Transcripts For BLOOMBERG Bloomberg Surveillance 20170531

June 8. We are getting data one hour from now. Lets quickly get to the markets. The pound definitely, the story of the day, dropping. I would point to the latest polls by u. K. Government. We have our London Bureau chief joining us to look at what a Hung Parliament could look like, and whether we believe the p olls or not. He vix, down from 1. 8 virtually600, unchanged. Lets get straight to the bloomberg first word news. Reporter in afghanistan, as many as 80 people have been killed and 350 injured in a suicide car bombing. There was a rate on the countrys Largest Military hospital in march. The u. S. Says the first ever test of the Defense System against an Intercontinental Ballistic Missile was a success. This was after a groundbased interceptor shot down a mock weapon over the pacific ocean. This comes amid mounting tensions with north korea. Reynard says soft inflation could make us rethink the path forward for Monetary Policy, should it linger. U. S. Growth looks poised to rebound. Tension between signs of the tentative progress we have seen on inflation could be slowing. If that tension between the progress on employment and the lack of progress on inflation persists, it could lead me to reassess the expected path of policy in the future, though it is premature to make that call today. Reporter meanwhile, larry fink reckons european expansion will outpace the United States this year. U. S. Growth is in the mid2 range and likely, will not happen. That contrasts to estimates made by bloomberg which forecasts 1 7 8 in the european union. Chinas official manufacturing gauge held up in may. The manufacturing pmi held at 51. 2 for a second straight month. That could give policymakers more room to rein in financial risk. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. This is bloomberg. Francine thank you. With eight days to go until the u. K. s elections, the pound has dropped against g10 peers. Mays conservative party could fail to secure a majority. Conservatives could lose 20 seats in the election with the Opposition Labor Party gaining seats. Model does allow for a wide margin of error. We have the chief Investment Officer at ccla. Welcome to the program. First of all, do we trust the polls . People are scratching their heads this morning, as to how serious we should take it. This is a new way of protecting the results. Ugov makes clear there is a very wide range. 3. 10 is the midpoint of the range. They tested this model with brexit and they got it right. We have to point out though, that polls also change the reality. One of the things theresa may has been struggling with is the risk of complacency, that tory voters would not go out to vote. You could argue that the polls will galvanize the vote and help bring the majority home. Francine what happened three or four weeks ago . The tories had a 20 point lead. Is this a bad month, or are there questions about brexit . Is the one area where theresa may seems to be comfortable leading. Polls suggest the country is with her and this week, she is trying to bring it back to brexit. Last week she came up with this plan to charge to make all people pay for their care until their assets fallen to 100,000 pounds. That went down extremely badly. Then, we had a pause in the campaign. We did not have polling during that period. What we see in the polling now, we are not sure if it is the elderly care or the manchester attacks. Francine james, you live in the markets. Do you trust the polls . I am trying to understand what the implications of either might be and how we could protect ourselves. We have to try to figure out what lies ahead for the u. K. Economy. I worry that the u. K. Economy will slow, and we have a difficult transition period. On that basis, i am nervous about the market. Francine ahead of the election, do you have a short position on the pound, or have you changed your Asset Allocation to get away from the u. K. In case . We are relatively short on the pound, for sure. We have an open position relative to the euro. Francine how much weaker can the pound get if we get more polls like this, suggesting there will be a Hung Parliament with eight days to go . What i think would drive the pound lower is the concern over the brexit. The polls can weaken it a bit. We saw a surge in the pound when the election was announced. We could see the pound go down to 1. 26 against the dollar, but the real danger comes when we start getting into the brexit negotiations. Who knows where to go from there. Francine emma, talk to me about what a Hung Parliament could look like. Are we talking about coalitions, or are there parties that get along on the serious issues . You would be looking at what theresa may calls the coalition of chaos. We have labor, and according to the times projection, that would give you a majority. And there are implications of brexit. Theresa may hasnt said she wants a very hard brexit. Labor has sort of different positions on brexit, but basically they would like better access to the single market, which may or may not be compatible with the therir views on the freedom of movement. Ter, what doespe that mean . On june 8, the country votes and on june 19, these brexit negotiations are meant to start in brussels. If we have a Hung Parliament, does it delay parliament, or is there a second referendum . Peter u we have no idea. Conservativese and the labour party are es, myted to varying degre guess is they will continue to open the article 50 negotiations. The question is how aggressive or how singular will be u. K. s position be in the event of a Hung Parliament . We know what the conservatives stand for. There is a broad expectation that does translate. We had an awful lot of that. Abouty, the people talk there being a Hung Parliament, i dont see that happening. Where are you on that issue . There were expectations at the beginning that the lib dems would capitalize, but we have not seen that at all. National polling does not really work, you have to poll the 100 key seats. It is also true that in 2015 we did see some local polling and it was not very good. So, it all will hang on the 100 marshall seats. Democrats have changed a little bit. They started recalibrating their systems, but because the election was called early, they are not their area, basically. Francine emma peter dixon and james bevan stay with us. Reporter Deutsche Bank has agreed to pay 41 million amidst Federal Reserve allegations. The fed says the company fell short in complying with the secrecy act, which requires lenders to help federal agencies prevent illegal transactions. Ireland has fired the starting gun for the initial Public Offering of allied irish bank, selling 25 of the nationalized lender. The government wants to sell the stake and Share Offering in london and dublin the terms to be set in the june. The sale could raise about 3 billion euros. And Manchester United premier League Season has not stopped the club topping the list as the worlds wealthiest club. United finished sixth in th englishh premier league. The value has risen to 3. 1 billion euros. The combined value is some of 30 billion euros. That comes from three teams, united, madrid, and barcelona. Francine the fed governor lael alterrd says she could her path forward for Monetary Policy. U. S. Growth looks poised to rebound. I see some tension between signs that the economy is in the neighborhood of full employment and assigns that the tentative progress on inflation could be slowing. If that tension between the progress on employment and the lack of progress on inflation persists, it could lead me to reassess the expected path of policy in the future, though it is premature to make that call today. Francine still with us, james bevan, peter dixon. Peter, how do you view lael bra inards remarks . Peter i think what she is saying is that maybe the federal is aves current path little aggressive. The markets might be more or less right. I still think we will get two rate hikes this year, possibly one in december. The question is, how far do rates have to go until we get some level of normalization . I still think a couple more rate hikes on top of that over the course of the next 12 to 18 months is a reasonable assessment, even if inflation is holding slightly below the feds target level. Given what the economy and labor market are doing, the u. S. Economy can handle the rate. Francine we are also saying live pictures of jeremy corbyn, the leader of the labour party, speaking i believe, in westminster, where he is morning of the impact of five more years of the tory government and the impact that could have on nhs and the Education System in the u. K. We have to mention it because a lot of people will be watching for his demeanor after we had that poll we were talking about with emma rossthomas, which could lead to a Hung Parliament, if we believe the latest yougov polls. We will keep watch on that. James, back to fed polls. These are the feds funds futures. The market does not seem to believe what the fomc keeps on telling them. I think there is a lot of ambiguity as to what people believe regarding the u. S. Economy itself. People talk about 2 . And we had Larry Summers from the wall street journal here last week. When one thinks about what is driving the u. S. Economy, the underlying economy seems perfectly fine, but the government is shrinking back. The real issue for investors is, will we get the tax cuts trump has promised, or will he not . If we dont, we are talking about 130 in round figures for s p 500 figures. We have to determine if the s p 500 is within this outlet. Francine what is the timeline . Will we get it this year . I think we will hit the limit in 2018. , asmarkets will be prepared long as they get it to 2018. If it turns out not to be possible to get those tax cuts through, then i do think it is correct that the fed will because just because the economy will look weaker. Do you agree, peter . I am not all optimistic we will get the tax cuts through, particularly after the political take th difficulties of the last few weeks. For that reason, i think you are quite right to highlight the risks to the market. That is something that will impinge upon the fed. It is not the story that Lael Brainard is telling us. Francine what exactly is she telling us . It is just wage growth, right . She wants to make sure they are ready for another hike. It important, but the demographic shifts in the states, implying to me that we will see a long period of relatively low wage growth and real growth. Then of course, we are referring to the u. S. Cpi in global trade. What goes on in china will have a huge impact on inflation. Francine peter, do you believe we need to accelerate . Do you think the fed is behind the curve when it comes to interestrate hikes . Probably not. You could argue they are being cautious implementing the second rate hike. But in terms of rate hikes, i think they are on the money. If they deliver one next month, i think we will be quite happy. We need to look at the equity fixed rate in the longer term. The growth rate for the u. S. Economy clearly has slowed down. That is something that many western european economies are going to have to deal with. Many people in the market can 4 or 5 the days of Interest Rates. Francine we will also be hearing from dallas fed president later when he speaks to tom keene at 1 00 p. M. U. K. Time. After the trump rally, are u. S. Equities overpriced . We hear from larry fink and why he reckons the success of the white house agenda will determine where markets go this year. This is bloomberg. Francine you are watching bloomberg surveillance. The ceo of blackrock thinks u. S. Equities are probably fully priced. That is after markets soared in the wake of Donald Trumps election with investors betting on infrastructure spending. Larry fink says where we go from here depends on the white houses agenda. We are trading high relative to other parts of the world. And depending on the success of the trump agenda, will probably determine the equity markets for the remainder of the year. Still with us, james bevan, chief Investment Officer at ccla Investment Management and peter dixon from commerzbank. James, do you believe equities are now fully priced . I was talking about 2400 as a year and target