Transcripts For BLOOMBERG Bloomberg Surveillance 20170612

This is Francine Lacqua on bloomberg surveillance. We have a great exclusive interview with Benoit Coeure, the it was the ecb member. The exclusive ecb member. Mark, what does the data look like . Mark we are low today, quite a losing run for the stoxx euro 600. We saw a big selloff in Technology Shares in the u. S. On friday. Sterling, not as big a decline as we saw on friday in the wake of the inconclusive election result on friday, which sent sterling down 2. 5 . At the end of the day, sterling is down by 1. 6 roughly. Investors are looking ahead, mean for shortterm versus longterm volatility . U. K. 10 year field has barely changed today. It fell three basis points on friday. Investors weighing up what the election means, weighing up against data. We had weak consumer data today. The boe this week, wage data. And gold also falling for the first week in five last week, marginally higher. The fed expected to raise rates this week against Political Uncertainty. Thank you, makr. Lets get to the bloomberg first word news. Reporter in france, president is on course for a landslide victory after the first round of voting for the national assembly. His oneyearold republic on the of therty had 32. 3 vote, more than 13 it Percentage Points ahead, giving him the biggest majority since 1993. Donald trump has renewed his attack on former fbi director james comey, tweeting his leaked cowardly. S were meanwhile, Jeff Sessions will testify on capitol hill tomorrow about the alleged russian meddling in the president ial election. Is reportedly considering postponing a planned visit to britain this year, muscular receives more support. It comes amid growing backlash over comments he made after the recent terrorist attack in london, including disparaging remarks about the citys mayor. North korea says it has moved closer to testfiring an Intercontinental Ballistic Missile with the potential of hitting the american mainland. The isolated state has accelerated the missile Testing Program in defiance of the United Nations sanctions. A china plane has been forced to return to Sydney Airport after airport failure. After airplane failure. One passenger said there was a loud noise and some people smelled burning. The airline says the plane landed safely and they are taking care of the needs of the passengers. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. On sebastian salek. I am sebastian salek. This is bloomberg. , theresa may, is chairing this meeting of her new cabinet. She will hear from those who blame her for the catastrophic election results. Nejra, the former chancellor, George Osborne, describing theresa may as a dead woman walking. This is the beginning of the end of her premiership, is it . Nejra it is beginning of a tough,. Of a tough period, mark. Today she will have a meeting with our cabinet, with a little bit of a reshuffle going on. Have remainedrs intact. We got the news late on friday. She is also going to face the 1922 committee of the tory members. This is where she might face some of the anger among her Party Members. Of course, we have had people like Boris Johnson and david davies speaking this morning, coming up in support of theresa may, but there have been others, notably George Osborne there that you mentioned, who did described theresa may as a dead woman walking. I mean, she is going to have to basically reconcile two different sides of her party. There are those calling for a softer brexit, and those who want to stick with the more hard lined stance. Mark where are we on talks with. U. P. , and what does this mean for brexit . Nejra this was one of the things that added to the chaos. The Prime Ministers Office had to go back on the and say it has not happened. We saidtalked about it, this would be probably a more Informal Coalition than what had been formed between the liberal democrats and conservatives back in 2010. , this isof the d. U. P. A pro brexit party, but the feeling is they will want a softer brexit than what theresa may is calling for. Why . From the Customs Union and the Single Market would bring about concern over the border between Northern Ireland and ireland. They want a frictionless border, which could mean staying within the Single Market and Customs Union. Theresa may is due to meet with d. U. P. Leader tomorrow, which is perhaps when we get more clarity on this, and perhaps more clarity on how the brexit talks might go, in terms of the coalition with the d. U. P. Of course, questions within her own party about how this might shape up. Theresa may does have to answer to calls from other parties, in particular the labour party, which had a surprisingly good performance in the election. Ou. K nejra, thank yo Peter Kinsella from cba group. Once again, sterling is proving to be the lightning rod for this political upheaval in the u. K. The big decline was on friday. How does sterling fair against the dollar in the short to medium term . In the short term, we will trend a little bit lower, probably around 1. 70. Sterling has been a lightning rod for brexit. If we look at it, we will have a very of elite level of Political Uncertainty in the u. K. , both this weekend the coming weeks. That afterxpected the beginning of the brexit negotiations, we would see a large increase. But certainly, the results of last weeks election make it even more difficult now. I think we are definitely in for a little more pain in the shortterm. Francine when you say it is more difficult, what does that mean . Will it be a soft or hard brexit, or is it impossible to say at this moment . I think it is rather difficult to say at the moment. The problem for theresa may is shes going to have to reconcile brexit with people who favor a softer brexit and the socalled hard brexiteers. It is likely to be a long, difficult and protracted negotiation. Consequently, there will be a lot of people within the conservative party will be unhappy at various stages of the negotiations. So, we are still going to have this high level of Political Uncertainty. I dont really see how the pound will fair well during the process. I am of the view that we could see sterling trade lower in the shortterm, maybe as low as 1. 22. The poundpeter, does become much more volatile if theresa may has to step down . Do we have to become a political analyst . I think the answer is, yes. We see an increased in geopolitical minus. An increase in geopolitical noise. The pound fx these currencies and what they do in the shortterm. The majority of market participants, and analysts seem to think theresa may will my last that long. The question is, who will replace her . Peoplely, whether or not say Philip Hammond whether or not we get a new minister, the truth of the matter is that does not change the underlying electoral conflict. We are in for a period of elevated uncertainty. Mark traders are finally less bearish on sterling. We went over the risk reversal data from friday, and we went to about 1. 30. Today we are at about 1. 20. We would get back to the br exit levels of high volatility in the coming months, even if we see may leave . Idol think so because the brexit level with the paradigm change. I dont think so because the brexit level was the paradigm change. I dont see of going back to prebrexit levels. But could we have levels fall to around 11 or 12 . Yeah, we could. We are still in an environment of broadly low volatility. It is not as volatile as it was prebrexit. Mark lets get the Bloomberg Business flash. K. ,orter optimism in the u. After theresa mays party lost the majority in parliament, t lesless than two weeks before brexit talks start. Directors saysf this is worse than when the country voted in june last year to leave the eu. Approved its board has several changes to the company. This is after allegations of Sexual Harassment from former employees. The company has provided no clarity on the face of the company owner, or his coworker emil michael. Device, would is priced at 499, is designed to work with the new generation of 4k television. The new console will be compatible with old xbox games and accessories. That is the Bloomberg Business flash. President macrons party is on track for a sweeping majority in the national assembly. His republic on the move received 32 of the vote in the first round come almost 10 points ahead of the republican. The results could give the party seats, and that is according to projections. Lets go live to paris. First of all, give us a sense of what this means for president macrons reform agenda. Reporter it means it will be much easier for him to push through reforms. His going to get somewhere between 70 to 75 of the seats of the national assembly. You can see behind me, the lower house of parliament. On thedifficult to reform agenda. First, the labor reform, which is scheduled to pass by the end of the summer. This is the biggest majority of french president has ever received in more than two dec ades. They would only get between 30 and 40 seats in parliament. Francine just talk us to the process. There is a second round, and that is coming up in two weeks. Reporter yes, so it is exactly the same as the president ial elections. Even though macron only got about 32 of the vote in the first round, that means a lot of these candidates will be present in the runoff. You would also see this republican france, which is able to vote nationally. Macron did not have enough to have a national group, but Marine Le Pen is said to win in her constituency. Francine thank you, from paris. She will be live for us throughout the day. Live with us here in frankfurt is Volker Wieland. He is also an independent advisor to the ecb, ha a member of the germand a member n council. Volker, when you look at politics in europe, is there a danger, actually, we assume we have gotten over the worst. There is still a little bit of Political Uncertainty surrounding brexit. Are we underestimating the fact that populism is still boiling in the background . I think it is a mixed bag. It has been moving in a positive