francine: china outlines growth. it, theersus inflation 11th round. the bank of international settlements says negative rates are working for now. eu leaders meet with turkey's prime minister to contain the refugee situation. tom keene is in new york. even when i am in london, we have to talk about u.s. politics.

we are seeing reversals. the stocks in europe are no longer gaining. touch on oil as it moves higher today. francine is really focused on the european central bank. is that thursday? francine: it is thursday and we will hear more comments on it.ative rates and the brex let's get to the first news with caroline hyde. caroline: leaders are expected to press turkey for not allowing migrants to enter europe. they want to support greece. turkey is putting it since the eu needs its help, a crackdown on opponents of the president won't hurt its chances of becoming a member.

the government has seized control of a company that owns a best-selling newspaper. curtis lawmakers may be stripped of their parliamentary immunity. killed 47nd attack people at a security checkpoint. it happened 60 miles south of baghdad. islamic state has claimed responsibility. it's the third bombing in a little more than a week. the democratic candidates faced off in another debate. hillary clinton and bernie sanders clashed over wall street, free trade and the export/import bank. marco rubio's struggling campaign got a boost. he won the primary in puerto rico. he still trails. nancy reagan is being remembered as the first lady who nurtured the political career of her husband could she died yesterday. husband'szed her

schedule based on astrological bleachers. she later became an advocate of stem cell research. she was 94. a great photo of 1976 when ronald reagan was pushed aside by president ford at the convention. as first lady, she was extraordinary. michael mckeon covered the reagans. we will get his perspective on them. we have a better market with nearly 300,000 jobs created on friday. currency is churning, but yields are higher. we have a reset in yields this morning. we will do this in this hour. we can do that on a monday. the fix is showing the good markets are down over 17,000.

so much for the gloom in the equity market as it clogs -- clause back. francine, what do you have this morning? francine: i don't have great news. european stocks were the highest in a couple of weeks. we were announcing a reversal of resources. i want to show you also euro-dollar and pound dollar. we need to talk about negative rates. the governor of the bank of england is going to try his best to not talk about brexit. tomorrow he is testifying. he has to talk about what will happen. tom: it's a clumsy week for european economics. we have a subtle chart on a monday. here is a comparison of china to america, there cap gdp and ours.

here is the u.s. superiority amid the china boom. this is up to about 5% of our gdp cap. we remind ourselves of how or china is compared to the united states. there is a hint of a rollover beginning here. it's an interesting comparison. those guys versus us guys. we will look at the dynamics of china. that off the most interesting meeting this weekend. francine: very interesting. let's stick with china. said 65% growth is the goal until 2020. we go to hong kong where we are joined. they will do whatever it takes to stick to that 6.5% growth plan. >> good morning. there is more than a hint of the old flavor here.

they have brought down their growth target. that is still a pretty hefty target to hit by any standard and to do that, they are going to have to spend more money and loosen up policy even more. that was the message coming out. physicaldo more on the side of things. look for more bank lending. all of this isis happening at a time when analysts will say to you that one of the biggest problems china has is the amount of leverage in the economy. inefficientlot of lending over the years. it's a message coming out about growth at all costs rather than the painful reforms and attacking the debt. there is an error of caution. francine: we heard that the outflow we see out of the

chinese economy doesn't mean there is a capital flight. it seemed to be contained a bit. >> i think they looked at a small section of the overall flow coming out of china. they were encapsulating all of the china. there is a sense that the outflow still remains somewhat. we talked about reserves there is not a sense that the capital scare story has gone out of china just yet the market may have stabilized the problems are still there. there is little confidence did they are going to address those problems in the near term. tom: there is a fabulous chart describing what you were talking about. credit is going up and they are going to save the day with credit expansion. time, nominal gdp is going down. the only salvation is more

inflation. are we going to see that? does beijing just assume they are going to give us more inflation? >> we are struggling with the same inflation the rest of the world is. they are daily from their 2% goal. factories are marred in deflation. that is a real problem for them with interest rates in the economy. there is little sign that deflation is going to take off just yet. they are facing the same issues as everyone else. without that inflation, it's hard to see how they get out of the that boundary. francine: thank you so much. james. for the hour is thank you so much for joining us. rates thenegative federal reserve may be hiking

too quickly. that was put on the back matter. what do you worry about the most? james: we can calibrate most of the others. the problem with china is they just take and there are lots of different opinions. tom was saying is very illustrative. they are trying to pump up the chinese economy but actually making the problem worse. francine: do they have too much debt? that is the only way to they can help your economy? james: the risk is that deflation in china that requires easier policy. thing that i have always believed is the chinese authorities have got more levers to pull then we have in the west. --y can instruct cut these companies to merge and banks to

lend. that is the message we got out this weekend. there are reforms that can be taken place that are going to be taking capacity out of the system. they are going to try to smooth the entire process. they actually do succeed in doing that, there is a tale risk. tom: when you talk to your china experts, what is the control mechanism to take capacity out of the system? is the illusion that it's a normal economy? run behind to read doors in beijing? james: i think the message came out clearly this weekend. the government is getting involved in this. they are trying to take that excess capacity, it's the heavy industries were they have excess capacity. steel, cement production, those areas.

they are trying to take down the excess capacity. they are very concerned about employment. one of myalk down streets for my hotel in london, there is a big china flag. i don't know what it is, china bank, i really don't know. what is the relationship between london and china? is it status quo? james: it's been growing over a number of years. the chinese have been invested in london. they bought property in london. the government here is wanting to increase that relationship between the u.k. and china. there are overseas bonds issued in london. there are relations that i think will continue to grow. the u.k. has, behind other countries. germany was way ahead of the u.k..

