tom: the prime minister travels to brussels in search of change. cameron says there still is no guarantee on a non--brexit. nestle, they turn out for datable cash flow. they turn out butterfingers. thisll speak to nestle in hour. it is bloomberg "surveillance," live from our headquarters in new york.

with me as caroline hyde. do you even know what a butterfinger is? carolyn: i know what a kick cap is. -- kit kat. is. tom: it is not european chocolate, it is an american acquired taste. as of right now we need to get to the bloomberg first word news. vonnie: david cameron hopes to close the deal on that u.k. membership. confessions -- if he gets the concessions he wants there will be a four month -- warned there is no guarantee that he will get an agreement. turkey's prime minister's is a

overnight, turkey carried out airstrikes against kurdish rebels in northern iraq. turmoil has gotten worse in the ukraine. -- there isoalition a battle between president poroshenko and that ukrainian prime minister. obama will make history with a trip next month to cuba, 55 years after the u.s. broke diplomatic ties amidst the cold war. more than a year ago, the obama administration and cuba's communist government agreed to normalize relations. the regime is still criticized for human rights violations. leadd trump has a big

prior to the south carolina primary. marco rubio jeb bush are fighting it out for third. rubio got a big boost on thursday when he was endorsed by nikki haley. i am vonnie quinn. tom: let's look at data here. week acrossa clumsy all sorts of things. on, risk off idea is fading away into sort of a clumsy feel. flat, the euro has done nothing for three days. oil with a left over the past few days. improved, 22.31. spread grudgingly curve, wet -- yield

need to watch again, a determinant. stronger yen after weaker yesterday. deutsche bank has been all over the map. -- caroline,red what do you have? just starting to come in on the senior side of things but we are looking at the stoxx 600, shares desperately trying to ramp up to sustain yesterday's rally. what headlines are coming out this morning, we are seeing them cutting eurozone growth outlook from 1.47%. it is germany they are raining 1.3% with german growth at . global outbreaks are being -- outlooks are being cut. and trustingly, they hold that view on chinese growth study. they still see six and a half percent. tom: dr. mann was with us a few

months ago from brandeis university, and the expert in the united states on trade. catherine mann it's is no words and calls it flatlined. she looks for urgency policy response, so that is a really important note to study from the oecd. i am glad you brought that up. let's go to over to the terminal. i am boring vonnie to death. it is just oil, down we go. $31.e: we are above i love how our story puts the iran part of this agreement, the cool embrace. tom: steve short looking at this in the macro and say on a somatic -- on an asymmetric basis, we will test lower.

caroline? caroline: cmc holding that view that until we hit over $36 on need, that is the level we to see any sustained growth on oil. as we see that correlation write-down, let's focus on china. bank,na's central conducting open market operations every working day. let's go straight out to shanghai to get to the bottom of what this means. allen wan is joining us now. this is about control of liquidity, control of cash in the system. they want to do it daily. month it seems that last we had this record surge in lending and a lot of people saying it had seasonal effects but this will not continue. what we have seen the last few

days is the pboc and government are intent on maintaining this lending momentum to boost the economy. --dman sachs came out with a they came out with a very bullish report on the economy saying that even though our growth has continued to slow and it will be bumpy, there is nothing to worry about. low and behold, the pboc comes out with all this measure that will reduce the rate that charges lenders to borrow money. it just shows the government is intent on spurring the economy through lower interest rates. is the consensus belief as a general statement on economic growth in china? oecd and catherine mann have just suggested over 24 months, it is 6% plus. how alone is the oecd? allen: it is really hard to say.

they are probably in the lower end of the spectrum. today, the japanese ministers are saying that china is poised for a hard landing so there are a lot of conflicting views. last fewave seen the days if the government coming out with aggressive measures to boost lending, that we have not seen since 2009. the stock market more than doubled when the government came out with their record stimulus that year. tom: allen wan, thank you so much. caroline: we have the perfect guest to do it with, andrew sheets. talk to us, andrew, about your view on what is happening in china. at the amount of intervention coming from the government to support lower borrowing costs and they are trying to sustain cash within the area as well,

with the over market operations. are you backing goldman sachs? andrew: i think in the short-term, these measures are clearly good for the market. confidencehas lacked in the ability of china to stabilize its growth profile. i think you have seen some of that in the concern around commodity markets and the weakness of economic sectors. policymakers are focused on these issues, aware of these issues. the fact the currents he continues to hold in the range the pboc indicated is a good thing for confidence. if weing to keep in mind, think about where a level of the market concern is over china in the big heckscher, that has related to the buildup of credit growth in the country, excessive growth in the eyes of many. this short-term boost is a good thing but i am not sure the market is going to look at that and say that as a long-term

solution that will make us feel confident on the broader chinese macro picture. caroline: are you expecting banks to start falling over? are we going to see this credit out of the market? andrew: i think easing policy is the right thing to do. given how entrenched deflationary pressures are, i think lower rates in china make sense but i think what the market wants to see is after a long year. were credit has grown -- a period where credit has grown and china, looking for signs that china can grow the economy. look at the oecd report it is about a dampening. how do you create growth? if you are advising catherine morning, how would you say that we are supposed to generate global growth?

twoew: i think there are key elements of this. policymakers -- and i think they are trying to do this -- are keeping interest rates below neutral levels, which is net stimulative. they cannot in themselves stimulate growth they can at least help. i think the second element is, what would help his in areas where there is demand deficiency , and i think you see that across a number of places, to look for instances where you would see longer-term investment either on the corporate side or on the government side. i think given where corporate and government can borrow, you can make the argument that there should be projects that can generate a return in excess of the current darling cost. -- borrowing cost. those projects obviously have to

be made with the assumption they are net contributive. tom: andrew sheets with us for the hour for perspective on the global economy. we will get global perspectives from the chief executive officer of nestle, paul bulcke will join us. caroline hyde in london, i am in new york, stay with us. ♪

tom: we welcome you worldwide on a thursday morning, in gorgeous new york city. i took a walk in central park last night and it was truly lovely, a late winter beautiful mark -- walk.