direction in the reform sense. It is key that france reforms of the economy, and that is the chance we have. It is good in the u. K. That things are mellowing a bit. We have trouble spots, italy especially italy is still dangerous for europe. Francine how should that impact Monetary Policy . At what point do we need to start thinking about getting out of qe . Otherwise, the unintended consequences are worse than what happens if you stick with them. Policy is isolated or it is s job. Ted, so it can do it it would be wrong to political situation in italy, and for the situation, it is simple. If a country with high debt gets into trouble, we have a support mechanism. They can always apply for an esm program and convince markets they mean business. Francine is actually crucial, convincing markets. Do you think markets are likely to freak out when we Start Talking about tapering . It seems everything is over communicated. That is what i think regarding the strategy. I think the main thing, and mitsubishi should have done this for a while, talking about how to access, and how the timing is coming up. I was recommending that for a while. Just to be clear, im not an internal advisor to the ecb. Consult a while back. Francine we did have a little bit of an appreciation of the euro, especially the trade weighted basis compared to the dollar. We start to see growth and inflation in decline. The ecb will not be on uncontent with the inflation. In its regard, last weeks ecb rating, where they put a damper on their Inflation Expectation for next period to one for 3 , that is a concern. 3 , that isod to 1 a concern. I think they will not be overly concerned with the euros appreciation at this stage. If we saw a eurodollars and. Ent francine Volker Wieland was saying they were not worried uroh about ye depreciation. How should they view this inflation that is going nowhere . I think it depends on how you look at it. Core inflation has been stable for a long time and the decline we saw in inflation, with the s, think inflation has been very behind. One thing you have to take into account is the are looking at hotspots from outside the euor ro area. That keeps a lid on which developments in countries, where we have massive growth and are growing mess potential. Francine Volker Wieland and Peter Kinsella stay with us. Coming up, we have an exclusive Benoit Coeure. Mark were looking forward to that. Coming up, we go live to doha on the latest roberts to resolve the dispute between qatar and its saudiled opponents. This is bloomberg. Mark you are watching bloomberg surveillance. Im mark barton in london. Kuwait said qatar is ready to understand the concerns of its neighbors and bolster stability in the region. There is a sign the dispute between qatar and saudiled opponents might be tempered. The index is now one of the worlds worse performance. Yousef gamal eldin joins us from doha. Yousef, what is the latest . Mark, as you mentioned in that statement coming out aom kuwait, looks like is vague statement. It is an important step coming that we kuwaiti side, have not heard that much from the reaction from the qataris, to the united emirates. Reason and wisdom will prevail. What remains to be seen is the role of the United States. There is nothing tangible here to r reassure the markets and chart a path forward. This is about trust, mark, and once that is broken, it takes some time to rebuild. Having as qatar financial firepower to defend its currency, to withstand this economically . Yesterday, they assured us they have the kind of mechanisms in place to be able to defend the currency, to be able to to stand. To be able to withstand. The domestic Banking System relies heavily on foreign cash. You are looking at 24 of deposits, they are supported by foreign deposits, nonresidential deposits, which is crucial, but it is not just what is happening in terms of interbank rates. Arealso see them with ports widening. The stock market is rebounding a little bit off early trade. Some of the customers of qatar, they are now using this weakness to get better deals on renewed gas contracts. Mark . Mark thank you, yousef gamal eldin, live from doha. Coming up on bloomberg surveillance, two hikes ahead. The fed meets later this week. We will discuss this next. This is bloomberg. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Tthats why at comcast,t to be connected 24 7. Were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Francine you are watching bloomberg surveillance. We have a great interview coming up, Benoit Coeure. Theresa may will face furious lawmakers from her party today after she was forced to promote a prominent hardline bid for brexit. In france, Emmanuel Macrons party is on course for a landslide victory. His republic on the move party about 33 of the vote. According to projections, the result will get him the biggest majority since 1993. Donald trump has renewed his attack on james comey, tweeting his comments were cowardly. Jeff sessions will testify on capitol hill about allegedly meddling in the election. Trump is considering postponing a visit to britain this era in less he gets more support for the trip. North korea says it has moved closer to test firing a Ballistic Missile with the potential of hitting american mainland. China Eastern Airlines plane was forced to return to the airport after an airline failure. Images appear to show a hole in the engine casing. There was a large a loud noise and some people smelled burning. Safely ande landed are taking care of peoples needs. Francine thank you. The Federal Reserve will increase Interest Rates in 2017 and begin taking it Balance Sheet. That is according to 43 economists surveyed by bloomberg. They expect the rate hike at the end of the fed meeting and another in september. Chanceket sees a 95. 6 of a rise this week. Us, an adviser to the german finance of ministry, plus, peter. Thank you for sticking around. What do you think the fed is looking at . We talk about inflation and wage growth, but you also look at something else. We are looking at where Interest Rates are going to be in the long run. Janet yellen has been giving several speeches where she thinks it has declines. In herpoint is lower view. The evidence is uncertain, possibly biased. I am perplexed of the and say one thing does not believe them. Are we getting used to by Central Banks . From wherey are away they usually are. In the past, we had a strategy to follow. Now, uncertainty is higher. They have a hard time communicating how they would normalize. They should keep moving and they should not be distracted by whether it isse, an inflation or other variables. Francine what do you like about shortterm policies . Volker i was in the u. S. A while. There is not much of a plan. They have announced something big, but there is no clear plan. The fiscal stimulus is directed to the supply side of it, tax production, if it is not a big expansion, if they cut spending programs, it would rain it would raise sustainable growth. The wrong time for the demandside stimulus. I hope they will stay away from that. Francine are you concerned they may be behind the curve if they dont hike three times this year . Not overly so. We are going to get a hike this week, that is clear. There is consensus we will get another in september. Being behind the curve, im not sure. If you read the research, they seem to think the overall natural will rate of growth is going to be slower. Should have a slightly lower level of Interest Rate. I am not that worried inner im not that worried about being behind the curve. In a global sense, we are in a situation where rates are low everywhere. I am not worried about being behind the curve. , are you volker worried . Volker i am worried. The policy is still unusual. It is not in crisis mode. Still needs to go towards tightening and it is hard to explain it to markets. They need to develop a strategy. It is good to focus on rules. Francine you believe the ecb is behind the curve and the set is behind the curve. It is said because is it because or do you believe this growth is different that they have no choice but to wait and see . Has been are strategy that says when you come out of deflation threat, as we you should keep Interest Rates lower for longer. That strategy is behind a lot of this thinking. There is danger to that. If you look at central markets and banking, keeping Interest Rates low for a long creates risk. They keep being underestimated. Francine thank you. Mark plenty coming up today. We are going to get a check on the market. Tech stocks are taking a beating. It later this morning, we are going to bring you an exclusive interview with Benoit Coeure. Dont miss it. Francine youre watching bloomberg surveillance. We have an exclusive conversation ecb Benoit Coeure, the board member. We will talk about inflation, Monetary Policy, and have a question or two on brexit and what we heard about inflation. I want to talk about Goldman Sachs and a couple of minutes and ask about brexit and some of your hiring plans. Everything you do is underpinned by the European Central bank. What is your biggest concern in the way they look at things . The Growth Outlook is friendly and improving. In that environment, everyone is asking about where risk may come from. Issue isy, a prevalent the continuous low Interest Rate environment causing a large issues for banks and Insurance Companies. Francine we are talking about distortions. Has a fear of inflation. Are you concerned the slower for germanpolicy will hurt . Just took down our european inflation forecast. To long firm, we dont see indication inflation is becoming an issue because it it is too, rather high. The inflation grade is leading to issues for the savings market in germany and Insurance Companies are concerned about that. The big thing is you worry about in the eurozone . Ims increasing their forecast, the ecb doing the same. Joerg they feel better because the rise of populism and euro critical movements have been halted. Me months ago,d that was the rise of populism and eurosceptics