at equity world. The returns on individual stocks are at a normal level so there is still opportunity to make the right bets or the wrong thats if you are an active manager. If you look at fixed income, the distortions that have occurred because of fed policy actually ine helped active management the bond side. You see better performance on a relative basis by active bond managers then we have seen at other times in history. Of rates normalization will actually help the lowcost argument even more in the future. Tom this is probably in john bogle thesis a million years ago. Let me ask you. Is there something thats is there such a thing as too much money in passive management . Can there be a day where there is too much money at vanguard . Mr. Mcnabb my short answer would be no. I think the more nuanced answer is, if you look at the arguments that are put forth it is all around price discovery. As long as you have somebody willing to make a price, two people trading, you are going to have price discovery. Look at the data. We are so far away from this even being a question. 85 of all equities are managed actively today and if you look at trading, 5 to 10 of all trading is due to indexing and the rest is due to active management. The argument, maybe we will talk about it in 20 or 30 years. Francine what will he talk about in 20 or 30 years in terms of m a . Do people feel forced to merge . This is something we have seen in europe. Will it be a global phenomenon . Mr. Mcnabb i think the trend is definitely that way. You are seeing the benefits of scale in this global and technologically oriented economy. It takes resources to invest in the technology. It takes resources and scales to be global. You are seeing much more attention paid to that. There may be a cyclical element but it is a cyclical a secular trend that will continue. See, inare going to certain sectors, the consolidation actually makes sense. Of ne right, in terms they make sense for pricing. Fees . T make sense for how many Global Players do you see in five or 10 years . Mr. Mcnabb in the investment world or more broadly . Francine both. Mr. Mcnabb in the investment world there are going to be fewer. You will see a bifurcated kind of world. You will see some big Global Players, 10 or 15 dominant firms. But then you will see a lot of smaller firms that will be niche players that will be able to carve out a good existence. That kind of structure will be present in a number of other industries as well. Tom bill mcnabb, thank you for joining us from our studios in washington. With us in new york, Komal Srikumar. There is a chapter in every economics book about investment. Chairman greenspan made a big deal. What does a bull market signal to you . Greenspan would always say it is a big deal. Bull markets are always a big deal for those who are involved in the process. The difference between the bull market of the greenspan era and the bull market that we have had post2008 is that you did not, at the same time, have Economic Growth pick up at a significant pace. The bull market of the 1990s, late 1990s, actually took a lot of the population up along with in terms of work and jobs and that has not happened. Bull markets are not all the same. They have differential impacts on the overall economy and that, to me, is significant. Francine think you so much Komal Srikumar. Still with us. Coming up, we speak with kasper rorsted. He is the adidas ceo that cannot with a earnings today and we will hope to talk a little bit about sports and leisure trainers. This is bloomberg. This is bloomberg surveillance with francine and tom from london and new york. We are live on bloomberg tv but also in London Digital radio. Shares in adidas have kicked higher as retro and the leisure passion have stripped out sale growth and much of nike. Much of the growth in the First Quarter came from north america. The strongest performing region. We are pleased to have ceo kasper rorsted. He is joining us now from germany. I took special german lessons so i hope i didnt but for that. Congratulations didnt that. R congratulations. How do you reach a bigger market share . I think right now we are creating the new. In the First Quarter we have very strong growth. Six to present globally, 30 in the u. S. And china and 53 on econ. A very strong firstquarter. Brandnow we have a lot of heat and consumers are resonating with our brands in sports. Francine you have very ambitious targets. You believe these trends will continue . I was looking at your figures in the last couple of years. Talking aboutwere declining sales, margins shrinking, people wondering if it could be turned around in the u. S. But today you come out with decent figures. Business by 31 . But i want to make one thing clear in the u. S. On the one side we are happy with the progress but we are also not happy with where we are so we need to have a longterm, consistent, Strong Performance in the u. S. With the franchise and the partners we have i am confident we will continue to grow and out of the market. Outgrow the market. Francine talk to me about reebok. It hasnt been a contributor for some time. What is the biggest challenge for the brand . In13 of the First Quarter, strong growth, we grew in all places outside the u. S. , in most places by double digits. A love that through Retail Stores in china. We are more focused on the products we bring to the market and we need to get profitability out of our brand because not only is it important to grow the top line but weve got to make money. We are executing that over the next two to four years and we are confident to get reebok back to where it needs to be which is a great fitness brand. Tom im the one that usually asks financial questions but im not going to do that. You dont have any Boston Celtics swaggy on your website. Im assuming youre sold out. Thomas, how important is it right now that all this product endorsement stuff . Are you in the same competition or is it a soccer new regime to how you get the big names to support your company. I think what you are seeing is a change in the Sporting Goods industry. Young consumers are relating to individuals more and more. And the individual player becomes more and more important. When you go to china you see that big american basketball players resonate in china. You go to china, you see the bigger european football players. Athletes is key because that is who the young consumer relates to. Teams are important but the young set the trend for the Sporting Goods industry. Francine let me ask the question every parent wants to know. Tom when the kids say they want this shoe, are we getting the same shoe as the athlete . Mostly you are but certain letes have, i would say, we customize our shoes to athletes but most of the athletes, if you take