the u.k. is playing a bit of catch up. francine: thank you so much for now. the consulate is next to regents park. there may be a bank around here. that's a good question. coming up, leaders are gathering in brussels over the migrant crisis. we will discuss the economic impact. ♪

tom: good monday morning. we welcome all of you. francine is ensconced back in london. reacquaintng to herself her family after a

dreadful week in new york. we have our bloomberg business flash. here is caroline hyde. : there will be a new executive at germany's second-largest bank. will succeed in april. he restructured the bank after the government bailout. the bank has cut cost. in china, regulators are financing risk in the housing market. will impose new rules to end the practice of taking out loans for down payments. there is concern that some house rises are rising too fast. the european central bank will fight against deflation. draghi is going to expand on purchases. the deposit rate to be cut further. they meet thursday.

francine: thank you so much. aboutne has warned uncertainty around rates. aboutis great uncertainty the behavior of these individuals and institutions if rates declined further or remained negative for a prolonged time, it's unknown if the mechanism will continue to operate as in the past. is james. us i read all of the report. they talk about prolonged rates being negative. we start worrying about the side effects of negatives. -- stay.here to say do we know the side effects? james: we don't. we are concerned about some of the side effects. what does it do to the banking

system? when the ecb cut deeper rates back in december, the mistake was not to cut the rate. francine: they are saying they are on top of that and looking at it and it hasn't had an impact on the banks. i could not believe that they are being this reckless. james: part of the problem is central banks thought they had this magic. the transmission mechanism is not the same it banks are reluctant to take their own the rate into negative territory. youmore you cut, the deep punish the bank. what happens in some countries like switzerland is margins have to go up to protect take property. that means higher lending rates. tom: that is beautifully explained. it's the effort by institutions to do this without paying.

if we finally get pain in the financial system, or will we see it? will it be negative rates affecting the positive's? depositors? james: it becomes impossible for having thoseithout negative rates to depositors. there is a limit to how far this can actually go. what the central bank wants to do, it wants to get those negative lending rates. that should be the number one focus of the central bank. if we are just cutting the deposit rate, that doesn't cut it. they need to lower lending rates. tom: you say it better than i do. what is the taboo that's broken? where's the pain going to come in the coming months within europe? i suspect you may see a

bit of stepping back from these policies. a 10th rate.sting they may try to do this to take pressure off the banks. clearly, the more negative the more it cost him. other banks are bringing tearing systems. they need to do something to break the negativity. jury rigged it is the only term i can come up with. david goldman is with us. let's take a look at futures deteriorating. we look at equities, bonds, assets. i will get right on a monday morning. i am tom keene in new york

getting your week started and smart. ♪

francine: tom keene's in new york and we were having a nice transatlantic conversation. for my morning must-read of the day i picked out something from larry summers. he said the important elements iscalbe a combination of f expansion. he said this might not work for

inflation. we talk a lot about his view. it seems a lot more economists are aligning with what larry summers has been saying. tom: it's a complex thing. i would suggest that gets a lot of support from people you would be surprised of. it's not just a right/left kind of economics. when you talk about what larry summers is writing, he is talking about unconventional monetary policy. he says this should be something that's only done in extremes. are we going to see a shock? all of this policy won't help. banks have got unlimited power. a central bank can create money.

they could helicopter in money. if the central bank really wants to, it can create inflation. how far do they want to go with those talks? they can buy government bonds. we have not seen that properly transmit into the real economy. it's the transmission mechanism that is the real problem. they are doing qe on one hand and trying to restore the banking system on the other. tom: what are incomes doing in europe? we spend a lot of time in america talking about inflation ingested median income. what are they doing in europe? james: wage inflation is relatively subdued. unemployment is still relatively high.

it's mostly because inflation has been low. growth positive has been has been cap it one of the big problems the ecb has is wage inflation is struggling to recover. it took years for wage inflation to go up. it's still not sleeping up. that is the big problem the ecb has got. can they find a way to get inflation to rise? real income growth in your going to struggle for a while. francine: stay with us. we will talk about some of the other crises europe is facing. that's coming up next. ♪

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donald trump for the ice service. it is 75 degrees today in new york. now, to our first word news. caroline: the greek prime minister wants eu partners to take plans for the migrant crisis. there is an emergency summit today in brussels. people are camping along the border between greece and macedonia. david cameron has agreed to help stop refugee smugglers. calling on the eu to stop the smuggling. it has become a ritual. the u.s. and south korea have begun their annual military exercises.

north korea warns it has targeted both countries with nuclear weapons. about half of americans are confident in the safety of the water they get. said theyose surveyed believe contaminated water in flint is a sign of widespread problems. americansn in 10 of drink tap water but run it through a filter first. jimmy carter says he no longer .eeds francine: europe's leaders are tackling the migrant crisis. we go to ryan in brussels.

