♪ francine: economists predict a brexit will drive the town to lowe's. output as the saudi saudi arabia rules out cuts and stocks fall over. a landslide win for donald trump . he takes nevada. we are one week away from super tuesday. this is bloomberg "surveillance." i am francine lacqua in london with tom keene in new york.

we're talking about the headache for finance ministers the exclusive interview with the treasury secretary jack lew. tom: i sure david westin will touch with the secretary on the global slowdown. we are certainly seeing that in the markets. also, the idea of is america buffered by the oceans and of mexico and canada? can america stay removed from some of the challenges? thouge markets are on the move s morning. is the world extremely globalized when we see nations such as the usa into u.k. wanting to be more in sealer. -- insular. trump pushes closer to the nomination with a victory in nevada.

marco rubio and ted cruz were battling it out for second place. pointsan 20 percentage behind. he spoke at a victory rally in las vegas. mr. trump: if you listened to the pundits, we were not expected to win much. now we are winning the country. in june, the country is going to start winning, winning, winning. announced ons super tuesday more than one dozen states and territories will hold primaries or caucuses on march 1. to.s. and china are close agreeing on sanctions for north korea. both want to punish north korea for its nuclear tests and long-range missile launches. new sanctions are essential. korea's largest trading partner. a group that wants to limit migration says migrants will be deterred by david cameron's

moves. camera negotiated an agreement that curbs benefits for migrants arriving from other countries. in cuba, the older brother of feed out and -- of fidal and saul castro has died. global news 24 hours a day, powered by our 2100 journalists and 150 news boroughs around the world. francine: we had breaking news. the second-largest company, we knew because he told us the ceo was leaving at the end of the year. we understand a new person will come in on april 30. not been doing too badly, he is taking over from a country that has -- from a company that has been reshaped

by the plastic units. we have a new ceo in about 1.5 months at bayer. werner bauman has been with the company since 1988. it will be an inside hiring, which is good to see. we are celebrating 40 years at daimler bends. -- at benz. the market is one big spoke -- one big faux baugh. nymex, a $2 over the last hours. no question about sterling. 139 making a real test. we will have more on that

earlier. i am watching the german 10-year bonds. the intraday is 0.132. on february 11. that is a litmus paper of global slowdown. jack lew will no doubt address that in the 6:00 hour. francine: global slowdown fears in the market. you can see it playing out. i put up the pound first. this is the first time i am done this in the last six-years. under 1.40. anxiety. that is playing out on the currency markets. this has more to do with liquidity than real eggs, that is the debate for the hour. crew 38.97. european stoxx 600 i concerned about growth and valuation. tom: i will break a rule. it is good to do this.

usually i have the single best chart and separately the bloomberg. today, i am combining them. the chart is so important. let's look at pound sterling he started working at socgen in the 70's. this is a long-term 30 year trend of sterling with 2 standard deviations down. it sets the ball down to 1.37. we are almost there. there are becoming more outlier 1.30,of getting out to to 1.20 discussion down level. this is truly unprecedented. moments ago on twitter making clear that this is the brexit, but there's a lot more going on. francine: it is about what other central banks around the world are doing and what mark carney

is not. globaloined by strategist kit juckes. when you look at the pound, one point 40 is psychological. will he go to one point 30. is it angst? the currency markets are a little off. markete foreign exchange is not heavily short of sterling. some are trying to get short, some are trying to hedge positions. the market can go further, but you have to have someone to face the other side of that. the lack of liquidity in markets does allow oversized. this is a fundamental move. toill try to work out how get a trade-weighted index, but if you look at the trade-weighted index, for the last five-years, sterling is above the average on a trade-weighted basis.

this is a sterling/dollar move that is looking dramatic as opposed to a euro/sterling move wish does not look so dramatic by historical standards. that is one important thing to say. as for the rest of the market having been driven by the steam of oil in china at the beginning of the year, they are looking around and instead of grabbing them up, this has fallen into the market slap. francine: the reading on brexit at the moment? it is too soon? what happens to the pound of we see a brexit? does it fall off of a cliff, 20% or 30%? kit: i wrote a piece where i thought we would be at 1.40 before the vote in 1.30 if we leave. we will be at 1.30 before we leave and i will have to work it out. the important thing about this is that the period is exactly four months before the vote is

the time of uncertainty. the campaign is important. the campaign to persuade the british people to stay will be based on fear. all of the ghastly things that will happen if you leave the european union. inevitably, there is a significant risk of all of these ghastly things happening. most of the fall will be seen between now and june 23. tom: i understand that. help me with how jack lew needs to respond to the kit juckes world. i have the german 10-year breaking down, the chairman 2-year down to new negative yields. ae swiss beckoning toward negative rate. how does the secretary treasury of the united states adapt to the kit juckes world? kit: that is a fascinating question. stan fisher was talking last night and he is not sure what the feed through will be to the u.s. economy.

he is not ruling out raising rates in march. there is a be within some corners of look, we will say how it plays out and we shouldn't drove her react. i am sure jack lew will be quick to acknowledge that political/economic are a much bigger deal now than they used to be. he definitely won't want a brexit. he doesn't need europe breaking up. tom: i agree. ki- robert skedels wrote a wonderful article. is everyone in a financial foxhole right now? kit: i rihanna foxhole? -- are we in a foxhole? you give the people a vote and there is not much you can do in the sense that politics and jim

walker see plays out for four months. mark carney can't do much except raise rates. we all understand the problems of excess supply. we can read about the iranians deal.oing the we are 10 control of that. been an enormous bubble in china with resources that has burst. we cannot control that. if we are not in a foxhole, we are reacting. tom: the theme for five-hours of "surveillance" is that we all have crisis fatigue to. crisis fatigue. if you looked at the bloomberg screen you would say what estate this is. my question to all of our guests coming up afterward, which rather be in oil minister, a central banker, or a moderate politician. next we speak with guy hands.

