francine: european stocks fall impacts negative rates. there is hope in reality. more caution when entering the bond market. the bank of japan has a currency reference rate. there may be a tax on foreign exchange transactions. the top of the oil market may be higher than you think. the recovery will weeks -- be sputtering. this is bloomberg "surveillance."

tom keene is in new york. it's a busy week. nationalll of the banks. tom: i like what you say about hope and reality. in america, we are focused on these key primaries today. let's get the first word news with vonnie quinn. hasie quinn: russia prepared a push withdrawal from troops in syria. this puts pressure on the syrian allies to come up with a deal in the talks in geneva. so far, there has been no sign of compromise. more tough talk from north korea's leader. he vows to detonate another nuclear warhead in a short time. he said he will test launch a ballistic mystical -- missile capable of carrying one.

merkel tod anglo review the flow of -- reduce the flow of refugees. she will be held from the turkish leader. has the power-- to hold them back or keep them going. there is a summit friday and brussels. it's another big tuesday for presidential hopefuls. five states are holding primaries. has come the main battleground for republicans. john kasich has a lead over donald trump. meanwhile, cup has a double-digit lead in florida. -- put an endend to marco rubio's campaign. overry clinton is favored bernie sanders in four of the five states. president obama pro-dex the trade embargo with cuba will be lifted under his successor.

the president travels to cuba next week. he said they are building toward ending the embargo. cuban leader raul castro will take part in meetings with business. we have global news 24 hours a day. i am vonnie quinn. tom: let's get to the data check. i've got a chart i want to introduce and i have never done that before. wait until the markets in the last 20 minutes, -12 on teachers -- futures. as francine mentioned, moderate -- commodities were hit. on the next screen. we are showing elevated equity prices. that may change at 9:30 a.m. your time. gold was down nine dollars. francine: i want to see your chart that you have never made before. this is my data board.

european stocks are down. basic resources are leading the klein. had some terrible figures. the yen's rallying on the back of japan holding off from adding more stimulus. i wanted to show you china. get withe going to that in a moment. the transaction tax for foreign exchange. bloomberg, can you have your chart of the year? i'm not sure this is the chart of the year. here it is. with the bluedp knocked out. this is the trendline line of three decades, 30 years. 50% gdp has declined over to 16%. the explains 142% of political angst in this nation. francine: i could not agree

more. you can see what china is going through. china is facing this, but on a higher level. this is the crisis year. the fact is we have lost so many -- left so many americans behind going from 3.7% to 16%. that is an extraordinary chart. it's an extraordinary chart, tom. the girl else are similar in the u k. they are similar. behind,re being left that's what you have a vote against the establishment. i am showing you some china foreign exchange. this goes back to the tobin tax. from the citypy saying it's shortsighted and would it drive away foreign investors.

the trades would reduce liquidity of the currency. is theam showing you chart in yellow compared to the u.s. dollar. this is the foreign exchange reserve. they track each other apart from when we saw all that volatility in january. the bank of japan has maintained its policy. we go to tokyo where brett miller joins us. it's great to have you on the program. we wereake a step back, not expecting them to adding more stimulus. we are trying to figure out the impact of the negative rates. : that is correct. he has brought himself a little bit of time. it was a very well measured us conference he gave. there is no hint as if we will have it next month or the following month. the economists say we will see stimulus from him by july.

japan is facing huge challenges and the burden is falling on the governor. we have had gdp bouncing in and out of growth. there's no idea if that will change. francine: what does that mean for japan? we hope this experiment would work. day after day, the yen tells us otherwise. brett: that's right. japanese households are an example of where there is concern. the governor has introduced negative rates. that was supposed to stir lending and economic elite. people are buying safe. they are getting more bills. they are talking things under the mattress. these are unintended consequences. walkis the fine line they when they try to change behavior. japan is a case where the challenge is very high indeed. francine: thank you so much from

tokyo. robguest for the hour is parnell. thank you so much for joining us. let me kick it off with you. brett was talking about unintended consequences in japan. when you look at europe, the side effects are unknown. now they are discovering that things like qe gives lots of money. you talk about people being left behind, these are exacerbating decades of growth and inequality across. these are not working very well. most of the gains are going to a small proportion of the population. people who would spend more are not in it. it's not working. it's doing active harm.