for s p 500. We are at 2400 already. We are very dependent on mr. Trump delivering on deregulation and cutting taxes. Francine where do we go from here . Correction, or where does it go next . Low growth, low Interest Rates. People will pay very high prices to participate in equities. If you really believe in zero Interest Rates, you should pay 100 times for the earnings. You need to but risk into the equation. If we believe the u. S. Economy is thecover, the 2700 upper limit. Francine peter, are we feeling a lot better about the World Economy . Is growth, for the first time in a long time, upgraded . From a european perspective, we are a lot more comfortable. We are on slightly more solid footing. My sense is, we are nine years on from the financial crash in 2008. It normally takes that time for the economy to find a bit more momentum after that crash. We are getting there. I am a little bit more confident than i was. Of obviously, that pace growth will depend on where you are. I think we are on a Slower Growth path. Francine do you worry about the memos and leaks from the Trump Administration . I dont worry much about that. The not interested in administrations views. My big worry for the moment is what is going on in china, the slowdown. Francine there is a china block coming up, james. You know what i want to talk to you about. President trump tweeted four hours ago. From this. Alight people are wondering what this means. There are about 100,000 retweets in less than 30 minutes. Do you care about this . Does this impact what the markets think. He has an extraordinarily confident team. And the people he has appointed below him are very strong and capable people, that i do think washington itself is a swamp. Francine peter, do they need to take away that twitter account, these able people james was talking about . They probably do, but they have taken his fun away in the past. Francine do you care about this . Funt just a little bit of or intrigue, or is it worry ing. In this particular instance, no. But there is a wary this could turn into something more dangerous. We could start to see tweets that we do not want to see in public, which is a different dynamic. Francine i know we are talking about china next and i know james has a great question for peter on china, but do you think geopolitics need to be taken more seriously by the market . When i look at the volatility of markets, it reflects relatively low economic relatively. But i think that is a mirage. Francine do you think peter, they should look more at geopolitics . I think the problem is, geopolitics is a symptom. I think the markets ignore it by default. They should pay more attention to it, but because they cannot price it, they ignore it. Francine james bevan and peter dixon stay with us. We will be asking about china and what happens when there is a shift in policy there. From chinapmi data holds steady. This is bloomberg. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Tthats why at comcast,t to be connected 24 7. Were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Francine you are watching bloomberg surveillance. I am Francine Lacqua in london. Best get to the bloomberg first word news. In afghanistan, 80 people have been killed and 350 injured in a suicide car bombing. Worst attack in the capital since a raid on the nations Largest Military compound in march. It comes during the first week of ramadan. The u. S. Says the first test of its Defense System against an Intercontinental Ballistic Missile was a success. That is after they shot down a mock weapon over the pacific ocean. It comes amid mounting tensions with north korea. In the u. K. , the pound has slumped after a poll shows Theresa Mays Conservative Party may lose its majority in next weeks general election. Sterling has been strengthening. We have increased security risks suggesting a bigger release. The u. S. Fed governor has said soft inflation could cause her to rethink the path forward for Monetary Policy. That as the Global Economic outlook brightens and u. S. Growth is poised to rebound. I see some tension between signs that the economy is in the neighborhood of full employment and signs that the tentative progress on inflation may be slowing. If that assumption between the progress on employment and the lack of progress on inflation persists it may lead me to reassess the expected task of policy in the future although it is premature to make that call today. Black rocks larry fink reckons european expansion will outpace the United States this year. In a conference in new york, he puts u. S. Growth in the mid2 range is not happening but it is likely in europe. That stands in contrast to estimates compiled by bloomberg which sees u. S. Gdp increasing by 2. 2 in 2017 and 1. 8 in the european union. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am Sebastian Salek and this is bloomberg. Francine chinas official factory gauge held up in may, bleed by improving global outlook. The economy remained at 51. 2 for the second month while the nonmanufacturing sector moved to 54. 5. Jeff kearns joins us from there. What do these numbers tell us about the sustainability of the chinese reflation trade . That was one of the key things we were looking at today. The numbers were not incredibly surprising. The main reading coming in a little bit better than expected. Consistent with the prior reading. The internals of the report shows that one of the things is in put prices. Whichre down below 50 now is a big swing from the end of last year when they were getting up close to 70. One of the things that is also interesting with this report, in the sense that there has been a divergence between large and Medium Companies with Smaller Companies, and this looks like this break with prices is giving them breathing room. Because the Smaller Companies are now converging with the rivals,for the larger these numbers have been far apart for the last several years. Now the pmi reading for Small Companies is getting up right next to the reading for Large Companies which is important in china because it is the Large Companies that are often state owned companies that have more access to debt and are less nimble. Nimblel elevation in little companies are the ones having trouble getting access to capital. It is an encouraging sign for the smaller parts of the economy that are more dynamic. Francine jeff kearns there, Bloomberg News with China Economy editor. Visit toay an official germany to attend the annual chinagermany Prime Ministers meeting. He will then head to brussels for a chinaeu summit where they will focus on trade and migration. Lets talk china with james bevan and peter dixon. James, i want to bring you over to one of our best charts that Hillary Clark did. This is chinese manufacturing pmi in blue. You have official figures in white. You have a space index which is an accurate way to look at this figure because it monitors over 6000 Industrial Facilities across china. Just believe the figures by seeing this is pretty similar . We can certainly say there is a reasonable match and i would point to the fact that i worry that a lot of the numbers coming out, related to jus diversification, they have been buying goods. There has been an overreliance on deposits. It is fragile. I worry that Chinese Companies will be exporting inflation. Makes china the single biggest risk for global markets. I want to ask peter where he stands on this expectation of mine that china is the big risk. Given its weight, it is a big risk. From my perspective, i look at the numbers and say, it is lower than six and a half percent growth rate and that will slow over the course of the next few years, but in terms of the risks, it is clear that we saw last week, the chinese sovereign downgrade. It is evident that the deafening boom that has propelled the economy over the recent years does pose risks. My answer to that is it all depends on the extent people are able to manage it. So far, they have done a remarkably good job. Look at the, but i relative health of the italian economy, the french economy, and i think, well, growth in china is continuing to do the thing. That is one of the reasons why i think we have to bear the chinese risk in mind. Ultimately, china is a large exporter rather than a huge importer. While a problem in china would in theajor concerns United States, i would be less concerned about china that i what about, say, the United States in 2008. I could be wrong. Do you thinkrall, they are able to manage the economy . Is goes back to managing the debts. The main concern is if we have something spiraling out of control like a financial crisis. I am hopeful. Im not sure how confident i am but i am hopeful. Another risk element is the extent to which their policy response is determined by international pressure. Do they manage any problems domestically the way they see fit or do they respond to International Concerns . If they start doing that there is a risk of some policy creeping in because their response to, say, United States pressure to revamp the codes then you could see concern. One of the things we do is we think about chinese policy through the prism of western political process and ideology. Competent butsely its priorities are very different. It doesnt have an electoral cycle to worry about. It is much more interested in longterm growth. Francine but they also want to be on the world stage. To be seen as the guys in charge so they wouldnt mess anything up that would make them less credible. They are the worlds secondlargest economy. They are at the table whether we like it or not. They are the driver of Global Growth because of the scale of what they are up to. , notl are exposed to china direct. Francine and that is not going to change anytime soon. No. Francine james bevan and peter dixon, stay with us. More coming up including europes persistent problem. Headline inflation has expected to ask low two slow in may. Francine you are watching bloomberg surveillance. I am Francine Lacqua here in london. Lets check in on markets with mark barton. Stoxx 600 1 10 of 1 . Year,ber the second last and in may will it go away . For the fourthk consecutive month, longest winning streak since 2013. May sincembed each 2013, writing an average of 1. 5 . 3 ry june, losing an average. 8 this month. Sterling, the big story today, falling to the lowest in over a month as Theresa Mays Conservative Party may risk losing a majority. They could face a hung no single which means party has an overall majority. It would be damaging for the Prime Minister and would seriously undermine her ability to rule. The result allows for a wide margin of error. The pollster did acknowledge its predictions would be controversial even though the model did Protection League did correctly predict brexit. All 32 of its major peers today after that you got poll yougov poll. This is two weeks into the volatility expectations that swing in, sterling dollar over the next couple of weeks. This is brexit. That was a record high for implied volatility. We are behind from february. In 2015. The election that was the Scottish Referendum in 2014. To put it in context, volatility highs in february. Those three events, activist investment funds, buying a 28. 