that is coming up with a great, exclusive interview live from berlin. then we have an exclusive interview with the u.s. treasury secretary, jack lew, about currencies. ♪

♪ we were talking about the pound, liquidity, and market functions. let's get to our new york bureau chief and for wall street coverage. the author of the new tycoons inside the trillion dollar equity industry that owns everything. we speak to him and the super return conference where we have an interview with guy hands. jason? jason: a big day in berlin. a big few days.

this is when the private equity industry comes together once a year to talk about what is going on. it is obviously a lively time and private equity. i am here with guy hands. it is great to see you. there are better than 2000 people here. what does this remind you of? are we headed for another peak? guy: it reminds me of 2007, munich 2007 around november we had the biggest conference we ever did. it was followed up by the crash. i've made a speech saying the bankers were going to go back into their basket like dogs and eat dog biscuits. i still have doubt biscuits, i will probably eat them one of these days. jason: are you expecting my dog biscuits in the coming year? how volatile is the market? guy: it is very volatile.

it is not underpinned by any real fundamentals. it will just flow around based on any news that happens. jason: how do you as a private equity investor play that? guys loveuity volatility, right? isn't that good for business? business,he portfolio volatility is difficult. even if you take the garden center business, we import a lot inproducts from china dollars. the products are coming in more expensive than we expected. when you sell to the customer he cannot pass that increase on. from a business point of view, volatility is not good. from an investment point of view, it can be if you get lucky . at the end of last year, we did 85 million, someone else did 84 million. we both decided we could not close by year end. the seller said we need to close

by year end and sold it at 60 million. the buyer benefited from the volatility and the fact the seller was trying to clear their books of an old deal and old portfolio. financing forout deals. we have heard bleak pictures of the last couple of days from your private equity brother written. can you get financing for deals if you want to buy something? want to buy something you can. the cost is higher. the ltd is lower, so you can borrow less. the big issue is it has to be really high quality. we have a real move the quality at the moment. if you have sub year se lling it can be sold as high prices, probably higher than the end of last year. as an issue move and do anything mediocre, it is down in terms of financing. if you have something that is poor, no one wants it at the moment.

you feel like you will be able to sell some of the things that you have talked about selling? odeon orhe -- the garden center? are willing buyers. if you have something that is good or you have years affecting, that is sellable. a work in progress, no one wants to pay for. jason: what is the mood for investors? that you wealth funds rely on for your funds? how are they feeling? what are you hearing from them? guy: they are scared. they are scared of not investing because they are suffering from negative interest rates or have taken and overturn. they are scared of the investing and looking stupid in a year's time as the markets are way down. fear and unhappiness. it is a very scary market.

jason: speaking of something that is spooking the market a little bit, talk of the brexit. you have been pretty vocal in the past, very much in favor of staying, i believe. how are you feeling about that now? how do you game this out over the next few months as the rhetoric heats up? think it will be a close call. it was looking more likely that thevote would be to stay in -- before boris entered the arena. he is an incredible self promoter. the risk for the cam that wants he galvanizes the lead camp. figurehead. you end up with a population loading almost like an expert

vote for the exciting figure, not thinking about the tragedy for europe and the u.k. if we actually left the eu jason: how much, if any, does it affect ipos and him and a leading up to it? guy: it will effective or as we get closer, the same way the u.s. election will affect more as it gets closer. you have the risk of the u.k. leaving the european union, you have a u.s. election where trump is continuing to defy expectations, and people in europe have no idea what that would bring. in france, you have the rise of -- politicalremendous uncertainty. the only place that seems certain is rusher with putin. jason: always interesting to talk to you. thank you for being here.

very interesting comments from berlin. i will throw it back to you. tom: thank you. as we look at markets, greatly challenge, it is a perfect time to speak to the secretary treasury. coming up, david westin in conversation with mr. lew. dow futures -116. stay with us.

♪ tom: good morning. kit jukes is with us from

socgen. torling is making a dash 139. you may get a red sticky across the bloomberg terminal in the next hour as the german tenure tries to get down to a new intraday positive yield lows. really some market angst this morning. francine: you look at the markets, if you are central-bank , what would you do? i took something out of the sp. he is talking about helicopter money. the world economy is flowing structurally and cyclically. for --akers must repair must prepare for a new normal. when you read that and put it together with guy hands' comments, there is nothing optimistic about what will happen? kit: no. god hands is someone who thought with superlow rates private equity must be having a bull.

they can borrow from the best credit they have from the best assets. the volatility of the uncertainty scares them. the most important thing he pointed out was the brexit is just as bad for europe as for the u.k.. there is not a lot of cheer coming from that. that has huge implications for the euro. we will have more on that shortly. with sirill speak martin sorrell. i'm expecting him to be pretty outspoken about the brexit debate. usually have a spirited conversation. this is coming up next on bloomberg surveillance. we are also doing extra market checks as european markets tumble. ♪

