into the terrorist attacks. this is "bloomberg surveillance ." i am francine lacqua in london. it seems pretty clear that there seems to be a risk off mood. the haven assets are getting quite a big bid. i want to start with the pound, but it is more of a dollar story with equities retreating in general and investors turning cautious following the seven-week search, with oil fluctuating. on the oil story, we will talk about the saudi story. 2.16.0 year yields, let's get straight to the bloomberg first word news. reporter: we start in australia, where islamic state has claimed responsibility for a hostagetaking in melbourne that left a gunman and one other dead and three police officers injured. 29-year-oldt the after he fired a police with a shotgun. he had taken a woman hostage that he had arranged to meet from an escort agency and is believed to have killed the building receptionist. the white house has insisted that president trump is not picking a fight with the london mayor. he criticized the high-profile british muslim on twitter. the mayor last night lit a vigilant solidarity with the victims of saturday night's atrocity. thousands gathered near the london bridge to honor the thousands. tim cook says the company has helped british officials to investigate terrorist attacks. pressure is mounting on technology firms to protect their products and services from being used by violent extremists. tim cook: we have been cooperating with the u.k. government, not onlyi in law enforcement kind of matters, but on some of the attacks. i cannot speak in detail about that. but in cases where we have information and they have gone weough the lawful process, not just give it, but we do it very promptly. the white house says president trump will not use executive privilege to prevent james comey from testifying to congress this week. comey is likely to face questions about conversations they had on investigations into alleged russian meddling into the election. boris johnson is claiming that only theresa may can 'get brexit right." this comes two days before the general election. its campaignusing on the welfare support for retirees. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. i am nejra cehic. francine: the ruler of kuwait will travel to saudi arabia to mediate an end to the diplomatic crisis in qatar. qatar airways has suspended all flights to the uae. the white house says president trump wants talks with all parties to resolve the dispute. >> the president is committed to having conversations with all the people involved in that process. we want to continue to de- escalate that. at this point, we are continuing to work with each of those partners. francine: plummeting the most since 2009. for the latest on the diplomatic span, bloomberg's middle east anchor joins us from dubai. what is the latest on the political front? there seems to be a lot of will to resolve the situation, but what is the likelihood of that happening? >> a lot of commentary,what is e political francine. the united states has answered through central command in qatar. you saw some of those developments firsthand. ultimately, if you look at the u.s. track record of patching up relationships in the middle east, it has not been very strong. this will come down to the gulf counsel figuring this out themselves. this is going to be very difficult. , thereme around in 2014 were ambassadors during the last crisis discussing, and it took seven weeks to resolve. kettner commented this could drag from six months to all the way up to one year. what is at stake in these conversations, the folks at eurasia group made clear it will come down to radical changes in qatari policy, or absolute capitulation. francine: give me a sense, the u.s. president says he wants this peacefully resolved. we see kuwait wanting to get involved. it will have the most impact in terms of mediation? yousef: ultimately, it will come back down to the gulf leaders to figure out themselves, as much as the u.s. is going to try to get involved, it would be tricky for them to pick one side over the other. they have a voice, they have relationships with qatar. it isn't everybody's interest -- it is in everybody's interest to bring this to a wholesome conclusion. ahmad have not taken a position to isolate on qatar. there could be another split between the gulf council. you have this alliance that is trying to isolate qatar, and then you have ahmad and kuwait, backing out of this, and then you have qatar on the opposite side. francine: what is the market reaction today? yousef: it has been remarkable. we are seeing a bit of opportunity come back into this market. keygold is one of the functions people like to pull up. a lot of strength is coming through with telcos and utilities. a lot of downside pressure remains on energy and materials. those companies, crumbling. also watching out for credit, insuring sovereign debt for qatar, which remain relatively high compared to the usual average that they trade on. that is what we are watching and we will keep you up-to-date on the story. francine: yousef, thank you. now joining us is jane foley, head of fx strategy at rabobank and max kettner from commerzbank. jane, let's start with the middle east. what is the read across into your currency world? jane: we have seen the yen a little bit firmer. that is not just because of the gulf news. .here are other pieces of news in japan last night, there was the news of the siege australia. they did not have a huge market impact in terms of risk appetite. ahead to, if we look the rest of the week in the u.s. we have the former fbi director questioning as well, the ecb meeting. right now, the market is waiting and looking forward to the events we have got coming. francine: max? max: absolutely. if we had cross asset perspective, there is not much of an effect on world prices. the reaction is relatively muted. yields are on the year to date lows. that is something that is fired up by the risk off move, but it is relatively contained so far. francine: i am surprised on oil because yesterday it spiked up quite a lot. i am not sure what calmed nerves in the market. max: that is tough to tell. it comes down to the point that we are in uncertain times and a very uncertain week. markets generally have a very tough time pricing uncertainty. we used to price risk, but we are not used to pricing uncertainty. francine: what happens next? if this escalates, jane, can this have more of a bid for safe havens? jane: it could. a number of commentators said this morning, if this gulf situation escalates, there could be less reason for the various opec nations to comply with their cuts. there might be more supply coming on board. it is very difficult to know which way to take it at the moment. it is early days. it takes a fair amount of political will. this crisis, it is interesting, the timing. it is literally days after donald trump's visit to saudi. maybe they are sending a strong message. they need to look at the u.k. government. they have ties to qatar, significant investment links. i think for now, the take is that this will not go too much further. they are in a very difficult position. it is also in their interest to calm this down. for oil, it is very difficult to tell right now. francine: jane and max both stay with us. let's get straight to the bloomberg business flash with nejra cehic. reporter: banco popolar's chairman will not go ahead with meetings today, citing identified people as investment banking sources. the spanish newspaper says they do not plan to request emergency liquidity assistance from the ecb. early merger talks between t-mobile and sprint indicate an all stock deal might be the preferred option, avoiding the need for refinancing. parent companies deutsche telekom and softbank still not know if they want a deal and a sprint and t-mobile are talking to other potential partners. any potential merger would become located by the need for regulatory approval. airbus is planning a further cut in bills rates in the superjumbo amid the new orders. the company is assessing how best to drop output between the 12 planes a year, known as rate one. the company said in july, they should be sustainable for next year. a decision will be made before the end of this year in the absence of further sales. that is a bloomberg business flash. francine: the u.k. foreign secretary, boris johnson, claims only theresa may can get the brexit right. this comes just two days before the general election. labour's switching the focus to welfare support for retirees, saying tory plans are the biggest attack on pensioners in generations. anna has been braving westminster for us. theresa may is putting boris into action today and he is focusing on brexit. anna: absolutely. good morning to you. boris johnson has moved back to the northeast of england. anybody watching as the brexit results rolled in one year ago will remember the role played by the northeast of england, and the early warning signals it gave to investors as to just how strong that vote for brexit was going to be. he went to the brexit heartland, to the labour heartland traditionally, to campaign for the ruling conservative party. he says this is a moment to believe in the huge potential for brexit britain and the only theresa may can get it right. in the meantime, the labour party will talk about retirees and pensioners. the focus is still on the aftermath of the terrorist attacks, broadly. how much do the police now about the attackers as various reports surface about how much was known by the police? police suggest there was no evidence of any immediate attack being planned. nevertheless, these are the conversations going on. that rhetoric could still stick to theresa may, who was home secretary for six years. francine: what is the latest in the polls, anna? anna: the latest is, they have been narrowing. we had another poll overnight. this showed one percentage point lead for the tory party. that was narrowing from the previous time we heard from survation. the polls range between a 1 percentage point and 12 percentage point lead. we have heard from axa overnight. they talked about how guilt yields could double if we saw a labour victory. i got a message from a gilt trader, saying how we have not reached peak risk, in his words, as the news about the terror suspects starts to percolate and stick to the conservative party. deutsche bank say they see a tories.jority for the that could mean the hard brexiteers get a hand. but having said all of that, my colleagues of bloomberg news suggest that theresa may and boris johnson, as they campaign in the traditional heartland, that could suggest the believes theparty polls are not as tight as we have been led to believe. francine: anna edwards in westminster through the morning for us. still with us, jane foley and max kettner. jane, we also had great pieces of analysis saying, if labor yields couldgilt reach 10.7%. jane: the market is very concerned about public spending. this cu couple of overrunning points. the markets are very much focused right now on this point, the gilts. they are very much looking at this. some of the media have not shown this in a good light with respect to their calculations. public finances, how the labor government would afford to have free education, free tuition fees for universities, higher spending on pensions, etc. francine: what does that mean, max? let's say there is a hung parliament -- first of all, if we assume there is a hung parliament, the tories cannot pull a coalition together? and what does