6 stake. Now we get the latest snapshot of euro area inflation and around 20 minutes from now, dpi is expected to have slowed. A new Intelligence Report suggests price increases will remain weak and prevent the European Central bank from withdrawing monetary stimulus. We join now david powell, chief economist for the area at bloomberg intelligence. And still with us, james bevan and peter dixon. First of all, there is a huge report that everyone can download if they are a bloomberg user called waiting for inflation. It is 32 pages long, just focused on inflation. Essentially, we have the shortterm movements in the month of may. Inflations are like to decline. With fuele transition prices and airfares this month which underlying, is very muted. As the Employment Labor market recovers to capacity, it is illuminated. However, there are few signs of that occurring. With the ecb withdrawing monetary stimulus. It is important to differentiate stop addingg stimulus and actually reducing stimulus. As long as ecb is still purchasing assets it is monitoring it is adding stimulus. It shrink its Balance Sheets for raises Interest Rates. The Growth Outlook will probably be sufficient for them to taper, meaning reduce the amount they are adding but the actual reduction of stimulus is probably not going to happen for two years. Francine we talked about this with the fed. Peter, what is your expectation in europe . We have countries with differing expectations but first of all, are we measuring right . Good question. Probably not. Given the data at our disposal, we have all sorts of questions on inflation. And we got the right prices . All of those kinds of things. I tend to take the numbers at face value because we dont have time to sit down and worry about measuring correctly. But i agree with the point that inflation across europe and across many parts of the world is likely to remain for the course of the next few years. I wonder at the extent to which technology has put downward pressure on inflation. We are buying more online. Dynamics whenhe it came to looking at macroeconomics. Francine do you invest linked to inflation . We have to worry about real rates and returns. All of our forecast inflation and justice and we have to consider bonds and equities through the real return. I would make to a divisions. Make two observations. One is we had a way that cant make any sense of low bond yields for longtime investors. If it does rise, Bond Investors are going to be skewered. The other issue is what is going on in northern asian economies . As for a very , northern asian economies exported inflation because they were interested in volume and less in price. Economies like china, korea, taiwan, there is much more profitability, perhaps in the much more difficult banking segment. In that environment, i think that the global inflation may be beginning to shift. At first, the bond yields conant component, there are a number of expectations. Real rates, etc. Expectation component of that has been very subdued. But likely, in terms of europe, as the risk of deflation has been removed and recovered somewhat and moving forward, while we would expect it to happen, not immediately, but for expectations to eventually doesve as inflation potentially rise, inflation is unlikely to stay subdued forever. There are economies in europe where we should be seeing wage gains but they are not. Germany is at full employment and spain employment is dropping like a stone. That explains the question mark people have about it. We will have to get you back on to talk about the depreciation in pound has pushed inflation above that target. David powell is the chief economist for the euro area. Thanks to james bevan and peter dixon. The two and 20is hedge fund structure. Billionaire phil falconi. Next, this is bloomberg. Francine you are watching bloomberg surveillance. I am Francine Lacqua in london. Lets get to the business flash. Deutsche bank has agreed to pay 41 million to settle Federal Reserve allegations that tou. S. Operations failed maintain adequate protections against Money Laundering. The fed says the company fell short in complying with the Bank Secrecy Act that requires lenders to prevent illegal transactions. Startingas fired the gun for the initial Public Offering of allied irish banks, laying out plans to sell 25 of the nationalized lender. The government had a Share Offering in dublin. According to previous estimates, sales may raise about 3 billion euros. Manchester uniteds core premier League Season hasnt stopped the club topping the list of wealthiest clubs. Sixth in theed league. Its value has risen to 3. 1 billion euros. Have aleading clubs combined value of almost 30 billion euros. Comes from three teams. United, madrid, and barcelona. Francine billionaire former Hedge Fund Manager phil falcone was under Fraud Investigation but he is putting his money to work. A rare and exclusive interview, he addressed a range of topics including the two and 20 c structure. There is a tremendous amount of capital out there. It is tougher for the smaller guys. Business has become much more institutionalized. I think the Fee Structure may have to change a bit but there is always going to be a need for highquality investors. When you say Fee Structure might change, what do you mean . Do you pay two and 20 four a s p . That matches in the should any fund be charging two and 20 . That will outshine the rest of the group. There has to be some flexibility, i think, Going Forward. It is very tough for investors to look at and say, i will pay two and 20 what you are barely beating the s p. But you have so, to think there are people out there, funds out there, and some talented people who deserve the two and 20. Speaking about the hedge fund world, we just got the news this morning about steve and how he and howout steve cohen he is raising outside money. About 10 billion or so. 10 billion in this day and age you just mentioned there is so much cash out there is that too much . I dont know. Capabilities,s there is no question he can manage that money at a substantial amount, but the structure probably works for that type of capital. I dont know exactly all the Details Behind it. Before, but ifed you were in that position of managing that much money no, i am happy doing what i am doing and ultimately, i look at it as our market cap will locally get at or close to that. Falcone there. Time to look at your data. A lot of that will be on pound. The latest polls show that conservative theresa may will fall short in the election. That raises the specter of a Hung Parliament. It is unclear about the you go study. The you gov study. Parliament may fall short of that by 16 seats. Bloomberg surveillance will continue in the next hour. We will hear from the dallas fed president about the Foreign Relations council. They will talk about inflation and rate hike projections. The word of the day, maybe the word of the month, it seems it is a word that is a typo. It was by donald trump, president of the United States. The newsroom is trying to figure out what it means and others are trying to figure out. This is bloomberg. Francine stock for sterling. A leading u. K. Poll says theresa may could miss a majority, leading to a Hung Parliament. Eurozone inflation figures get released after soft data could warrant a rate rethink. After being fired, former White House National security adviser Michael Flynn agrees to turn over some documents in the russian probe. This is bloomberg surveillance. I am Francine Lacqua in london. Tom keene is in new york. Eurove some significant area inflation figures. This is crucial to what the ecb will or wont do. Let me see where we have had an impact on euro net inflation at 1. 4 in may. The estimated figure rose 1. 5 . This goes back to what we heard from oil in the u. S. If you have slower inflation it may be a way for banks to improve Monetary Policy Going Forward. Tom it is front and center right now, what we will hear from Robert Kaplan in dallas later today. Larry finks comments were important yesterday. What he said about just a little bit of slowing down is that debate as we go into fridays job report. Francine larry fink said two things. First of all, that markets may be perfectly priced. And that europe is actually full steam ahead. We will get back to the markets but first lets get to the first word news. Aa car bomb near Diplomatic Enclave has killed 80 people. It is the worst attack in the Afghan Capital since in years. No one has claimed response ability. The Islamic State has been stepping up attacks in afghanistan recently and the taliban has taken over more territory. In the u. K. The pound is falling after a new poll shows Prime Minister Theresa Mays Conservative Party may not win a majority in asked we selection. It shows the conservatives may fall short of an absolute majority by 16 seats. The government says it is based on an untested model. In japan, Industrial Assets havent been this high since 2008. Production rose 4 from march to april. The economy expands five quarters in a row. That is the most in a decade. Former National Security adviser Michael Flynn is backing down in the face of a threat from congress. He has agreed to turn over a limited number of documents when the Senate Committee demanded them for its investigation into the russian interference in the election. That is according to persons familiar with the matter. Lawmakers have threatened to find him in contempt of congress. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Tom real seen for the hour. The United Kingdom poll. The United Kingdom currencies. Let me get some data with francine picking up the currencies. Curve flattening yesterday. On american media, that gets our attention. These Foreign Exchanges, sterling under 128. Eurosterling we are watching. Jens nordvig will join us in the next hour. The side is the yuan is on a tear. Francine i am glad you mentioned china because we are talking about pmi figures at length. We will also see strengthening of the chinese currency. However, my story of the day, the pound is climbing up with projections showing that Theresa Mays Conservative Party may fall short of the majority in next weeks election. This is a study. It is based on a new model. It is not actually a poll. Europounds,he 0. 8748. 1. 28. N see it is below the vix index, nothing. Tom i want to show a chart that stunned me. Inflationadjusted german exports to the United States. This is a big deal with mr. Trump yesterday. Bob nardelli joining us later. Here is jfk. And here is the boom in the german exports, inflationadjusted, a little bit of an 80s rollover, and then where we are now. Price adjusted is flat, back to 2005. Right there. I did not expect this. German exports are a big deal to the United States but they have been flat since before the financial crisis. Francine i like that. That is the erik nielsen chart. We will get to erik nielsen in a second. I have a simpler chart. This is the way of having the poundrisk reversal. Out, the study that came this basically shows you the increased cost to hedge against a weaker pound versus dollar. You can see that as the polls change and studies change. We are not talking about a Hung Parliament we are now talking about a Hung Parliament. Look at the difference today. The pounddollar, one week reversals. Eurozone inflation slows in may. We had that figure in the last four minutes. Inflation data has been taking notice. The Commerce Department on roseay says that the core 1. 7 in april from a year ago. Down to continue treasury yields. Speaking yesterday, theyll bring art said soft inflation and inflation one. I have seen soft tension between signs that the economy is in the neighborhood of full employment and signs that the tentative in progress on inflation is slowing. Given that tension, it may lead me to reassess the expected path of policy in the future although it is premature to make that call today. Francine our guest host is erik nielsen. He is with us for the hour. Great to see you in the studio. What do you make of inflation overall . Weaker than i expected inflation bringope but also, lael raenard saying the two last Inflation Numbers in america have thrown a spell in the wheel. That is important. But for them to come out and say, just because you get 1. 7 instead of 1. 