would have been up there, but the results of the elections are positive. Francine is there concern we are underestimating the forces of populism . Germany, the investor base, and globally, has been less concerned about populism. The two biggest parties in germany are proeuropean and the singledigite polling results. That is not seen as a concern. When you look at global perspective, is there a part of the world where you see better opportunities . Joerg we are optimistic on europe. In our forecasts and investment propositions, we are featuring european equities favorably. Positiveiven the evolution of the economic outlook, we are overweight in europe. How do you look at oil . Does that lead to inflation . We thought it would take longer. Joerg as a moment, it is a halting factor. The anticipation oil would move towards mid 50s has not come to fruition. Downe one reason we took our headline Inflation Numbers is because the Oil Price Increase has not materialized. Francine does business feel better than four or five months ago because of the renewed hope about europe . Joerg the optimism of investors in European Growth is there. The other side, it is difficult because the Financial Markets are such a low volatility environment and are not moving a lot. That is something the amount of limited at they moment and volatility is at record lows. Francine what do you think would be the catalyst to change that . What willis unclear drive change. The hope is the catalyst to improve things further in europe europe,ete progress on more reforms, better cohesion, betweenl collaboration france and germany on things like Capital Markets union. That could be a big push forward. Francine thank you. With us and stays we will ask him about brexit and the impact it has on Goldman Sachs in germany. Lets get the latest on the markets. A downbeat start to the week. Read across the board. 600 dropping below its 50 day moving average. The driver of this, tech stocks. A drop of 2. 6 in early trading. Europeanst drop for tech is october 2016. Netflix,e fang stocks, google, dropping as much as 2. 3 . Talking about awarding low volatility in u. S. Tech stocks have led this recent rally. To risk. We saw it spread to asia. Here is the European Tech sector. Up 16 this year, now, taking this selloff. Applewest revenue from there. A look at the pound in perspective. What a weekend it was. Is sterling on friday, falling by almost two standard deviations below the average, but not a big drop if you put it in context. Here it is on the brexit vote and back in august. We are looking at it approaching the 200 moving day average. We could see a drop to the april low of 123. 51 to the dollar. The dollar. Will bring you an exclusive interview with Benoit Coeure at 11 30 u. K. Time. Francine you are watching bloomberg surveillance. Lets get to the Bloomberg Business flash. In the u. K. Timism economy has plunged after theresa mays party lost its majority in parliament. A survey of Business Leaders showed 57 are pessimistic about the prospects of britains economy over the next year. That is worse than when the country voted to leave the eu last year. Uber says its board has approved several changes. The company has provided no clarity on the fate of the ceo or his head of business. Its smallest and yet willrful console be released in november. The console will be compatible with older xbox games. That is the Bloomberg Business flash. Francine thank you. We are back with joerg kukies. We are talking about macro policy, inflation. Talk to me about brexit and Goldman Sachs. Are you going to attract talent here . Is too early to make statements about that. Negotiations have not started yet. We are monitoring the situation closely. We have not made any decisions yet. Francine does the weekend change anything . Ares unclear whether we looking at a soft or hard brexit. How do you view this . About one third of clients think it means a harder brexit, about a third think it is a softer brexit and about a third think it is neutral. Only the beginning of the negotiations can tell what it means. Is unclear on what implication, if any, it has for the negotiation. Tryinge are you still to beef up your operations in frankfurt . Are you hiring . Before brexit we made plans to increase our presence in the market. Means, one conclusion we have is we will have to move business into the eurozone. Frankfurt will be part of that and we do have significant number of people covering clients from london at the moment. It is process it is possible those clients will migrate to the euro zone. Francine how much more activity are you expecting in frankfurt . Will it be ipos, private wealth . Joerg it will be interesting. Capital markets union, which i , weed about your earlier think part of the response function of the eurozone to brexit can be a deeper integration of its Capital Markets and that would mean in the bond and equity markets we will see higher activity in marketbased financing of the corporate sector. France is what our clients asking of you . What do they expect of you . Joerg the biggest topic and point of debate and area where our ideas are welcome as how to face the low Interest Rate environment. That is the same talk it same topic. Time we offer a longer duration, that generates a lot of interest. Anything enhancing yield on the a bigng asset classesis topic. Francine it is getting better. We see some bonds creeping up. Still in negative territory, but not where was five or six months ago. Has waslow point two months back. We are still at levels, especially in the German Government aspect, where the yields are so low, Insurance Companies cannot cover their liabilities. They have to pick up yield by going into higher risk, longer duration assets. Francine there is controversy about venezuelan bonds and Goldman Sachs. We have made a public statement. The bonds were purchased for a client. They were not bought for our Balance Sheet. It is a normal process. Many other Asset Managers have done this as well. Francine the point of contention, it is unclear latest the developments mean there is a bitter almond for italian banks. Italy, we see crossing the 1 growth line in the next two or three years. Italy needsmething to do more of. Is a positiven mechanisms arean working. Francine thank you. Joerg kukies there. Coming up, a great interview for you. An interview with Benoit Coeure from the ecb. Tom keene joins me for bloomberg surveillance. Francine pressure mounts for may. The u. K. Prime minister faces furious Party Members later. Is a softer exit in the cards . Increasesacron control of his party gets majority control. To more rate hikes in a shanking of the Balance Sheets before the end of the year, despite slowing inflation. Good morning. This is bloomberg surveillance. I am Francine Lacqua in frankfurt with an exclusive ecb conservation conversation. Tom keene is in new york. Tom we are going back to 1922 or 1923. The Committee Meeting the Prime Minister will be in is really going to be something, isnt it . Francine yes. 1922. And in the french area, we go back to 1933. Coming up, we have the exclusive conversation with Benoit Coeure at 11 30 u. K. Time. Lets get to the bloomberg first word news. Heres taylor riggs. Taylor a showdown in london that could signal the end of Prime Minister theresa mays time in office. She meets with furious lawmakers from her own party, who blame her for the catastrophic election results. In france, president and menu macron has tightened his grip on the national assembly. His party was the big winner in the first round of the legislative elections. Macrons backers are expected to win as much as 455 seats of the lower house in parliament. Join in has agreed to an agreement with g7 ministers that says that they u. S. Disagrees with some of the environmental north korea says it is closer to developing a Ballistic Missile that could reach the u. S. North korea is not far away from testing an icbm. Last week, the pentagon said its missile intercept system a testfully blocked icbm. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Tom in the equity markets, what a day. Really extraordinary. Futures at negative seven. The curve is going nowhere, oil is going nowhere. Did the sterling complex here. There is the dow. The nasdaq on fire. 731, which means francine cannot come home. Francine yes. This is what i am looking out. The stoxx 600. We are seeing a selloff in u. S. Technology stocks. That is filtering into europe. I know you were talking about it, but it has been fluctuating a lot as investors assess the impact of the u. K. s political turmoil. The head of Goldman Sachs in germany and austria says he does not know what happened with brexit, because one third of investors think brexit will not happen. One third think it is a hard brexit and the other third things it is a soft brexit. Furiousmay faces 1922kers from her partys backbench committee. Joined now, from manchester, anna edwards. By anna edwards. It is interesting to see how long she can last, that is for sure. The voices we are hearing in public seem to be supportive of her in the moment. The head of the 1922 committee that there is an appetite for a leadership contest. Boris johnson says there is no plan for it. David davis says theresa may has 100 support. That is what they are saying in public. Behind closed doors, it may be another matter. Michael gove rivals to theresa may the last time around, but she also has friends in there who managed to confirm other, slightly softer brexit opponents. On the subject of brexit and the conservative party, my favorite line is that europe is still the cancer that eats away at the heart of the conservative party. Stunned i was really to hear George Osborne yesterday walkingt dead woman when referring to the Prime Minister. How long can she last . Anna indeed. Certainly enjoying his new role as editor of the evening standard. May, soired by theresa these are not close friends, it seems. What she said to him when he was fired, he said, she told me i get need to get to know my party better. He seems to be enjoying it. He was one of the voices who brexit is in the trashcan right now. That is something that investors are increasingly trying to grapple with. Tom anna edwards, thank you. Aancine, you will have ,onversation with Benoit Coeure a wonderful economist. Let me run over to london, as francine is in frankfurt. Joining us is the right guy at the right time for everything going on in europe. James bevan is in the investment business, where he worries about multiples and valuations, but he also links it into our political economy. Can you do that this morning . Is there any dampening effect on gdp because of the political uproar on your side of the ocean . James when i look at the u. K. , i anticipate that it is likely the agenda is more populist then reform. So not the heart agenda designed to deal with supplyside inadequacies. The composition in the uks materially worse than the United States. And over to senate seat and over dependency on services. Indicated that this was what she was out to sort. Frankly, she will not get the mandate to do that now. Tom i want to go into the real estate business. The best place to go is london. Look at pound sterling. This is brexit in the middle, june 23 at about 1. 