this time we are going to find a credible solution to the refugee crisis? brian: that is the goal. it is angela merkel who is really pushing this. she called the summit. the idea is to find a solution to the crisis. this is the biggest crisis the continent has seen since world war ii 1.2 million refugees have come in. everybody recognizes it. you have to look at the direction from which they come. they need to solve the problem in turkey first. the vast majority come from a syria, and afghanistan and make that journey from turkey to greece. the turks have been invited. the eu got boggled down in .enegotiation efforts

the british prime minister was here. they want to get the turks on board with those refugees and stopping the flow into europe. francine: we talked about the eu and turkey. they have been cracking down on opponents. their track record for human rights is not up to scratch. how will the eu strike that balance? : the eu wants turkey to stop the flow of refugees, it wants them to take back some of the refugees that have already arrived. they are asking a lot of turkey. they recognize that turkey gets something in exchange. turkey wants their bid to join the eu to be sped up. that has been going on for years. there is a little bit of money in this for turkey. that was already promised at the

last summit. the real thing the turks and get , it's a little bit of a damping down of the criticism of the regime when it comes to the crackdown on the opposition. this newspaper was taken over over the weekend. a pro-government editorial team has been in charge. countries lot of eu criticize that over the weekend. we're not hearing a lot of it today. the eu needs to work together with turkey on the issue. francine: thank you so much. he will be live from brussels throughout the day. when you talk about the refugee crisis, there are many different angles. it's a humanitarian crisis. the eu toportant to show it can stay together without fostering more disquiet.

i think that's why leaders are so focused on turkey. in order to deliver a reduction in refugee flows, they desperately need to improve living conditions for syrian refugees in that country. up to now, the government has shown little or no willingness to comply with the eu's demands. the margin will deliver some good news. fundamentally, the question remains are they willing to improve living conditions. the answer is probably still a big no. tom: i look at what we speak about, what is the long-term outcome? is it that migrants, and in our bliss, everything gets fixed and you send them back home? is there a permanence to the day-to-day dialogue in europe? overtime, this is fragmenting

politics in europe. we are seeing an uptick in right-wing nationalism. we are seeing some of that in core europe. xitn you think about the bre the long-term resolution of this crisis fundamentally lies in turkey. we have to ask the question, does turkey have any structural reasons to comply? when you think about this isernment, their objective to hold a popular referendum and rewrite the constitution and create more powers around the presidency. they are going to continue to use the crisis as leverage in order to get what they want in syria and get what they want to mess to clean. tom: they are using the crisis to advance an agenda.

what is germany doing with the crisis to advance their agenda? >> germany is in a much more reactive than defensive position. merkel has an open door refugee policy. she cannot commit to a to mastic ceiling. it's a symbolic blow for her. it's unenforceable. you can only enforce it through border controls. that's the end. merkel is desperate for turkey to deliver. the other leg of the european response is the stabilization of syria and using russia as a vehicle to help stabilize syria. russia's involvement has completely changed. i don't think anybody is looking at that situation to stabilize them. increasing in violence in syria is going to increase flows. francine: this is the eu at its

worst. this is geopolitics. it's a humanitarian crisis. it will impact gets voted in. day, how thesehe economies grow. james: it's one big european mess. whether it's the migration xit, the eure struggling. is it possible? ofes: dealing with some sort response to the crisis, that's what was missing last year. merkel said it pours are open. everyone try to get through that door. this is about in some controls back and face -- place. -- in place. tom: they will continue with us.

one of the themes this week be quite -- is oil is substantially higher. this will be a theme throughout all of surveillance this week. on the why an update of higher oil prices. ♪

tom: thank you for the thousands of tweets asking if francine made it back to london. we report that she did. she took her fingers with her. she stole them right off my desk. francine: a lot of people don't know what her fingers are. it's one of the four food

groups in the united states of america. right now, we are putting out a chart on oil. i usually don't do this. i'm not a believer in support and resistance lines. from 55.il we are in the yeah but stage. there are a lot of opinions on this. i don't want to give an opinion. we will get smarter with bloomberg news. let's start with the why. i will say that the main reason oil prices are higher is opec has been talking about a , that is to russia

discuss and out freeze it that is beginning to create the market. to cover been forced their petitions it there has been a rally in the market that could continue in part because of what you were talking about. to have sohat needs we can call it bottom? >> we need to go above 42. that is when the market is going to turn around. we are going to see a lot more recovery. opec ando wait for what they decide. we see that we are not really seeing any great action from opec countries. the market could see a movement going into. francine: if people like you need to make a call on it, is a

good time to get back into the industry? shot toil prices have a the downside in the early part of this year. we see normalization from those levels. it does look like it's breaking higher. can break in to the low to mid 40's. it's going to take some time. you've got a lot of excess energy around. you need to pick up the seasonal demand before you get there. we could see oil prices in the mid 40's. tom: jump in if you would like to discuss. we talk about demand. is the demand dynamic of oil in europe normal in any way? think for the oil question, the most important issue to think about is the impact this

has at the ecb governing council meeting next week. there is a lot of talk about pressure on draghi to deliver additional stimulus. inflation is not moving in line with targets despite the bank having brought on a tremendous amount of stimulus. think the ecb is being pulled into a difficult discussion given german opposition and opposition in northern europe to additional's -- additional stimulus. tom: my take on this as a total hack is oil comes in through italy. help me. it is there and oklahoma in europe? >> it is rotterdam. it's completely full. inventories are increasing. hub, it's very high.

we saw a rally last year. what happened was the moment that prices rallied, they locked in prices and continued producing. thehis rally continues, interest rate in the u.s. is not going to stop. maybe we have a production keeping up levels. in that case, what opec is doing is kicking the can down words. later this year, we will have lower prices. francine: there is always in by tom keene.ion when you look at the ecb on thursday, how should draghi view this downward pressure from oil? is it here to stay? difficult one. what is the additional stimulus

the bank can bring online? i know that's the debate in germany. that is the debate in finland. it's not clear how draghi will positioned himself. it's difficult for him to look through this given the extent to which inflation is not moving. thank you so much for cushing,ing me on the oklahoma of your. it's amazing what you learn every day. we have a phenomenal show for you tomorrow. bank has an exceptionally cautious view of dynamics. is bloomberg "surveillance."