9 you may have to rethink, i think they are trying to finetune it. At the end of the day, Interest Rates in america have no they arebeing where unless you throw some big issue of politics and uncertainty into this. This is probably what is going on. Francine what about europe . The same thing but we have a bigger outlook cap output gap. The core inflation in europe numbers are trending upward but ever so slowly. The ecb is in no hurry whatsoever. I think you can explain most of an european story from output gap story. It is not complicated. Tom ive got a chart coming up here. Lets look at the vectors. Throw in some physics. You learn at the second week of exams before you bought your textbook. Here is core inflation. The red line is the rising inflation vector we have seen back to the summer of 2015. And we rollover. Eric, why is this a global ramadan. Speakingss brainard about something everyone has seen worldwide . There are a couple of things, for sure. We all know about the shift in retail practices both online, instead of going to the retail stores, and that has compressed prices to some extent, and we have seen a shift towards more technology which has put downward pressure on things. Then we have this phenomenon of income distribution. Maybe it is not the persons the purchasing power across the used to have. Tom that is the heart of my discussion with Robert Kaplan later this morning, this idea of two americas and, as you say, income distribution. Tell me about that. Is that global and can central bankers ignore two americas or two United Kingdoms or two v. As two latvias it is global but in a funny way. Global distribution has become more even with the rise in china and compression in europe, but can central bankers do anything about it . No. Should they take it into consideration . Probably. The issue is the inflation targeting may not fit this world quite as well as before. About the macro potential, because we are worried about other prices like real estate and other things, but that is an untested area. Are in the Central Banks a little bit of a bind. Francine interesting. I want to get some comments. We heard from larry fink yesterday. He said, first of all, the stock market is fully valued. Does that mean you see a correction . He also says europes Economic Growth is exceeding the u. S. Do you agree . I agree with the second one. That is the obvious one right now. We are good in europe compared to america. In theck market, i think u. S. It is expensive, but it is difficult. If you think about where we are in the cycles and where we are Going Forward looking, i would argue that lots of europe is still quite inexpensive. You also have to think about what discount factors can be used. We are at a place where the riskfree rate is extremely low. And with thelevels amount of liquidity, i wonder whether all of the charts on where pricing should be maybe a price. Tom this is fascinating. Erik nielsen, wonderful to have you with us. Some of the mystery folks we just see globally. We will continue with more coming up. Robert nardelli on American Manufacturing. Later on, my conversation with Robert Kaplan of the dallas fed. This is what the council on Foreign Relations. I spoke to kaplan yesterday. I will be wonderful. This is bloomberg. This is bloomberg surveillance. I am emma chandra. Lets get to the business flash. Deutsche bank will pay 41 million to settle a moneylaundering investigation. The fed claims that the bank failed to maintain adequate protections against illicit trade. Regulations involve billions of dollars in potentially suspicious transactions. It is company is facing pressure to renegotiate a takeover deal with qualcomm. Activist investor Elliott Management is among those trying to get the better offer. Costargued that qualcomm 47 billion offer undervalues the company. That is the business flash. Francine now, the pound has dipped after a shocking projection showing theresa mays party may miss winning a majority in next weeks election and face a Hung Parliament. The projections published in the Times Newspaper was based on a new model and shows the party may fall short of this overall majority by acting point. By 16 points. Joining us now is erik nielsen. First of all, this is not a poll. It is a projection. How much do we trust it . I think polls are still the discussion about how much to believe it. The polls in previous elections have been wrong and some forces have been trying to tweak the way they carry around carry out these studies to get better results. In thew model was used Brexit Referendum Campaign and got it right when so many didnt. That is what gives it credibility. Them everyday and they will continue doing it for the rest of the week. What we have in the u. K. Means that National Polls generally are a bit useless. Because there are 100 key seats. What the model is trying to address is that weakness. Francine i have a lot of questions for you. What would a Hung Parliament look like . A Hung Parliament would probably mean a Coalition Led by labor, the Scottish Nationalists , so that would have implications for brexit. Labor wants to maintain access to the single market. Whether or not that would be compatible with their plan towards movement. The Scottish Nationalists dont want brexit at all. Francine we were once at a 20 point lead for conservatives. What happened . A couple of things. It is hard to know exactly because of the manchester bombing. We had a pause in the campaign. The publication was caused. Paused. D are going to spend their assets until they were down to the last hundred thousand on their care, which is basically, depending on what happens, it is above the threshold of 100 grand. That was very unpopular among key tory voters. That was saying is that really affect her in the polls. Tom emma, go back to the 100 districts using that as an amateur the 100 districts in play that are not covered in the polls. Are they influenced by key labor voters . Is this a rejuvenation of labor voters . A couple of things. Verse lee there has been a surge in the number of young people registering to vote. We dont know if they will actually vote that we know that even more than during the brexit referendum, more young people have registered to vote. That will help labor. Because of the system in the u. K. Which means that you can win a majority in Parliament Without winning a majority of the popular vote. Where i live, there is a very lead. Labor that means the tories dont bother to show up to campaign because labors are going to win. Elections are won or not in the districts where there is a very narrow it is a few hundred folks that make the difference between labour and conservative. Francine what does this mean for the market . This is a risk reversal. It is showing bets to put on how you think the pound will weaken. That is getting more expensive. Can this go down further as we approach june 8 . Sure, it can. People are seeing a campaign which is a mess to put it bluntly. You see some probability of the coalition you talk about. I would quite like it in a way because the chances are that the brexit. Ld have a softer the people are looking at labor and their tax proposals and looking at the Scottish National party and their tax policies and , a number ofwonder business policies it might not be so good. Francine would a Hung Parliament not involve the tories . I know this is speculation but you can see theresa may may be leaving and someone else coming in. It is very unlikely that anyone would team up with the tories. In 2010, it was a complete disaster. Lib dems,owns the that has not materialized as far as you can see. And the snp the s p is nowhere near that in the history. Francine thank you so much. Bloombergs London Bureau chief and ross thomas and we will be back with erik nielsen of unicredit. The Prime Minister of australia, incolm turnbull at 9 30 a. M. London and 7 30 p. M. In sydney. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua in london with tom keene in new york. We spoke about brexit and the election coming up and the pound. We also need to look at another possible problem child, italys government contacting investors to help fund the rescue of the banks. The Administration Needs permission from the ecb for a state backed recapitalization which means it must resolve privately. Meanwhile, fox of an autumn election have seen it spread in recent days. Left it back to erik nielsen from unicredit. In italy. Two issues one is early elections, but also the fact that we still have not recapped these the nation banks. And if you start bailing in the italian moms and pops that could have repercussions. That wont happen. You cannot imagine ailing in privates. It could be different, but i think this is a done deal. You are not going to bail in moms and pops. That is not happening. I think the really curious thing is where the commission is spent on this. , wastory earlier today that a leak on purpose . Was that spinning the story . I am a little worried about where the commission is going. Religious in the way they approach it from the commission side. Francine what does this mean for the spread between german and italian . It certainly put the pressure on the italian sovereigns. Just because of the way it plays out, it also has to do with the rumors of possible early elections next year which was our baseline scenario. It suggests we could have elections earlier rather than later. Red, wherehis is in mario draghi said to do whatever it takes. Is there any idea that the ecb tapirs and this could spike up again . It could buy i dont think this is what it is. Let me be clear. There is no conceivable argument that this prevents the ecb from tapering for the simple reason that inflation in the eurozone is nowhere near on the forecast where you can justify a tapering. That is the issue. Will this cost some . Maybe. Tom erik nielsen with us with unicredit. Hourr next hour, strengthening. Jens nordvig. This is bloomberg. Afghan force have been in the caliphate and they have stepped up attacks. They have refused to swap rate with investigations into russian meddling. The the request from congress are fully phrase not capable of answer. It is what he calls a fake russian conspiracy. The pentagon is claiming success in the test of a long test missile system. It destroyed a mock Intercontinental Ballistic Missile. Is the first test of the system in three years and take on on more urgency with north korea ramping up testing. Paid more than 3 billion to settle charges of corruption and other crimes. They will pay out the money over 25 years in what prosecutors called the worlds biggest leniency deal. Janice is run by the batista brothers. Global news 24 hours a day powered by 2600 journalists and analysts in more than 120 countries, im emma chandra. Francine just getting a little bit of news out of crude so i want to show you the price for wti. Ais trading below 50 barrel. That is after prolonged cuts from opec and its allies. That is what we heard last week. We also have some stockpiles data coming up a little later on. We need to keep and ill on oil and always keep an eye on brent and debbie tee up you and on wti. Beating estimates for drops. Activity accelerated from a sixmonth low and the Prime Minister will kickoff a trip to europe with berlin. Lets get more from eric nielsen of unicredit. Thank you for joining us. To you first of all, pmi not bad. How do you rate overall growth in china . This is basically pmi manufacturing in china in blue. We are also monitoring things from space. These are pretty much in line and we can believe in these figures. The map of figures have been more convincing than before and the government needs to know whats going on. The markets a little misguided. Trying to coolis off what they think is a slightly overheated economy from the stimulus of last year and these are good messieurs. These are good measures. These are different cycles and i do not think we should over interpret it as a dramatic slowdown for any real fundamental reasons. Francine theres one question that keeps on coming up when i speak with experts. Do china and the west have similar interests . When you are managing an economy, do you know how much china wants to really transform the economy . Keyu china is in transition right now. Aside from the political reasons that there is a lot of vested interest in the cannot push through structural reforms, the dual mandate really to the people of Congress Later this year is about Financial Stability and growth. Its a very delicate line to tread. I dont think any government really handles that well. Over time, its really building up a huge moral hazard problem. That is the fundamental problem. Currently i do not see a financial crisis looming because they still have a lot of tools and huge amount of savings and deposits and the government Balance Sheet looks healthy. Tom help me with the idea of a new silk road, whether its the romance of a road road, whether it ships, airplanes. Everyone is waiting on this. I saw an article that goes right back to the geopolitics. Should americans fear the socalled silk road . Keyu i hope its more than a romance and so do the chinese. The question is i dont think the chinese are good at articulating. Tom he got that right. [laughter] in terms of acting as an enabler, making a platform in which technology and Raw Materials and etc. Can be gathered in combined. That is transporting a