44. Election, out15 here at 1. 53. This is a path from cameron down to may. This makes real estate in the United Kingdom cheap, to say the least. Is that going to be the best outcome, an investment boom in the United Kingdom . James i look at real estate the commercial markets and the Residential Markets. The Residential Markets are receiving substantial support from nondomestic investors, particularly in london. China, seen inflows from but little so from france and italy. I am not clear, in my own mind, as to what will happen to flows from china. It is clear the bank of china will want to control its economy. That made him been demand that may dampen demand. Tom looking on james bevans britain, about how the british wrong. Ent so the expert a outcome could produce new forms of conventional wisdom as misleading as the flawed punditry that enticed made to call the election in the first place. They encountered while campaigning doortodoor were absolutely furious over trumps verbal assault on the london mayor after the London Bridge attack. This is something i was reading over the weekend. I guess it was tangential. But there is the issue of the terror attacks, the issue of trumps unique relationship with Prime Minister may. Does that play into where we are monday morning . James i would say not. The main constellations was to focus on brexit. Since every major party says we will deal with brexit, that is no longer something that electorate was keen to hear about. They wanted to hear about the domestic strategy. The british people it is clear the labour party were offering an agenda of more spending, and particularly for students, the removal of payment for university fees. Over here, a lot of students feel really badly about it and clearly voted with mr. Corbyn on that basis. Tom very good. We will continue with james evan. James bevan. The executive board member from france of the ecb is Benoit Coeure. In economics. D really looking forward to that conversation. Francine lacqua with Benoit Coeure in frankfurt. This is bloomberg. Taylor this is bloomberg surveillance. Lets get the Bloomberg Business flash. Uber changes coming in the wake of investigation into the companys workplace culture. Clarifystors did not the future of its ceo. The board suggested a leave of absence for travis kalanick. Google is bracing itself for what could be a record antitrust from the european union. Impose a penalty within weeks. Many expected to be bigger than the 1. 2 billion fine imposed on intel in 2009. Regulators say google systematically promoted its own shopping search, allow me to go more than rivals. Economists predict the Federal Reserve will raise Interest Rates twice more this year. The central bank will also start shrieking its Balance Sheet by the end of the year. A rate hike is expected at the end of the twoday meeting this weekend and in september. Tom thanks. James bevan in london. And we are joined by sharon who isran, someone linked into this idea of politics, process, working within trade and regulation. Professor, wonderful to have you. Last time you are on, we had a huge response into the idea of process in washington. Is the process broken in washington . It isould definitely say seeing a stress test in the sense that we have polarization, we have a president who is not working well with his own party, we have a lot of our own institutions under an enormous amount of stress. We have investigations, on down the line. Tom can anything get done in that environment . Sharyn we anticipate a enormous amount of gridlock tom we call it trumplock. Sharyn we can call it about. Extreme circumstances, but we still have legislation being forced through. Nope bipartisanship, bipartisan coalitions. Tom set us up, particularly with the Banking System. The banks want doddfrank, ordered the banks want trump and the antidoddfrank croup to succeed . Group to succeed . Sharyn both. There are certain parts of doddfrank they would like to see leave. The volcker rule. A lot of the rules are onerous. But some of the rules have proven to be helpful, even if it is difficult to comply to, because it allows for certainty. N the market in that sense, they do not want to see the whole thing revamp. You are a Columbia University professor of immense note. If you went down there, you would be the undersecretary of this, or that. There is not a lot of Sharyn Ohallorans in washington, are there . Sharyn there are not. Tom sharyn, this is a huge not the that there is bodies for the grind of your work, which is a grinding work. Sharyn that is correct. What you need to be able to do is understand the interests of each party, build up a coalition, and find, what is in essence, the rules and regulations that allow businesses to do the business but allow for consumers to have the protections that are necessary, the regulators to be able to regulate, and for the oversight of congress and politicians to take place. That is a balancing act, but it is something that has to happen. Excuse me,n james bevan in london. James get my name wrong anytime. [laughter] tom ill get ted keene wrong. Investment into politics, is the United Kingdom becoming like a u. S. In terms of the chaos we are seeing there . James absolutely not. The checks and balances are a deep part of your democratic process. Over here, in contrast, parliament has had far more immediate capacity to make change. And the one we face of the moment is it is unclear that get may will be able to significant changes through. Trump has a majority, but he still cannot get the changes he wants affected. Tom what is soft brexit . James i asked us of the same question. There is brexit, and that is it. His talk of hard and soft is makebelieve. The signing of article 50 means the clock is ticking. It is not up to the u. K. To determine what the future relationship with europe will look like as a onesided arrangement. E. U. To decide. Thank you, james bevan of ccla, and Sharyn Ohalloran of columbia. And anna edwards and nejra cehic onsite as the conservatives figure out their passport. Later today with david gura on bloomberg surveillance on Bloomberg Radio, we are talking about the tax degree of the Republican Party. This is bloomberg. Tom good morning. Bloomberg surveillance from franco, germany and new york. Francine lacqua talking to Benoit Coeure right now. We will get that to you in a bit. Lets get to the morning mustread. The smartest thing i read about one path in britain. Mrs. May is a remainer who tries too hard to compensate. Pritchard goes on to say Sharyn Ohalloran is with Columbia University, and james bevan knows about the norwegian solution in london. James, it is absolutely fascinating to me where the United Kingdom would set up like norway. Is that feasible, is ambrose right . James the real challenge is getting agreement within two years. Of course, britain can recommend a route forward. To walk away is to inevitably retreat from the wto arrangement does not give real free trade in the way that we enjoy free trade with europe at the moment. What it does remove the requirements to commit to paying the budget. It allows for the reduction of the move into people. Find a middley to ground. Professor, you just came back from looking at antitrust and trade. Do you envision that could be a different calculus for britain . Sharyn i do believe that being in the Customs Union is an option, but it is one they have to negotiate. The snapback is to the world trade the wto. Being in the Customs Union would actually be key. There are quickly, ambrose touches on the idea that the end of the day, at the end of the day, it is about migration, that is really what this is about. Right . Absolutely not. Migration is one issue. The other issue is rules and regulation. A lot of want governance and independence. E. U. Asl against the unelected diplomats. Where european laws have precedence over u. K. Loss. Tom james bevan with ccla and Sharyn Ohalloran from Columbia University. We had the fed meeting wednesday. A two day meeting with the announcement wednesday. We will have the usual fed show. We have a terrific interview of germany. E and Francine Lacqua with Benoit Coeure. We will come back with Sharyn Ohalloran and james bevan. From new york and frankfurt, this is bloomberg. How about those yankees . Tom good monday morning, everyone. It brilliant surveillance in frankfurt germany. What passes for shakespearean theater in london. Here is taylor riggs. Taylor foreign secretary Boris Johnson is saying that theresa mays resignation they are calling for her to step down after the disastrous election. That couldwdown signal the end of her time in power. In the u. S. , President Trump may postpone a plan after backlash over his remarks about the london terror attack. The president has expressed skepticism about the threats in the last week, day after