right now we need to get to our bloomberg business flash with vonnie quinn. vonnie: nestle says sales rose in 2015 at the slowest rate in six years. they were hurt by weak demand in asia and a product recall in india. they say sales this year will go above last year more than 4%. we will speak to nestle's ceo. has got its greatest profit in the past two years. vodafone is going into the bond market. they are planning to raise about $4.1 billion by selling mandatory convertible bonds, convertible into regular shares. that is our latest bloomberg business flash. caroline: of course, we have

always got to keep our eye on the prices. we are obsessed on commodity -- with commodity movement, wti currently up. brent extending those gains after iran voices support for the output freeze. we want to see how much impact iran has. javier bloss is joining us. the jury seems to be out. the ihs says this is important, but they do not outline whether they're going to be dampening output themselves. javier: it is a very clever play of words that was used yesterday. he is welcoming but is not saying whether he will adhere to the agreement. i think saudi and arabia did what they needed -- and now is the moment of true diplomacy going back to the back channels

to negotiate how to move forward . i think the market will get some comfort that iran is being rejected. this is putting a flow into the oil market, it is not a green light to go and beat up a market. caroline: we have a major reaction when you are saying 2% gain on wti. we are still not hitting that much above $30, but is there a flaw? we are freezing at record high production where we are still seeing shale come out of the u.s.. see a: you will begin to flow because we have gone significantly below what we were expecting to go. we are $30 and the physical market. in many places they are trading well below those levels. to shuts are starting down production and that is what is really creating a bit of comfort to the market. the biggest question is, the

market is seeing action from said,n a year where they we are not going to do anything. now opec is beginning to talk about doing things. the market is perceiving that opec is back into movement. tom: buried in 25 or 30 headlines this morning on turkey from the imf, there is a quote from a turkish economist on oil for longer. i know there is a benefit to cheap oil prices, cheap natural gas prices, are we seeing that now that the imf guesstimate would be even worse if oil was at a higher price? is a hardthink this issue that a lot of forecasters have struggled with because the regular relationship has broken down. i think we have to think about why, one reason could be the

decline in oil and the type of factors driving that decline have been very different from anything we have probably seen since 1986. on the demand side, you are seeing month after month small benefits to consumers, huge one off declines in capital expenditure that if hit immediately and been a big drag to growth in the u.s. and elsewhere. i think it is those big one drags-- one off drugs -- -- is: andrew sheets threatening to discuss income and substitution of facts, we do not do that on thursday. there will be a quiz at the end of the hour on the economics of oil supply and demand. next hour, we will not look at the micro, we will look at the macro of technology, health, and our social good in

america. we are happy to bring michael porter in the next hour. ♪

, alwaysda greenhouse definitive on the supreme court and the new york times on justice scalia. i have to read every word of that and i hope you do too. strong new york times op-ed today.

vonnie, you have a different take. vonnie: the title of the op-ed ofa variation on the theme why candidates are getting along so well in this election. and i quote "american voters to be demanding change but sometimes they turn to reforms and other times two scapegoats, like refugees. the historic question in 2016 is which direction the popular revolt among american voters will ultimately take." tom: and to his point, whether liberal or conservative -- and it is interesting that the word liberal is coming back. but the basic idea of the calendar, it is march. we are getting there so with mr. trump and mr. sanders gathering many of the headlines. vonnie: there was a recent poll

, thecame out yesterday size of the lead is growing. the question of south carolina is third place. tom: andrew sheets with us this morning. not to get personal, but do you do a write in ballot? andrew: i vote absentee. tom: it shows the international reach of the election. it is germane to help close this could be. your thoughts on the tension as we start to get into the serious primaries. andrew: i think there are a few things to keep in mind. i think there is a long track record of the early primary votersbeing dominated by who are at more of the political extremes on either end of the political spectrum. process,ve through the how much does this momentum keep up, and i think that is what

markets are focused on. i think at the moment markets have been quite unreactive to the political landscape, may be rightly so because it is still early on in the process. i think you will see more focused on where this is going to settle out. caroline: we have to bring it close to home because politics will be dominating your trading day, as the brexit debate unfolds in brussels, we will take you there live. this is bloomberg "surveillance." stick with us as we watch the markets continue to trade volatile, mine is down in the u.k. ♪

tom: good morning, everyone. let's look at the data. curve steepening, clumsy risk on, non-correlated, all over the place.

1.08%sis points, difference between the two year and the 10 year. the yen is stronger and we are watching deutsche bank turn and try to find a direction. here is our bloomberg first word news. vonnie: turkey bombed kurdish militant positions in iraq. peoplelled at least 28 and the turkish prime minister says turkish rebels in syria carried out the remark -- the attack. change in the relationship between the u.s. and cuba, president obama will travel to havana this month. he and president raul castro agreed to normalize relations for the countries that have been estranged for more than half a century. congress will not lift a trade

embargo. south korea is warning that north korea is planning terrorist attacks. he has ordered his military to increase the terror capabilities. they are pushing the national assembly to pass new anti-terrorism bills. ted cruz leads all presidential candidates in donations from the oil industry. he has surpassed jeb bush, his father, and brother. large energy investors have given $25 million to crews. teche, facebook, and other companies are supporting apple in its fight against the u.s. government. it has refused to help the government unlock a cell phone of one of the terrorists from san bernardino.