♪ tom: markets are on the move. kit juckes and jack lew in the next hour. we have a lot to talk about this

morning. the 10 year yield breaks, risk worldwide, sterling trying to handle. one point 38 german yields at new record lows. oil is a bit soggy. here is our first word news. >> three victories in a row for donald trump. trump one last night in the nevada caucuses, strengthening his position for the nomination. he got 45% of the vote. marco rubio and ted cruz were 20 points behind him. next a super tuesday on march 1. more than a dozen states and primaries will hold caucuses. standing firm on the supreme court. members of the senate judiciary committee will not hold hearings nominatesnt obama someone to replace justice scalia. they want the nomination to come from who was elected president in november. junior hospital doctors in the

u.k.'s national healthcare service will stage three strikes over a new contract that would cut pay for working at night or weekends. the government said 2 previous strikes led to 6000 operations being canceled. the legal battle is heating up between vladimir putin and petro poroshenko. the government sued ukraine for gasillion over a bond and export is demanding $32 billion of unpaid bills. meanwhile petro poroshenko once pressure to pay $62 million over the annexation of crimea. the cases are expected to take years to evolve -- to resolve. is committed to reduce spending on the military to 2% of gdp by 2023. australia is a major ally of the u.s. news, 24 hours a day,

powered by our journalists around the world. francine: sterling is trading and the seven-year low. oute trying to figure exactly what governments are doing and cabinet ministers are doing. we're talking about the brexit, theimpact this will have in future of this country. how the you case he is itself in the future in the country and the world. let's get to barcelona. we have more business voices taking a side. martin sorrell joins us from barcelona. boris johnson, the mayor of london -- martin: i'm not only fighting with you, i am fighting with the crowd. i know you'reow, brave, but this is an important topic.

boris wants the u.k. to leave the eu. ac stoppable? yes.n: he sees this as a political opportunity. he has some concerns about britain in the eu the agenda is clear. the latest polls show about one third of the country is in favor of staying in. one third want to go out. the other third down now. if you look at the data, most of that third 2000 know feel uninformed and lack information. the nine-week campaign which is limited to 7 million pounds or $10 million on each side will be critical. i expect the vote to be quite close. it is an opportunity for those who believe in the future of written being in europe to express the case is a logical

and coherent way. i think it is about trade, it is about employment, jobs, security . i think it will be a stronger, safer britain. frankly, the people who say they want to come out don't know. it is sort of the blackhole we are jumping into. we don't know. there is no clear agenda about how if we did come out we would manage those pre-trade agreements people think would be instantly renegotiated. the norwegian case is a case where they paid for membership and have no benefits as a result. models as the alternative are not coherently explained or adequately explained. it will be an interesting campaign, an important campaign, to convince the electorate one way or the other. francine: we are surprised that boris johnson is quite popular and is the mayor of london -- arguably the most to lose.

and soosure to the banks many european companies have bases here. were you surprised he chose the brexit route? obviously, there is a personal/political agenda which is important in. a majorhis as opportunity to break with the direction of prime minister cameron. i think with expedients on that level. has concerns about the extent of the bureaucracy in the eu, and the nature of that bureaucracy and interference. having said that, i think it is important to be inside the tent trying to reform and change rather than being outside the tent on a totally unknown where it would be

difficult for many years to what britain's role is in the world. where the traders, employment is, and jobs are. best, what is happening is neutral. at worst, highly negative. plans will be postponing decisions, waiting to see what happens on june 23. postponing investment and trade decisions, and considering alternative scenarios, blakely all are, about what we will have to do if the country does vote to come out on june 23. a time of is instability and uncertainty. you have seen the reactions of the markets, sterling, we are 1.38.g it is an elway and with 10% of our business in the u.k. lastd a currency headwind

year which we will announce on friday it was a good year. that, this is a weak pound giving us advantages internationally, but long-term, it does not do the country in a good from a trade and investment route. francine: let's rewind. you said you are evaluating options like many other businesses. are you considering if the country were to leave the eu moving your headquarters outside of london? breaking up,e francine. i doubt know if the mobile world congress is having problems, but try again. martin: sir martin, are you thinking about relocating in europe if the country leaves the eu? we are examining what the implications of any -- of a

negative vote, being about to come out. we have to examine all of the scenarios and what it means. the thing that worries me most is that our biggest trading bloc, whether we like it or not in the u.k., still remains the european bloc. it is one of the world's largest economies with 500 million people, a gdp roughly equivalent to the u.s., around $16 trillion. is access to that is restricted or limited, that will exacerbate the issues that exist. look at the big for markets in europe where we have done extremely well over the years, particularly germany, spain, italy, and maybe less so in france -- which tends to be a more inward looking market, but

if i look at potential blocks to that expansion, i worry about that. one would have to look carefully about how we are organized and structured in western europe. roughly one third of our business is in the u.s., one third in western europe, with 10% of that in the u.k., the .ther 20% in western europe then we have central europe, africa, latin america, and asia being the remaining one third. europe as a whole, including the u.k., is important. any structural change we could see will cause us to look carefully about how we are organized and seek to increase our market share where we have a very strong market share. as you will see next week, where we have increased our market share over the previous year. those markets of germany, germany is our fourth largest

market. france is our seventh largest. italy and spain are important in context of our top 10 markets. all 4 are critical. the other thing i would add -- francine: we are running out of time. ukraine, russia in the longer-term. germany is important. closeness to germany is important in that context, as well. toncine: coming up, we go the africa summit where we will speak to the africa chief. not miss our exclusive interview with u.s. treasury secretary jack lew to talk globalization and currencies. that is coming up.