that mean for the markets the next day? max: the markets would have a tough time initially. it is a different situation than with brexit, when you said sterling is down in a couple of you.k. equities. you will see the proposed labour policies. that will probably not prop up u.k. equities. equities will have a tough time win, as willlabour sterling, probably. francine: jane, these are my positions on pound. do you expect this to accelerate? we are two days away from the vote now. jane: we had one sterling value in january, when tresa may outlined she had her plan sterling rallied as a result. the next was when she announced the election on april 18. the polls at the time showed she would win in a landslide. sterling rallied again. but it did suggest that yes, the markets generally speaking, prefer that government because of the public-sector financing applications. but opinion polls now are much closer. we have seen these short positions change a bit, the market no longer wanting to take that bet that theresa may will get a strong government. the market is also concerned that if she does not get a strong majority, the brexit negotiations could be a lot more messy, more difficult for her to sell her plant a at home. francine: if she gets the huge majority, she can almost ignore the ventures. jane: sterling would go up with that. francine: jane and max stay with us. we will be building up to the u.k. election all week. tuene in for our one-hour special thursday, when we get instant analysis as exit polls a re published. up next, an exclusive interview with apple ceo tim cook. this is bloomberg. ♪ francine: you are watching "bloomberg surveillance." i'm francine lacqua in london. apple's chief executive says the company has helped u.k. officials investigate terrorist attacks. tim cook's exclusive interview with bloomberg comes as technology companies face mounting pressures. emily chang started by asking him if apple's new operating system helps strengthen user security. tim: these terrorist attacks first of all, our heart goes out to everyone affected by them. they are horrendous and the u.k ., for us, we have been in the u.k. pretty much the whole length of time for our company. and it feels like they are our neighbor. we have thousands of employees there. our heart goes out. what do we do, helping with this? we have done, one thing since the beginning of the app stores, app store.the we don't want hate speech out there. we don't want these recruiting things on there. we have tried to be very careful since the beginning, not having that stuff on there. i am not saying we will never make a mistake, but actually, i don't know of a case where something has gotten through in that perspective. we are really vigilant on what happens from that point of view. we also, we have been cooperating with the u.k. government in not only in law enforcement kind of matters, but on some of the attacks, and i cannot speak in detail about that. but in cases where we have information and they've gone through the lawful process, we not just give it, but we you know, do it very promptly. and so, i think, i would hope, that they would say that we have been cooperating well. that.think, you know, there was valuable information. there is a misunderstanding, i think -- encryption does not mean there is no information, right? because likely metadata exists. you're area, if putting together a profile, is very important. emily: can we assume apple is always working to make encryption even stronger? tim: the reality is that the cyberattacks on people and governments and i mean, it is happening left and right everywhere. these upset your safety, your security. it is not just privacy. it is not privacy versus security. it is privacy and security versus security. and so, we are always working to try to stay one step ahead of these hackers that frankly speaking, had gone from the guy in the basement that is a kind of hobbyist to a sophisticated enterprise. it takes all we can do to do it. users't think our should have to think through all of this. it is not practical for people. we try to stand up for users and stay one step ahead of these guys. francine: tim cook there. up next, will critical questions about the jobs report influence next week's fed rate decision. we look at that and the movements on the markets. we look ahead to the fed, but also the ecb, next. this is bloomberg. ♪ ♪ you are watching bloomberg "surveillance." i am francine lacqua in london. islamic state has claimed responsibility for a hostagetaking in australian that left a gun man and another dead and a policeman injured. him after he fired at least with the shotgun. he had taken a woman hostage and was believed to have killed a building receptionist. the white house has insisted president trump is not sitting 8 -- starting a fight with the london mayor. vigil -- led a vigil and thousands of people gathered near london bridge to honor the seven killed and dozens others injured. airlines has canceled flights. plummeted the most since 2009 as a result of a dispute. president trump wants to talk with all parties to resolve the situation. committed toent is continuing to have conversations with all of the people involved in that process, and those countries commented de-escalate that. in the u.k., the foreign secretary boris johnson is claiming that only theresa may labor isbrexit right." switching the focus of its campaign to welfare support for retirees, saving the conservative plans could lead to almost 4000 more deaths this winter. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. cehic.jra this is bloomberg. we get the u.s. federal reserve's latest rate decision this week after last friday's jobs report. critical questions about economic vitality. the market still sees a 90% chance of a rate hike according to the world interest rate probability. if you have a bloomberg terminal , just type wirp go. fed, theyht, the still want to hike three times? the market does not want to believe it. jane: if they did not hike next week there might be credibility issues. in our view they will not hike at all for the rest of the year. some say the fed is on the cusp of making a policy mistake. yes, thee'll know that numbers were disappointing but the labor market is pretty tight. why isn't labor inflation lifting? this is not just a question in the u.s., we have this in australia and japan. a few weeks ago we had data from japan that for every job seeker there were 1.48 jobs. inflation, it did come out this morning and was a little bit firmer but it is still pretty low considering how tight the labor market is. there are structural issues going on, the same in the u.s. we do not have a buildup of demand and i think that is something which will keep a lid on fed policy. francine: is it structural issues, or the fact that we are measuring things differently which could be part of the reason why we are seeing prices -- when it comes to wages? max: perhaps we are measuring things in a more traditional way that we should. it is very much a structural issue. i believe there will be another hike at the end of the year but i think ultimately, that comes back to the structural point, it does not matter that much whether it is two or three times. the first thing is maintaining credibility, that is crucial. the second one, that would be the regime shift if the fed says we will transfer into more mechanical start to hiking rates, and we are far away from that. gradual andng to be it does not matter that much whether it is two times or three times, as long as it is gradual and data dependent, that is crucial. francine: what needs to happen for inflation to fit -- inflation to go up? the performance on inflation would make janet the only chair in 30 years not to achieve sustained inflation close to the fed's declared goal. how much does the fed have control over this? jane: all central banks have less control over inflation than they thought. to phillips curve goes back 1958 and this was a trade-off between inflation and unemployment. clearly this is not working anymore and clearly we do not know why. there is lots of reasons, demographics, all sorts of different reasons why wage inflation is low. perhaps because technology has taken over a lot of jobs, factory jobs, school jobs, etc., a hole right of reasons. for the time being we do not get wage inflation and the fed cannot rely on mechanical movement. francine: let's say she ignores -- first of all she said gdp was -- she ignores these inflationary non-pressures. is it a policy mistake or more of a mistake to wait? max: i think it is more of a mistake to wait is that hurts credibility and for the fed, particularly after what they've done the past three to four years, that is a dangerous issue to now say, we are not going to hike. i think that would be much more of a policy mistake not to go ahead next week. francine: what happens to treasuries now? this is the other market we are sometimes puzzled by. jane: i think it will be data dependent. we could see potentially more flattening. the other big question is what is the fed going to do with respect to the balance sheet? that adds another variable into this equation. francine: when do you expect them to move on the balance sheet? they have got to have some common of plan in place. suggested they need to be reducing assets by the end of the year, but if the data disappoints that will be perspective. francine: coming up next, we focus on the european central bank. a preview of the ecb's latest willy meeting, what path mario draghi take on unwinding stimulus? more from our exclusive interview with tim cook as he talks trump. this is bloomberg. ♪ ♪ francine: you are watching bloomberg "surveillance," i am francine lacqua in london. mark: european stocks are falling for the seventh day, down 1.5 percent since reaching the 21 month high on may 10. health care down by 1%. a key study on its cancer drug combination has disappointed shares in roche. the biggest drop since june 2015. this is a great charts, over the span of four weeks hedge funds and other large speculators have amassed the biggest the list wager on the euro in more than six years. morgan stanley no longer season falling to parity with the dollar and expects 1.18 this year, also boosting its euro area forecast. the median forecast is for the euro to reach 1.11. back on march 24 analysts were much more bearish with a 1.05 call. another fantastic chart, as polls narrow analysts are reworking a scenario for gilt. for deutsche bank, 10 year yields could rise from 1.20% 1.7%,to between 1.6% and that is the green dotted line, should labor win outright. the yellow dotted line is another scenario, should labor form a coalition government, between 1.4% and 1.5%. the most bullish outlook is if the conservatives achieve a smaller majority than the last parliament, pushing yields toward .9%. one of our many charts that highlight the upcoming election, a very simple chart, favorability tracker for corbyn and four may. 40 four for corbyn. francine: investors will be looking for clues on the path for normalization as the ecb travels to estonia for its monthly meeting tomorrow. still with us, jane foley and max kettner. first of all, how much of an impact does ecb strategy you lookfactor in when at portfolios when it comes to european assets? max: initially it was quite big. and 2016ooked at 2015 you looked at the correlation between euro and eurozone equities, which was consistently negative. until the end of last year, eurozone equities, particularly italian and spanish