our top running shoe, that you can buy off the shelf, some people prefer to have it customized. Over time, you can get our shoes customized. We do with 3d scan of your foot and we 3d print it. It will cost a bit more. Francine i think tom is running the London Marathon and he needs an issue. A new shoe. Tom im bringing the dance mr. Paris. Francine talk to me a little bit about amazon. Are you expecting operations with amazon . We have a Good Relationship with amazon in the u. S. Which is one part of our strategy to be where the consumer is. Equally important is driving all ecommerce experience. We boosted in the First Quarter and our aim is to have a full ecommerce business. It set up with amazon like we will do with ebay. Tom are you managing for when this ends . You guys are booming and everything is going right now. How do you manage for super success . I think youve got to have the longterm view. We spoke about reebok where the question was, are we turning around . We need to understand where we need to be and not necessarily where we want to be next quarter. It comes to the brand and infrastructure building. It comes to hiring the right people and training them to get them to the right places. It makes it certain that you deliver on the shortterm but you have to longterm. You have the longterm. There is no long term without the shortterm so you have to get both pillars right. Francine it is always fun to hear from kasper rorsted. I promise you, we will get combat shoe we will get tom that shoe. Tom i just need my Isaiah Thomas jersey so i can walk around in a hat looking cool. How about technology . We think it is a huge success. Tv. You can watch my ugliness there. You can come over on the right side and find your segment, your chart. Click on it and learn a lot about iron ore. You can own that chart on your bloomberg. This is bloomberg. Commodities sell south, oils as well. Done at the bottom, 1. 37. An ugly 10 days for canada. Ever weaker, larger numbers are weaker. 109 1. 0929. Weaker yen as well. There is our foreign extent report. Francine coming up shortly, a bloomberg daybreak americas with david westin, Jonathan Ferro, and alix steel. I know you are excited about commodities. Francine is that not enough for you . We are going to cover the latest in the french elections. Alix the healthcare bill. What does it wind up meaning for risks in the market . Day two of the fed and what it means for june. We will be talking with edge of any. Ed yard any. Yardeni. Tom i agree with you. There is certainly a mystery of the dollar quote. We have put up a copper chart. Ere to dazzle you the copper chart shows lower highs. That is not copper right now. Come on, anthony, that is not a copper chart. Anyways, i know you are going to talk about copper endboard Jonathan Ferro to death as well. And bore Jonathan Ferro to death as well. This is debt. This is the backdrop for anybody, optimist or pessimist. Ronald reagan is down in the lower left corner. Up we go to Tax Reform Act of 86. Mr. Trump in the upper right corner with 100 debt gdp. He doesnt have Ronald Reagans america. He does not and he doesnt have much leeway either. The issue is when you talk about tax reform, he has to have the tax cuts matched equally by some way to increase the revenue because as you show in your ratio,ith the debtgdp he does not allow you much options to be able to increase the deficit further and increase the level of debt. Can i ask you the question mr. Bernanke wouldnt answer . Where is your 10th point on deficit your tent point on deficit to debt and gdp . Do you have a number in your head . You asked the question yesterday and i saw he didnt come up with an answer. Ifould say if you go 34 , you are approaching 5 , you are really hitting the danger signal. You would want to see the deficit side by side with what happens to debtgdp ratio. The 104 is not the only troublesome aspect. Is risen onward, it some 30 percentage points. So that percentage to gdp is important that just as important is the pace at which the ratio is rising. That is what we are concerned about when we look at different countrys risks. Francine are the markets aware of this . There is sometimes a discrepancy between what academics look at and what the markets see. That is a great question. I dont think the markets are sensitive to it at all. , think they are assuming that this being the United States, things will somehow be taken care of. Gdp ratio is not significant for the United States because it is not in the eurozone currency, but i think that eventually comes to a halt. Part of the issue is you have japan which has a debtgdp ratio of 240 and that is still considered safe. Going back to answering toms question on where the danger signals come forward, it does come eventually but it is going to take a while before it happens and there is going to be some amount of time before it happens. Francine meaning five or 10 years . Or 18 months . I would say more in the 18 months to five year range. More than five years is way too long before the danger shows itself. Tom thank you so much. Wonderful to have you on. Thank you tom. Tom thank you for the further perspective. On Bloomberg Radio we will continue our discussion on economics as well. Much to talk about. Jobs day tomorrow and then on sunday, our special coverage in paris of the french president ial election. We are going to do that in new york. That will be sunday afternoon in europe in the evening. Francine, looking forward. Francine im going to paris tonight so i will have live coverage from paris. I know you will join me over the weekend. This will be significant. At, if macron becomes president , how he forms his government. He will need to try to get that majority in parliament. It is significant who he chooses for Prime Minister and how he projects himself to the other party. Tom from new york, this is bloomberg. Jonathan if at first you dont succeed, try again. The Obamacare Repeal goes to a vote after republicans said they secured enough support in the house. Firstquarter growth does not sway the Federal Reserve. Keeping options open for a rate hike in june. The president ial candidates get ugly. Macron is called the candidate of savage globalization and le pen is a liar. If you thought trump was bad, check out france. I am Jonathan Ferro, alongside david westin and alix steel. In risk on field this morning, futures up one third of 1 , the euro stronger. A weaker japanese yen, yields up two basis points. Alix for your morning brief, we got a data dump. Jobless claims, unit labor costs, and the trade balance for march. We also have durable goods coming up at 10 00 and at 4 00, donald trump will meet with australian Prime Minister Malcolm Turnbull in new york
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