new model yet china does not presented that way. It is sensitive. Countries going into prochina and antichina camps. Tom will they d develop a political silk road . They need to do it within a new body of contract law and rule of law. Do you anticipate a better rule of law in china . Keyu over time, yes. The question is how quickly that can happen. For china to enter the next stage of growth, in the us to develop good institutions and intellectual property rights. Borders likeoss infrastructure, its not only about connectivity physically. Its about regulatory connectivity and customs connectivity. Its going to be a very complicated issue. Francine when you look it china, i want to ask you a currency question. This is a mixture of funding costs, surging with speculation that policymakers are basically intervening, but what does it mean for investors . How should an investor look at china . Do they say i want exposure but not direct exposure or because regulators have this in hand and they wont let anything that happene to the economy, i want to go in . Eric depends on what type of investor you are, but generally speaking sitting here in europe, it looks very opec. Ue. It looks very opaq but they are doing now is a bit of a mystery. When they come on out on friday and said we want our dealers to incorporate these quotes, they seem to wonder if the market is more in yesterday. It seems like what they want right now, but then they should do it. Way theyloat in a really dont try to tell us what they want. Francine one thing i heard in davos is that sometimes were being unfair on china because regulators with through this in the u. S. Years ago, but it wasnt in the spotlight. The issues that china has to involved in the spotlight of the world. Erik lets step back. China deserves a huge amount of credit for what they have achieved. Theyve lifted more people out of poverty than ever before and created an incredible economy and system. Its a move that they did faster than europe or america did. We as investors just sit here and say should i be involved or not involved . The point is is china ready to step him as the world leader on trade now that america seems to be leading . Develop road, if they the structures you talk about, im all for, but so far we are quite far away from it. Keyu i completely agree with you that the tools for managing the Exchange Rate are not only opaque but misguided, but theres also a recent turn that with the development of Financial Markets and more tools in the Financial Markets, the speculators are going to front run policy. We have seen that many times. The government had to pull back some of the measures and thats not like before where a lot of policies can be of limited gradually because there were no Financial Market tools. Now that time is over. Each time they put in some new thing, the markets overreact and i agree to have to step up. Tom i look at this and this is a great debate here, but what it really comes down to all in all is the Economic Growth of the nation. When you hear someone ,ntrustworthy like eric nielsen when guys like dr. Neilson say 6 Economic Growth in china, and you buy it . Keyu i buy it. [laughter] way, there are a lot of external studies done by the fed that show how good figures like inflation in gdp are today in china. Look,if you go back and we at unicredit have a nice index. We are looking at retail sales in the next kernel trade and stuff you cannot cheat on because you have to be factual. If you look at those 1012 indicators, and they come up with a growth rate may close to the gdp number, to most to imagine that a country like china coordinate a cheap that copperhead sheet that comprehensive. Tom i should point out that mr. Nielsen usually gets china gdp right. [laughter] coming up later this morning, real treat. Im looking forward to speaking to Robert Kaplan. He said yes will do the fed meeting and how many rate cuts. America, texas, and the two americas. This is bloomberg. Tom good morning, everyone. Bloomberg surveillance. Francine lacqua in london and im tom keene in new york. This is a really important conversation and we will speak with Kevin Cirilli in the next hour. Stephanie baker joins us with erik nielsen in london. The top story in the wall street journal saying a certain part of the white house, h. R. Mcmaster and gary cohn, writing together stating their view of trump Foreign Policy. Stephanie, the absolutely extraordinary this is the coat that quote that we are going to use with kevin. Again yeahll once true friend to our partners in the worst foe to our enemies. The president s visit show the power of both competing to advance interest and engagement to develop relationships and foster cooperation we. I love that they wrote in english instead of the other manufactured pieces of garbage. They Foster Global unity instead of an arena. Did you witness an arena on the global trip . Stephanie we see her heading back saying there europe can no longer rely on the United States. I think in some respects this mightve been for domestic consumption. Merkel is facing a tough election and trump is not a popular figure in germany. It shows the fact that he pushed back on key issues where there is unity in europe the paris climate records, the fact that he did not reaffirm the u. S. Commitment to article five of nato. She pushed back and said we are going to have to close ranks in europes to respond. Tom not only is the opposite of what chancellor merkel said, but is much ofte of what the white house as well. Inyou read the tea leaves pennsylvania avenue, how lonely are mr. Mcmaster and mr. Cohen . Stephanie especially given how the Russian Investigation is heating up, i think its very hard to push ahead with any kind of domestic agenda let alone Foreign Policy switch. This russia investigation keeps engulfing trumps soninlaw, jared kushner, and ways that every day we wake up with a different headline. I think it shows that there are real splits within the white house and there are certain corners of the white house that are feeling very much under the gun. Francine talk to me about the Russian Investigation. We now understand that mr. Flynn , who was really at the start of this, is now going to hand documents over. Stephanie thats right. Remember he at first had refused to cooperate and then he was issued a subpoena, which he refused to comply with, citing his fifth amendment right. Doing is finally somehow some sort of deal and he has agreed to hand over some documents for his business lobbying firm, as well as personal documents. That has led to some speculation that he has flipped and is now cooperating. I dont see any sort of evidence to suggest that he has got anything on trump that would really change the nature of the investigation, but it certainly let some questions about what exactly is he going to hand over. If you really does run into trouble, will trump pardon him . How much will this really shift the Russian Investigation . Francine who do we know is actually testifying or providing documents . Theres an article saying paul manafort, but do we have an overall understanding of who these probes are targeting . Stephanie we have once again a subpoena for michael , trumps longtime lawyer. He has refused so far, saying the subpoena is vaguely worded. I think that is significant. Paul manafort has handed over quite a few documents in response to the senate intel request. We dont know the actual details of that. He has offered to testify. Theres no date so far as to when he is going to testify. Tom i dont want to put you on the spot, but you do the details and much better than i do. Ohn oped,asterc theres a single have sentence while read affirming reaffirming americas commitment to nato in article five, did he do that . Stephanie even from his private conversations, we got no indications he did reaffirm that. He was lecturing european nations for not paying their fair share. That was the message that they at least took home. Francine i have to ask you because twitter is a light with this and we understand that tweets that President Trump tweeted about four or five hours ago talking about the press got the lea deleted. This was the most retweeted tweets since the inauguration. I dont know what that tells us about the state of social media or how this team does not have a handle on the president s tweets. Stephanie that was the interesting thing about his trip is that he was actually quite restrained and controlled about what he tweeted out. As soon as he touched down in washington, the tweets storm resumed. It shows that when he stays on hisage and coordinates with munication steam his Communication Team things are under control. He has been told not to speak about the Russian Investigation. He has not listened to that advice. Until someone takes his twitter handle away, i think we are still going to see this corrupt erupting. 6 00 a. M. , most mornings, you are just awaiting a new tweets for. Storm. Francine stephanie baker, thank you. We will talk about trump reflation, stocks, and we will ask him about japan. If you are a bloomberg user, this is what you need to do. You need to watch us through tv. Once you are on tv , you can see all of our data checks and you can ask if you clicked here, you can ask the guest the question. Be sure to do that. This is bloomberg. Francine this is bloomberg surveillance. Emma im emma chandra. 16,000 Financial Advisors at Morgan Stanley are about to get some cyborg help. New machines will see just trades, take over talks, and set reminders when a clients birthday is coming up. Morgan stanleys thinking is that humans with algorithmic assistance will be a better solution for wealthy clients than software that allie gets assets to the masses. Former Florida Governor jeb bush has abandoned his quest to acquire the miami marlins. Option tobush won an buy the marlins, but jeter wanted to change the terms of the deal to eventually give himself complete control over business and baseball operations. As the Bloomberg Business flash. That is the Bloomberg Business flash. Francine we have seen some strength at the end of the session. The bank of japan will keep the scale above largely unchanged in june. Yields on some short to mediumterm government notes rise. Erik nielsen of unicredit stays with us. When you look at japan, it seems to be the most positive story overall. Inflation may not hit 2 , but the sentiment, the mood is starting to take up in japan. That seems to be giving kind of more of a rosy tinted picture for the rest of the world. Erik thats right. The world looks better. Emerging markets are picking up very nicely. Global trade is picking up very nicely. The best numbers we have seen since 2012. Japan sitting next to china, who is doing really well, and asia is doing well, along with the ir on reforms, i think we are in for a period where japan looks good. Francine who does that benefit . Does the feelgood factor translate to western economies . Erik we are looking at pmis in the eurozone equivalent to 3 gdp growth. Real gdp is running at 2 annualized and a little bit higher than that. That is predominately exports and it has done that for 69 months. It is starting to come to the domestic side and you see the confidence in the indices out of france and other places. It is spreading very, very nicely. Tom this is to complicated to go into on television. Im only doing this to dazzle erik nielsen. Nielsen. This is a five trend study of the u. S. Dollar. Whats fascinating is that this trend of the dollar is clearly weaker dollar, but there are many other currency relationships that are range bound. Which is it weaker dollar and Everything Else stays range bound . What is the framework that you see for dollar in the next year . Erik i think it is slightly weaker along the way. It has a cover of reasons. One of them is that in this world where we have so much notrtainty and people are betting as heavily as they used to do in the fx market, the balance of payments are not as important as it used to be, so the current account has become more important. So trade deficits and all the rest of it. There you have an underlying downward pressure on the dollar from the real activities visavis the world. That you have a president obviously obsessed with the deficit. Nielsen, thank you very much. Francine lacqua is exiting