the attack. The president made the chart on twitter that london mayor had downplayed the danger to residents. Attorney general Jeff Sessions is offered to testify before the Senate Committee investigating the russian meddling in the election. Sessions is likely to appear tomorrow before the Senate Intelligence committee. That is the same committee that questione former fbi director james comey. In france, voters have given a resounding victory to president Emmanuel Macronsyearold party. It is the result if the results hold up, macrons are projected to win more as 455 of the 577 seats in the house of parliament. Emma put macron and a strong position. Global news 24 hours a day 2700ed by more than journalists and analysts in more than 120 countries. Paris andwe were in number of weeks ago, there was no mystery about what this twostep limit election would be like. Customer cron seizing the opportunity and doing much better. To go to rtunity teaming up over the politics. I want to go to the zeitgeist. There is no u. S. Dollars and cutters. Are they being financially strangled by the uae and by saudi arabia . There is a component, which is the Saudi Central Bank asking for additional precautions when dealing with qatari banks. A utter already had rates have been rising to levels we had not seen in seven years. They are saying that the qatari Banking System is resilient and can withstand the withdrawal of capital flows. It is a waitandsee attitude for now. Tom there was a movie years ago from the russians are coming, the russians are coming it was an american comedy. How is that funny for qatar . What does it mean that the russians are taking a Significant Interest . Not and they are at the same time. They did have the meeting between the qatari and Russian Foreign ministers on saturday. They had discussions, but the statement did not see clear sides. They had a conversation with Rex Tillerson as well. Given on the phone with some of their gulf counterparts. They having continuing to take charge of some of the mediation. Saying that the qataris understand the concerns of their neighbors, but that is not the kind of statement you are looking to hear when it comes to the future of this part of the world and the integrity of the operation counsel parent tom of the operation counsel. Tom thank you so much. Hollidayan and sharon and Sharyn Ohalloran here. Quitellerson is not focused on cutter. How important is it for the u. S. And the u. K. To get their asked together domestically to address the cutters of the world . Sharyn that is leaving a huge vacuum for both china and russia to lay a larger to play a larger diplomatic role. I think we will see some of the aftermath of that when some of this all shakes out in six to nine months. Tom james, what you see in london . That is where everybody ends up going. How is the cutter u. K. Relationship changed . James they continue to invest heavily in properties in london, and there is no expectation from the Real Estate Market that they will be reducing interest anytime soon. But there are many british people who will welcome the fact that for a wild, britain will welcome the fact that for a while, britain will not be on the front lines when it comes to this. It will be brexit rather than the broader stage. What is the u. K. Foreign policy a Prime Minister may if she makes it to tuesday . James it is a very interesting question because we have the press secretary who was very quiet during the campaign. Knows the way he challenged the leadership, which made him unpopular with some sections of the conservative party. The story on the streets is that he wishes that may continues on the path, and then makes moves. Folks, it is time for surveillance gossip, our daily soap opera. James bevan, what is johnston going to do . Cut to the chase. James theresa may will stay there will be a falling short of any serious challenge to her leadership. Seen a not want to be party in disarray. James bevan and Sharyn Ohalloran. Francine lacqua rejoins us from frankfurt, germany. Do i go longer short after your conversation . [laughter] francine tom, you know i cannot say that. We are not allowed to invest. But i did have a good conversation. I will bring you highlights and 55 minutes from now, tom. We did talk about a bit about currencies, but he did say the ecb does not target currencies. I knew that. We will bring you that it goes a conversation about Monetary Policy and 55 minutes, so we will talk about brexit in the French Elections. This is bloomberg. This is bloomberg surveillance. Im Francine Lacqua. President Emmanuel Macron looks to expand his control of politics after his party put him on track. Majority cane president mccrone get and what does it mean for his reform . Given because of the two set to get ae is crushing majority, three quarters of the seats in the national assembly. That definite helped him to push through reforms, and the first major one everyone is waiting reformthe labor market but they are spending over the summer. Assembly is the only from 1958. Is this a new government . Is this a new calculus or methodology for france happening right now . Tom,ine it is historical, because in 1958, that was the beginning. At the time, there was a very the onlyority, but person who managed to get such a majority was not the president. , organized the election, but won 80 of the seats in parliament. Between theliance two at the time. But we are seeing today, macron ofting to quarters assistance in parliament. That has not happened in more than two decades. How do you explain his popularity . We saw that handshake between President Trump that was forceful. Does stuff like this play into the voting in france . It does in fact, the , the head take with donald trump, the reaction he had with the president pulling out of the paris Climate Change agreement. He has managed to split the example, joining forces with some socialist members of the government. You can see the republicans, in athough they will be obviously, it is not as good as they were expecting a few months ago. Ruling having decimated the election, they are losing more than 260 seats, and they would only get between 30 and 46 in parliament could this is a major shift in french politics. Francine thank you so much for going through that major shift. Martin luke of blackrock is here with me in frankfurt. Talk to me about the ship in policy. Is there a concern that we now ignore populist policies because of what is happening in france . Martin thanks for having me. I think the shift we have seen in politics is a pretty recent development, and the argument that has been given as an encouraging one, but it should not detract attention from populism. I think politicians in europe should bet on the future. Warning was the set populism is a reflection of any quality on the one hand in some was in democracies. But still, a concern. A big challenges migration. I think these two challenges continue to exist and put a threat to democracy as a whole. I think it was a warning sign that needs to be heard in the future as well. Francine give me a sense of how that changes your portfolio strategy. Martin it does not necessarily change the portfolio strategy and is there a moment. Withve an very cautious the rozier to fixed income more in general we have been very cautious with fixed income in general. Since 2013, when we had the taper tantrum in the United States, and then for some time in other jurisdictions. It is a period in time if you got to that where we had the come anon of reflation stronger growth anymore synchronized later on the globe. We have inflation coming back or to some extent, the fear of deflation being over, so that changes the trajectory of it. It is a more official environment for equity and fixed income. Francine where is the real growth going to come from . What about animal spirits in europe . Martin evaluations in europe have held back a bit, but since the start of the year, we have seen European Equity outperform u. S. Equities. We make this call a couple of weeks back and we were right. This was very good. Phenomenonwe see a of global reflation and more synchronized growth in several parts of the world. This means we have those sectors benefiting most better most of the global trade. Francine four months ago, three months ago we were talking it was the end of globalization, but it was the end of free trade. How do you square that two . What of the Trump Administration becomes more martin it will probably play out in the mediumterm and it should play out, not only in the way that donald trump announced it in the campaign usually, as a politician, you going to the election announcing something you will put in place. We did not even the trump for that. We already see globalization. We had an increase in the number of onesided impediments to trade since 2011. We at peaking globalization in the mutual trade in 2011. Since then, it has come down a bit, but there was still a lot of potential. If you look at the difference in capital income in emerging worlds, there is still more to come. Francine martin, thank you so much. Tom, we will have plenty more on this and we will talk about the us over between politics and Monetary Policy. Coming up, i will bring you my screws a conversation with executive board member Benoit Coeure. Francine thank you. Sharyn ohalloran we will continue with her as well. Technologies. U what you get here is a look back. You not only get the live tv screen, but you can come on to any chart, bring up that section. This was james bevan nonsterling. This was james bevan on sterling. This is bloomberg. Francine this is bloomberg surveillance. Lets get to the business flash. It is another sign of the impact on brickandmortar retails. A Childrens Clothing store has filed for bankruptcy. By 900reduce its debt million. Lyft,is a new partner for the secondlargest right hailing company in the u. S. For lyftffer vehicles drivers. They invested 25 million in the still as part of a funding round a closed in april. Microsoft is targeting hardcore gamers with its