equities were suffering. that very much has changed and we are in a positive correlation right now. as eurozone equities go up. that has very much to do with the brighter economy outlook, brighter corporate outlook for eurozone corporate. -- eurozonesets assets up together. francine: this is basically euro net speculative positions. how will that change post thursday? jane: i think thursday will have a short-term impact. some disappointment if draghi is dovish but it does not change the long-term. money is flowing back into eurozone assets and really i think, if we look perhaps on the foreign exchange at the dollar and euro we have seen a rotation out the dollar back into the euro. this is because of europe, we keep hearing, one of the surprise stories of the year. if you go to the end of last year there were worries about politics, populism, nationalism, economic worries. fast-forward to the spring we have a better economic story than we expected and some of the issues of populism have gone away for now. meanwhile in the u.s., what is supposed to be at the end of the year according to the markets, has gone the way of the disappointment. one of the reasons the dollar oggy is because of this pour back into the eurozone. a lot of that money is coming back across european assets. some market participants were expecting mario draghi to be a lot more dovish. what exactly are you expecting from the ecb on thursday, tomorrow -- two days from now? this is basically our ecb survey from the depot rate, is it significant? we don't think there will be a change in the depot rate for some time. we think the market could be disappointed on thursday but we do not think there'll will be a change in forward guidance. we think he will change his economic outlook and will say that will be more balanced, but if we go back to the inflation story, core inflation particularly, that is still very low with some of the inflation numbers ticking lower recently. if we talk about the inflation in the u.s., wage inflation is very low and a similar story in europe. we think draghi will remain a little bit more dovish and people are hoping. i do not think that will change this rotation story out of the u.s. into the euro. francine: do you agree? max: absolutely. atdo not see the ecb moving all next year in terms of deposit rate hikes. i also think for now that the rotation, this is not going to be stopped. -- in the grander scheme of things this tells us that despite 68 months of better do it -- six to eight months of better data, and not being willing to change the forward guidance or acknowledging that the economy outlook is more balanced, despite that, what happens if in six months the economic outlook deteriorates just a little? we are going from the spectacular growth we have now, or much better than analysts expect, to a little bit less, what then? it is an environment where the ecb has to say we cannot do anything because we missed the time in the beginning of 2017 when we should have moved. we should have left the gradual part being more toward the part saying, we need to adjust that policy. by the end of the year there could be a bit of a danger to the story of rotation. francine: the ecb would be waiting for what, because of political risk in italy? i think that is probably the key part, political risk or ticket early in italy. that is where the -- particularly in italy. maybe this is the hawkish german speaking out of me, but it could be the perfect time to be dovish like being hawkish. taking the market and saying, we are taking a step back from kiwi and hiking rates to show the market -- qe and hiking rates to show the market, things are good. we have 20 billion less in qe volume just after the italian referendum and nothing happened, so this could be the time when we can be hawkish but dovish. francine: jane foley and max kettner, thank you for joining me. change, morete from our exclusive interview with the apple ceo. we get his reaction to president trump's paris pull out. ♪ ♪ francine: bloomberg "surveillance," i am francine the clot in london. chairmannko popular will not go ahead with the meeting with the ecb. , theg unidentified people friend -- spanish newspaper says it does not expect to request liquidity from the ecb. trly talks between mobile and -- t-mobile and sprint -- parent companies deutsche telekom been softbank still don't know if they want a deal, and sprint and t-mobile are talking to other potential partners. and a potential merger would be complicated by the need for regulatory approval. cuts -- the more company is assessing how best to drop output below the 12 planes a year known as rate one which they said in july should be sustainable for next year. a decision will be made this year in the absence of further sales. tom: after donald trump -- francine: after donald trump announced his plan to quit the paris climate change, many including tim cook spoke out against the decision. what theng asked him move means for his relationship with trump. tim: i think you did listen to me. -- id not decide what he think he did listen to me. he did not decide what i wanted him to decide. i think it is not in the best interest of the united states what he decided. the way that i look at this , do you interact with politicians or do you not, my view is that first and foremost, things are about, can you help your country? if you can help your country and you do that by interacting, then you do it. that country eclipses politics. emily: you have other people that are leaving the table, like bob iger and elon musk. is the president jeopardizing his relationship with a key business community? differentiate -- and i am not speaking for those guys -- i would differentiate leaving a council and advising in a way that you think can help our country. i think the first one is a judgment call that people make. i did not join a council so it is not a decision i had to make, but i understand both sides of that. advising on something that you believe will help america i as a ceo. requirement you definitely do that. honestly, if i get the chance to go pitch the paris agreement again, i am going to do it again because i think it is very important that we engage to fight climate change on a global basis. this isn't something where you country. it country by it requires a global action. emissions created in one country affect another. something that we feel very strongly about, and i wanted to do every single thing that we to tell how important it was to stay in the agreement and unfortunately, he decided something different. emily: why didn't you join a council? , my primary job is being the ceo of the company, and i spend the bulk of my waking hours doing that. i do so willingly because i love the company and the people in it . so traveling back east isn't something that i look forward to do.g, except when i need to secondly, i don't find these councils in general, and committees, to be terribly productive. but it wasn't about not wanting to advise on something where i help, orhat we could we had a point of view that should be heard. so i am doing the latter. i can't imagine a situation where i wouldn't do the latter because it is in the best interest of america, and i am first and foremost an american. francine: tim cook speaking to emily chang. we are seeing a little bit of haven assets being in favor, the u.s. currency, the dollar trading at an eight-month low. the 10 year treasury yield at an eight month -- at a low since december. stocks in sydney falling to the lowest since february. bloomberg "surveillance" continues for the next hour. we will be talking to morgan stanley's recherche sharma about the markets and the qatar spat. we will talk a little bit about globalization and wage growth, what does it mean for fed policy? this is bloomberg. ♪ francine: the risk to oil gains ground on expectations that a haveatar spat will invocations. theresa may unleashes boris johnson on the election campaign. and playing ball. apple ceo tim cook tells bloomberg the company has been helping u.k. officials in the aftermath of the recent terrorist attacks. good morning. this is "bloomberg surveillance ." i'm francine lacqua in london. tom keene is in new york. .k.have to talk qatar, the u election, and a couple market moves. tom: in washington, people are transfixed on thursday, much like the united kingdom. francine: thursday, there is the jim comey testimony, the ecb, and the u.k. testimony. let's get straight to the bloomberg first word news. reporter: and the u.k., less than 48 hours before voting begins. theresa may will send foreign minister boris johnson to the northeast of england today, the areas that voted to leave the european union. johnson will say that only may can get brexit right. meanwhile, jeremy corbyn will try to shore up his support in working-class areas, warning about may's plan. tim cook says the company helped british officials investigate terror attacks. cook spoke to bloomberg's emily chang. tim: in cases where we have had information and they have gone through the lawful process, we not just give it, but we do it very promptly. reporter: law enforcement officials have criticized apple for the high privacy standards. the ruler of kuwait is trying to resolve the dispute between qatar and a group of arab nations led by saudi arabia. they have cut off air and sea transport and closed qatar's only land border, accusing qatar islamic relations. president trump vowed to crack down on leaks by the news media. they have now made their first arrest, a former linguist charged with espionage. they are accused of sending a national security support on russian hacking. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg. tom: let's begin with a data check and i really want to reset here. it is uncorrelated and really nuanced. .2tures are negative to the spread. new curve flattening, we will show this chart later, but there is a real bout of curve flattening going on. the euro churns oil with a little bit of a bid off at 47.00 level. the vix, remarkably quiet, shown the uncorrelated nature between equities. brent crude, still well under $50 a barrel. francine, out of nowhere, gold puts together a real set of data higher, 1291 an ounce. francine: i know you have a very nuanced data check. mine seems to be more blunt because i went to try and show viewers and our regular listeners -- i will talk you through it -- haven assets. you have the dollar weakening, equities retreating, investors, tom, trying to turn a little bit cautious following the seven-week surge for global stocks, bond gaining, gold gaining, and oil fluctuating. tom: right. francine: for me, there seems to be a little nervousness out there. but apart from crude, it seems like it is a haven asset kind of day. tom: i have noticed the 10 year yield is lower by three basis points. it is a really odd take right now. you really wonder where we will be on friday after the politics, both in the united kingdom and in washington. let me go to the bloomberg, which is a really cool chart. i stumbled upon this on facebook live yesterday. here is back to world war ii, payrolls. it is a gorgeous picture of a trend from 1950 to 2000 that's remarkably stable. th growthe of the payrolls. american job machine and it stops with a vengeance here, francine, with a lift for the last 17 years. this gap is enormous, this extrapolation of our hopes and dreams. francine: i like the way that you brought it back to the 1950's. i'm not bringing it back to the 1950's. i am staying on the news and for me, it is about