tom: we say good monday morning to you from new york. our bloombergt to business flash. chemical the german maker is considering whether to make a counter offer to dupont. that is according to people

familiar with the matter. to at -- dupont agreed merger with dow chemical. over the sale of the london stock exchange may get nasty. they have said it's in talks with the largest exchange owners in the world. they may trigger a bidding war. launcheds in hong kong last month to a 25 year low. they are being deterred by falling prices and economic uncertainty. home prices are down 10%. that is the bloomberg business flash. francine: this is what we are watching today. the eu is holding in emergency meeting in brussels. they will discuss the refugee crisis. the summit begins at 3:00 in

brussels, and :00 in europe -- new york. -- 9:00 in new york. we are looking ahead to thursday. the ecb governing council will meet and review interest rates. the council is expected to cut deposit rates below zero. tune in for the coverage of the decision. at 1:45 p.m. on thursday in brussels. carney's we have mark testimony. still with us is bank of america. thank you so much for sticking around. when we look across the world, we talk about china and negative rates. there is not much optimism. if you look at the investment world, is there something you can latch onto and say this is the right time for investors.

we won't fall off a cliff. i don't see it. a very latee in cycle. they are worried about the u.s. economy. they are worried about china. risks don't come to pass. really showedta the u.s. economy is not on a bad track in terms of the chinese. if we end up with the situation this year that the u.s. economy grows ok and china does not follow the clip, markets will in the year higher. in which situation most investors are for. they have been stung. they are very offensive. tom: let's bring up a chart of the dow. cut me some slack. it's monday. this is my avril lavigne moment.

we were listening to her this weekend. up we go with the resilient stock market. that's the missive. dividends in europe are higher. european a higher dividends or better growth in the united states? james: you want both. when you look at the long run of returns, they are driven by dividends. we like european equities on a medium-term perspective. it's the level of the dividend. you can get a selection of you 5%.hat actually if in a world where there is no yield, that is very encouraging. u.s., you want dividends and growth in the u.s.. francine: there is no yield.

are we mispricing the risk? that's a very high number. applications found not simply on the u.k., but also europe and globally as well. that 30% is driven by three factors. cameron negotiated his package. the number of rebels is increasing in sick advocate number. this will be very noisy. that's likely to be a problem. the context in europe is hard. how does one sell membership to a club that is perceived to be failing. it's very hard to make a positive case. that is what cameron will

struggle with. tom: thank you so much. james barney, thank you so much. hour, with the news flow in china and central-bank action, david goldman will join us. we are thrilled to have him on to speak of inflation and deflation. he will talk on the mysteries of the chinese meetings. are negative nine. dow futures are -62. we are looking at oil advancing this morning. west texas is 36. ♪ stay with us.

tom: risk on with even oil catching the bid. this morning, yellen driving,

and the people's bank of china adopt better news. goldman escapes velocity. after jobs created, is it morning in america? nancy and ronnie -- the first lady as a moderate republican. this is "bloomberg surveillance ," live from our world headquarters in new york. i am tom keene. francine lacqua in london. passing awaygan this weekend, it sets up an interesting week for republican politics, with that big michigan primary tomorrow. francine: i think you are right. it is politics around the world because you are watching the u.s. presidential election. what i am watching is the crisis with refugees. we hope there will be a solution in brussels. we are here from angela merkel saying that she hopes for a concrete step forward on the refugee issue.

tom: it has been an extraordinary 24 hours on the migrant refugee debate. to bring you up to date, here is caroline hyde. the european union is holding an emergency summit on migration in brussels today. leaders are expected to press turkey to do more to prevent migrants from entering europe. being14,000 migrants allowed to cross into macedonia. turkey is betting that the e.u. needs help with the refugee crisis. erdogan'sys, government is seizing control of newspaperthat owns a or they may be stripped from -- a suicide bomb in iraq killed 47 people at it security checkpoint. it took place outside baghdad.

is the third such bombing in a little more than a week. in u.s. presidential politics, the democratic candidates faced off in another debate. hillary and bernie sanders clashed over wall street, free trade. marco rubio' campaign got a boost or he easily won the primary in puerto rico. he still trails donald trump and ted cruz. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am caroline hyde. tom? guests thisul morning. let's get to the data check. currencies,nds, commodities. until an hour ago, futures negative nine, dow futures -55. yield elevated 1.91% off the 300,000 jobs we saw friday in the u.s.. -- the vix the s&p

-- that is a remarkable clawing back from the doom and gloom three weeks ago. the two-year yield gets my attention as well. francine? say in europecan we have had a decent run in the last couple of weeks, and european stocks are now down. this is four days ahead of the meeting this week. economists expect them to go into further negative territory. you pound-dollar, 1.4 150. tom: we focus on china. i did this for our guests. china's per capita gdp versus our per capita, the slope -- here's u.s. accidents. the china boom, china acceleration over the last decade, and it is just ebbing out toittle bit as a get

around 14% of our per capita gdp. globals been a huge success story. david goldman, for years with bank of america, he is with "the asia times" right now. he is way out front on the crisis of 2008. he was months and even quarters ahead on what we saw coming in august of 2007 into 2008. joining us in london, timothy craighead of bloomberg intelligence. wonderful to have you with us. you bet on the asia watch for years. what is the level of sweat and panic in beijing coming off these meetings? showingarly, they are as much of a firm stability note as they possibly can. that was the whole communication