stage right. Where you dont . Going . Francine im going to madrid. Im going there for the foundation of her foster. Tom safe travels. We continue with Robert Nardelli. This is bloomberg. Tom it was to be a landslide election. This morning the Prime Minister may consider a Hung Parliament, steelering weakens. There are two americas, fed officials grapple with a fully employed labor force and millions not in said labor force. Brainard and kaplan see little inflation. And the president says enough is enough to germany, build more b. M. W. s in america. Meanwhile, ths a tug of war from the east room to the west wing. Good morning, everyone, this is bloomberg surveillance. Live from our World Headquarters in new york. Im tom kean. Nejra in london and francine on assignment. What an important announcement of this nonpoll in the United Kingdom. How is it taken by the london media . Announcer nejra weve seen the reaction in sterling and seen it dip. Theresa may said recently she warned not to be complacent because just the loss of about six seats could mean bad times for the conservatives and here this poll saying they could lose as many as 20 seats which would mean no majority for the conservatives and of course, you know, this really causes concern when we initially thought it could be a done deal. Tom Emma Ross Thomas was great from london. A lot of nuances and well cover those in the hour and across surveillance. To our first word news, heres emma. Emma in kabul, a diplomatic unclauf killed 50 people and wounded others. Its the worst attack in the Afghan Capital since last year and happened in a home to foreign embassies and the president ial palace. No one claimed responsibility. Islamic estate has been stepping up attacks and the taliban has taken over more territory. In the u. K. The pound is falling after that poll you discussed with nejra. Theresa Mays Conservative Party may not win a majority in next weeks election. The poll shows conservatives may fall short of an absolute majority by 16 seats. Mccory banks doesnt believe the poll and is tested on an unbasis model. Industrial production rose 4 from march to april and increased demand for exports helped japans economy expand five quarters in a row, the most in a decade. In the u. S. , former National Security advisor Michael Flynn is backing down in a face of a threat from congress. He agreed to turn over a limited number of documents that the Senate Committee demanded for its investigation into russian interference in the election. Thats according to a person familiar with the matter. Lawmakers have threatened to fight flynn for contempt of congress if he didnt produce the documents and agree to an interview. Global news 24 hours a day powered by over 2,600 journalists and analysts in more than 120 countries. Im emma chandra. Tom equities, bonds, currencies and commodities. Well get to washington and the curve flattening the last 48 hours. West texas intermediate, thats a big move, 4882. Weaker oil this morning. If you were at 10. 23. Sterling on the move. And stronger yuan as well. Nejra i have sterling on mine and we saw cable dip and look at the wont the one month dip. The dollar is unchanged. We did get disappointing inflation data out of the euro zone, raising more questions ahead of the e. C. B. Decision next week. Ive also been watching the b. T. P. Bund spread closely and we saw the blowout yesterday but narrowing again. The 10year italian yield is down two points and the 10year bund yield is steady. Tom what you need to do is rip up the script when news changes. It changed this morning in a wall street journal oped from general mcmaster and mr. Cohen of the white house. Heres one of the key quotes of many, america will once again be a true friend to our partners and worst foe to our enemies. The president s visit showed to competing in advanced interest and competing to develop relationships and foster cooperation. We have a vital interest in taking the lead internationally to advance american military, political and economic strength. We could spend an hour with kevinner isily over a cup vin cerelli and a cup of coffee. The essay is where the meat and potatoes is, a Global Community versus an arena. Is that how mr. Cohn sees it . Mr. Cohn is largely perceived as more of the globalist in the Trump Administration. I think this oped comes at a time Angela Merkel has completely gone to task with the Trump Administration in private comments and Public Comments in saying europe must go it alone. You have a situation where our european counterparts as well as the United States are both saying the same things and jockeying for positions it would seem in the global geopolitical world. Tom you were in the room so to speak on this trip. The key half sentence in the middle of the essay, while reconfirming americas commitment to nato and article 5. Did the president do that on the trip . Kevin no. Heres whats interesting about nato, the president consistently called for nato allies to pay their fair share of the 2328 nations to pay their fair share because theyre not meeting the percentage benchmark that they have said that they would. From the europeans perspective, people like german chancellor Angela Merkel feel that they are actually paying more simply because of the antiterror programs they have to pay for domestically. Case in point, the u. K. Manchester attack. You know, they feel that a lot of the budget that theyre paying for in Police Programs and domestic counterterrorism programs are programs that they feel the u. S. Doesnt have to pay for right now. Tom who did they write this essay for within the white house . Theres a raging tug of war going on now. You know it better than anybody i know. Who is opposing general mcmaster and mr. Cohn, the globalist and democrat . Kevin i think its a political tug of war from those who want to have a more nationalistic standpoint. I think that from this oped standpoint, its clearly a signal coming out of what potentially could be perceived as missteps on that First International trip in the sense that it wasnt they didnt do enough to win over the europeans. This could be an effort for them to put forth a more mainstream or more appeasing rhetoric coming off their first trip. Nejra when we talk about International Relations and global cohesions, another topic at the g7 was climate change. Im wondering what we are expecting from the president this week in terms of the u. S. Backing out of the Paris Climate Accord . Kevin a lot of signaling the administration will back out of the climate accord. The president tweeting a decision will come this week. Its a white house that wants to move beyond the russia probe. I was speaking with sources yesterday on the House Financial Services committee who tell me at the end of next week is when everyone is anticipating the financial choice act, the repeal of dodd frank and thursday or friday have that be a house floor vote. Things will move along. Congress is in recess right now. Yesterday White House Press Secretary Sean Spicer getting news of a shakeup and saying meetings are very much ongoing on tax reform and Health Care Even though the house and senate are in recess. Tom very good. Kevin cirilli. Our chief washington correspondent as well. The backdrop of this is the American Business spirit. Robert nodelli is former chrysler chairman and c. E. O. But that barely describes his ability to run through Large Companies changing processes right now. How lean, the backdrop of this politics, whats the confidence level of a lean and means Corporate America . Robert the confidence level started very strong. Tom and its faded. We see that. Robert its faded because there is increasing concern about the doability of getting the tax corporate taxes rolled back, etc. , with all the distractions, tom, happening in washington. Its just unconscionable with whats going on there relative to the issues facing this country. Tom this came up over a beverage of my choice this week and ill ask Young Nardelli this because hell get it, out of respect for the president , is he a businessman or entrepreneur or a person that didnt like him in the conversation, is he a wheelerdealer, hes not like a bob nardelli type, is he . Robert im probably a little more predictable than the president of the United States but hes unbelievably resilient and tends to overcome this stuff. Hes clear aye businessperson and entrepreneur if you look at what he created but he is unpredictable and even in the movie rocky took a calm one too many blows and well have to see how it plays out with russia and how it plays out with the soninlaw and so forth but hes a very resilient individual, very resilient. Snmbings ejra still one of the things in question is the border adjusted tax. With your experience at home depot and chrysler as well, your wellplaced to talk about this, what do you think well get from it . Robert again, theres two very different camps out there today, from my home depot days, you would be very much opposed any retailer would be very much opposed on the border tax with products coming in. I think on the manufacturing side, you may have a different point of view. So again, talking to a lot of my colleagues, you know, i think the current consensus is pretty split as to where this thing will go. Nejra do you think its fair the way President Trump has been criticizing germany so much about its trade surplus, particularly in relation to cars, especially when some of the big german automakers especially manufacturer a lot in the u. S. , creating jobs that way . Robert this will be may sound a little selfserving but issue isnt gger b. M. W. And the germans. I think when the Obama Administration gave chrysler away to fiat, he really opened the door, if you think about it, fiat had no issue isnt dis no dealerships in the United States until they were given chrysler which allowed them to bring in a lot of the fiat cars. The bigger issue is there as opposed to the mercedes and the other german manufacturers. Tom i did this chart, the nardelli chart. For those on radio, its a massive german export juggernaut. This is real intern exports adjusted for u. S. Inflation and then we go flat and frankly, were back to 2005. German exports dont seem to be as dominant as the rhetoric and the discourse but the processes of the businesses you helped run changed, and this interview after interview, b. M. Y. , where are they, stuttgart . Bob stuttgart. If you look at b. M. W. Or mercedes or nissan, a lot of them have established great manufacturing plants here with high employment and again, i go back to fiat is one of the few that if you look at the fiat brand that basically is 100 import and they never would have been able to get into this country they could not have afforded establishing the dealerships that they inherited. Tom would mr. Trump have let buy chrysler . Bob no. I think what happened during that administration, you had pelosi and reid who really didnt want to take responsibility for assisting two buy chrysler . O. E. M. s, gen and chrysler, so they gave one away. Tom what a great day to have bob nardelli with us and to wrap our heads around the central bank discussion and well do it later. I will speak with Robert Kaplan of the council on Foreign Relations, hes the interesting president of the dallas fed, Robert Kaplan on the two americas within the texas district. This is bloomberg. Emma lets get to the Bloomberg Business flash. Deutsche bank will pay 41 million to settle a Federal Reserve Money Laundering investigation. The fed claims the u. S. Operations failed to maintain adequate protections against illicit trade. The regulators say it involves billions of dollars and transactions. N. X. P. Is facing fresh frur investors to do a takeover deal with qualcomm. Elliot management is among those pushing to try to get a better offer. They argue the 47 billion offer undervalues the company. Thats a Bloomberg Business flash. Tom what were proud of is conversation and into june were resetting the discussion with Kevin Cirilli in washington and our guest Robert Nardelli in the state of American Business and manufacturing and do it with arguably one of the most courageous short read in europe i read. Hes in denmark with xanta and been extraordinary on the dynamics. Lets talk about the inflation. Brainard saying maybe weve got