♪ tom: here is what you need to know about the markets this morning. as one litmus paper of the global system, something jack lew is paying attention to, the german ten-year breaks down. percent is getting near the february 11 record low. let's go to the long-term chart. this is important for kit juckes of socgen. slope matters. you can see the convexity or acceleration in the german 10 year. there is a new acceleration in a lot of these correlated markets. i am assuming in the last 90-days we have cleared out many speculators and these are normal markets working. we are not worried about short covering on any given trade?

kit: i think so. the 10 year german bond is an example of a market where what you are getting is the people buying it. the conversations you can have online with anyone in london is can bond yields follow into negative territory? we have an ecb meeting next seeh where we expect to more easing. we have a central bank that does not want to see its currency bounceback. with another drop in oil prices we will get ongoing soggy data and disinflation. people are thinking, there is a value. tom: we have curves on logs. if you did not have the math, you need to know this is ugly. this is where stan fischer last night in a speech or the secretary-treasurer this morning will have to finance this. do we need coordinated action yet from international institutions? kit: i don't think we will get

.oordinated action i think it has to turn up in some of the domestic economic data in the u.s. to bring the united states in. , going back before the international stuff was so important, the rate cuts after russia when long-term capital went bust in 1998 were a mistake. you could argue the rate cuts after 87 was a mistake. the world is very different now and we have people like guy ofds saying this reminds me 2007, which terrifies me. i don't think the fed is doing anything more than waiting and watching, and seeing good retail numbers, decent home cell numbers, and to saying "we are waiting." by the time we finish waiting we will be a negative yields in germany.

tom: in london, is there any discussion of a fiscal response? francine: we are still in austerity? to understand they will deliver less austerity. at the end of the day it boils down to a few you are the ecb, do you do more qe, or go into negative and have an effect on consumer prices, or say you don't want to disappoint the market? kit: there's diminishing returns and terms of what you can do. people are more nervous. over people storing cache places plays in here. i don't think central bankers think they are out of ammunition. they don't think it will have an impact on cpi quickly. francine: to your question about fiscal policy, this is something

economists are asking for, but we haven't seen any. kit: fiscal policy gets wrapped up. helicopter money is where fiscal policy meets monetary policy. it is the financial easing if you want to dress it up properly. but that they terribly don't want to boost levels, can we have fiscal policy without boosting debt? that is how you do it. we are getting closer to that being serious. it is a big line to cross. tom: bring up the german intraday. we are within three decimal dudes out of the german you can see the german 10-year breakdown. where is your sterling level where the debate changes in london? kit: the debate level in terms -- the bone debate level -- the bund debate level changes when we get to zero in terms of the foreign exchange market. sterling, the debate doesn't

change until i see the trait-weighted index lower. to see it even below the last five-years, below one point 30 if we get there fast enough the debate may change. sterling change is quite a long way away. no one will worry about the euro being weak this side of 1.05. the bond markets are different in the sense that we will sit back and take notice if we take german 10-year yields below 10 basis points toward 030. tom: what i like is the 1.05 level. the german 10-year is nearing record lows below 0.14%. all of these are issues for jack lew. we will have our conversation was secretary lew. ♪

tom: more data checks this morning with the market on the move. the euro sterling has not moved, but with a 1.30 handle we are near recent record lows on the

german 10-year, we are 2 takes of three decimal points away. erik schatzker traveled to cape town, south africa. it is the bloomberg summit. he is there with an important guest. i don't know if you know this, but he is on the board of trustees on the college with the most beautiful college hockey rink in north america. that is what you get when you go to st. lawrence university on the edge of canada. much.thank you very we are here with jay ireland. we looking forward to this conversation. the narrative on africa has turned negative. when you look at commodity prices and the impact the precipitous plunge has had on economies like south africa and nigeria, can you not help but share some of that pessimism? >> in the short term there is a

pessimistic view. when you think about africa, you have to look at it in a long range of you. we go through cycles, commodity cycle of and commodity cycle down. a key is how people react and how you will invest for the long haul. that is the key. when you look at the impact, you have had a trade impact, a has beenllar, which translated into inflationary terms. the oil and commodity companies specifically. it is time to invest, because now is the time you also have positives to look at. erik: ge has tripled its revenue in africa from 2011 from $1 billion to $3.5 billion. can you do that again? .ay: that would be the goal i would say, again, i would say

may be double would be hopeful. the goal is that we continue to fill the backlog that we continue to deliver 43-four years, hopefully in the 3-5 time range. power is the big one. was at and gas business biggest business. it still lose, but percentage wise it is getting less. power is a huge opportunity, there is a tremendous demand. health care is another huge one. rail. as the infrastructure builds in africa, all of those businesses will -- erik: the export import bank is an business, but it cannot do transactions without another board member. what are the implications for a company like ge? is it as simple for american

exporters to simply give the business a way to china? simple.is not that what we have done is reacted. we are looking at other countries that will provide us financing from where we manufacture and the programs they have. we have had a great program in angola out of canada. in france for a lot of power business we have here. we look at other alternatives. it is an issue, yes, but it does not make us go completely away from the business. erik: thank you. it is great seeing you at the bloomberg business and africa summit. that is jay ireland. over to you. a great: that was interview. we saw some of the risks of a ceo in charge of region. what is your major concern?

defaults? kit: market uncertainty in commodity countries feeding back into the real economy through losses., bad loans, job at the moment the data isn't that bad. are we in a replay 2007 moment? kit: it is a 2007 moment that doesn't have to turn into 2008. francine: kit juckes from socgen. do not miss bloomberg televisions interview with jack lew. we will be asking him his main concerns, the biggest risks, and what the u.s. can do to protect risks inrom the china and the brexit. ♪

tom: this morning, all markets adjust to global retrenchment. how -- pound sterling prints at