our 24 hours day powered by 2400 journalists and 150 news bureaus around the world. tom: this is a huge deal for everyone involved. areae: and such a great between terror and privacy. tom: my answer as dumbest guy on , i want to know what paul could ask you thinks about this. mr. cook is playing a dangerous game of brinkmanship with the u.s. government, just as an opening line. vonnie: a fantastic conversation between megan mcardle and and ian lake. fear of the hackers or fear the fbi. tom: i love the assumption that it goes to the supreme court. vonnie: i think the court will have to be the final arbiter. hyde rings in our

next procedures death -- guest to talk about brexit. caroline: we have been obsessing over it in the united kingdom for the best part of six months and now eu leaders are meeting in brussels this afternoon. that could determine the united in the eu, ande ryan chilcote is joining us. over sevenat, just hours until the meeting starts. what is the latest? we will be getting the cars rolling in, and a dinner meeting at 8:00 p.m. ryan: the bottom line is everyone wants to get this over by friday dinner. cameron shows up, he is going to meet with the other 27 eu leaders. the hope is that everyone well, after they discuss what written --ts today, get a good night what britain wants today, get a good nights sleep, reconvene

tomorrow morning, and if cameron gets his wishes he will have a deal by noon. he will fly back to his offices on downing street and an a referendum on june 23. is that youthe plan have dinner at 8:00 p.m. as well. what is the number one ask that the prime minister is asking for? ryan: the number one ask is on migration, tom, and he is seeking to limit some of the benefits that eu migrants in the u.k. can get. there will be some argument about that, in particular some of the eastern european countries are can discern -- britain getst if away with it other countries will try to do the same. concerned that could give the british banks eight competitive advantage.

the bottom line, everyone wants to get home on friday night. everyone wants cameron to start his campaign to keep written in the european -- britain in the european union so they can move past this issue and get to other stuff. caroline: ryan chilcote live all day. let's bring in thomas raines. brian, do you agree with that it is the welfare payments that are a stumbling block, or the fact that we might see concerns starting among other eu members? there are four issues that cameron brought to it is the final two which are the trickiest. the economic governance issues, it seems like most of those have been resolved. we had some talk before hand,

particularly from the french for their concerns. they want to avoid any sense that the u.k. is getting special treatment. it seems like a deal there is pretty doable. on the welfare side, that is the quickly -- trickiest issue. issues ofith discrimination between citizens from different countries and the u.k.. as ryan mentioned, we have heard from eastern european countries who have concerns about pushback for access to benefits. there are many big issues the eu is facing at the moment, the migration crisis, lingering issues in the eurozone. people want to give cameron something to come back and campaign on. caroline: what about the campaign trail for the referendum? is the deal going to be strong enough for the u.k. voters to

follow it? thomas: i think the idea of the renegotiation was for two reasons, to try and give some to tories whor want to stay loyal to their prime minister but say they have at the statusgs quo, and cameron to present a new deal. in a way, the specific terms of the deal, i do not think they will persuade any of the hard skeptics and i think the value is chiefly rhetorical. tom: thomas raines, i am not informed on this. most of my reading comes from and's brave -- mel gibson's braveheart. does mr. cameron have to keep in the calculus of scotland with ?ngland as he goes to brussels is that front and center or is that a back story for the movies? thomas: i think there is a real

issue that if the u.k. as a wele goes to leave the eu could see another referendum in scotland. the smp has said very clearly they will look to hold a second referendum if there is a material change in circumstances for scotland within the united kingdom, and they say they think leaving the eu would qualify, but they have political circumstances to consider. i will be honest, it is sort of like, caroline is talking about it every day and francine is going mental but now it is here. what will you listen for as the back story out of these brussels meetings? thomas: i think what we will look for is there will be a -- declarationon from cameron that he has a new deal. he has a tricky hand to play. he does not want to oversell what he has got.

he wants to have seemed to have one, not in concessions, and not be offering people the status cuomo. -- the status quo. caroline: bring it back to business. we have got the footsie, -- the , business, the economy, not too worried about it? andrew: i think the markets have not focused on this enough and well as it gets closer to the vote. i think the vote will be closer than markets are expecting. it is a classic intensity gap issue. wonder, why are certain candidates in the u.s. as popular as they are? it is because the voters that are focused on the stage of the primary are focused on certain issues. caroline: protesting. andrew: the same thing for the

is., the case for leaving very simple and the case for staying is nuanced and complicated. i think the reason it could be a close vote is because the voters who want the u.k. to leave are motivated i one specific issue. -- by one specific issue. i think this is something we see on u.k. assets relative to the rest of europe, the reason we are bearish on sterling. tom: that is a very important point to watch. i guess a weaker sterling means a weaker united kingdom, is that a good correlation? thomas: it would be good for u.k. export. leaving the u.k. would be an economic shock for the united kingdom and andrew would give a better sense of this, but i think you would cad valuation and sterling and big uncertainty in the future in terms of trade.

i think this will be a major economic shock. tom: thomas raines, thank you so much. coming up. i remember when it was a dog company. nestle has been outstanding for the past 10 years. paul bulcke is their ceo. we will ask him some tough questions about their financial and political path forward for the leadership of nestle. ♪

tom: good morning, everyone. it is time for a surveillance ceo interview, and this is one of a success story. paul bulcke is the ceo of nestle. i remember when it was a dog

stock and with his leadership, they turned nestle around. let's look at the chart, this is absolutely stunning. you cannot make money in espresso. how about 11.8% per year out of a global food company? paul, wonderful to have you with us. how do you link the next 24 months at the sales line with nominal gdp? the oecd just cut global estimates. how do you in a sluggish global economy with you need to make top line growth? paul: let me answer first and say, we do not sell gdp. we sell to people product's they love and that they value. it is true that the growth projections are subdued. but what we do see is quite a bit of flapping of markets.