the u.k. elections. if you are an investor, you want to take a position on gilts and the pound. you can see the difference that a year makes. two research notes i would point to. first of all, access. if the labour party pulls off a shock upset, they see yields at 1.7%. n of course, in terms of the actual news, theresa may has deployed boris johnson, her secret weapon, over in the northeast of england. we will have a little bit more on the election, the middle east, qatar, and oil. oil gaining some guard after dropping late in the session on expectations that a diplomatic clash involving opec members, saudi arabia, and qatar will have limited impact on supply. donald trump is committed to holding talks with all parties. this is according to the white house's spokeswoman sarah sand ers. we also have kuwait trying to get i involved. javier, great to have you on set. oil is fluctuating. i can't figure it out. yesterday we had the spat with qatar. oil spikes up and suddenly traders say, hold on, it will be ok. what is going on? >> i think the oil price going down tells you what you need to know. the market remains oversupplied, there is every indication that this is bad in the middle east will trigger a war in production. qatar is a low oil producer, 1000 barrels a day. so, that is the kind of magnitude of the oil rate we are talking about. and cool heads are beginning to prevail i think in the middle east. i will be very sorry tomorrow when i said cool heads of prevailing in the middle east. behinde kuwait and ahmad the scenes to resolve the situation. the united states has no interest whatsoever in this escalating into a complete crisis between saudi arabia and qatar. i think an end, that will be resolved. francine: is there a feeling out there that if there is something going on with qatar and the situation escalates, opec members will cheat. they will actually pump more? javier: to be fair to opec, we have seen production be very .estrained for the traditional production 70% maybe,, we see perhaps 75%. we have seen 100% delivery of the cuts, mostly because saudi arabia is doing more than it needed to do, bringing the production cuts together. the main concern is, you still have too much oil. we have six months of production cuts that have barely dented global stockpiles. you have u.s. shale producers pumping more oil. increasingly the focus on the market is not on how it is looking today or over the next six months. it is increasingly looking into 2018. therefore we see a big increase in two u.s. shale production. that focus into next year is is affecting the market. tom: as you well know, you have to see it to believe it. the first time i flew into dubai, there it is and it is small is affecting the market. tom: at 600 miles long, there was at 35 miles and its 210 miles at its maximum width. who controls the seas of the persian gulf? is it a group, or is it saudi arabia or iran? how do you move around the persian gulf? >> the united states control the waters of the persian gulf with a fleet. number of countries control the persian gulf waters. i would think that the united states, among everyone else -- tom: really? >> the saudi's, all the regional fleets are very small and they depend on outside powers to monitor those waters. the united kingdom has a strong presence in that area. and then probably, if you think about the regional assets, you have to look at the iran authority having the strongest capabilities. tom: interesting. javier, this morning. way too much tuesday geography for normal mankind. coming up, we speak about the geography of the emerging markets. ruchir sharma, and his multiple books, plural, on commodity markets. from london, from new york, stay with us. this is bloomberg. ♪ francine: this is "bloomberg surveillance." look at the bloomberg business flash. the largest passenger jet is getting closer to the brink. airbus is running out of orders superjumbo and plans to cut output below one play in month unless it finds more buyers. a production cut last year was widely regarded as the beginning of the end for the a380. u.k. households are keeping the lid on spending is retail sales fell for the fourth time in five months. consumers are starting to feel the pinch from higher inflation and a stagnant wage growth. and its the most dramatic attempt to get to revive the fortunes of j.crew. the ceo is stepping down after 14 years. he will be replaced by the president of williams-sonoma's furnishing. the company has been hurt by the ce and faces amer restructuring deal with lenders. that is your bloomberg business flash. tom: as you can imagine, we at "bloomberg surveillance" get hundreds and hundreds and hundreds of book. five years ago, another book waltzed in and i said, yeah, yeah, yeah, nobody cares. little did we know it would be one of the most acclaimed books of all time in emerging market literature. ofcome to ruchir sharma morgan stanley. it was breaking out -- who is breaking out in 2017? >> thank you for that. i believe it is the eastern european countries, given the turnaround we see in the eastern european economies. they are benefiting the most from that. the fact is, their fundamentals, whether it was their external balances, their domestic balance sheet, those have changed dramatically. they are leading the charge for emerging markets this year. tom: president trump is leading the get out of nato charge. there was a lot of that yesterday where he supposedly edited speeches literally in real time away from this foreign policy. experts link nato and donald trump into the economic well-being of the baltic states and eastern europe. >> there are a lot of shifts going on, but my basic view is, this has very limited economic and financial market impact in the immediate future. these are very long-term shifts which are going on in geopolitics. it is not something i think will have any meaningful impact. soon we will be able to see. i wrote this piece last week, basically, making the broader point that why there is no trump effect on wall street anymore, either for good or bad, there is no trump effect left in wall street. francine: i want to get to ann a edwards, but quickly coming to talk about the changes in the post-brexit world. >> i think the set up for my book really is there are four deeds affecting the global political economy today from de- globalization to demographics to debt. if you look at brexit, in terms of what happened one year ago, a lot of that is something i have spoken about in the book, which is this era of de-globalization is upon us and such occurrences will be more frequent compared to what we have seen in the last three or four decades, which was an amazing era for globalization. francine: we will be back with giltr sharma, but u.k. yields have edged lower, and this comes as deutsche bank and citigroup say they will return on debt if the opposition wins. theresa may deployed boris johnson to the northeastern part of england. let's get to bloomberg's anna edwards in westminster. good morning, braving the beautiful english weather this morning. give me a sense of the polls, anna. it seems the conservatives want to talk about brexit. labour wants to focus on security. anna: absolutely. the conservative party are dispatching boris johnson to the northeast of england. anybody who watched the results come in overnight on the brexit might will remember the role played by the northeast of england, typically a very labour leaning part of the country. they are dispatching boris johnson because he was a leave campaign or. he will be in charge of delivering the message because the tories think only theresa may can get brexit right. they want to move the attention back to brexit and labor want to talk about welfare payments. we still have conversation about the aftermath of the attacks. what did police know about the attackers? mean, i: the polls, i know you spoke to somebody from yougov earlier on. how confusing are the polls? do most pollsters think theresa may can win this? anna: the polls are very narrow. the polls have been narrowing, sorry, but there is a wide range of outcomes. betweenatest, there is a one percentage point lead and 12 percentage point lead for the tories. pointse polls at 12 have been narrowing from where they were at the start of the campaign. the latest one overnight shows a one percentage point lead for the conservative. it is interesting to see how the market is reacting. we have heard from a number of gilt strategists. they are talking about how gilt yields could double if we see the opposition winning, concern about the number of issuances we might get. i got a message from one trader who said we have not reached peak labor levels. there is a conversation about what labour would do if they get the power here. francine: thank you, anna edwards in westminster. let's get back to ruchir sharma. ruchir, i don't know how much you look at the election and say, there are so many factors thin play. >> the broader point i want to make your, which is that, if you look at it from a global perspective, what is going on in comparedis different to what was happening one year ago. one year ago there was a lot of fear in the marketplace. what will happen after brexit? today what is happening in the u.k. has become increasingly local. nobody really outside of the u.k. is carry that much about what is happening with the elections. u.s., and heint the will probably back me up on this because there is very little attention being paid to this. this has become much more of a local issue compared to the global issue it was one year ago. this is a big change. e expected the worst out of this. and now it has become local. i have been saying to my british friends, you might not be the most important country in the world, but it is the most self-important. francine: that is rough, ruchir. that hurt. ruchir: there is so much attention about what is happening here, but the issue is, outside of the u.k., there is very little interest in this election. francine: unless we have a hung parliament and this means there is a lot of movement in the markets. coming up, we discuss what apple's ceo tim cook told us yesterday. we talked about terrorist attacks and of course, his new products. this is bloomberg. ♪ find these councils and a general committees to be terribly productive. and, but it was not about not wanting to advise on something where i thought that you know, we could help, or we had a point of view that should be heard. so, i'm doing the latter. i can't imagine a situation where i would not do the latter because i think it is in the best interest of america to do it and i am first and foremost an american. francine: that is apple ceo timko telling us why he did not join president trump's advisory council. ruchir, talk to me about the animal spirits. if he has animal spirits researching, he needs ceo's like tim cook on his side. ruchir: that is true, but it is interesting because on wall street, the trump effect is completely gone. all the globally oriented companies are doing much better than the domestic oriented companies. was first elected, there was this brief surge in this thought process, all about america first, all about protectionism and domestic companies doing well. today, i think what has happened is, it is the global story that has taken over from the trump story. the trump affect has faded. tom: let's come back with ruchir sharma from morgan stanley on the trump affect. i am watching the swiss franc stronger. stay with us. ♪ . tom: it will be different on friday. washington, d.c. after thursday's testimony by mr. comey will be a different place. we will have full coverage of the comey testimony. kevin cirilli has made clear that this is a huge, huge deal, warning out global audience that everybody will lean forward on thursday at washington to hear from former fbi director. this is "bloomberg surviellance" and i am tom keene and francine lacqua. first word news. we do that with taylor riggs. london, the mayor said future terror attacks will be harder if theresa may wins. he praised tremendous bravery of police joint saturday's terror -- of poll lease during saturday's terror attack -- of terrorduring saturday's attack. islamic state is claiming responsibility for a fatal hostage taking. three police officers were wounded. a report that police are investigating what the gunmen killed a man and took a woman hostage in order to lure police. in afghanistan, the death toll has been lowered. the president said 150 people were killed in the attack. that makes it the deadliest forle attack in 16 years and if he had of the food and drug administration wants more price competition for generic drugs -- in 16 years. of the fdahe head was more price condition for generic drugs to lower the prices. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. caroline: thank you. we get breaking news out of south africa, a country which is mired in political upheaval. important, gdpat figures much, much lower than expected. in fact, for the first quarter, its contracted 0.7% quarter over quarter when it was expecting a 1% growth. the second recession in eight years coupled with the political uncertainty with a president jacob zuma fighting for his rand iscy means the weakening. we are keeping an eye on south africa and we are keeping an eye on china. the move comes in the aftermath of the credit crisis where this type of short-term funding it is -- is seen as pivotal. meanwhile, a crackdown on leverage continues back home. use throughow is a trader and ruchir sharma. thank you for joining us. give us a sense of what it tells us. , it meanss me -- icbc there is an appetite to be in that space and shadow banking. >> i think it indicates the chinese themselves given with the domestic chinese market, they are looking at ways to grow the global market share and venture into the china europe and within the china space is deleveraging and the main focus and therefore, some of the lending activities in china. francine: if i am a global investor or a citizen, what i fear the most probably is a credit crisis or methadone in china. what does the prop -- crisis or breakdown in china. what is the probability? ruchir sharma: it keeps increasing because the amount keeps -- the debt keeps a mountain. no developed country or developing country has taken on as much debt as china has taken on in a short span of time. what our work shows which goes to the argument in the book that the single best predictor of financial crisis is a rapid accumulation of debt in a country. china has many defenses which it has been able to deploy, a lot of debt is internally owned and owned by government agencies so it can pass between the different agencies. the fact of the matter is the debt keeps mounting. what we have seen over the last five to six years, every significant market wobble has been caused by some concern about what is happening in china. highs,ets hit all-time there is a steady deterioration which is setting in. one fact i would look out for in the next few months as china keeps cracking down on the leverage, could that have adverse effects? the single biggest risk factor remains china and what happens to china's debt problem. tom: when we talk about china, we must talk about indonesia, singapore and of course malaysia. give us an update on the political stability of southeast asia in particular the of war in malaysia after the last 12 months. how stable is malaysia? kheng siang ng: at this point in time, the malaysian political situation is stable. the prime minister having a strong hold on the government. no doubt, that will be unhappiness or disappointment from the opposition side at least in this point of time, the opposition still do not -- steeped are knee-deep in malaysia. help us with the idea of an expanding china given the vacuum from the trump administration. how will china influence malaysia? how will china relate with the capitalism of singapore, as well? kheng siang ng: china is taking bondage of the political vacuum by building strong, bilateral ties with southeast asian countries including malaysia. there have been a number of significant deals being announced. therefore, that will continue to build stronger economic networks with the south east asian countries. tom brought of malaysia and there seems to be a of investors returning to malaysia on fundamentals like rising exports. overall, a lot of these emerging markets are decayed by the fed. : in terms of the weak dollar is helping. it is interesting part of malaysia because i was in malaysia two weeks ago. it was the first time i went to malaysia in six years. towas a market we all tended ignore and for good reason. i was struck by a couple of things. this is the flip side of the dollar story. one is how expensive the dollar has become and the dollar bull market seems to have run its course. and how cheap some currencies have become. very few countries that are as cheap as malaysia when traveling a couple of weeks ago. the malaysian currency is very cheap. in today's seem to be getting some growth momentum by focusing on infrastructure -- and they seem to be getting some growth momentum eye focusing on infrastructure like high-speed rail. away, hoping it will go the political instability. today than better five or 10 years ago and is a single biggest factor helpful was the currency, it's bottomed out and is extremely cheap. it is exceptional to the egyptian currency. --: do you agree with that caroline: do you agree with that? is malaysia your favorite? are seeing ag: we big rebound. last year, it was down because of many concerns on the political side. we have seen a rebound in e.m.. i think malaysia looks to be promising at this stage. tom: thank you. kheng siang ng with state street. we greatly appreciate. we will continue with ruchir sharma awful morgan stanley. so -- of morgan stanley. so much to talk about. joe quinlan it has more. has more in the 6:00 hour. stay with us. this is bloomberg. ♪ caroline: -- taylor: let's get to the bloomberg this is flash. apple ceo tim cook sat down for exclusive interview. he spoke about every thing terrorism to president trump's decision on the paris climate accord. he did not listen to me. he did not decide what i wanted him to decide. . think he decided wrong i think it is not good, in the best interest of the united states. we have been cooperating with the u.k. government in a not only in law enforcement kind of some of the on attacks. i cannot speak in detail on it that. in cases where we had information and they have gone through the lawful process, we not just give it, we do it very, very promptly. you saw the demos that were done today. i think this is profound. and i think we today, as we get the developer worked out, we will have the largest augmented reality platform in the world. taylor: that is your business flash. caroline: thank you. let's get back to news of south africa, the country has fallen in a recession for the first time in 2009. the gdb figure we had was much, much worse than expected and we were expected growth and it contracted. ruchir sharma is still with us. he is here because there's a new edition of the paper called "the fall and rise of nations." you have a chart, a map that goes from -- through the world and it is clear south africa is one of the ugly countries. what would it take for it to be average or good? the mostarma: one of important we focused on was politics. usually when a good leader columns, it is good -- comes, it is good for an emerging economy. they are suffering from a still leadership. le leadership. i see the single most important factor in south africa before we get positive has to do with political change and that is something in later this year. i think december, nominations. caroline: the cabinet will change completely. is there anything economically that means he will have to go? i am looking at rent. -- rand. it has to do with the central bank trying to keep a lid on it. ruchir sharma: there is a lot of fear of what to do for zuma to try to stay in office. fiscalfrica has run its accounts over the last decade or so despite fears to the country. now, it is whether they will stick to that especially given that so many techno-graphs have been shut out. i think the market's hope is that somebody like the deputy president -- i think the key risk remains the longer this plays out, the worse for the country. tom: let's go into the rise and fall of nations to page 164. on radio and i am drawing a circle around the this odd word. client south africa is a ilis country. what is that? ruchir sharma: the fact that you have the country out there, it is very concentrated. a few people which control a lot of what is happening in south africa and we do not have -- institutions can push against that or do they have to do it themselves? ruchir sharma: in terms of the central bank, it is quite independent. it is something that is good in south africa. they have pretty good developed market type institutions. the financial structure has been pretty strong. over theen strong years. i feel the key thing in south africa is political change. made even inoint i the peas i wrote for "the new york times," which is every time you have a change, there is a bigger change in the country. let's take it back to where all conversations and which is with trump and the u.s. the impact seems to be quite a minimal because the institutions are so strong in developed countries like the united states weather in places like south africa, there are a few strong institutions, politics can have a big effect of the political affairs in this country. look for political change in south africa. caroline: you see how tom defaced your book. you see the difference between us. i do not like to hurt them and tom goes with a pencil writing on them. tom: i'm do. i tear them to shreds. francine: i know. tom: there -- look at that. francine: there you go. i put them under a -- and do not touch is them. ,oes the trump administration the rise and fall of nations, do western nations directly have an effect on south africa? you're talking about political change within but what about outside? ruchir sharma: outside factors do have a big impact. what i talk about is how this world of globalization is going marketst emerging because the traditional growth prosperity. you look at korea, taiwan, even china, all of these countries were able to rapidly on the back of exports. they had export growth over 20% per year for many years and that helped them catch up with richer countries. the problem today is the world trade growth is so slow, fornant, it is very hard countries to export their way to prosperity. i speak about is a new map of economic success, for an emerging markets, a growth of more than 7% was considered a very strong growth rate. any countries in the world are growing at more than 7%. , there were 60 countries growing at more than 70%. over the past year, only six to seven countries growing at over 7%. arear me is the new 7% that is the new normal. that is the change that is taking place. trip tor that sort of export them your way