1.38 handle. new record10 year at lows. the g20 are not going to come to the new mediocre rescue. in this hour, a conversation with the secretary of the treasury. this wednesday -- it is the wednesday before super tuesday texas, georgia, tennessee, and virginia to vermont consider donald trump. good morning, everyone. this is "bloomberg

not expect a crisis response because we are noncrisis. that is the question we are trying to figure out. tom: you really wonder if the markets will adapt and adjust to the headlines from david west in's conversation with the secretary. let's go through the data check. to show the german 10-year intraday print futures deteriorate -13. the story is euro breaks down a bit. oil breaks down two days in a row, not to any kind of support nevertheless, 30.85 gets your attention on the screen quickly. the german 10-year we will get to in a moment. francine, what do you see this morning? this goes back to the brexit debate. if we are just seeing everything -- stoxxy -- stocks, europe, and oil. jack lew would never

mention this in any interview. february, record low, we come up with improvement, and we just rolled over on the edge of that as well. that is on the mind of the secretary, and david westin as well as they look at international events and how they adapt to jack lew's united states of america. here is the secretary. lew: i am hopeful this will be a g-20 where we take the commitment that we got in the for countries to refrain from competitive devaluation and push it a little bit, and have that be something that is heard outside of the meeting room, but to reassure the world that that is a commitment taken seriously. david: what can we hope to see in the communique out of these meetings that goes beyond that? is, lew: what is different

these last months have made clear that weakness in demand globally is a problem that cannot be solved just by everyone looking to the united states. i have been telling my counterparts for a couple of years now, i think we are doing pretty well. they think we are doing pretty well. but you cannot count on the united states providing all of the demand for wealth. consumer of first and last resort. there needs to be more. and regions that have big economies, they need to use policy tools. china needs to look at how it stimulates consumer demand. when europe looks at its tools, it looks beyond monetary policy and it needs to ask what it can do for fiscal policy as well. in a country like japan where there has been two decades of slower negative growth, they are careful not to make the mistake of stopping the economy with fiscal policies that put the to tryon, but instead

things forward. fiscal policy cannot solve all the problems. structural issues need to be addressed. some countries it is regulatory, some it is labor markets, summit's financial reform -- some is financial reform. when used together, they are powerful. that message, combined with sharing information about exchange rates, having a clear understanding that it is unacceptable to target exchange rates to gain unfair advantage outside of your country -- that is a beggar thy neighbor strategy. pie. not growing the as i talked to my counterparts. they want to be clear that is not a direction that we in the world community can go in. i am hoping the g-20 reinforces that. there is a lot of speculation in the world that these conversations could lead to different kinds of decisions, underscoring that that is an

important principle. david: in your answer, you started with global demand. we hear economists, business leaders saying the problem that we have is really a demand problem at this point. what can be done? the committee k coming out of the g-20 has specifics about how global demand can be stimulated? lew: there are general principles that apply a different countries in different ways, and there is always a lot of discussion about the words because no country wants to sign on to general words that it knows would be behaving inconsistently with. getting a little bit more meat on the bones makes a difference. i cannot get ahead of the process. we're still going back and forth on some of these issues. i do not think this is a moment where you will see individual countries make the kinds of specific commitments that have been made in some other contexts

that have been marked by real crisis. this is not a moment of crisis, this is a moment where you have real economies doing better than markets think in some cases. could bea future that influenced very much by the kinds of policies that i am describing, and the idea is how do you avoid having things go to a place that you do not want them to go. that is a different conversation than what do you do in the middle of a full-blown crisis. the only time you see the kind of communiques with that kind of detail is once you have gotten the on the point. i am hopeful that the kind of conversation that i am describing moves the dial. if the conversation were to go the other way and you were to see some reticence to make the commitment to refrain from competitor evaluation and not take a step further, that would be a cause of concern. right now it is a moment where

if one country were to move in that direction, there is a -- there isn effect a triggering effect. it would not grow the economy and it could lead to a negative ramification economically and geopolitically. i think this is an important moment, and these kinds of principles really matter. there is no substitute for seeing her counterparts face to face and talking to them. david: and the world will be watching, to some extent. are you concerned that expectations may be too high about what the g-20 can deliver as a practical matter when it comes to growth? jack lew: my response is sending a clear message, do not expect a crisis response in a noncrisis environment. it is not the job of advanced -- of finance ministers to avoid a crisis.

i have, in my conversations with counterparts, gotten the strong sense that there is serious attention being given to how to address the issues of what we are discussing, and i think together, having this conversation can lead to better outcomes. does that mean that coming out of this you will have point estimates that each country will -- you rarely get that out of the meeting lightless -- out of a meeting like this. i do not think it is unreasonable to have the expectations coming out of this will be a more stable understanding of what the future may look like. that is an important thing, because you look at the world's reaction to policymaking in china within the last two months or the last six months, it has underscored how communication of policies is critically important in order to have the markets and

other counterparts around the be what you expect them to do. these -- as each of us understand these policies, -- tom: the secretary of the david westin this morning. i'm thinking about how many world leaders will look at a statement of noncrisis and go, "really?" francine: you have gone negative. we are talking about negative rates, we're talking about the possibility of helicopter money. how is that night in crisis -- how is that not in crisis mode? i understand how finance ministers and jack lew are looking at the real economy, but the real economies in the markets will have to click. daragh maher is with hsbc.

-- theye a street as i have a strategy to synthesize these. is the secretary correct, that we are in a noncrisis? h: i think policymakers have crisis fatigue. tom: i have that. things have shifted so much that will we are experiencing at the moment is perceived to be financial volatility, but the real economy is not changed much from a few months ago. will feature the pound on our single best chart in this hour. out front of that, there is a brexit-specific debate. i do not buy it for a minute. there is an overarching u.k. debate, and then anti-on -- a tie-on with the jack lew dollar

strength. will we see the jack lew dollar? daragh: i don't think so. we have brexit, and if you look at a bookmaker, they are saying there is a one in three chance of brexit. thate great probability is we will reconsider a potential rebound. on the u.k. cycle, we have a right hike priced in -- a rate hike priced in. in the last weeks or so, the banks are pushing against that. they have said we do not believe the market is priced for interest rates. that massaging i think -- tom: what about the linkage to euro? daragh: it is this idea that we are getting more twitchy about the u.k., leadership should be getting more twitchy about a, b, and c. you either believe jack lew is saying we are in a noncrisis environment, or you atieve that we are looking