low interest rates are supposed to increase lending. they encourage to save more. save the reasons it they have to think twice as hard to it hurts the economy. tom: is the negative rates frenzy past-due? we tried it. they said there was great uncertainty. hasn't already seen its day? we've seent think the end of it yet. i would like to think we had. we will see another of attempts to make this work. we have seen the ecb and the bank of japan are finessing their tiered programs and try to have an impact on programs. we know thisy doesn't work. this does not bring what they wanted to. the original goal is just to can't the currency, we

all be can our currencies. that's not very helpful. tom: francine, that's the headline. japan is trying to weaken the currency. it didn't work. francine: unfortunately for japan, that's what they've been doing for the last eight months. the model they are trying to deal with. the environment worldwide makes it negative. they have been punishing the banks. what does this mean for banks in japan? a lot of people have come on the program and said they are huge buyers in theory of japanese equities. it's not panning out. >> there are a lot of aspects to the question. the facts of negative rates being value disruptive in the short-term for bank earnings is the case.

that building on his point, what you are seeing as a result of this negative rates scenario and the recourse to quantitative easing is undermining confidence. situationtting a where you are increasing the stock of money in the economy. the velocity of money is collapsing. think you are starting to see in a language of some central bankers that this tension increasingly comes up. it becomes a contradiction between the ecb says the banking , we tested it under stress conditions and we've got no conditions. when ever this week data leads to more contradictory policy. we need to bring you

up-to-date. england,e bank of powerful federal reserve coverage. we will do that tomorrow afternoon at 1:00 p.m. we are really thrilled about this. anill get to join for afternoon of coverage. this is bloomberg "surveillance." ♪

thereetimes in a cartoon, is something. they need to become an agent of change. good art has provocative works.

francine: welcome back. tom keene is in new york. we have a lot of news on china. let's get to the bloomberg business flash. vonnie quinn: they are going to go to the u.k. in a cost-cutting move.

avon split off its north american operation. them with a focus overseas. president obama will reverse course on drilling off the southeast coast. the administration may announce today is drying the plan to open much of the southeastern atlantic coast to offshore drilling for the first time. they had packed the plan to drill. sony will pay the estate of michael jackson for his stake in their joint using business. that gives sony control of the catalog. he bought the catalog in 1985 for almost $42 million. that is our latest flash. tom: that's huge symbol for the publishing industry. it's time passing almost. that's a huge transaction for the entertainment is this. it's complex.

the tobin tax is something people talk about in global wall street. it's a very small, minute transaction tax or fee on every transaction. in this case, for an exchange. china is in an uproar over the puzzle of attacks named after professor to open of yale university 40 years ago. he joins us now. what is the likelihood that china would do something so radical? good morning. they have been floating this idea for a while. they do have a problem with capital outflows. they have been slowly enforcing capital controls across the board. this hasn't gone down very well with the market. they would make the problem worse. there is a contrarian view.

there is emerging data. there needs to be a consideration to curb consent -- excessive outflows. that's what china is hanging on. they are pushing on this during the g-20. i guess we will have to wait and see. tom: let's take a ligety article from bloomberg news. the focal point of all of this outrage. was .05 four japanese yen. spreadge difference in that you would affect their. i tried to chart that. it took me most of the morning and i could not come up with anything good enough.

this is a concern. we were talking during the break. i would love to get your thoughts. this would be a disaster. ,nstead of stopping transaction you're stopping outflows out of china. volatile hot the money that the tobin tax was stop, this does not do that. there is a tiny little tax on my outflows. so what? i'm going to do it anyway. i might as well do it today. this does not solve the problem. they do need something to stem outflows. this is in it. francine: how much do we know about the likelihood of this? would this be a policy mistake or just the threat from china? enda: we still don't have the details on it. they have been talking about it

for some time. is the outflow out of china is illicit. it won't be captured by putting a tobin tax on it. they have a fake import invoice. buying of insurance products overseas. a lot of this would not be captured by the tax to begin with. tom: thank you so much in china this morning. we will continue with our guests. we have three central bank meetings. hour, we have a briefing on janet yellen. a briefing on politics as well. this is bloomberg "surveillance." ♪

tom: it is as dark and gloomy as wuthering heights. new york city is rain bound. new york waits in torment. right now, the new york rangers have lost two in a row. not sure i can read it. i want to hear you read that poetry. is what i pick for the morning must-read.