to prosperity. francine: thank you for that. ruchir sharma of morgan stanley is with us. if you have any questions on the fall ofthe rise and nations, which countries you think should be rising or falling, directly and in touch by using bloomberg goal. .o underneath the video screen we have really cool charts and the gdp over in south africa. this is bloomberg. ♪ caroline: this is "bloomberg surviellance" with tom and for same. today's must read from the editorial where it will be difficult, they say for qatar to from from these -- endure a severing of ties. an unforgettable lesson for qatar one of the premises that it will be allowed into the original middle east jim littell -- geopolitical structure. ruchir sharma is still with us. how do you see qatar? it came quite fast. it was quite abrupt. what does it mean for stability in the middle east? ruchir sharma: it tells you about the tensions in the middle east. kuwait's getting involved in trying to resolve this issue is what i last heard of it. i think the economic consequences are quite severe that are the incentive is strong for qatar to resolve this really quickly. sort14, we had a similar of -- of not as significant where the sanctions were imposed inn on the private citizens the goods and private citizens between these 4 countries and qatar. i do feel that this will get resolved because the consequences are so significant for qatar, it is in the best interest to find a solution to this because otherwise, it is hard for it to -- it has the resources but hard to go through. up and now itwent is back down. it is a market dynamics or something that investors choose to ignore? "bloomberg surviellance -- oil issharma: as far as concerned, something else is going on. the oil market would get impacted if they felt there was a trade disruption in the region that would hit exports of oil. i do not think it has implications of that. tom: i will bring up a chart. this is the inflation-adjusted bloomberg commodities index. you invented this chart five years ago and something will know for decade bowl you brought it to the -- but you brought it to the forefront. ruchir sharma: the worst may be behind us. what you find on the last 200 years is commodity prices tend foro up one decade and down 2 decades. we had been going down for all the decade and we may be done in terms of inflation. stuck in ano be agreement for a long period of time. a couple of years ago, i said the price of oil is likely to be stuck in a range of $30 to $60 a barrel and that is still mine. tom: thank you so much. if you need five books this summer to get smarter, this is one "the rise and fall of nations." your equityhour on markets, joe quinlan of merrill lynch u.s. trust. stay with us. ♪ tom: is it a june where finance and investment are simply about politics? president trump scrambles two days from james comey's testimony. this morning, markets ebb. with a thursday election this tuesday in the united kingdom, a moment of silence again. let us listen in. [sirens] [bell chiming] a minute oft is, silence in the united kingdom. francine, this has become way too common. help our audience with where we are on enough is enough. there is the mayor of london. what is enough is enough, francine? francine: this is what theresa may was saying yesterday and this is a contentious point because we need to put these attacks that happen on saturday night with the tragic loss of human life into context. we are two days away from the election and all political parties, but especially the tories and the labour are fighting about what enough is enough means. does it mean more police force? tories have come under increased pressure, especially theresa may, but labour point to the fact that she cut the police force by 20,000 when she was home secretary. certainly, it is also the last days of campaigning and i have been clashing over police numbers. that minute silence very poignant because yesterday we also had the names of the two attackers being released and nhs saying that 36 remain injured in the hospital and 18 people are still in critical condition. tom: and the images from the london bridge station and the south bank as well all in the the sanity of those attacks a few days ago. with our briefing this tuesday morning with our first word news, here is taylor riggs. taylor: apple ceo tim cook says the company has helped british officials investigate terror attacks. he spoke to emily chang. kim: in cases where we have information and they have gone through the lawful process, we not just give it, but we do it very promptly. taylor: law enforcement officials criticized apple in its high -- with its high standards and encryption. the saudi, the uae, bahrain, and egypt cut off air and sea transport to qatar. -- will travel to saudi arabia. president trump vowed to cut down on the leaks of classified material to the news media and the government has made its first arrest, a former air force linguist has been charged with espionage. they are accused of sending a national agency report to the online news outlet "the intercept." global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. let me do a data check. at negative three. .il, 47.33 -- $47.33 of the curve is flattening. i have a great chart that shows 86 basis points. the next screen quickly, i want to get to francine's european euro. , one of swiss franc those global indicators. francine: mine is not so much as a european view as a global view, but it is havens. $1.29 13.e the dollar you have james comey's testimony and ecb policy meeting and the elections in the u.k., extremely uncertain, which is why we are xau upgold, x a you -- 8.8% -- 6.9%. -- .69%. on thevin cirilli somewhat -- some would say flow.ic news this is something an old geezer would get her i believe i saw the cbs television network will take the comey testimony over their network. that underscores what a big deal this thursday testimony is, doesn't it? kevin: they will not be the only network either. this will be dominating all types of national coverage. comey fbi director james -- secretary sean spicer say the president will not use executive privilege and mr. comey will testify before the u.s. senate intelligence committee on thursday 10:00 a.m. the first time he will be speaking publicly since he was fired by president trump last month. tom: what is he going to say? not so much this is what we guess he is going to do, but what is the anticipation of what he will say? is he going to give us a john dean moment? kevin: i have spoken with resources on the committee and i can tell you what he will be asked. i think that is where it gets interesting because the big takeaway immediately in the first opening statement of his -- and the first round of questions will be why he believes he was fired. he has said in a statement to his former colleagues that he believes that the investigation into the russia probe will continue, but he will be pressed for why he believes he was fired, if he believes there were politics. that is where his answers will get interesting and it will also be interesting in terms of republicans questioning him on the leaks which we just heard from taylor in the headlines that the administration is looking to clamp down on. he will also be pressed on that by republicans. francine: how long will the testimony last? overall, it is going to be pretty explosive. kevin: it is going to be very explosive, high theater. in terms of how long it will last, typically these types of hearings -- it is going to be either about two hours or it will be an all day affair. i think there is a lot of pressure on lawmakers to get answers and so they will also be feeling the pressure as well. i don't anticipate -- at least the feeling on capitol hill is this will not be a bill cosby -- not be a benghazi affair. benghazi starts and "b" and so does ban that has been in the news. allrom harvard law review, tweets -- what is going to happen on the travel ban? kevin: should the supreme court overrule it, it will be a devastating policy blow to the white house and show a lack of crafting policy. it would be a massive failure. tom: thank you so much, we greatly appreciate that briefing. joe quinlan taking all of this in. he is in charge of finance and investment talk at u.s. trust and yet we are all political experts right now. how does our audience a debt to guys like you having to do politics 24/7? politicale in this storm so to speak, but look at earnings and the synchronized global growth and the confidence levels in the united's dates, you have to separate the two. we have moments where the , itets are dragged down will be a tug-of-war. at the end of the day, there is good outlook for the u.s. and the global economy. francine: what i struggle with is actually a lot of people are saying they are, it will different and so it is normal the markets do not look at geopolitics and necessarily translate into -- translate it into trade. but what happened to animal spirit quest and market your uneasy with geopolitics, du not hold onto your cash? joe: you might, but i think they are seeing the underlying demand come forward. the euro is growing faster than -- united date states. there is no doubt that ceos weather in canada, poland or the united dates are worrying about the regulatory environment, any blowback or potential problems in the middle east slows them down, but it does not the brakes on activity. tom: joe quinlan, we will continue. we have a lot to talk about the equity markets in the hour. we are really looking forward to this -- he's got a great book out on the nuances of trade. what is american trade policy? the nextr themes in half hour. stay with us in london, new york, and worldwide. this is bloomberg. the pollution of new york city, know that is fog. ♪ ♪ >> this is "bloomberg surveillance." i am taylor riggs, let's get the bloomberg is this flash. households are keeping the lid on spending. retail sales fell for the fourth time in months. kpmg say consumers they are starting to feel the pinch from higher inflation and stagnant wage growth. the most germanic attempt to revive the -- the most dramatic attempt to revive the fortunes of j.crew. he will be replaced by the president of williams-sonoma home furnishing's change. the company has been hurt by the shift in e-commerce and faces a restructuring deal with lenders. that is your bloomberg business flash. francine: thank you so much. u.k. gilt yields have edged lower ahead of the general election. as deutsche bank and citigroup say they return bearish on government debt if the opposition wins. as deutsche bank and citigroup say they return bearishas the new you got pullil predicts the conservative -- ugov pulling model predicts the conservative -- much susan for joining us. we vote in the u.k. on thursday. what will people vote on? is it security? is it brexit and the economy? mix.: it will be a real when you have general election, you can't control what the topic is. i think theresa may thought this was going to be about brexit and the particular position she wants to reinforce, which is that she alone will make the decision on whether or not we continue to participate in any part of the single market, agreement.have an she alone would make that decision and there would be no more say but for the people and she would basically dictate where it went. that was the basic decision she started from. we have had some terrible experiences here within london and manchester that puts security on the agenda, but frankly, i think the shocker for most people has been