, if you want to look at it from the positive side, out of the npc so far. reasonable gdp growth with more flexibility than last year. a push on both monetary as well as fiscal measures. various reformf measures. what you do not really here is i suppose maybe the urgency that we got to make rapid changes. they are trying to set a stone of stability. tim craighead out of london, david goldman in new york. we all have our stereotypes in china. what is the number one thing we get wrong about china one he 16? david: the number one thing is .hat there is a lot of debt on one side of the balance sheet . there is a great deal of assets on the other side, and we tend to look at one side. the decline in china currency reserves during 2015, a lot of

people including george soros said this was a panic run out of the financial system and it would lead to a crisis. that all that has happened is chinese corporations are paying down their dollar debt. they are accelerating their own torency to buy dollars reduce their dollar obligations because they think the dollar is going to rise. as the chinese central bank has lost reserves a month outside the balance sheet, chinese corporations have reduced dollar debt on the other side. it is a boring story. tom: it is, but i think i just learned something about diet -- about debt dynamics. that is what you do with david goldman. francine: i remember speaking with george soros at length in davos. there is something going on in china that people are nervous about. we saw that in the numbers. we do not have capital flight.

outflows were not as good as they were in the past. the you wantalue because they cannot do otherwise? wrongoros was completely and misinterpreted the data has the data for international lending to chinese companies, which has diminished. china has delivered in terms of dollar obligations. at the same time, the reserves are balanced. francine: i understand that completely. i spoke to george soros for an hour, and what he was saying was that he does not -- i was asking to his thoughts on that. we will get back to you in a second in new york. tim? tim: i would agree with the statement that there is much more to it than having money flowing out. he goes back to the issue that it is a pretty insular market on all sorts of fronts, whether it is debt, equities. there is not a lot of

international risk that you would think of with most emerging markets where we have had massive currency problems. inside question about china, are they worried? they are worried, yes, but a lot of the things you look at, whether it is what is going on with travel, with various consumer purchases, what is going on with housing when they find an opportunity where they think the momentum is there, and chinese investment and speculation is all about momentum and trends -- they jump on it. that is good old-fashioned china, and it has not changed. going back to the income chart, it has grown with income. tom: bring back this chart, anthony. this is china's success, the relative improvement of china versus the united states. you do not perceive that to end. china continues a linear path to a relative wealth versus where

we are, and that is a good thing for all. david: i do not think it ends, but china's productivity occurred by taking 600 million people and moving them from the urban life.to that is pouring concrete and putting down steel. that is slowing down. so of course the heavy industries will have to be reorganized you have overcapacity. on the other side, the chinese consumer has been over saving and under borrowing and under consuming for 20 years. tom: do you see a shift to a service sector china? tim: we are already seeing this, tom. if you look at the comparison of service to manufacturing, consumption versus investment, they are moving in the right direction and we do think in the next three to five years we will see more of this on a progressive basis. there is an indicator that we have built that looks at china's

old economy versus china's new economy. you think transportation. the old economy is freight traffic. a lot of that is basic materials. the new transportation is truck's, which are taking consumer goods and services, goods and products, to retail. that is growing rapidly. the old stuff is now contracting. i think to the degree that a lot of people's measurement of china and economic activity is based on the old measures because that is where it was, it is not really appropriately measuring what is new. it is in fact doing pretty well. francine: they are also talking about a shrinkage of offshore renminbi deposits. do you think that china will have no choice but to devalue the yuan longer-term? david: china's effective exchange rate has risen by about 40% since 2007 and about 20%

since 2013. that is obviously -- that has obviously had a negative impact on their trade. late ins much too addressing the appreciation of renminbi. of the because they took their time about it, when they first began to reverse this in august, nobody knew what the policy change would be, and the chinese central bank was poor in communicating with the markets. but absolutely, they are now stabilized on a currency basket, on a trade-weighted basis, which is what they should have done a long time ago. we have seen the latest currency flows trickle down to almost nothing. we have kind of reached a part of stability, where the r&b will float with that basket. tom: what a way to get the week going. david goldman, tim craighead,

thank you for joining us. we will continue with david goldman on china. look for it on social media later in the day. common up, after that terrific u.s. jobs report, ward mccarthy will join us. he is with jefferies. we will see if we can drive forward. 300,000 jobs -- that was the statistic with the revision. from new york and london, "bloomberg surveillance." ♪

it is monday morning. i am francine lacqua in london, and tom keene is in new york. let's get straight to the bloomberg business flash with caroline hyde. caroline: the european central bank -- almost record as of

economists said they predict that ecb chief mario draghi will expand purchases. only one expected to see the deposit rate cut. ecb policymakers meet thursday. there will be a new ceo at japan's second largest bank. -- the bank has cut costs amid concerns. the ceo of united airlines is returning to work after undergoing a heart transplant. oscar mu knows will be back to his full-time duties starting this week. he received his new heart in january. that is the bloomberg business flash. tom: thank you so much. it is time for the single best chart. a little obscure, but that is what you do with david goldman,

writing for "the asia times. dollar-renminbi, but yen-renminbi. this is japan versus china, back 20 years. you can see a contained trading range, and then something happens. that is a stronger yen cutting down her that is the abenomics effect with a little bit of a reversal. i put this up as a symbol that it is not just u.s., u.s., u.s. there is a hole in asia thing going on here. defends asia and japan against what the renminbi wants to do? david: when the dollar was rising at against every other currency in the world, there was a huge disequilibrium. it reduced chinese trade, which was not good for the rest of the region. given the fact that the federal reserve signaled tightening and 25%, that jumped