2007. if you look at the real linkage, are we concerned that we may see a default in some kind of commodity trader or something linked to commodities that brings down the bank? daragh: we could go back to john unknown. the unknown, what is tricking markets is the uncertainty level, be it brexit or how the oil story plays out. from jack lew's perspective, he is looking at the u.s. economy and saying i generally do not believe this economy is tipping into recession. i have to agree. it is understanding this kind of teenage angst we are getting where things are bad so we are separately -- so we are extrapolating that it is going to be bad forever. with us fromaher hsbc. we are getting new weakness in ,terling, down to a solid 1.38

to 1.3889 right now. coming up, a conversation with someone who knows economic theory. 0 atformer teacher of ec-1 harvard. worldwide, "bloomberg surveillance." ♪

tom: collapse is too strong a word. sterling, 1.3889 now. i would watch oil. it is indeterminate right now. technically it is in no-man's or no-woman's land.

jon ferro was all over me this morning on the linkage of euro and sterling being secondary, as we just heard from daragh maher of hsbc. francine? we worry about liquidity and we have euro treasury secretary jack lew downplaying expectations about an emergency response because he says we are not in a crisis. let's get straight to bloomberg africa business and economic summit -- erik schatzker is in cape town with bob diamond. erik? erik: francine, if you were to walk down the halls, you would hear people talking about many things, including barclays. you know why. that is why i have to begin with bob diamond with me in cape town. good to see you. erik.ood to see you,

know and everybody knows, there is a real possibility that come tuesday we will find that barclays is exiting all or part of its investments in africa. so, simple question -- will barclays regret that move? will it end up looking at it as a mistake? bob: i know barclays business in africa very well. i know it from the time i was there. i do not know anything about an announcement on tuesday, so that is news to me. but i also respected incredibly as a competitor. barclays africa is a terrific platform. 11 countries -- i think the top three in nine or 10 of those countries. i think barclays has done well, particularly in getting synergies from clients and products. the credit card technology that is developed in the u.k. has come to africa, as an example, and they have done a terrific

job of connecting corporate in the u.s. and the u.k. who have businesses in africa here. erik: so you make it sound like a business they should want to keep. bob: the question you have to ask is, what is the business you are trying to solve? it is a global bank or a global bank headquartered in u.k. -- is owner for them capital point of view? erik: is it? today the best model is a regional model, not a global model. the issues barclays face around ownership is around the regulatory requirement to hold 100% capital when they have 62% economic ownership. it is a tax on the global balance sheet as opposed to just the domestic balance sheet, so some of the impact on the earnings -- i think the last time i saw barclays africa earnings, it was 16%.

erik: but it is proving hard at the moment to persuade investors of the value of the opportunity. why is it so hard? bob: i do not think that -- with them measuring it stock price of course. enthusiasm fore anyone who has a medium to long-term view for investing in africa is not really changed since we began investing here. erik: the fundamental story is still intact. bob: notwithstanding the headwinds of the commodity cycle, china pulling back, i think the demographics, the democracies, the business orientation all continues to be very positive. buying --contemplated or dared, i should say -- buying zambia upon bank with yield -- zambia's bank.

what are you prospecting for? bob: we hope that closes sometime in the next few weeks, a goodthink that is opportunity with a weaker currency and lower prices, the institutions, this is a time we would like to accelerate our investing in africa, not pull back. erik: do you have the capital to do it? bob: we are in seven countries today. ideally we would like to be in 10 to 15 countries. yet, soot at majority we clearly have more investing to do. erik: i look forward to keeping up with your activity in africa. tom, back to you in new york. that is bob diamond, now building in africa with alice mara. -- with atlas mara. early thiseakdown

morning, we have rolled over to a new lower-level this morning. when i look at the data, it is correlated to that german 10-year, to what we see with a strong japanese yen as well. stay with us. more next. ♪

marketst interesting this morning. real correlation, the german 10-year to a record. sterling with a stunning 1.38. a perfect moment to speed to daragh maher.

afternoon, late into this weekend, rather. we are now talking about japanese direct intervention. every single paper, tex burke, -- textbook, all of them say unilateral intervention does not work. why are you considering japan will do that? daragh: because i think they are considering it. politicalso much capital in getting the yen to where it is at, we have to think about the timing. the government is putting huge pressure on them to deliver some of this cash generated from the weaker yen earlier and give that to employees. if you are japanese corporate yenyou are seeing the strengthened, what are you going to do about wages? you are going to hold back. the government does not want to see dollar-yen go lower.

they are constrained by the shanghai. bloomberg,ew told the narrative should be on change, we do not look for this to carry on. it is a tricky position. tom: so sunday or monday morning, we get direct intervention? daragh: at least until wednesday. tom: daragh maher of hsbc is with us. this is a serious issue. coming up across all of our bloomberg media platforms, steven ratner. of course, on detroit, on 18 million units. steve ratner on our interesting markets at this moment. this is "bloomberg surveillance." ♪

francine: european stocks declining, but we are looking at pound. the volatility is increasing. we had -- oh, my gosh, we have gone below 1.39.

i do not say oh, my gosh, very often. i think if we have an intraday chart, we will show it to you in a couple of minutes because that psychologically is a huge deal. martin sorrell's was telling us he is thinking about all options . i want to show you created. 30.8. it is the first -- i want to show you crude. 30.8. south africa markets, we are expecting the governor of the bank of south africa to speak later on. let's get straight to the bloomberg first word news. rowt is three weeks in a for donald trump he won last night in the nevada caucuses. that strengthens his position in the race for the nomination. he got 45% of the vote. and ted cruz are 20

percentage points behind him. march 1, more than one dozen states will hold primaries and caucuses. senate judiciary committee say they will refuse to hold hearings if president obama nominates someone to replace justice antonin scalia up. they want to have the nomination hook -- from whoever replaces president obama in november. korea -- china's participation in new sanctions is substantial. it is north korea's largest trading partner. it is heating up between vladimir putin and petro poroshenko. 's governmenttin sued ukraine over a $3 billion bond default.