new version of the xbox. Mostompany culture xbox 1x powerful videogame console ever. 499 inbe released for november and is designed to work with but and is designed to work with a new generation. That is your Bloomberg Business flash. Tom very good. Taylor, thank you so much. Sharyn ohalloran is columbia is a Columbia University professor. She has a wonderful book on policy. Finance look company of u. S. News over the weekend. Particularly in the United Kingdom, when processes jumbled, nothing gets done, and then you assume confidence strips away . Sharyn when you understand that how policy isn by made, it allows you to define who is a key players in the process, one of the decision rights, how do things get done and in what order . When the process gets rambled and no one knows this, that is when there is huge amount of uncertainty, and you dont know what the possible range of outcomes will be. That is where we are and a lot of these cases. Tom i look at the beginning of the week and we are into june. I know you dont play the market when we go into the fed meeting on wednesday, do you assume a dampening, a fed adjustment without an adjustment . Assume that the market will increase uncertainty in place it down and i do not think the fed will play the Political Uncertainty game. That is my assessment. Sharyn, you talked about deregulation with the trump team and Central Banks. What do you think the markets are getting wrong . Are we too optimistic about growth in general . Sharyn i believe we are optimistic about growth in general. That is my assessment. I do not believe the trump agenda, which is progrowth and probusiness, which is going to be incredibly forthcoming. I think it will be problematic. I dont even believe the limited reform on the doddfrank act. I think even though even those limited reforms will be problematic. I do believe youre being overly optimistic, yes. Aboutne when you talk over optimism, as is about growth or markets . Sharyn both. Were being over optimistic on growth, which means we are being over up which means we are being over optimistic on way the markets are playing out. The way in which we are seeing lending taking place. The filter it through over all the different parts we filter it through all the parts of gdp. Yes, i do believe that to be true. Tom what do you need to see from not only mr. Trump, but Steve Mnuchin and others in washington . There is this ballet of trying to get something done, is there . Sharyn i would need to see people having a coordinated agenda, and people coming up with a plan that is executable. I would need to be able to see there is a way in which one could actually take that agenda, form a coalition, and build it out. Those of the types of things you would need to be able to see that could be done within this congress. The midterm elections are coming up. And if you cannot get anything done within this timeframe, the probability tom that is a calendar item. Sharyn that is the issue i am seen, and that and if cannot happen, forget about it. Those are my predictions. Sharyn, thank you so much. Sharyn ohalloran of Columbia University. And usup, we bring you is a conversation with Benoit Coeure. We talked tapering, Monetary Policy, brexit, and politics. In at 8 30 up in the u. S. This is bloomberg. Tom i am a 100 supporter, so said the loyalists, and they are ready to swerve this monday morning, Prime Minister may fight for her political life, thirdg hard brexiters off chair yellen will raise rates on wednesday, but then what . She and the fed hope to wish inflation and wage growth ever higher. And get over it. It is a tremendous all market. Where are you, down 17,000 . Good morning, everyone. This is bloomberg surveillance. Im tom keene. Francine lacqua in frankfurt with a very important set of interviews. What do you have today in beautiful frankfurt . Francine beautiful and sunny frankfurt, tom. We are a couple of steps away from the new European Central bank holding were i spoke extensively to Benoit Coeure. The market wants to know when they will start tapering. Very good. We will have a conversation for you. I am a huge fan of a monday briefing with first word news with taylor riggs. Taylor and the u. K. , the foreign minister is saying for those to get a grip, calling for calm after last weeks disastrous election. Angryets today with lawmakers who blames her for losing the majority in parliament. It is a showdown that could conclude her time in power. In france, voters have given a resounding victory to Emmanuel Macronsyearold party. It if the result hold up, macrons back hours are expected to when and then 55 of the 570 seats in the lower house of parliament will put mccrone and a strong position to enact his probusiness agenda. In the u. S. , President Trump may postpone a plan after backlash over his remarks about the london terror attack. According to the New York Times, the president has expressed about the trip. The day after the attack, the president made the charge on twitter that the london mayor downplayed the danger to residents. Sessions will be testifying in front of the intelligence committee, and will likely appear tomorrow before the Senate Intelligence committee. It is the same committee that questioned former fbi director james, last week. Any tweet last week, trump called comey cowardly. Im taylor riggs. This is bloomberg. Tom thank you so much. A lot going on. Futures negative. Down a little low a fraction. Moving on, the vix was a nine. Your sterling weaker here in the last hour. Francine in frankfurt. Frankfurtfrancine in talking really about pound. Tom, everybody wants a talk about about what is going on in the u. K. What that means for brexit. We are seeing pounds weaker now, but there are very big pound swings as people try to figure out what the Prime Minister theresa may hanging on to power means . Here in europe, we are seeing a selloff in certain technology stocks. We can see the volatility, but nothing huge for the markets. Tom i would note that the intraday on friday on sterling was 12636. We are not near that breach of the friday support. With us from washington is our chief washington correspondent Kevin Cirilli of the festivities of the weekend. Help me with Jeff Sessions, kevin, with the attorney general. He is in a really challenging spot. Is there any measure event that he would resign . What is that dynamic this morning . Kevin they fairly patched up their rocky relationship. And center Jeff Sessions is one of the lawmakers to support donald trump. It is still very unclear whether or not his testimony tomorrow will be public or behind closed doors. To thiss urging him testimony tomorrow to be made public, but it is very much unclear, and everyone i have been trying to get an answer out of do not know. Tom who are the lawyers at the white house that he would speak to . The New York Times gives a big play to mr. Trumps personal lawyer. He got face time on the sunday shows. If the lawyering of the white house normal from where you sit . Have alwaysntation had lawyers president s have always have lawyers. It is unclear if trumps lawyer from putting his foot and mouth as some folks have said. Instrations have boiled over capitol hill about the president s personal comments. Tomorrow, you will be hearing questioning from potentially mr. Rosenstein as well, who will testify levy before the house. The testimony is going to continue. Last weeks events with mr. Comeys testimony, again, all of that continuing to dominate here in washington, making it very hard for them to get through anything else. Kevin, talk to me about how the Republican Party is taking to this . Do they gasp with every tweet. Do they still support the president as much as they did several weeks ago . Kevin that is a great question because there is a palpable frustration amongst the public and i have been speaking with. There is an understanding amongst them that they dont feel there is an evidence to withst the president obstruction of justice, but there is a frustration that he would put himself in this position. Later, they will be picking up a russia sanctions bill that they feel well they will begin to debate on russian sanctions and they fill the president could pass this and put pressure on russia for hacking during bit 2016 election. There is consensus on that point that russia did hack into the election. Tom Kevin Cirilli, thank you so much. Our chief, washington correspondent this morning. We need to get reset on our politics, our International Relations and go to the festivities on wednesday, the fed meeting. Ian provide lovely perspective with macroeconomics. It helps that he has a real british view. He will get to the british be and a moment. Does all of this up for dampen gdp . Fomcchair yellen and the going to the meeting going to have to wait on ddt because of the politicians . Sure. Am not not at this point. But they are expecting is the numbers fort gdp the next quarter will be good. I am expecting a three plus for the Second Quarter. It will look ok. Tom bring up the chart. Fu is adamant i do this. Here are all great increases. There is a clear trend upwards, then we jump up with all of this enthusiasm, and again, it is not bad. There is a relentlessness to it. What do they do after june . It is a real debate now. Or december maybe neither, markets i am quite baffled. I think they will hike at least one more in september or december. There is a potential for quiet quite a lively summer. President so we need to come out and talk to the markets before they know we been business . They stopped looking at the data. They want people to tell them out ian it is a little bit of both. Between the gym in september meeting, we are going to get a lot of big numbers. Im also expecting to get another big and priests to get another big increase and the quarterly. The last one was a big number for the first quarter. We will get the Second Quarter number at the beginning of july. If the fed wants to buy into that september high, we will get it like we did in march. The markets were skeptical than the fed push them into it. Francine how with the fed interpret the dollar weakness . I asked Benoit Coeure wcb should interpret euro strength, especially on a trade weighted asset . Softish, butar is not to the point where it would make any material difference. They care about that more than they do anything else. Right now, the focus is on the domestic data, and they are right to think that weakness in q1 was a trajectory. Inthe time they sit down september, unemployment might be 4. 