forces everyone to readjust, and that becomes messy, and the currency flows out of china is really a currency readjustment. posen's petersons institute has been brilliant on this. forget about japan and the chart. bring it up again, showing abenomics. it is abenomics, but there is a lot more going on here. thailand,ore, taiwan, etc. how do they readjust successfully? make lovee porcupines -- very carefully. the biggest problem is the inexperience of the people's bank of china. the people's bank of china should have been reacting to this 18 to 24 months ago. they should have moved to a

approach.hted asking that is something that central banks need to negotiate because you have no global standard. if the dollar goes to the ceiling, it throws everybody out of whack and there is no sybil solution. tom: david goldman comes on and figures out my single best chart for tomorrow. i am going to try to be mathy and you might trade-weighted basket of china versus everybody else instead of the dollar. i think my little brain can do that by tuesday tomorrow. david everyt's book monday so you can sort it out by tuesday. david, when you talk about the pboc being inexperienced, this should be forgiven, writing? this is a little bit like what the fed went through in the states 34 years ago but they were just not in the same limelight. david: equity investors have not forgiven the pboc yet, which is

why chinese stocks are undervalued. take equityill investors a wild to regain their confidence in the chinese authorities, and the chinese authorities will have to prove that they have to regulate -- that they know how to regulate a free market as opposed to a directed market. tom: david, thank you so much. david goldman with "the asia times." what a great briefing from dr. goldman and dr. craighead as well. coming up on bloomberg radio, from tufts university and from nato and the u.s. navy, james stavridis. o long sinceto we have spoken to the admiral. good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." in new york, francine lacqua and london. michael mckee is joining us now. it was 30 years ago that michael mckee was 14 years old, something like that, and he had the privilege of working and being year mrs. reagan. he joins us right now. she was the first lady. i think of mary todd lincoln or something like that. michael: she was charming and disarming, but she was distant

from the press. she was formidable as first lady, but unlike many first ladies, her influence was not in the service of the political philosophy, but in service of her husband. she did not attend cabinet meetings or testify before congress like rosalyn carter. in him very interested reaching some sort of agreement with the soviet union. she hated raise a gorbachev, and she thought that ronnie and mikael could make a deal. watching those old cold warriors dancing in the moonlight after -- in red square after he signed a treaty. tom: a great effort by mr. hunt on mrs. reagan's passing. the list of influential first ladies does not usually include mrs. reagan, and that is a mistake. she forged a close alliance with secretary of state george shultz

. how much was she disliked within the white house combine gekko mich. michael: people were more afraid of her because she was very imperial and she could be very demanding. it was because she wanted ronald reagan to succeed so badly. francine: you are saying that, as a first lady, she was not in the limelight because she did not enjoy the limelight that was in service to her husband. of difficult was it, because social media with his first lady ? for the next first lady, come december of this year, how hard is it not to be in the limelight? michael: they take a lot of criticism from almost everything. when reagan came to office the white house was rather dowdy. that was not even matching china. she raise private funds to fix up the white house and to buy a new set of china, and she was tremendously criticized for it. it's a time when we were then at

worst recession since the depression. people criticized her. one of the times i got in trouble with ronald reagan was asking about that. tom: you did. michael: what about the dresses, sir? tom: you really said that yak of you are rude and cool. the president went right after you, right? michael: he let me know he was not happy with me. tom: michael mckee come with terrific perspective as well. nancy reagan is dead. ♪ v

francine: iamb francine lacqua in london. tom keene is in new york. futures down, european stocks

also down. let's get first word news of caroline hyde. caroline: angela merkel says talks will be tough. she hopes for a quick, sustainable solution with turkey on the migrant crisis. she and other european union leaders are holding an emergency summit in brussels today. they want to do more to stop migrants from entering europe. u.k. prime minister david cameron has deployed british ships to stop refugee smugglers. he is calling on the e.u. to redouble its efforts against the smuggling. cameron has said there is no prospect of the u.k. joining the e.u. a silo system. -- and e.u. asylum system. many of those surveyed said that contaminated water in flint, sign of a bigger problem.

former president jimmy carter says he no longer needs treatment for cancer. jimmy carter is 91. peyton manning is calling it quits. after leading denver to the super bowl title, he will end his 18-year career in the nfl. he was named most valuable player a record five times. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am caroline hyde. tom: a huge deal in the united states. for those of us -- we have a lot of e-mails overnight with this. michael mckee has been medicated and there will be an iv drip with him on radio this morning. michael mckee in shock and awe about his denver broncos having to move on without peyton manning. bring up the unemployment

chart to show how extraordinary this is. ward mccarthy joining us from jeffries right now. there are some statistical issues with that regression, the red line down, the crisis. we come back extraordinarily. i wanted to bring up how rare 4% unemployment is. we think it is -- we think we should just get there. it is not often we get to 4.3 or 4.2 or 3.9% unemployment. ward: it is really quite rare. it is an indication the labor market is strong. that is the direction we're headed in. the u.s. economy continues to generate jobs at an impressive rate, and i do not see anything on the radar that will change that. tom: after what we saw with the data friday, i know it is always a mix of jobs and that would is what you guys say. but are they good job? ward: some of them are good jobs. some of them you could argue are maybe not as good.

but they reflect the changes in the structure of the economy. one of the things that is happening is that we have a demographic change with a lot of people reaching retirement age and older, so we are getting a lot of medical related jobs that you can see consistently in the data. we also continue to get a lot of business services jobs. they tend to be high paying. that is important. market isso the labor recovering, right? continuing its recovery. this is what the friday jobs number told us. but we are concerned about which growth because it was not as strong as some people would have liked to see it. ward: to the extent that there was a blemish in the data last week, it was that the average hourly earnings declined. but so when you put january and every together, it is on trend. i think it was somewhat suppressed by the fact that we had a next her day in february. we get to the point with the labor market -- we had an extra day in february.