europe, united states, have grown through the whole crisis. it is a matter of connecting, understanding, creating the value the consumer is looking for. tom: on a price basis you could find growth but really what you are doing is trying to manage the next nespresso. where are you looking? how do you do that process? a sizableave actually portfolio to manage first. we have to manage that well and we have a portfolio management tool that looks into each category in the market, and pays down a few criteria. can we win it? candidly enjoy it? that is what we do and all of our businesses.

when some a category fits into our strategy where we could help fill a void, that is where we go out and have these acquisitions. there is so much to be done with what we have. we do have a sizable portfolio and that is where our prime attention goes to. tom: you have been engineering the cash flow for years. i want you to engineer the succession process. i spoke with karen in zurich and she was adamant over the debate of chairman and ceo positions. what you want to take over both jobs whether it is out a year or are two years or three years, or do you think nestle needs a divided management? paul: i am not going to comment on that. i do not think it is the time to do that. that is still out there but not for now. we have a board that is

responsible and will take that up in due time. tom: caroline hyde does not know what a butterfinger is. the next time i go to london, i am bringing a case of butterfinger for caroline hyde. caroline: i like the amount of cocoa in my kit cat. do you have to drop your long-term goal of 5% to 6% growth? you brought in less than that, 4%. can you sustain that? paul: it is a longer-term line we want to walk and that is what we will do over time. for the last years in a softer trading environment, we have to be realistic and i feel that 4.2% is outperforming the market. of that 5%it is part to 6% low return so i am ok with that. caroline: what about new countries you are entering?

what about iran? paul: we are already there. we have two factories and 760 people already. we are there for a long time and know how to work there. the idiosyncrasies of this country, and that is a strength we have. we have a factory for water and one for nutrition. up, how it is opening can we and gained our presence or brand in that country even more now? .om: now we are speaking french let me ask you about the savoir faire you have at the swiss bank. what do you need from thomas jordan and the swiss national bank? switzerland has struggled with the money coming in, the stronger swiss franc.

what do you need from your bank? paul: that they stay independent and do what they have to do. that is something we have to cope with. like we did 10 years ago, we would have 50% more turnover in the swiss franc so it is affecting us and the last five years, 30% down. it is for the aesthetics that we grow getting a smaller number in the swiss franc. that is how it is. paul bulcke, thank you so much, the chief executive officer of nestle. it has been really something. coming across all of our bloomberg platforms, howard martz, the discussion will be in the 8:00 hour.

i am in new york, caroline hyde in london. this is bloomberg "surveillance." ♪

tom: we welcome all of you

worldwide in london, and new york, this is bloomberg "surveillance." vonnie: barclays may close it egyptian unit, according to people familiar with the matter. it may be worth more than $500 million. the ceo is deciding whether to keep emerging markets' businesses. dealers to buy their new vehicles. matterfamiliar with the say if bmw had not pushed the loaner strategy, and might've lost u.s. sales to lexus. global gdp will rise 3% in 2016, the same growth weight -- rate as last year.

one reason, slow growth in the u.s., germany, and brazil. caroline: we have got to bring it back to those breaking headlines from the oecd, the fact that global growth trajectory being downgraded on a day where we are digesting fed minutes. we have ecb minutes due out at 12:30. let's bring in andrew sheets. we have ray dally l, head of the biggest hedge fund in the world saying central banks cannot do enough. our central banks lost now? clear theyhink it is have more limited policy options and i think the market is realizing they cannot stop a global recession if it is happening. caroline: is it happening? do not think so, but that would not be a new phenomenon. withve had many recessions

the federal reserve and the ecb and we were not able to prevent that. they cannot change the overall dynamics of the business cycle. right now, i think the market is ringing its hands with this fear that the data that central banks cannot stop that and down we go, but by the same token it works in the other direction. i think that means if the data gets a little bit better, and we saw this in the market reaction yesterday, then all of a sudden this does not seem like such a hopeless case. that is important and that would follow the pattern of what we saw 2014-2015. central banks stepped back and the data stabilized as you move into march and april. tom: do you share hans redeker's scathing indictment of rates? andrew: hans is a very smart gentleman.

i think it is clear that negative rates have a limited ability to work, and i think my colleagues have also done some very good work on this, that the are, if negative rates designed to further ease financial conditions, then that does not work or cannot work given their relationship with the banks. it causes banks to shrink their balance sheets and land less. tom: we are going to come back and continue this discussion another day. hour, michaelnext porter of harvard business school will be with us for the next seven hours. ♪

tom: there are two americas. we consider the barriers to

innovation entry with michael porter of harvard. lagarde consider oil lower for much longer. janet yellen will not blink. she is the central bank's adult in the room. this is bloomberg "surveillanc " ." i'm tom keene. with me, caroline hyde. brexit day begins today in brussels. what are you looking for? caroline: i really want to know precisely what the terms are. is it the welfare payments that will be the hardest not to crack? because june the 23rd is the key date. what david cameron wants is a shorter time frame. he was to get this through by the weekend and he wants to start campaigning as quick as he can. and stay with any e.u.

tom: the timeline is so shockingly un-american. they need to take three years and debate starting with the iowa caucuses. british prime minister newd cameron hopes to get membership terms for the united kingdom. concession hethe wants, there would be a campaign leading to a nationwide referendum on whether to stay in the e.u. last night the e.u. president warned there is no guarantee cameron will get an agreement or the kurdish militants in syria -- the bombing in ankara. 28 people were killed in overnight, turkey carried out airstrikes in northern iraq. the political turmoil has gotten worse and ukraine. after one of the parties left the alliance. there is a battle between the president and the ukrainian prime minister who survived a

no-confidence vote in parliament. president obama will make history with a trip hnext month. he will visit cuba. more than a year ago, the obama administration and cuban government agreed to normalize relations. congress refuses to lift a embargo. donald trump has a big lead heading into sunday's primary in south carolina. 19-point lead over ted cruz. marco and jeb bush are fighting it out for third. rubio has been endorsed by south carolina governor nikki haley. time case it is far behind. -- tom kasich is far behind.