poroshenko wants russia to pay $53 billion. that is of a prudent -- over -- that is over putin's annexation of crimea. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. tom: francine really gets rattled, as you just saw her live on the air consider a 1.38 sterling. let's look at it. 1.45 and the move down. to move down the inflammatory language on "surveillance." nevertheless, this 1.40 level, the dissent here. to our single best chart. we got a huge response on this in the last 24 hours. this is sterling back a gazillion years. daragh maher with us from hsbc. down we go two standard deviations.

the belief of many shops that we can migrate to a 1.30 the first circle or even a little bit of job owning to a 1.20. let's start with the hsbc call. ieve we could fall below two standard deviations? daragh: absolutely. if we get a brexit story, we're talking 1.10, 1.15. tom: overlay that with the euro call. do you assume euro parity along with the collapse of currency if you get brexit? i think that would be -- that kind of scale of move, 20% from where we are here, europe would be doing that half, a 10% move. that i think is a consistent story if we truly are on the brexit route. 1.38, under 1.39, is

that psychological? we started the program by saying -- today would be pretty quick to touch that level. daragh: it is significant. just above 1.40 was a key amount. we seem to have had it overnight and in this morning. the difficulty is we have not had any fresh news, so it is like the worry factor seems to be building. the upside of that is you have built this bigger political community into sterling. so if you get any news suggesting the brexit vote will be knocked back, it will pop higher. this is the difficulty. we have four months to this vote, and i do not think we will have clarity on the outcome, so if the market gets itself more wound up and worried, the sterling will remain tactically vulnerable on the downside. it is difficult to pinpoint. we discussed this earlier.

how much does this have to do with fears on brexit, fears that the referendum will be emotional? it will be difficult to predict, like you are suggesting. how much does it have to do with what you are suggesting? doagh: we look at what interest rate differentials, u.s. versus u.k., tell us? 11%, 12% of a discount in sterling relative to where it should be. that is all explained by this brexit story. whattell me about economists say about what the signals to political institutions in a given nation, whether it is combined europe and brussels, whether it is london and mark carney and other good people. they are challenged by a weak currency. is it a sign of national failure? daragh: it is one of the

peculiarities about a discussion in currencies. people think that a weak currency reflects failure, but what it reflects is an adjustment. tom: is it an adjustment of income dynamics or balance sheet wealth dynamics? daragh: it is simply a view of what is the risk associated with holding assets to this currency? we are seeing in europe a ratcheting up of the fear factor in sterling. there has not been a reappraisal of whether we should be holding -- tom: my observation here is you cannot -- it cannot just be about brexit because other markets are moving. it is not just about sterling. ,rancine: but the problem is and again, the correlations between oil and the equity markets -- i think you are right. there is another component to how the markets are functioning, but at the same time there is angst out there. they are given all of this.

given the fact that jack lew is saying do not expect a big response because we are in no crisis mode, the markets are telling us that we are in crisis. what do you expect over the next six months? daragh: i think sterling topside is a standout. europe -- the u.k. will vote to stay in europe. we saw in the 2015 general election in the u.k., that is one. the second one is euro-dollar topside. we will see that the ecb has run out of ammunition. it will underwhelm again. 1.60.e i am quite comfortable with those at high conviction views that we are holding at hsbc. francine: you do not think we will go into negative territory? think they will shove

the interest rates ever lower. they may have to move again later in the year. for currencyrates -- we have seen in sweden, denmark, japan, negative rates are not driving to weaker currencies. tom: we are seeing new bouts of curve flattening this morning. we are at a recent record, curve flattening with jack lew's point to spread. lew's .2 spread. the big picture, six months view, is how do you tactically play it? tom: how do you play the three-month, two-year flattening? daragh: one currency you have not mentioned yet is gold. it is a safe haven and it does not have an intervention threat. clean.

maybe that is the winner in all of this. tom: i may need to rip up the script and come back and talk gold with him. well, heel at hsbc as has decided to go long on gold as well. on bloomberg radio this morning, an important and timely conversation with martin feldstein of harvard university. martin feldstein on the american economy and on the austerity of the united kingdom. stay with us. "bloomberg surveillance." we say good morning. ♪

francine: the pound sinking below 1.39 for the first time since below march 2009. four months until we have the

u.k. referendum on brexit. look at that -- european stocks down, further down by 2%. crude oil at $30.7. let's get to the bloomberg business flash. second largest joint maker has named a new ceo, replacing the current ceo, who will leave at the end of april. airbus has posted full-year profit that rose almost 2%. the plane maker ramped up deliveries of its newest model over its first assembly line in the u.s. and cut jobs. airbus is forecasting that earnings will be stable. it is cashing in on the growing demand for fuel-efficient aircraft. depot,ke his rival home lowe's is cashing in on the home-improvement boom. sales says fourth quarter

rose almost 6%, beating estimates. americans are spending almost as much on clothing or electronics, but rising home prices are encouraging people to fix up their homes. home depot did a little bit better than lowe's. i will suggest quickly that really speaks to what jack lew is talking about, which is, in america, he stated there is no crisis. go to thely as we g-20, america is better than good. look at the hsbc call. back ofreal gold, billion years. don we go, gold deflation. up we go. we rollover. aramark, your colleague james , your-- daragh maher colleague james steel may have made the call of the year already. colleague james

steel's optimism on demand in india and china with your foreign exchange space. daragh: this is exactly it. you have the physical story and the risk-off story on top of gold. it doesn't yield -- who cares? you pointed to germany this morning. it does not yield. in fact, most countries have negative yield. we have often had crises associated with the stronger dollar. we are not getting the dollar bid to the same extent in this fear factor, so gold is getting more amplified shift relative to a stable or weakening u.s. dollar. -- notere are inflationistas, but people looking to inflation. does gold still have a traditional inflation dynamic? daragh: i think it still has

that role, and i do not think it will be a part of the story come inflation coming through. if it was simply a risk-off story, it would be a little bit more susceptible to the downside. as james said, we have the situation with a physical story. tom: the overlay, steven major as well without low-yield call. i'm changing -- i'm changing to hsbc. when you look at gold, is this really the chart that people should be looking at? we look at yen, we look at risk-off, risk-on, but gold is probably the chart of the month. daragh: i think so. if you are nervous, this is the cleanest asset player because you do not have an intervention threat. you are not worried about yield.