when we get to the point with the labor market, -- it is something you cannot only see in workersgrowth, but in wanting to leave one job from another now. francine: if we are looking at these good numbers, if the labor market is recovering, are you expecting it to translate into political votes in november? these should be related. if the economy is feeling healthy, people should vote for the status quo. ward: i do not know what is driving u.s. voters these days, to be honest with you. it has been a little bit of a puzzlement to me and also to people who make their living interpreting what is happening in the political side of things. there does seem to be a lot of disenchantment in the u.s. some of it is economic related, and it seems like it is going against the establishment. bostonu came out of

school to amherst, to records, and your claim -- to rutgers. , which isg up a chart what robert gordon, who joined us last week, really focused on, which is labor participation. here is robert gordon talking about the end of economic growth , saying, wait a minute, this is great news. did we see that on friday? ward: yes, we did. it is the number of people who are willing to be in the label force, actively looking for a job, because they -- in the labor force, actively looking for a job, because they think they can get one. people were so disheartened that they thought there was nothing out there for me, why should i look for a job? it hit autumn late last year -- it hit bottom late last year. half a percentage point below where it is now. it is rising.

people are feeling more comfortable about the economy. tom: the history of that getsnues, and once that going, does it feed on itself? but thistends to, is unique. years going back above 15 -- i think on a secular basis we are going to continue to see that the participation rate is going to continue to rise because the u.s. economy is continuing to generate a lot of jobs. what matters here is that the ,tructure of the u.s. economy 85% of the households in the u.s. are involved in a primarily domestically generated service sector. that is where most of our jobs come from. even though there is a lot of turmoil and problems with overseas economies, that insulates us to a significant degree, whether it be problems .n europe or asia or wherever

the u.s. is still able to be more resilient because of its dependence on this domestically oriented service sector. if you think the u.s. is insulated, that means janet yellen is ready to hike again? ward: i think in april the fed will take a page out of the october playbook, and i think the fed will raise the funds rate again in june, then probably take time off, let the markets digest things. they also want to take -- to stay under the political radar, given the unique nature of this election cycle. they will get another one in before the end of the year, probably in december. because inflation is going to accelerate as the year goes on, and the fed cannot have inflation above 50% and a fed funds rate near zero. a conversation on china

earlier with tim craighead and david goldman. this is what you get, which is a ginormous move in iron ore. it has been a recent moonshot. you really wonder where this escape velocity begins with a move on iron ore this morning. something to pay attention to this week. a follow on their with other commodities -- a follow on there with other commodities as well. pissarides will join us on the conversation. brexitraging battle on as we near the june vote. stay with us. "bloomberg surveillance." ♪

tom: commodities around the world move up this morning. top are moving, oil moving up nearly $40 on brent. francine, you have to believe the iron ore move comes off the china meetings as well. francine: iron ore still contracts -- iron ore/steel contract in asia moved this morning. that is why you see all these contracts going up. tom: let's get to our monday bloomberg business flash with caroline hyde. the german chemical maker bss is considering a counter offer to dupont. dupont agreed in december to a merger with dow chemical. asf is working on whether it should ge into a bidding war. a fight over the london stock exchange may get nasty. lse has said it is in a merge

talk with germany. a bidding war may be triggered. and home sales in hong kong plunged 70% last month to a 25-year low. buyers are being deterred by falling prices and economic uncertainty. home prices are down 10% from their high in september. that is the bloomberg business flash. francine: today e.u. leaders held an emergency summit in brussels, where they will discuss the crisis. we are expecting from washington, fed vice chairman stanley fischer, who will speak at the national association for business economics. that is at 12:30 p.m. in washington. the ecb governing council will meet to review interest rates.

the council is widely expected to cut the deposit rates further below zero. tune into bloombergtv for coverage of the rate decision and mario draghi's news conference at 1:40 p.m. in 7:45 a.m. in new york. mccarthy weward were talking about the impact on janet yellen's thinking after we had the good u.s. jobs report friday. are you uneasy about negative rates? if we are looking at negative rates across the world, except for the u.s. that is ready to hike, what does it mean for the dollar? pressure isns the going to continue to be stronger. that is one of the obstacles that the fed faces during this cycle. the fed was more aggressive than the central banks early in the cycle. that is one of the reasons the u.s. economy is doing so much better than the other major economies, and that is what the fed needs to raise rates. what it means is they will do it

cautiously and opportunistically. when the data looks good on the economics side, on the inflation side where the markets are relatively stable, that will be a green light for the fed to make another move. but they are not in a major rush. sap last december, which was much too aggressive, is only expected they will raise rates over the course of 2016. they will raise rates half of that. then they will gradually continue in that direction. francine: are you uneasy about negative rates for other countries, which may hurt the banks unnecessarily, which may hurt the transition mechanism, which at the end of the day hurts the u.s.? i think negative rates make sense in certain instances, in particular for small, open economies that rely heavy on their currencies. it makes sense for denmark, switzerland. it might make sense for japan.