tom: extraordinary the lead trump continues to have. not much going on. yields a little bit higher. but nowhere31.65, near anyone's take ou technical breakout. when i feature is deutsche bank trying to find a legitimate bid. curve steepening, making things exciting for the banks. caroline: let's look at the stoxx 600. holding on to are gains. even though the miners continued to drag us down today, yesterday, the rebound up 8%. we are in a bull market when it comes to miners/ . can you believe it? a lot of stocks going ex-dividend. gilt flat.

this is the best major bond market so far this year ahead of that big brexit question. 9% compared to the u.s. 1.2%. the oil chart, down we go. we cannot get through. we are not to any form. form.ough any shork says it is asymmetric. he does not have a clue higher or lower. he says based on what he sees, lori would be a better guess. our guest is to speak to someone intelligent about the themes of we cannot start better than the aerospace engineer for princeton at harvard business school, michael porter. stood me up in davos. we are barely on speaking terms. you didn't miss anything at

davos. it was the most confuse meeting i've ever seen. why is there a confusion about where we are right now? michael: there are a lot of crosscurrents. is not a wholere lot of energy and positivity in the world right now. ofs a time of crosscurrents, struggle across all major economies. and a really lack of a path to jobth and a path to generation that are the fundamentals that are going to get us into a better place. tom: later i want to talk about our social good and talk about your care for work on health care. we looked at cancer yesterday. first, let's start with michael porter on our political system. you own the phrase " barriers to entry." why does so much of america feel so angry about their inability to enter a more productive

america? their barriers to entry seem tangible. political system to me and a strange thing coming from an economist, our political system is our number one problem. we have a political system that is not generating solutions. and it is not designed to generate solutions. it is a political system that is locked up by the two parties. there are enormous barriers to entry to freshness and new innovation. this election is something we have never seen in our lifetime. it is not about solutions. it is about two sparring partners that win by sparring not win by solving. caroline: as we have been seeing, this is a trend across europe. we have seen the extremes gathering steam. you see it in france and in

greece, the far left sweeping to power. michael: there is a massive protests going on. it's a global protest. mr. trump's support this process. bernie sanders support is protest. notink because people are seeing progress p people are not seeing governments solving problems. -- people are not seeing governments solving problems. talk much morean fluently about america. we have not gotten any progress on any of our most important issues, our tax system, immigration, our infrastructure, our education. all of the things we know we have to fix we are not making any progress. tom: i have cited in interviews how you are the anti-robert gordon. the professor at northwestern with a book out on the fall of american exceptionalism.

the nostalgia for another era. i have always heard to push against that. defend our present exceptionalism, defender innovation. michael: i think america is a remarkable and still highly innovative place. we have enormous strengths, in numerous opportunity for innovation. we have really quite a competitive business community. we have an enormous ability to generate new companies in high is holding us down is this diversions between those with skill and those with a capacity for innovation and ordinaryt are arjust workers. tom: it is the innovation for the few. vonnie: in "the financial times" there is a fantastic op-ed talking about innovation in america and britain. and how there is plenty of and britain and american companies tend to buy a british companies. brainpowerturning is

into thriving tech firms but they end up in the arms of american giants. michael: the system of financing and capital and risk capital is very well developed. companies can raise lots of money. but, and there's no reason why america is not and can't be the most competitive economy in the world but what is happening that scares me deeply is that the gap between those people that are thriving and the greatness of america and those people that are getting left out is causing us to not make headway. system,hin a bi-modal alan crude and talking about inequality. president summers of harvard, professor hummers talking about secular stagnation. terse are anti-por phrases. it is to america's. what is your prescription to bring the joys of technological progress to more americans?

michael: i think we have to equip more americans with the capacity to be players. again, there's no, nothing new here. our, fundamentally, the key challenge facing us is skill. tom: agreed, yes. michael: yet, we have not made progress in doing anything about it. we're having combat between those who think that we should not touch anything about our education system and our unions are fine with those that think we have a problem. we are having combat. we are not making any headway. we're not making any headway on obvious things like our infrastructure, which we know are making us less efficient as an economy. and pushing jobs that middle-class people can do to other countries. we are, the tax policy issue doesn't sound like it is about innovation. unless we can get the u.s. in

the game for ordinary work. see, we are not competitive for ordinary work anymore. we're competitive for high-tech. vonnie: you mean manufacturing? michael: it is work that requires middle skill. we, we're relatively high cost. we have high taxes. so, all the jobs that do not require your stanford degree, those jobs we're losing to eastern europe. and other parts of the world. the generation of work for the people that we're talking about that are getting left out -- tom: we will come back. michael porter with his focus on america's health care system. coming up, michael mckee was in washington for the minutes of the federal reserve. always interesting. we will look at our central bank with mr. mckee. stay with us. bloomberg "surveillance." ♪

a data check. the stock 600 power in up. two week highs. oil and gas leading. miners after an 8% gain yesterday. oil up 2.5%. we are getting dangerously close to that $36 breakthrough line. is that the technical level? could we break higher? iran supports the deal between saudi arabia and russia. s&p futures signaling an up day in the u.s. gauge down 2.4%. says salestle's

rose in 2015. it was hurt by weak demand in india. klm group has posted its first annual profit since 2010. air france warns it must get a deal with pilots on productivity to stay in the black. vodafone is going into the bond market. it plans to raise $2.1 billion by selling mandatory convertible bonds. convertible into ordinary shares . that is our latest bloomberg business flash. took theael mckee surveillance gulfstream down to washington to peru's the minutes. several governors, presidents, the chair set several things.