1 . Francine thank you so much. Oning up right here bloomberg surveillance. We will bring you an exclusive conversation with Benoit Coeure. Up 11 30rview coming in new york. This is bloomberg. This is bloomberg surveillance. Lets get to your business flash. As changes are coming in the wake of an investigation of the ride hailing company. Directors did not clarify the future of the ceo and one of his key allies. The board discussed leave of absence and possibly firing michael and named a new independent director. Google is bracing itself for what could be a record antitrust fun, european union. The e. U. Could impose a penalty an investigation. Many expect it to be bigger than the 1. 2 billion fine imposed on and tell back in 2009. Regulators say that google limit its own shopping search. Economists could the Federal Reserve will raise Interest Rates to more times this year. The central bank will also start shrieking its Balance Sheet before the end of the year despite a downturn in the outlook for inflation. Economists expect the rate hike at the end and end in september. That is your Bloomberg Business flash. Francine thank you. The tension intensifies for theresa may as she faces serious lawmakers for her backbench committee. How much pressure is theresa may under today . Is there a chance she will be forced to resign, or do we think that the party is unhappy, but will stick with her . That is the interesting question today. Forget opposition from the Opposition Labor Party or other parties. Toay, theresa may is having face anger within her own party as well, so she is cheering a cabinet meeting. We saw some changes to that cabinet over the weekend. She is going to be facing backbench members, many of whom will be angry about the disastrous Election Campaign that led to the surprise loss of seats and lost the majority for the conservative party. There have been some members that have come out strongly in support of theresa may today, namely brexit secretary david davis, and forced johnson as well. On the other side, you have had comments from George Osborne. May is ahat theresa dead woman walking. Francine what does it mean for brexit . Are we looking at soft brexit or a harder brexit . This is unclear at the moment, francine. On the one hand, what we are hearing is a lot of administers within the conservative party is going to use it as an opportunity to push a softer form a brexit. There are others saying you got the hardline skeptics who may take this as an opportunity to push their point of view forward, but then there is a question over the possible coalition arrangement with the dep. This is another embarrassment because after announcing a deal ,ad been reachedd with the up theresa mays office said that deal has not been reached. She is meeting with the leader of the dup, and they are saying no one was a hard brexit. People are interpreting this as a possibility of a softer brexit. They want a frictionless border between Northern Ireland and britain. Tom she will come back with us later. Story. Ian, it is your United Kingdom. How much of a united . Ian not very. [laughter] tom this constituency is really important is really concerned the Prime Minister johnson. Ian there are various stories that say they would do anything to stop johnson from becoming pm. We have to wait and see. We are a ways off from another election, but there will be one. She will not be premised are for the next five years, that is for sure. List. Ets do the short here is sterling. It here is the gap down here. This little regression of the last two days. We just went below the line. Below the line is ugly for may and above the line is salvation. What does this turmoil due to em . What this what does this do for emerging markets . They have to look attractive given all of this. That is a good question. Across the globe, where is their growth . We have been looking at data and the u. K. And it has been rolling over. Tom are we going to get out of the u. S. And go over you have to think about where there is value. Environment of slow, global growth, it is about where the value is pairing still want to focus on em. We will get back to that, but a very political question. If you think theresa may does not last five years, will she last a year . Will she go through to 2018 . , that wouldture change the Economic Forecast for the u. K. . Ian yes and no. There is a good chance that she may be gone by the end of the month. There are a million different pathways. Is problem with the economy that the incentive was already there before the political situation. The uncertainty has been primarily caused by the brexit situation. Even if we get a quick change of of the Prime Minister, that does not give the u. K. A quick uncertainty on the economy. Away the brexit negotiations that will last two years. In the meantime, everyone is in the dark, and they wont want to invest or people because they dont know what will happen. Tom we have lots to turn lots to talk about. Fu, youred, scarlet people are talking to my people and we will be doing a fed show. Michael mckee in washington, which is always a good thing. This is bloomberg. Tom good morning, everyone. Bloomberg surveillance. In new york in frankfurt, germany. We need to go to doha for middle east anchor. What changed over the weekend . What was the dynamic in the energy within the steam bath known as doha . The energy was one where people are holding their breath to see how the first of diplomatic activity will play out. Two key things i want to play out one is a regional effort. Ed by the code weighty amir that is not yielded anything tangible. The qataris are not willing to listen to the issue of their neighbors. Trying to engage and get their support. The United States has been trying to get involved, but we do not have anything real we can hold up and say, you know what, this is going to be resolved peacefully and swiftly. Tom the backdrop of skyscrapers behind you is gorgeous. I believe they own everything but the new york yankees. Are they solvent . Are they like abu dhabi with your money then anybody can count, or are they like to buy with trying to figure out how to get to july . The banks are solvent here. They got an enormous pool of liquidity t they canap liquidity they can tap relative to their peers. You can argue that there is a liquidity squeeze, but nothing to be worried about. They did a health check in terms of what what happened if tactical flows go out, but the qatari bank system, they say is resilient. Tom thank you so much. We will continue our discussion with Terri Simpson a blackrock and even jefferson, and also Francine Lacquas cover station with the most interesting person Benoit Coeure. The biggestone of monetary from new york in frankfurt. This is bloomberg. Tom good morning. Frommberg surveillance frankfurt, germany. Spoken. Eople have they dont like theresa mays decision when it comes to leaving the european union. Has rejected a tory extreme hard brexit, the version put forward by theresa may, and the government has to recognize fat. Recognize that. The consequences are businesses choosing not to come here, businesses choosing to leave. The battle over brexit is being used in order to get more autonomy over transportation and infrastructure. President trump may postpone a trip to the u. K. The president has expressed skepticism about the trip and the last week. A day after the attack, trump made the accusation that the london mayor downplayed the attack. Jeff sessions has offered to testify before the Senate Intelligence committee. Sessions is likely to appear tomorrow. It is the same committee that question james comey. President trump called comey cowardly yesterday. French voters have given a resounding victory to Emmanuel Macrons party. His party was the big winner in the first round of elections. To winkers are projected as many as 455 of the 577 seats in the lower house of parliament. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you so much. With andere to talk ecb board member. Last weeks meeting was important because the central bank changed its communication draghiy, with mario dropping a longstanding reference to rates being cut further. It also lowered its core cost for inflation and that the underlying picture remains subdued. What does are still not seeing inflation where we would like it to be. We are still not seeing the criteria for inflation being sustainable being met. How much of a nightmare is stronger gdp on qe . It is good news, unqualified good news. That is why we changed our communications to adapt to the changing reality. It shows our monetary measures and a lot of jobs have been created because of the accommodative monetary stance. So we willandate, have to focus on inflation. Why was tapering not discussed last week . It is too early to discuss it. We discussed the Economic Situation and prospects for inflation. There was a sense of progress when it comes to inflation, if you look carefully at the forecast, inflation is less dependent on our Monetary Policy measures, which is a step in the right direction we are not there yet. Francine when do you think it needs to be discussed, the idea of tapering . To give a date. I dont think it serves a purpose. We are datadriven, driven by fax, so whenever we see the Economic Situation and the prospects for discussing it. Francine do you have in your mind a perfect idea of when tapering should be discussed and what it would look like . Depend onthat would the economic numbers coming inflation. We obviously have to discuss it before the end of the year. That discussion will take place, but it will take place when the data will support it. Meeting is july a life. We do work in july. As i said, the discussion last week was about taking stock of the progress in the economy, the progress that will improve support, a discussion we will have again and again. The governing council wants to in line with reality, and that will continue. Executivethat is the board member of the ecb saying inflation is becoming less dependent on stimulus. You also have breaking news on ge. Yes. This is after a 17 year run at namedhn flannery is ceo reaffirms 2017 forecast. Coming you need to know the following names. The sale of the historic ge , the idea was driven by mr. Flannery and has been critically involved in other transactions, including the smooth initial Public Offering of their consumer loans space. He is the combination of a financial guy along with an International Operating guy. Mr. Flannery is out of Fairfield University and wharton business school. Where did you go to school, in the midlands . This is in your wheelhouse. Is the international emergingmarket company come and heres the guy that had to go out and do the emerging market tour of duty. Every time you have someone coming in with a lot of progress that he has coming in, this is interesting for the company. Cant speak a lot about individual Companies Come but we ares on who the members come and this looks very supportive. 