it makes no sense in the u.s. the fact that we have these differences and policies is one of these reasons that the financial markets has been so volatile. and it is another reason why the fed will grow so slowly. tom: help me here. the theory was not in your textbooks, was it? ward: no. ultimateare the economist -- look at the data. what data support striving to negative interest rates. ward: i am not a -- tom: help me here, oh wise one. ward: i question the logic and wisdom of doing so. i think it was an act of desperation, at least in the significant part, by central banks that were too slow on the draw early in the cycle. tom: what should they do if they do not institute a new orthodoxy? ward: what other central banks should do is follow the fed's footsteps and be really

aggressive with qe until they start to get the results they want. tom, you had a great question on friday, when you said, should we worry about the u.s. becoming more like japan? my question is that everyone in the world is becoming more like japan, and that we get stuck with this disinflation pressure we cannot deal with? ward: i do not think the disinflation pressure is going to continue. you are starting to see commodity prices on the rise, and that has been the primary catalyst for the disinflation or a pressure. for example, in the u.s., you can disaggregate the cpi between service prices, which are a little bit over 60% of the cpi, and commodity-based goods prices, which are the balance? isvice inflation in the u.s. running at 2.5%, but we have had outright deflation on

commodities for about a year-and-a-half. if we start to just get stability in oil prices, copper , if these commodity prices should continue to rise, that is going to make the acceleration in inflation even faster. tom: ward mccarthy with us from jeffries. let's take a bit of a tangential look in data this morning. equities, bonds, currencies, commodities. you forget where equities are. it is a bear market. we are at 17,000 closing on friday. that is important, brent crude trying to get to $40 per barrel. this monday, "bloomberg surveillance." ♪

tom: here is your forex report. francine lacqua says she would not go back to england and less pound sterling rallied, which it did. sterling well up with a 1.41 handle. our forex report shows yen doing next to nothing, but hydrocarbon currencies do better. loonie,anada, the 1.3352.

dxy, 97.63. francine? francine: thank you, tom. i am in new england. coming up shortly, it is "bloomberg ," with david westin, stephanie ruhle, and jonathan ferro. david: we will be joined by jeffrey garten. he has written a new book that could not be more timely, particularly on the questions of europe and china. we will talk to another a guest about china and oil. and we will talk about high-yield debt. that is all coming up on "bloomberg ." francine: thanks so much. david westin there with "bloomberg ." the linkage with oil, it is a good time to speak with ward mccarthy of jefferies & company. we show this on friday. using the traditional moving averages. this is the resistance line.

i am not a big believer in these lines as gospel. nevertheless, there is a little bit of enthusiasm here right now with, in this case, american oil migrating nicely above 35. ward mccarthy, let me start with the easy question. all clear on commodities? ward: i think it probably is all clear, at least from the standpoint of having a bottom. as far as the upside on oil, there are a lot of inventory issues that are set to be resolved before we can figure out what the upside on oil is. but the important thing from the u.s. standpoint, or from the fed standpoint on the inflation side, is that as long as commodities stock is going down, deflationary pressures are going to abate. they do not want to fall too far behind the curve on that. tom: the look back of a rate of change right now -- where is core inflation, when you take out oil and a few other things?

ward: core inflation has never strayed too far below target. it has driven -- it has been driven primarily by services and by rent and oer. in this cycle, one of the key characteristics of the cycle is that multifamily housing has recovered faster than single-family housing because rents have been rising quite rapidly. so i think that is going to continue. unfolds, we will see koren inflation get closer to 2%, service inflation closer to 3%, and then if you kick in commodity prices that are flat or higher, it is not hard to get above the fed's target quickly. tom: i would suggest service sector inflation at 3% as a real number. francine: it is a real number. you are absolutely right. talk about big numbers, and for the person who has to live in this environment, it is not always easy.

back to your statement saying as long as oil does not fall from here, then things will get better and there will not be so much pressure on inflation -- how do we know? when do we call the bottom for oil? the mechanisms that we used to look at our kind of broken when you look at the oil markets. ward: the problem with bottoms is that you always call them after they happen. you probably need two or three months of relative stability. the oil market is trying to figure out what the trading rate is going to be. it held in the mid-20's. now they are trying to figure out what the high end is. once we figure out what the high end is, we will probably see oil traded in the range. the worst is over in general for commodities, and that goes for oil as well. francine: i am quite interested in looking at the transmission because i have always been looking at numbers that told me if the price of oil falls by

five dollars, it increases european gdp by this much. transmission now broken, or is it because we worry that there is too much petrodollars being taken off the market, which is why the market is binary? ward: i do not know if that rule of thumb ever held. lower oil prices, especially in the u.s. -- gasoline prices tend to support both consumer confidence and also consumer spending. what we saw in spades over the last year and a half is that lower oil prices also can take a very hard hit on spending. -- on capex spending. standpoint,ount 200,000 people is right up there with manufacturing in terms of spending. -- in terms of capex spending. tom: there are only 200,000 employees? ward: in the energy exploration

area. yes. there is a lot more supporting in transportation and what have you, but in terms of people involved directly in energy exploration, it is about 200,000 people. tom: ward, thank you so much. from jeffries. francine lacqua and i getting you started on a monday morning. tomorrow, really looking forward to two smart guests tomorrow on the show. sallie krawcheck will join us. .hrilled to have her with us and before that, dominique constant will join us from deutsche bank, with his immense caution on the global economy. this is "bloomberg surveillance." ♪

david: new data released shows capital,fforts to stem and that it is paying off. arelikely european votes

joining forces to take on the refugee forces. his trump showing signs of slowing? david: i have my partner here we are in good shape. stephanie: this guy is back from vegas. i am back, and we are about to give you a good show. iron ore is up. china is in the news and helping us to kick things off today is jeffery gardner -- jeffrey garten. he has a new book. jeffrey, welcome. we have a lot to cover this morning, but first let's get to first would news with caroline hyde in london. caroline: u.s. vice president joe bi