there was very little of the normal verbiage. mike: not the back-and-forth of some think this or some think that. they went through the list, oil, china, the dollar and discussed why they thought these things were happening. the conclusion is they were not sure. tom: did you get a sense of uncertainty, uncertainty that vice-chairman fisher talked about? mike: if you did a word search you would see uncertainty and downside risk in the minutes. that is the reason they punted. they weren't certain what was the big drope over in oil prices. it was an extended discussion of inflation because they made it on employment side, but they are worried about inflation and the fact it might be too low for too long. and they talked about fed funds, the fed expectations index and how that has gone down so far it may be becoming unmoored. tom: michael porter throws chalk kat harvard business school's -- at harvard business school when

people get it wrong on the math. why is janet yellen looking five years out? mike: inflation is a lagging indicator. the fed is reacting to that. they are looking ahead. vonnie: you pointed out yesterday that they were all the n'te -- the markets are listening to the fact that it is data dependent. i want to talk about james bollard. mike: this is more important than the fed minutes because those are old. the one that was most for citrus league arguing for a rate hike last year. now he has changed his mind -- ratevociferously for a hike. but now we should be at a pause because expectations are too low. caroline: talk about the dot plot. jim bullard is saying we do not

want them anymore. mike: the markets have been so confused. jim bullard said last night we should get rid of tehm. i was excited to bring this elegant chart to you, tom. if you look at the blueline, that is the tightening cycle from 2004 on to 2006. and look at how the dot plot's path currently matches that. no wonder markets are confused. they think we are going to do the same thing we did then, even if we say we will slow, they are not believing us. tom: mr. porter, you have a lot to can to be in class, and i hope you will. we please contribute now on the nation's monetary policy? are we ignoring our goods producing sector by only looking at the mumbo-jumbo? michael: i think that our national strategy for restoring our economy has been monetary stimulus. isn't that sad?

tom: i agree. michael: yes, i feel for the fed having to take this burden. to try to get this right. and, of course, it is a very challenging, delicate question ise, buten to rasie fundamentally we are not moving ahead on our tax system, not moving ahead on and for structure, not improving our immigration circumstances. we are not addressing anything that is fundamental to long-term growth. tom: let's come back with some of those things on health care. michael mckee, are you taking the gulfstream again today? mike: i'm stuck working with you on bloomberg "surveillance." tom: coming up across all of bloomberg's global platforms, howard marks. an exceptionally important and timely conversation on value or non-value in the markets in the 8:00 hour.

stay with us. bloomberg "surveillance." ♪

tom: a list to the market. euro -dollar, 1.113. i'm not going to call it risk on. it is a jumble. time for the morning must read. it goes to the state of the nation. we reached back two years to 2014 where michael porter trotte d out a social progress index.

the country satisfy the basic human needs of its people, have the institutions and conditions in place to allow its citizens to improve quality of life? does a nation offer an environment in which each citizen has the opportunity to reach his or her full potential? as you go back to simon and look at the math, the accountability the civil solution you want us to be more like europe? michael: no, tom. first of all, what we try to recognize is that gdp does not capture -- the question is how. we created this measurement system called the social progress index to really measure whether a country is making social progress on meeting needs, creating opportunity. what we found is that there is a correlation with gdp. when you get wealthier you're able to do that.

but there is a lot of variation. the u.s. has been lagging. our gdp rank is much higher than our social progress rank, and that's probably because of some of these fundamentals we talk about. tom: do the conservative concern, if we bring up our social progress success, everyone agrees that is laudable, is there a certitude that you pull down your gdp placement? mike: no. in general, i think, i believe metrics arerogress probably at the root of a lot of the problems we are having in growth in gdp. we do not have enough education. people do not have good basic education. we do not have a good enough basic health care system. tom: which country is best? which wins the michael porter trophy for that combination of might and social? mike: the scandinavians, once again, are doing a good job of integrating. they are creating a lot of

opportunity. they have institutions that are raising people's skill levels and health levels. but yet the scandinavians, which is not well known to bernie sanders have been cutting their tax rates in making their economy more efficient and getting government out of the way in health care. sweden is going to private health care firms. they are practical, pragmatic. they are education systems are much more data-driven. tom: we will come back. michael porter with an update on the state of the nation's social progress. coming up, he is optimistic on the american economy. neil -- will join us from renaissance macro research. futures advance, up 10. ♪

the conference call. the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voice mobile app. it lets you switch seamlessly from your desk phone to your mobile with no interruptions. i've never felt so alive. make your business phone mobile with voice mobility. comcast business. built for business. a stunning morning in the u.k. beautiful picture of st. paul's. the miners pulling it down

slightly today. rio tinto falling after quite a phenomenal rally yesterday, up 8%. let's have a look at what is happening at the stock 600. up 1%. tech and utilities leading the charge. oil driving stocks higher as well. $35.37. reaching that technical resistance point. s&p futures, looking like it is going to be bright. that fear index coming down both sides of the atlantic. back to you for the first word. days,: in the next two david cameron hopes to close the deal on new european union membership terms for the u.k. he travels to brussels to meet with other e.u. leaders. if he can get the concessions he wants, there would be a campaign leading to a referendum on whether to stay in the e.u. the european commission president says you will see a

deal reached at the summit. turkey bombs kurdish militants in northern iraq a day after a deadly bombing turkey blames on the kurds. the attack killed 28 people. the turkish president warns the western allies not to wornaborate with turkey's sow enemy. south korea is warning north korea is funding terrorist attacks. kim jong-un has ordered his intelligence units to increase their terror capability to rate government is pushing the national assembly to pass new anti-terrorism bills. ted cruz leads all candidates in the race for the oil business. it's not just the scores of smaller gifts. large energy investors have given $25 million to cruz. google, facebook and other tech

companies are supporting apple in its fight against the u.s. government. apple rejected a court order to iphonee fbi unlock an used by one of the shooters in an attack in california. supporters of the big tech companies say the form -- the firm should not support back doors into their products. this is such an important issue. we would be rude if we did not ask michael porter. quickly, professor porter, we finally have technology confronting our nation's domestic security. it will go this to the supreme court. everyone suppor -- everyone presumes that. your immediate thoughts on an issue that will be with us for years of legal process. i'm glad i'mosh, not having to decide what to do about that. these are huge issues.