to see theresa may herself. she has been very weak and refused to debate the other candidate. a u-turn on key parts of her manifesto. the mood, frankly, at houses is one of almost a sense of dismal hopelessness right now. francine: of course and the tories would push back against that and say that your leader is the same and labour would do as well. give us a sense as a business representative whether you are not worried -- i am looking at some research analysis from a lot of the banks saying if there is a deal between labour, the s&p, and the live dense -- would -- on friday, the markets would tank. they are worried about yields in the u.k. what is your response to those critics? susan: i have no doubt theresa may will come back with the majority. the way our electoral system works that we have like you --labour has to be well ahead in the polls to even have a hope of drawing level because of the way the votes are distributed. theresa may is going to get a majority. i don't think it will be the great walkover everybody majority that she has hoped for and that is healthy because there are so many questions and i think it is a step back a bit. they will -- if they step back a bit, they will see it is important that other voices are going to be heard. that we have a grown-up relationship with european partners i continue to look at them as partners, that we are involved and engaged in the customs union. for business, i think it is actually important that theresa may doesn't get an overwhelming majority because if she does, they will fight almost everything -- find everything that she will actually negotiate will not be there. francine: i have heard that if she gets a great big majority she can ignore some of the more eurosceptic backbenchers. susan: but when you look at theresa may at what she said and the way she behaves, it is clear that she is very comfortable wing.er eurosceptic the people that have been eliminated from her government are the traditional pro-business, pro-free trade, entrepreneurial conservatives. they are not really represented pretty much anywhere within her have hert, they don't favor. this is almost going back to a very old form of conservatism, which is quite inward looking and not into the thought of business expansion. i think it is beginning to dawn on a group of businesses that that is what they are looking at with a may dominance. tom: take us back to 1988 and the merger of the two parties that made your liberal democrats. this is roy jenkins and a group of people that got together because i guess they didn't like labour. where in 2017 do the liberal democrats fit in? i can't figure it out. susan: we look at both the two leaders. theresa may on the one side who has been moving very much to the call itd takes -- we hard brexit because it is no participation in the single market, no participation in the customs union. we look at the position she is taking and that is one extreme. we look at jeremy corbyn and he has no sort of logic for the economy and the future either. we are just saying this is not a time when you can do coalition's . we went into coalition with a conservative government in 2010 at a time when it looked as though the british economy -- the markets would have collapsed if we didn't. it was just after the incredible 2008.ial crash of it was really important that we pick up that role then. now we can see nothing that was left to create that common goal with either of the other two parties. it is going to be i think a may government, but the question is a deity have a voice that challenges and questions and for business it is crucially important that we do. tom: maybe that is the key phrase of the democrats, that common bond. thank you so much, a liberal democrat from outside parliament this morning. coming up, we hear more from the apple chief executive officer. he is a piñata, the critics go after timothy cook. i don't know, look at their cash flow. look at my house, there are too many apple things in it. ♪ ♪ councilsfind these in general and committees to be terribly productive, but it wasn't about not wanting to advise on something where i or we had could help a point of view that should be heard. , ii am doing the latter cannot imagine a situation where i wouldn't do the latter because i think it is in the best interest of america to do it and i am, first and foremost, an american. tom: is a better than average interview. tim cook with emily chang on apple and on politics in washington. , what is he going to do with all that cash? does he have a moral responsibility to give it to shareholders or a moral responsibility to distribute it coast to coast and sea to shining sea? both,e has enough to do we will put it that way. we will see what he does with that cash. there is a lot offshore because of that tax situation. , pharmaceutical companies, all investors are waiting -- what are you doing with this cash? it is yet to be determined. compare and contrast of ford motor company and apple computer says it all. ford employs a lot of people. joe: ford does. apple employs a lot, but some of the newer startups, facebook, even less. there is more capital and less labor and that has playing -- that is playing out in that is where people are putting their money. tom: do you see productivity turning quickly? joe: no. i see it turning, but not quickly. i think we are doing more with less and it is not being captured. tom cole and this has really done it. productivity, here it is. joe quinlan with us. we will continue, more tim cook as well. edward -- edward alden, next. ♪ ♪ live pictures of london. you can see london bridge overlooking saint paul. we are now into the final stages of the u.k. election campaign. theresa may, the prime minister, sent i guess her secret weapon, -- wejohnson in a bid to will be following the labor election in any kind of impact it has on the election. you can see boris johnson speaking right now. let's get straight to bloomberg first word news. here is taylor riggs. taylor: in melbourne, australia's islamic state is claiming response ability for a fatal hostage taking. there is a report that police are investigating whether the gunmen killed a man and took a woman hostage in order to lure police into a shootout. in afghanistan, the government has raised the death toll from .ast week's truck bombing more than 150 people were killed in the attack. that makes it the deadliest attack in the 16 years since the u.s. invaded afghanistan. in south africa, the economy is unexpectedly slipped into a reception. gdp is off for the second straight quarter. economists expected an increase up to economy declined in the fourth quarter. global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. this is a real pleasure, edward alden of the council on foreign relations. smart,lure to adjust is smart, smart on where we are going with trade. us.erful to have you with on the back end of your new paper, you absolutely nail the trump zeitgeist. a horatiou mean by alger trade policy? edward: it is basically this notion that the structure of the rules doesn't matter so much that if we just go out there as americans and tried, that we will succeed. i think you have an administration that doesn't appreciate the importance of having a stable system of rules for companies and workers to succeed in the global economy. tom: let's spend more time on thomas hobbes -- i have spent more times on thomas hobbes in the past three months when at gunpoint i was forced to read "leviathan." are we snowflakes in our lockean independence? does the in need to shape up and get tougher? edward: i think it really does. there is this sort of chaos in the administration's approach to these issues that i do not think will serve the united states well. i think a lot of what trump said about trade will have merit. the notion by pulling out different arrangements or saying we're going alone does not constitute a strategy. you have to think how you are going to succeed in a competitive world market and i don't see this administration developing a strategy yet. francine: talk to me about infrastructure. we heard the president yesterday and the overhaul and he stuck to the message and to the script and it was smooth. was it? edward: i think of -- a lot of what this administration is talking about in infrastructure makes a lot of sense. i wish it had been a first priority out of the box. even there, they are taking basically a sound point that there is a lot of private money that you could to work in developing u.s. infrastructure, but not thinking through the steps involved in that. you have to have competent government at the state and local levels where these things are done in order to make that private money work for you. good headline idea, but no execution yet and that is what we see -- we keep seeing with this administration. francine: what are you expecting on thursday when mr. comey testifies? edward: there is going to be a lot of fireworks. i think it was interesting the president decided not to block his testimony. it is going to keep this story alive, i think. not just for weeks, we are with robertonths mueller doing the investigation for the justice department. i think from the perspective of a business audience, all of this is a distraction from the with t things we thought this administration was going to be able to pursue, tax reform or infrastructure or a more hard-nosed trade policy or all the other things the president campaigned on. tom: your new paper, you -- it is truly one of the best government execution people i know. what is the tactical to do list for alden, what is the thing that has to be done to jumpstart a better trade economy? edward: i think the thing -- what we are focusing on in that paper is making sure that here in the united states we have the best skilled workforce to encourage companies to locate , that you gote people who are ready to do a better jobs that are going to be created as a result of that investment. a policy that tries to make it easier for people to move to where the job opportunities are. isility in the united states way down. there's a whole set of issues that have to do with matching employees to available jobs that just doesn't seem to be on this administration's radar. tom: joe quinlan is with us as well. companies do not have the luxury of being a failure to adjust. like tim cook, they adjust every day. what do you see corporations doing with our fractious trade policy? joe: they are confused and worried about the rules of the road. trade. related party that means companies trade, not countries. look at german-u.s.. our inputs around german, 66% are from german -- south carolina would beg to differ. you see the kind of push and pull of trade. i think it is important the global supply chains take a long time to establish. they fine-tune -- they are find tune and they generate earnings. when we talkisk about ttp, no nafta, so forth. you are putting at risk huge investments company have put forth -- have done for decades. know whetheron't this is something to do with diplomacy, the fact that the president shows up in saudi and with their allies decide to completely freeze off qatar or whether it goes to trade relationships with allies and people that are less allies. >> i think what we are seeing is, in a way, the rest of the world emboldened by the approach that the trump administration is taking, which is sort of you are with us or against us. we know that in international relations there are a lot of gray areas. i am not a middle east expert, but there are big