to pause. Thats one opinion out there. Bring up the chart, if you would, for yens. For those on radio, the selector is up, inflation is up, the red line is up, up. Core p. C. E. Is a little elevated and then we roll over. How do you gauge that . How do you judge that whether youre Lael Brainard or Robert Kaplan or the hawkish most hawk out there. Its a very tricky one because if you look at everything that should be driving inflation, we should have a gradual uptrend and now we have a hiccup and dont know whether its something going on with the economy or some sick technicalities. Theres a thing about the devalue and the items that go into c. P. I. And we had adjustments like that in the telecom areas, is it a technicality or Something Real . Tom is a technicality and can you take the inflation goods from innation and deflation out of what has been substantial Service Sector inflation . Is everything rolling over or is it just certain parts of the mix . Jens no, there are clearly certain parts that drag these numbers down but typically when you dig down on these things, its not just one thing. So theres one big item but there were a couple other gray zones. So i think this is something the feth is fed is looking at and they want a couple more data points before they draw a conclusion but i want to give it a global angle, tom. Its a problem we have all around the world. We have japan and sweden, countries that have very, very tight labor markets that can generate Wage Inflation and cant see the core inflation coming through. The people at the fed say maybe its a technical thing but there are other countries that have this smar issue and makes it difficult for policymakers. Nejra we have the euro zone inflation read as well coming in worse than expected for the headline and the core. You say its a challenge for Central Banks globally. Were all asking whats happened to the phillips curve. I want to ask you, ive got here the treasury bund spread. You see just a few days ago we saw it hit its lowest since the u. S. Election but its been coming up a little bit since. Where do you see it going given the dynamics of inflation in the u. S. Versus europe . Jens theres a few moving parts in that specific spread. I was in europe last week and one of the interesting things were trying to investigate is how focused is the e. C. B. On the fact that the bund yield is trading well, well, well below money market rates. Normally you have Government Bond rates trading on top of what money rates are doing and thats not the case right now. So its not just about inflation. Its also about essentially the shortage of bunds in the market and therefore its a big question whether e. C. B. At some point will say we want all Interest Rates in europe, to be on top of money market rates but right now they seem ok with having this drift below the money market rate served in the bund market. Nejra i also was told this was also down to the Political Risk pendulum swinging from europe to the u. S. Robert nardelli, stay with us. Coming up tomorrow on bloomberg surveillance, we hear from the Prime Minister of australia, Martin Turnbull with a interview 10 30 p. M. In london tomorrow. This is bloomberg. Nejra this is bloomberg surveillance. Weve seen the pound dip after a shock poll showed theresa mays party may miss next weeks election and face a Hung Parliament. It was published in the u. K. Times newspaper and based on a new model and joining suss tom ross from bloombergs u. K. Government team. And still with us our jens nordvig and Robert Nardelli, former chrysler c. E. O. With us as well. Tim, its come as a bit of a shock. Yesterday we were talking about the fact of a Hung Parliament pretty unlikely. Tim overall people think its still mostly unlikely. What youve got in this poll is different from previous poll which is looked at the national u. K. Wide vote share. And how its playing out. This latest digs down into the seats and the kind of majority in Parliament Theresa may could end up with or not. It looks like this time she may not get one at all. Nejra even if the poll itself they say theyre giving a big margin of error but this is a poll that called brexit, right . Tim they make the point, theyre using the poll that consistently puts the lean vote ahead of last years referendum and also is very clear its innovative and experimental and new and theres quite a big margin of error. I think we need to take it with a bench of salt at this age. Tom lets help tim ross write his next title. Are you looking at sterling u. S. Dollar or euro sterling, where is your opportunity and which of those should Prime Minister may look at . Tim i tend to look at eurodollar and euro sterling and put them on top of the cable and thats normally how it works. Weve seen the last couple weeks sometimes cable can drag eurodollar around with it with big moves out of the u. K. News stories. I have to say when i look at whats going on in europe, we clearly have a lot of noise around the u. K. Election but we also have a trend change in the euro, like weve had multiyear downtrend and its over. So that i think is the key dynamic. Tom tim ross, when is the next poll or event as we stagger to june 8 . Tim well, what everyone will tell you is the poll on june 8 itself, we have a number of polls coming out the next few days in the newspapers which re keen on them so stay tuned. Tom how fascinating things can change on a dime particularly in the United Kingdom. Well come back with a good conversation on Foreign Exchange and bob nardelli of manufacturing and speaks to the former Federal Reserve bank of pips. Of indianapolis. You must watch. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Nejra in london with tom keene in new york, francine is on assignment. Were looking at some great, beautiful pictures of the brandenberg gate in berlin and not a great picture for euro zone c. P. I. , missing estimates on the headline and core numbers, tom. Though that might support some of the arguments in germany for e. C. B. Policy. First et the bloomberg word news with emma chandra. Emma its the worst attack in kabul since last summer. A bomb exfloweded in a neighborhood home to foreign embassies and irans president ial palace. People were killed and wounded. No one claimed responsibility. African forces have been stuck in a stalemate with the taliban and Islamic State has stepped up its attacks recently. Trump. S. , president says there will be refusal to cooperate. The request from congress are not capable of being answered. Cohen said there hasnt been anything that links him to what he calls a fake russian conspiracy. Pentagon is claiming success in the long troubled missile Defense System. An interceptor was fired from an air force base in california and destroyed a mock i. C. B. M. And is the first test of the system in three years and has taken on more urgency with north korea wrapping up its testing. In brazil. Investment company decided to pay 3 billion to settle charges of corruption and other crimes. J. M. S. Will pay out the money over 25 years in what prosecutors call the worlds biggest leniency deal. J. N. S. Is ran by the batista brothers who control j. B. S. The meatpacking giant. News 24 hours a day power abouted by more than 2,600 analysts in more than 120 countries. This is bloomberg. Tom its multifaceted in washington this morning. Any number of ways to go. Heres a great thoughtful oped on president reagan and President Trump. This is from the always aliegeant Francis Wilkerson at Bloomberg View and is a fabulous read, ill put it out on twitter on makers and president reagans takers. If you feel the wild hoard is coming any minute now, ryans proposals like trumps Taxpayer First budget, would get the job done. Republicans are working to safeguard wealth from the tyranny of democratic masses to hold off the takers long enough to enabling the makers to gather and secure their just desserts. Just a bit of an exceptionally thoughtful essay. Greg gives us wisdom on takers and makers. Where is the battle now in washington, who has the high ground, the takers are themakers . Greg the high ground may be among the pragmatists beginning to say look, we cant get tax reform this year the tradeoffs are enormous and maybe we focus on tax cuts and youll hear more about that from an administration desperate for a victory. Tom i agree they want a victory, mcmasters and cohn writing in the journal, i believe theyre the pragmatic crews, is anyone listening to mcmasters and cohn . Greg cohn for sure because hes become a powerful figure as we see a shakeup intensifying the next couple weeks. Tom within this is a shakeup and the talk in washington and we covered this territory with Kevin Cirilli. Does the nation care about the beltway dynamics . Greg no, i dont think so at all. In fact, im not sure the nation cares all that much about the russia story. Its a huge topic inside the beltway and in new york but i think the nation cares more about where the economy is headed. Thats why i think tax cuts, not reform, tax cuts have a chance. Nejra the nation cares about Health Care Reform as well and its a serious problem, isnt it . Greg it is and a awful lot of republicans agreed privately to just put it on a shelf and come back to it at some point a year from now. The votes simply are not there. Nejra how do you get a compromise then . Greg you dont on health care for quite some time. I do think on taxes you could get 50, 51 votes which would be enough to get tax cuts through. I think even some democrats might, if the tax cuts were constructed to their advantage, i think even some democrats would look at the bill. Tom when we look at Vice President pence where does he fit in on all of this . Im hearing his name a lot. Is the Vice President distant from the white house or is he a part of the debate . Greg theres a lot of rumors that he may be leaving town for a while to do some campaigning to raise his profile. Look, its still way too early to talk about impeachment, down the road, a year from now could we be talking about obstruction of justice . Maybe. But i frankly being a cynic think that democrats are content to keep trump in office. They think hes in way over his head. Theyd be quite content to keep him there. Tom thanks so much, greg valiere from horizon with a note on tax cuts and tax policy. Jens is with us from norway with no clue on american politics. Bob nardelli and grew up in ohio and grew up in a part of older america. How is the president playing in the geographies you know so well . Jens just to continue on the tax issue, tom, Corporate America is counting. They are very optimistic about tax cuts and you saw that. Tom 15, 20, 25, right . Bob the president talked 15, its not that, its not 20. What im hearing out of the house is 25 . And again, theyre still talking about tax reform. I think the transition to tax cut is going to be good because the confidence level in Corporate America is counting on leveling the Playing Field on a global basis, tom. So weve got to get that done and weve got it get it done quickly. The problem is washington doesnt work. We just heard theyre on recess again. If you look at it now and analyze it, they probably are at work 100 days a year. Thats a little bit thats ot quite what you work, tom. Nejra i want to get your view, bob, on the impact on carmakers, i know we mentioned the climate deal and this is something Kevin Cirilli said, we could see the u. S. Back out of. Is this actually going to be positive for carmakers who have been struggling a bit recently . Bob one of the big things the president did early on when he met with all the heads of the Car Manufacturing Companies was to roll back the cafe standards, which was really quite unattainable. It was going to be rolled back at some point in an off ramp and he gave a lot of incentive and encouragement to the auto manufacturers to start working on autonomous cars, to work on new technology, to keep advancing all of the benefits you see inside the car. The average citizen wants all the comforts they enjoy in home inside that car today. So im encouraged with what he has done with the corporation. Tom the average citizen wants what the rich guy down the street has. Bob nardelli, the president won this because he won bucks county outside of philadelphia. Is he losing the affluent republican vote