we are drowning in technology and i.t. it's permeating every product in the economy. tom: including our police system. fundamentalhave choices to make about how to make sure all of this does what it does that is so good, but there are privacy issues. tom: it will continue. we will have much more on this. this will be in the coming years as well. we are pleased to bring you know at renaissance macro that barely describes his substantial research pieces, not only on what the fed is doing but their impact around the world. you have just -- beautifully fed research that shows the impact if we raise rates on the rest of the global economy. is janet yellen the central bank of the world? neil: the markets are pushing her in that direction. ideal world, in think the fed would be the central bank for the world where inflate as much as

they possibly can the u.s. economy to offset the disinflation very pressures globally. you know, maybe three% inflation -- 3%. in the world, the fed has a price stability mandate. they can overshoot above 2%, but they are only going to offset the imported disinflation consistent with that objective. they are not going to go, you style and up their inflation target to 4%. that means you have a market that has to deal with these issues and right now it is working more to time -- tom: you nailed where i wanted to go with this with professor porter and yourself, the basic idea of let's do something. larry summers looks for a more measured approach. worrying about secular stagnation. you've pushed against that, haven't you? larryremember, since

summers introduced that secular stagnation concept, we've seen robust implement growth and the u.s. the employment rate continues to fall. to the extent that there is secular stagnation, i think there is more of a case to make it on the supply side. robert gordon. tom: we mentioned that earlier. , ond you comment, please former president and professor summers idea of secular stagnation? it is such an anti-porter concept. michael: again, it is my broken record, tom. we have not been dealing with what the constraints to our growth and on the supply side to driving productivity and creating jobs. therefore, when we are stuck with monetary policy as the way to try to manage our economy and we are not dealing with all those other things that --

tom: you end up where lawrence summers is. michael: you end up where larry is. i think putting on the gas with monetary policy to try to deal with what are deep, underlying weaknesses in policy is not going to work. i'm overwhelmed with the kind of pickle we have got her cells in. -- our selves in. caroline: there is a great piece on bloomberg talking about how eear needs to be ebbing out th market. that correlation is starting to break down. we first started to bring back our expectations of rate hikes. i just wanted to get the view on what the fundamentals are signaling. that correlation broke down when lastw retail sales come up week. better than expected industrial production. signalingndamentals that the u.s. is not growing as fast as it is expected?

oecb that, when the is a good contrary a buy signal for u.s. equities to be frank. with respect to this recession talk, six months from now we will look back and come to the conclusion that the recession fear in the u.s. was never a serious proposition. employment growth remains robust. wages are rising. since the january fomc meeting, the on the plumbing has ticked down another tenth. and obviously financial conditions have eased. the fed has been kicked to the curb by the financial markets, but i think if i were an investor thinking about this, i would say one hike this year areefinite, two hikes probable. i do not think the fed has

altered their expectations as much as financial markets have. continued likelihood -- jobless claims just hooked back again -- that is going to put the fed in a bind. and put pressure on wages. given the weak productivity growth we are seeing that creates an inflationary impulse. compensation will translate into higher inflation more quickly. go ahead. caroline: where does oil play into the inflationary outlook? we seem to be coming off our lows. when does that play into consumer spending? i think it will put inflation expectations higher. but again, what i would say is that when we talk about oil prices, we are talking about a relative decline in inflation. you do not have deflation in the u.s. with wages accelerate. the inflation process comes down

to the household budget constraints. if you have oil prices falling in wages falling, the household budget constraint is moving down, which means prices are going down. right now the household budget constraint is moving up into the right. vonnie: we can't completely dismiss the market reaction. as the market is pushing in one direction -- negative rates being introduced. it could and being in the case here. neil: that's interesting. after the fed breast rates, they talked about policy. does anyone really think these market moves were not be happening if the fed hadn't raised rates? in october, they were more hawkish, the markets rallied. you know, you have to call into question the nature of markets -- the announcement effect, we get a completely different reaction.

tom: 10 seconds. are we finally seeing wage growth? neil: yes, it's here. unambiguously. tom: you are way out in front on that. with renaissance macro. on bloomberg go. aboutan tisch much to say the state of his new york city. we continue with michael porter. this is bloomberg "surveillance." good morning. ♪

$31.44 a barrel. dow futures of 79. vonnie: barclays will sell his

egyptian unit. unit may be worth more than $500 million. the ceo is trying to decide whether to keep emerging market businesses. bmw found an unlikely way to stay on top of car sales in the u.s.. it pays dealers to buy bmw's. people familiar with the matter say if bmw has not push that strategy at might have lost a u.s. sales title. dish networks -- full-year earnings fell. 1.73.sts projected this comes as more tv customers cancel services. that's our latest bloomberg business flash. the back and forth.

what is it the media or the cable wars? quiet9, it was a very article in "the new england journal of medicine." michael porter laid down the gauntlet on what we need to do about health care. there are a lot of people working on this question. it is seven years on. yesterday on bloomberg "surveillance.," the costs are the single priority. with this right now, michael porter. in the shadow of your harvard is ngh which is part of the media fabric of america with tv shows. let me ask the basic american question. how are our doctors and nurses doing? doctors and nurses are struggling with the health care system which is not really putting them in a position to do a better job for patients, where we have not in health care, we're riveted on the payment notem but we're

restructuring how we deliver care. we are not focusing on preventive care. we are not integrating the care across specialties. we are sideload and fragmented in the system. -- we are siloed. but there are positive things started to happen in health care which have encouraged me, which only in the last two years, we started to see changing reimbursement systems. now instead of getting paid to do things, which is the fee for service system, you're getting paid only if you deliver good results. you're also getting motivated to actually make things more efficient. these are called value-based reimbursement. guess who's the innovator? our medicare and medicaid system is taking the lead. tom: peter or zach has the optimism in you have -- peter has optimism.