the constraint there will be people cannot hold cash. you can hold a lot more wealth in gold if you do not have money parked in a bank charging you money. again, a large number of narratives around in this wall of worry, seem to point to gold. you lay on top of that the physical story of excess demand, unusual in the commodity world at the moment, it is a great feeling. francine: we are currently at 12.36 for gold. -- at 1236 for gold. i do not think there is a magic number for gold. my problem is, with these numbers on the financial market, it is a bit like me when i get on the weighing scales. we are kind of getting used to gold or oil stabilizing. that ranges were relative to where we used to be, but at the moment it feels normal.

i do not think it is easy to put a magic number on it. with us.gh maher we will continue this discussion. you see oil trading down and sterling down to new weakness here, moments ago. let me look at a data check. equities, -15. dow futures -132. euro-dollar, that bears watching. equities, bonds, currencies commodities, this is "bloomberg surveillance." ♪

tom: we follow markets, we follow forex, yen with new strange this morning. not near intraday lows of the last couple of days. euro-sterling, we will get to that in a moment -- sterling-dollar, excuse me. 1.3895, bouncing off new weakness. you see a little bounce there moments ago, but nevertheless that is a distressing trend. in lieu of talking about anything else, we need to talk about david westin's informative interview with the secretary of the treasury.

was he in a mean and surly spirit? david: i love your pun, in new of talking about anything else -- in lieu of talking about anything else -- that was very good. he is concerned about currency wars. we spent a fair amount of time talking about that. in addition, we will talk about hedge funds. uses cricketr rules to figure out how to invest. important earnings to govern, that will come out on "bloomberg ." tom: francine, i am not going to ask about cricket. let's talk about the german central bank. francine: i have been here for 20 years, i still do not understand that. it is lucky i do not invest in financial markets. with aa great interview

european central bank governing council member. he has given a speech in germany saying things about the economic outlook. has been part of the caution about european central banks. hans nichols will conduct that interview and what the risks are. when you look at euro and when you look at euro-dollar, what is going on today? daragh: i am a little bit surprised. ,hen we see big risk-off moves you would have expert the euro-dollar to be a bit higher, and it is not. , somerelated to brexit numbers we have had since the beginning of the year? that could be part of the narrative, but the big story here is that a huge portion of those euro shorts have been in play for the last year and a half and have been cleared out over the last three months. i look at the data, and we had a on 25 billion dollars.

now it is close to $7 billion. i suspect that process is still running. that means it needs periods of risk-off. we need to spend a little bit of time because the linkage between brexit and euro could be quite strong. it cannot continue falling. it could take the country with it if the country decides to leave the e.u. daragh: sterling will be more of the base, and the brexit story is higher. who would be next, who would renegotiate, try to play the same card as the u.k. you can see why the euro is linked. i am wondering if that is a big part of the euro story at the moment. we do not have the kind of stretch position in the market that we used to have. clearing out the shorts on

to one-way bet -- the 1.39 1.38 on sterling -- bring up the yen chart, if you would. these are big figure moves against their central bank. i just looked at a paul lewis article from "the new york times" in 1985. we are having the same conversation now they had in 1985 about your world controlled by central banks. are they? daragh: not really. this is the reality. i think the growing perception -- this is part of the fear factor, that we are used to having central banks ride to the rescue. jack lew said we do not need to ride to the rescue. central banks -- we say do not find a central bank. you can potentially fight the boj. they want a weaker yen, but perhaps they do not get it.

this is the reality of the currency market at the moment. you can push back. tom: is a big figure environment something like this, with bob redeker and bob censure -- i am kidding, folks. within the game, when we say big figure moves, is that an opportunity, or is that a time for risk management? daragh: we ran the numbers in this. when you are running they figure moves remarks chevy positions, do you think that could be the cause for sudden reversal? no. the data shows is, heavy positiono markets, all it shows is volatility. we thought the great narrative is everyone is in it, it has to reverse. francine: can we not fight the fed? i had two bloomberg exchange strategists say we had to cut. daragh: you want me sitting in

the u.s. to say we are going to fight the fed? there is a narrative out there that seems at odds with most of how the rest of the world is viewing the u.s. economy at the moment. they have to really accelerate the process of accepting the kind of rate story they delivered in december and january of this year. it really does not seem to stack up against what we are seeing elsewhere. tom: brilliant. thank you so much. he is with hsbc. let's look at a data check. we have -16 earlier. coming up, a continued conversation with david westin, with the secretary of the treasury. good morning. ♪

he sat down with bloomberg for an exclusive interview appeared airbus is flying high.

we'll hear from their cfo. iraq's oil minister calls for producers to stick together. that is only -- the only way will affectfreezes prices. david: welcome to "bloomberg ." stephanie: big day in the markets. my friend david westin had a big night in d.c. tom: i sat down with jack lew. he was interested in global growth, concern about global growth and currency wars and expectations. stephanie: he is no different than some of the biggest investors out there. they have the same concerns.