53 billion in the united in europe, billion 21 billion in asia, and another 20 billion spread out over the world. It is a multinational dealing with all the politics, john the emotion in france, dealing with that. It was every other day. Youll run into the politics if you do any big deals in france. Maybe with macron it gets a bit easier. A historic moment. Lets remember jack welsh out of the old manufacturing juggernaut of general electric, then he gave over the reins. Years,been 17 extraordinary. I might be off by a year or so, and now stepping aside for john flannery. We will continue our conversation in this historic moment for american industry. Ian shepherdson, Terry Simpson with us. N wednesday, the fed decides we would do extended coverage beginning at 1 00 p. M. Michael mckee will be in washington. From germany and new york, this is bloomberg. Francine bloomberg surveillance from frankfurt and new york today. We spoke earlier to an ecb board member and asked not only about inflation, but the main risks out there. We see Downside Risks mainly , future u. S. Ide economic policies, emerging market economies, and these are the risks we want to focus on. Francine he is a board member there. In shepherd is still with us. Talk to me about how the ecb should deal with inflation. I tried to get out of him how to deal with tapering, but he says wait for the day. We cant talk about it too soon. Broadbased increase in core inflation across the eurozone is a high bar. If you can pair the German Economy with the southern economies and peripheries where there is little inflation, there is tension with the ecb because theyre setting policy for the zone as a whole, so there is a real war going on. They are hoping it will raise inflation across the holes sown, and at that point, it will become straightforward. , and athe whole zone that point, it will become straightforward arid they dont want to go to early. Straightforward. They dont want to go to early. Francine is there concerned they will be behind the curve . If i was sitting in germany, i would be thinking i dont want it to get tighter, but it is a currency zone. They have to deal with the zone as a whole. Now, the inflation risk is in germany, but they cannot respond to that alone. They are not behind the curve and i am confident they are doing a decent job at the moment. Francine what is your take on this . I would agree. Monetary policy is benefiting some, and not benefiting others. Because of tight labor markets in germany, you will see a inflation there first and foremost. Positivewe are still on the region and the prospects for growth, so we have been shifting some of our portfolios there and have seen significant flows coming into europe. We expect that to continue for the rest of 2017. Tom we will continue. Let me show you tv. Try this on your bloomberg at your desk. You can do this at your summer cottage like terry shepherdson does. Terry simpson, i will get it out correctly. Look at an intraday four pound sterling. There it is. You can take that chart right off the screen. This is bloomberg. Tom this is bloomberg surveillance. Spoke exclusively with an ecb board member and got his thoughts on inflation and ask about risks and fiscal policy. Council hasning said the balance of risks is balanced and we see Downside Risks from the outside. We see risks surrounding u. S. Economic policy, emerging market economies, and these are the risks we want to focus on. Less on the inside than they used to be. Qualify theld you tensions inside the governing council . It is healthy to have different views. Beneed different views to reflected, different economies inside the eurozone running at different places, so far, so good. Weekwe have decided last was for much a consensus, which give strength to our communication. Francine how do you rate political concerns . Is there a danger of that because frances outoftheway that we now underestimate political risks . Political risk is there. Decide onfor us to political risks. We are not a Political Institution and dont decide based on political outcomes. We decide on economic facts. That said, it is true Political Uncertainty has held back consumption and investment to some extent in the eurozone. I hope in france, this is not the case anymore with the strength of the french economy, and i also hope the outcome of the French Election can support a momentum of reform in france and in europe. Eurozone andonger for Monetary Policy to be effective. Comes to when it fiscal policy come mario draghi has been asking for fiscal policy for his long as i can remember. Why would it be different this time . It is about improving labor markets and making the eurozone work better, which is say political discussion that the ecb cannot and should not lead. We dont have a mandate to do that. We need eurozone members come in germany and france, to lead the discussion and am confident that discussion will start. Francine does the u. K. Election last week make your job harder or easier . The u. K. Is not so important for the eurozone economy. I wish the best for the u. K. Economy. End, that is not a major risk for us. Francine clearly the focus was on inflation. He says inflation is less dependent on stimulus. We will have more throughout the day. Tom thank you so much. John flannery is the new ceo of general electric. More on the changing thing known as ge. Were you surprised by this announcement . I was not surprised that a replacement was announced. T was bubbling for a while tom with fresh blood is there a tincture here of underperformance . He has remade the country in , hepinion, operationally has done a tremendous job of making the new ge. The problem is the earnings have going. Not gotten organic growth is not bad. The tides had changed and people felt jeff was not the guy to move them to the next phase, and i think this is an important step. Tom this is a chart back to 1993 from jack welsh now to the new mr. Flannery. Of black demanded i do this log. Here is the expansion through go 1990s, and then down we with the longterm underperformance, but many would give him the credit for the ge capital, and the huge recovery as well. Stockthe recovery of the or that longterm disappointment through a tumultuous time . Given 2009 was a shakeup for everyone, i think of the biggest jeffs legacyl be is he decided ge capital would no longer work and took a huge step to go back to their roots, which is an industrial manufacturing company. I give him credit for that. The underperformance that he could not move the needle on earnings and set a bar of a two dollar number and people beat him up every step of the way and he would not step away and say to dollars, we will not make that. People felt he could not meet his next big goal. Tom will there be a generational shift that ge . Be you just presume they move on to a new set of leaders . Will they provide comfort to mr. Flannery . That is a good question. He comes from an odd background in that he did have operational experience and has run health care and done a good job, but he rolelso in the strategic where he was looking at all the businesses. Im not sure there will be business changes. In terms of management changes, it is unclear to me. Fornt have a good feel where he might make shifts in the Management Team at this point. Tom i need to give a profound thank you to ian shepherdson. We would love to have both of you back here. With all this breaking news, so we will continue on Bloomberg Radio with you guys. Francine, will we have a Prime Minister by 2 00 p. M. New york we have theresa may. The question is whether she will stay. This is probably the most significant question for the eurozone and the u. K. It was on the 19th it of june 19th of june that present negotiations were going to start and now depends on whether theresa may can hang onto her seat and stay Prime Minister and see whether these negotiations start on time. Francine we will see. A Foreign Exchange report, quiet, but sterling weaker over the last two hours. 126. 87, that is up through recent lows, but it is getting there rapidly. There is the Foreign Exchange report. A lot more coming today. This is bloomberg. Jonathan the tech selloff goes global, spreading through asia and across europe, Emmanuel Macron tightens his grip, theresa may loses hers, and changes at general electric. York, good morning. Good morning. A warm welcome to bloomberg daybreak. Up tobegin by getting you action. Futures softer, down 56 points. Markets weaker. Sterling takes another leg lower. Treasury yields higher for a fourth straight session. David lets get back to that big company story. Hasral electric