a lot of our viewers would go, maybe not. can washington have a health plan as we do not have an energy plan? michael: i think there has been an effort, because the government payor programs, medicare and medicaid, are getting to be quite large, moment hasat this a fair amount of influence on the direction of the health care system. it sets policies and the private sector can fix them up -- pick them up. and we've got, i think, a very energetic set of government leaders now in the medicare/medicaid space that are actually realizing that we have to start innovating. we have to start changing how charis delivered. we have to start worrying about whether people get readmitted. we have got to start worried about making their long-term care more efficient. so, i think we're having the right discussion now. i think the notion of value in health care. this is the term that five or

seven years ago we never used this term. now we are finally using it. we are starting to measure things. tom: caroline hyde in london with a national system. caroline: i find it fascinating when we hear the u.s. -- we are at the poitn of c-- point of care. we have a socialized system in the u.k. but we have posted one of the best -- commonwealth fund saying the u.k. had the best health care system in the world. our junior doctors are on strike. junior doctors leaving the country to go to australia and canada to provide services. how do you square the circle of keeping those policies but also the people delivering it incentivize, particularly the junior deliverers? michael: i think the u.k. system has got a lot of strength. i think it has been very slow, though, to move toward some of the innovation and restructuring in care delivery models. i think the junior doctors are frustrated.

they feel like they're duplicating their -- they feel they're not equipped and allowed to practice medicine the way they hope it can be practiced. so, i think there is a more innovation going on in the u.s. right now in the care delivery process. tom: we continue with neil dutta as well. our single best chart coming up next on the linkage of economics into our politics as well. coming up across all bloomberg platforms, howard marks on the state of the equity markets across other markets as well. ♪

--: it is in an interment we an indeterminate week. yen stronger but i do not want to make too much of it. the euro weaker. i do not want to make too much of it. euro-sterling important as a barometer for cameron's visit. managed yuanhe

making speculators. it is a jumble of foreign exchange. it is so clear on bloomberg . here is david westin. david: we have got everything from walmart earnings coming out in eight minutes to brexit and . david cameron we are joined by john tisch. and howard marks from poetry and by larry summers who has a new prescription on how to get the economy growing again. coming up on the program. tom: let's go to our single best chart. with michael porter of harvard business school and neil dutta. i did not know what this chart would look like that has a lot to do with michael porter's estimate that education matters. 25ng back five years -- years, the growth and employment of those with a college degree not a with those with single dent of colors.

you can see the tensions of 2007 and 2008, everyone flattens. the college degrees pick if up -- it up in countable jobs. michael: skill is valuable. the people with skill are doing pretty well in america. college degree has been the ticket to that definition of being skilled and being educated. tom: the college degree is different than in robert nostalgia. he looks at where america was a narrow more smaller group of colleges. there are different kinds of colleges. michael: there has been quite a diversions. we have got private sector but the system.iers in there are some issues about what the sort of mid and lower tier in our college cheer is delivering. is this a good product? is it real? is it worth it? there is a big debate about is

college necessary for lots of people that are now going, whether the college education rate is a metric that we should be maximizing rather than optimizing. vonnie: it is not just college in the u.s., it is college plus $200,000 worth of debt which is not the same as in britain. caroline: it is 9000 pounds worth of debt. today in "the telegraph," there is a showcase of how much the to plevel of universities in the u.k. are letting down the disadvantaged. oxford and cambridge are failing to boost the proportion of disadvantaged students. a universitydoes and sure that they have some sort of positive discrimination, to ensure just because they have not had the rights they have the fundamental talent to make sure we have the brightest in our universities no matter where they are from? michael: this is the great challenge for all universities is how to find all the students

with the ability to take advantage of that experience. there are a lot of ways, a lot of recruiting going on. the universities are looking for disadvantaged students. they metric themselves and what percentage of disadvantaged students today admit. now virtually free college and many leading schools for anybody who needs financial aid. it is free. bute are serious efforts this goes back earlier in the system to what happens in communities all over america and theary school and what are sort of community circumstances that allow kids to actually make this elevator up to the middle and upper middle class. tom: neil, what is the update on full-time versus part-time employment? are we created more full-time jobs? neil: unambiguously.

more full-time employment. full-time employment is at a record high. this sort of nonsense about this is all part-time jobs. the work week is extending. and most of the jobs are full-time. i want to say one thing about student debt. let's not forget that the people are going into student debt are also more likely to buy durable goods and to form households, because there is a return on education. you soil dutta, thank much professor porter, thank you so much with harvard business school. we will continue with michael purves. bloomberg on tv next. coming up tomorrow on bloomberg "surveillance." of speak with hans hume greylock capital. we will talk about investments trends. ♪

david: the world's largest retailer reports earning. we will hear from walmart. david cameron tries to close the deal. ritish prime minister

hopes to get an agreement that would keep the u.k. in the european union. state of the holdout industry. -- the hotel industry. we will talk with loew's hotel chairman jonathan toews. -- jonathan tisch. welcome to bloomberg . for anie: we are hoping big day in the markets. for the last three days, we have seen the s&p up 1%. if we get it today, it will be the first time since 1982. is that reading tea leaves, is it looking at crystal balls? we know participants and the market are desperate for signs that things are turning around. when you look at crude. up to nearly 3%. this is a positive for those who