that says well give this guy a chance, but is he in the process of losing them with the buffoonry . Bob i hope not. He really won as you said on the individual, the working men and women out there. Theyve been a big supporter. I think the Upper Echelon of the republican party, look, this is a lot like the bahamas in my opinion. Youve got its called the bahamas but you have a Thousand Islands unconnected and what we see in the republican party. I think either you wear the jersey or dont wear the jersey but theyve got to come together and try to get support for this president on some of the major initiatives. Nejera i mentioned the Political Risk pendulum swinging from europe to the u. S. Post the French Election. Youve been talking about the fact we have been seeing these flows into europe. Is this going to continue given whats happening with President Trump . Jens yeah, i think theres a lot of Global Investors that are focusing on the risk now and the French Election was a very big deal and its out of the way and we clearly have some political issues in the u. S. That a lot of investors are focusing on. I think youre seeing a trend change with, for example, in equity flows, just a lot of money coming into europe for the first time in a while and some of that is moving away from the United States. I think thats a trend change thats very important. Tom nardelli has talked about everything but pittsburgh steeler football so well leave him alone. Jens nordvig will be back and well dive into the dynamics and mystery of the u. S. Dollar. Bob nardelli on American Manufacturing and the two americas. Thats my theme with Robert Kaplan, the Federal Reserve Bank President at dallas on the council of Foreign Relations. Really looking forward to it this. The between americas that all of the central bankers face. This is bloomberg. Emma this is bloomberg surveillance, im emma chandra. The 15,000 advisors at Morgan Stanley about to get cyborg health. Help. Theyll suggest trades and send reminders when a clients birthday is coming up. Morgan stanley is thinking human with al gore it mick assistance will be better for the clients. Al gore rhythm assistance will be better algorithym assistance will be better for the clients. Last year they won a chance to buy the team. But according to people familiar, they want to change terms of the deal to give bush complete control as business and baseball operations. Thats the Bloomberg Business flash. Tom how about a foreexreport and then well get to jens nordvig. The index under 100 and weaker dollar over last week and weaker sterling on the way to 0. 90. Sterling at 1. 27 and rebounded in the last two hours because of Emas Ross Thomas in london index. Es a stronger a fabulous book was written a few years ago on euro and was biting and passionate and unfortunately a lot of it has come to pass. Mr. Nordvig is with exante. You were ray out front on 140120. Will europe fall further because of the societal attention you grabbed so well . Jens i think were changing trends. I wrote that book in 2013 and we were 140 at the time and relished the trade all the way down to 105 and now i think were about to turn in the other direction and its not that all risk in europe is gone. But we do have some growth for the first time in many years. And theres more optimism about what Investment Opportunities exist there. So i do think were trading higher from here if we can get through the italian risk. Tom we only do complex questions on wednesday so here it is. Whats optimal euro for chancellor merkel, whats optimal euro for President Trump and are they the same . Jens so i dont think the u. S. Stands stance towards europe is particularly well thought out if i can be totally honest. I think the u. S. And europe should be very, very close allies and dont understand why theres such a severe amount of tension. Doesnt make any sense. Beyond that, i think theres something very important going in europe where merkel, macron has come to the conclusion Something Really new and fresh needs to happen and partly because europe feels more alone internationally but also because theres something nighted to generate a new narrative around europe and after the german election we could have major announcements, for example, on defense corporation, something that never really has been discussed seriously, i think we could have some progress on that. And is really needed now that the question marks around nato re coming bigger and bigger. Nejra before we get to the german election theres talk around the same time we could have the italian election and saw what that did to the b. T. P. Bund spread yesterday. You said the euro could go higher if we get through italian Political Risk. I want to put it in context because actually we were talking about that spread blowing out yesterday but its nowhere near where it was back in 2012. So is this actually where the spread is now, is this a case for more euro buying in your view . Jens the one thing to keep in mind is one thing that happened between 2012 and now is that the e. C. B. Started to buy a lot of bond. So obviously if theyre going to taper and reduce the pace of bond buying sometime next year, that could be a bit of a tricky situation for the town bond market. But i do think theres really something fresh going on in terms of the growth situation and i do think theres also potential for more progress on the political front in terms of real fresh momentum in terms of european reforms and i think germany and france is going to work very, very closely together after the german election to generate some fresh momentum and generate a positive narrative. I think theyd really like to see some big headlines, some new momentum and that could then play positively into the italian election if it comes after that so i think thats the strategy they have in place right now. Nejra talking at the e. C. B. Can we get any of those hawkish signals at all especially given the latest inflation print . Jens the comments i made before are more medium term observations. I think in the very short term draghi frankly almost preempted the press conference with his speech earlier this week where it was very, very clear they want to keep very easy Monetary Policy in place until they see something fresh on Inflation Inflation day to day was forecast and in the short term dont think well get a hawkish signal from the. C. B. E. C. B. But what is changing is they say theyre not easing anymore and theres an emphasize on better growth and that in itself is important. Tom bring up the chart if you would. Heres the dollar and where you are after the big move 2011 and 2014, up, up, up we go. Nardelli loaded the dollar here and here we go with a rollover here. Lets write your next book, will you be writing the fall of the dollar . Jens my wife told me shell have to approve any book i write. Well know tomorrow. I think the dollar has seen a major, major move from 2014 up ntil the end of last year. One of the biggest moves since the 1980s. When you have a move like that you have to keep in mind is this overextended . There almosts of the dollar narrative, border attacks and fiscal expansion and so forth thats not coming through. It makes sense were giving back that trend and keep in mind trump is not a fan of the strong dollar and that is limited the potential from here. Its going to be very dependent on what we see in terms of reforms from here but i think the general trend for the dollar will be a leakage weaker from here. Tom thank you so much for the briefing today with exante. Well continue with bob nardelli from American Manufacturing before i speak with Robert Kaplan. On your bloomberg and trading desk, watch whats going on on television and be current and go back and forth with our staff. Ut the best thing about this you can go back on all sections and here the blather and bonus round, you can steal the semilogged chart of real german exports. Come on, you wake up and dream of doing that. Tv go. Tom bloomberg surveillance. Im tom keene. Francine is on assignment. We have a guest with a cautious assessment on says la. A cautious assessment on ford as well. A cautious david west joins us. David for a car guy its fascinating. Jonas is the dean of auto analysts and he has a fascinating note out saying internal combustion engines are on their way out faster than you think. Electric vehicles are coming and at the same time, Oil Consumption will go up and you might ask how can that be . And he says well end up driving more miles though were using fewer combustion engines. Well see. Tom youre causing a coronary in Robert Nardelli. Thanks for ruining bobs morning. Lets do a single best chart for mr. Nardelli. Its an honor to speak to you about this with the challenges and good news you face at g. E. , home key oppose home depot and the rest of it. Mari g. M. And ford and barra treaded water they say was a triumph and from the red circle mr. Field didnt get it done. What happened . David its very unfortunate. If you look at a recent survey theres been more c. E. O. s ousted by activists in boards in the first part of this year than ever. Bob whats disappointing in mark fields case, bill ford endorsed him and allen melelli and the board endorsed him. For three years they praised him for the earnings and couldnt get the stock to move. So c. E. O. s can control what they can control but cant control the market. Tom heres the money question for me and this goes back to the corporate disasters of Eastman Kodak and others over the years. Was this nothing about engineering and nuts and bolts guys like nardelli versus the staff guys as well, was that culturally what happened when they went for the center of a university of Michigan Football team . Bob i think remains to be seen will happen, theres no question, david made two points, one is i dont agree with the pace with which well go to electric vehicles. Its less than 1 of the installed base today. Number two, Oil Consumption is up. I was just down in houston at a conference and its projected, or example, our tracking rates have gone from 400 to 600 to 800 and projection to be 1,100 by the end of the year for africaing and Oil Consumption is up because people are driving more have gone from and last two yea they set a record and one of the most strongest Retail Markets is auto part because the car park is largest than its ever been. Those things are true. I think the rate of change for the consumer is not going to be s fast as people are predicting for electric vehicles. Tom nejra, jump in, please. Nejra ive been wanting to ask you about what weve been talking about, you recognized the early signs after last financial crisis by looking at the Auto Industry. What do you see now . Bob theres no question, again, i stepped into chrysler in 2007 and we were at a seasonal adjusted race, sars, of 17 million and within a year fell to 9. 6 million and created the issue for the Auto Industry primarily driven by the financial industry having a meltdown. We may see some tapering. Whats amazing to me is we fixed a lot of the old problems in the Auto Industry through period but weve seen discounts and incentives. Were now back to 10,000 on the hood, period but weve 72 m financing charge. So the sins of the past have come back and trying to keep the volume up. Mary is making the right decision, shes not trying to be number one on volume but trying to be number one on profitable. Tom well continue this debate on bloomberg radio. Im heading up park avenue to the council on Foreign Relations, a conversation with Robert Kaplan of the dallas fed. Nejra cehic, thank you so much. This is bloomberg. Jonathan growth is an too cold and inflation is anything but hot. Taking the pressure off the European Central plank. Bank. Larry fink weighs in on a transatlantic split. Continues to dominate foreignexchange markets. Prime minister mays election lead narrows. One projection points to a Hung Parliament. From new york city as we trade on the polls, good morning, good morning. This is bloomberg daybreak. I am Jonathan Ferro alongside david westin. A warm welcome back to alix steel as well. Futures are firmer on the margin of about. 1 . Treasury yields higher by a single basis point at 222 and the euro looking resilient even with a and inflation miss. X at 8 30 exxon mobil will hold the new annual meeting