issues between qatar.di's and cutter -- the united states is trying to smooth over those differences over time because there are large interests in getting along with our -- getting along. i think that emboldens other countries to do the same. i was troubled by those reports. tom: maybe it was qatar's inability or failure to adjust. edward alden with the council on foreign relations, cannot say enough about his book "sell your to adjust." coming up on radio, we will -- we will talk to james not only about our trade policy, but mr. trump greg: international approach gas -- mr. trump's -- we will talk intl approach. this is bluebird. ♪ ♪ francine: this is "bloomberg surveillance," with francine and tom from london and new york. apple product launch was the internet connected speaker called the homepod. he spoke with bloomberg after the event on a range of issues. take a listen to his view on the president's decision to fall out of the paris climate change accord. didn't listen to me and didn't decide what i wanted him to decide. i think he decided wrong. i think it is not in the best interest of the united states what he decided. of -- the way i look at this thing and do you interact with politicians or do you not, my view is that first and are about, cans you help your country? if you can help your country and you do that by interacting, then you do it. emily: see you have other people leaving the table like bob iger, elon musk. is the president jeopardizing his relationship with one of his key condition wednesday -- constituencies. differentiate leaving a council and advising in a way you think can help our country. one is ahe first judgment call that people make. i did not join a council, so it is not a decision i had to make, but i understand both sides of that. advising on something that you believe will help america, i a ceo,s a requirement as you definitely do that and honestly, if i get the chance to go pitch the paris agreement again, i am going to do it again because i think it is very important that we engage to fight climate change on a global basis. this is an something where you can solve it country by country, it requires a global action. a mission created in -- emissions created in one country affect another. it is something we feel very strongly about and i wanted to do everything go -- every single thing we could do to tell how important it was to stay in the agreement. emily: why didn't you join a council? tim: why didn't i? is reasons, my primary job being ceo of the company and i spend the bulk of my waking do sodoing that and i willingly because i love the company and the people in it. traveling back east is not something that i look forward to doing except when i need to do. thesely, i do not find councils in general and committees to be terribly productive. about not wanting to advise on something where i help or we hadd a point of view that should be ,eard, so i am doing the latter i cannot imagine a situation where i would not do the latter because i think it is in the best interest of america to do it and i am first and foremost, an american. tom: mr. cook talking about everything with emily chang except apple and the products and the financials. we are saved by joseph quinlan. let me bring up the chart. they slog along. love charts, slope matters and it is basically an act of goddess as they moved to $1 trillion in value. i have got a fifth of a trillion in revenues and they bringgodden $70 billion. these are generating after $13 billion in, $53 billion of free cash flow. how do you move the needle? what is your experience of a company nobody gives a damn about a home disk, it looks a good cup of coffee, it's a new toy, but it doesn't move the needle. how the you run a company where you don't move the needle? joe: for apple there is a lot of upside. there is 3.5 billion people not on the internet yet. they don't have a smart phone and they are going to get one. apple has a relatively small share in china and our next market will be india. i do not follow stock, not recommending it, but when you look at the underlying digital command, women, girls, education, there is a lot of upside. tom: i am as bored as anybody is product and the silicon valley stuff, but the bottom line is that a static that steve jobs -- aesthetic that steve jobs had is still there. where is the aesthetic of the ford motor and exxon mobil? the autonomous car making the extra leap. maybe elon musk kind of hijacked that new aesthetic. it is hard for these iconic industrial companies to reinvent themselves, but they are trying. we will see whether it is the autonomous car or any type of vehicle, that is what we have to go in that sense. you got the disruptors in elon musk and tim cook doing it for them. francine: at the same time, apple doesn't want to talk about their products. i was in madrid and listened to a presentation and they need to keep this secret because otherwise people copy it. if you have a home pod, tom thinks it is like a cup of coffee, but does the apple magic not mean that this could be -- this could be a success and therefore they bury their competitors that try to do the same product. e health, aree, they becoming a health care company when it comes to monitoring? i have heard a lot about that. apple -- maybe a mini amazon going into other companies and using what they have in breaking into other industries and driving growth. nobody does it like amazon, but i think that is where tim cook in the company is going to get into larger industries and disrupt them and drive growth earnings bottom-up. tom: joe quinlan with us. homepod. all they do at home's order slime off the thing. let me show you our static -- aesthetic here at bloomberg. if you have a bloomberg at your summer cottage like francine does are on your trading desk, tv you can come over, click on the whole thing, and you can steal the chart. ♪ bloomberg.co♪ chart, let's do it right now. it's a chart on the bond market as we look at equities. this is the trump fade and this chart is changed, changed, changed. here is the election, here is the day after the election, the world is going to be wonderful and here is a big quadratic rollover. all you have to know, joe quinlan, that is an ugly chart. what is it mean for the stock market and does it mean we are going toward economic slowdown or even recession? joe: no, we don't see any recession with the consumers having the wherewithal to's end, jobs,-- to spend, consumer confidence is up. we are still in this slow growth mode. tom: what is that due to revenue if you have nominal deep -- gdp at 4%? joe: you have to work harder to maintain cost and cut the margins. oomph wee is the m&a will have to see? joe, did me a sense of what will change. you take the next 12 to 14 months, what are the game changers in whatever you are talking about now? that we knownger we have had coming is the corporate tax reform, infrastructure spending. see continued improvement in the emerging markets, self-sustaining consumption-led growth and there is a lot of questions about the eurozone's durability when it comes to expansion. we have to see the fiscal side globally kick in so we can reduce some monetary dependence we have been on for the last 6 are seven years. that will be the game changer. the problem and the concern amongst investors is if we reduce balance sheet to quickly and game in point is really the u.s. with concerns on wage growth, inflation, and the like, is what you are left with is an ugly economy. joe: not necessarily if you can pass the time carefully -- pass the time carefully without dropping it, we will see global fiscal spending pickup. can be done, but the problem is it will be a multiyear process. it doesn't mean it for 12 months you are in the clear. it doesn't have to end badly. corporations are doing a great job managing expenses. i think the biggest issue is finding skilled labor because at some point companies are not have to pay up and it will hurt their bottom line that they do not get the productivity increases from that. francine: talked to me a little bit about how you see the markets. tom was pointing to his iphone and saying maybe this is a problem with productivity and low wage growth. how do we change it so that we actually get an accurate reflection of what inflation looks like across the world? joe: that is a great question for the statistician. i would say they are not capturing all the productivity of what it is doing with laborsaving issues is the automation, artificial intelligence, we are producing so much more with a lot less labor. deploying capital better in a creates a divide, i think, between skilled labor and unskilled labor and brings it back to the income inequality debate and the rise of populism. i don't think we're out of that circle. tom: one circle is we don't know what to do with our cash. do with new money right now? it is a conundrum. joe: it is but we are looking .or the large dividend payers we still like the technology. i know there is a lot of people worried about valuations, but go back to the number i used earlier, three point 5 billion people have never logged onto the internet, but they are going to. in india alone, 100 billion new internet users this year. robotics, defense, we like robotics. utilities, consumer staples. tom: toothpaste? joe: you got to be long on toothpaste. tom: are you walking into meetings saying it is nifty 50? joe: not necessarily because we want to look for companies tapping into the emerging-market consumer, but not coca-cola and cars, health care and technology. the emerging-market consumer is rising to the point where they are now much beyond staples and more discretionary income health it is travel, care, financials, iphones, smartphones, that is the next big move up francine:. our companies investing enough? companies: are investing enough? think maybe they could do more. it depends on the underlying demand. there is still a lot of excess capacity, say car companies in europe and even in china, you are taking capacity out. i think they are being very careful with there cash and i think the regulatory backdrop, global trade, the multilateral institutions causing warping in functioning, if there are questions about them cracking or breaking or not working together, that makes ceos a little less hesitant to the ploy cash. i have enough and they are kind of waiting for the green light. they got yellow instead of the red. tom: joe quinlan, thank you very much. oncontinue with mr. quinlan bloomberg radio in a moment. let me do a foreign-exchange report. surprisebeen a huge over the past three weeks. 109.45. that is only in the last few hours. strong yent is a big move and euro swiss, 1.0854 as well. stay with us through the day. new york city, it beckons. this is bloomberg. ♪ ♪ jonathan: prime minister theresa may goes on the defensive. an urgent mediation effort in the middle east, the saudi's tighten the screws. m bit.r crack in the big e south african economy falling into recession for the first time since 2009. good morning, i am jonathan ferro alongside david westin and alix steel. let's get you up to speed on the market action this tuesday morning. futures, little bit softer. a bit of a risk off tone this morning. it treasury yields grinding down toward 26 -- 2017 lows. negative three basis points. the euro-dollar decision of bit later in the week. 9:30 general motors will hold a shareholder meeting in detroit that will feature a proxy fight for board representation. at 10:00 we t

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