i wish i had gone to wuthering heights. i looked at bloomberg view. this is only have on russia. he talks about vladimir putin. similarhown announcements in the past. he continues. --always has a contended hidden agenda. no one except local human rights activists are able to monitor the situation. he is often times on the money about this. there's nothing optimistic about this. it shows that the markets choose to ignore these geopolitical events. it was very different 10 minutes -- 10 years ago. it's kind of binary at the moment. guy: there's a lot of geopolitics out there. rob: this is a positive direction.

i think they pointed out some stuff. we have heard similar things before. it comes to something, we might start to see a better assessment. people are once bitten twice shy. francine: how are we evaluating risk? the markets looked at central banks. the markets looked at oil. they don't factor in a geopolitics. it's really about the context. you've got a market in germany where sentiment is skewed to the negative. geopolitics is complex. the political environment is very confusing for people. the commodity market is difficult to read. central-bank policy is confusing.

general riskd of of atmosphere where everything is interpreted in a relatively cautious way. i think what's interesting for us as investors is positive perspectives are being crowded out by these views. i think the reason there isn't additional reaction to the marginal bit of geopolitics -- geopolitical news, germany falls under this envelope of unsatisfactory sentiment. later today, erik schatzker speaks with tony james of blackstone. he will be talking about the state of his global wall street. this is bloomberg "surveillance." ♪

tom: good morning, everyone. tom keene new york. francine is in new york -- london.

on thursday, all eyes will be on francine. the bank of the three central banks back to back to back. it's a total nerd fast here at bloomberg. here is the news with vonnie quinn. quinn: donaldie trump and hillary clinton can take steps forward as five states will primaries. ohio has become the crucial title ground. john kasich has a slightly to overcome. polls show trump with a double-digit lead in florida. this could put it into marco rubio's campaign. clinton is expected to increase her leader the delegate race. she is favored in four of the five states. the prime minister is making a trip to washington. he will hand the whole of shamrocks.

party lost the majority and last month's election. his trying to get back for another term. voters will decide whether to build casinos outside atlantic city. yes, they will authorize building to casinos in the northern part of new jersey near new york city. there will be a historic changing of the guardian myanmar. in here andard mark. -- miramar. she has promised run the government anyway. in brazil, lawmakers are trying to revise the impeachment process. that comes after millions of protesters marched on sunday demanding his ouster. there are new allegations leaking him to kickbacks.

there is global news 24 hours a day. francine? francine: thank you so much. there is a profit dropped to 39%. global steel demand is falling. this is the lowest since 2013. we go to moscow now. thank you so much for joining us. it's not a pretty picture out there. demand is lagging. prices going down. have you seen bottom for steel prices? iron ore is going up. can we call it bottom for sure? vel: we can see improvement across most of the products that we sell. coal --rts with iron diane or in cold indifferent types of steel.

this is too early to see. we are hopeful the production cuts that were announced in china along with stronger demand we see across markets are helping the price improve. francine: what is the long-term trend? hopeful that very there is some stabilization. this will help sustain the levels now. what's important now is to understand that this is a stable level. this is an improvement. we have yet to see that. tom: the sign is abrupt about the difficult situation your company is in. what you going to do for a debt workout? the industry needs a debt workout. you are in the trenches on this. what are you going to do to unwind the debt? trend, thisr as the

is our priority. we managed to extinguish about $1.4 billion of debt, most of that came from our free cash flow. we will continue doing that. this is the operational performance generating positive free cash flow for our business. ourere able to extend maturity profile to over three years. that allowed us to return to 2013 levels. that was fairly good. extendingiority is our maturity profile with the subsequent reduction of debt. that makes a lot of sense. what you going to let the pressures for combination. the industry is in massive turmoil. given theu do pressures of combination?

are you managing to sell the company? no, we are not. we are satisfied with the combination of assets we have. this will help us sustain the difficult times in the industry. if the debt situation is so difficult, why not sell assets? the ones in the u.s. are not doing that way. you could get encouraging prices for them. pavel: i disagree with the statement that the debt situation is difficult. this is very low leverage for a sector. we don't see any immediate risks whatsoever. our liquidity a strong. we have cash on hand which is sufficient to cover our redemptions. we are under no pressure to make that call. .rancine: thank you so much

when you look at a lot of these commodity producers, they are under a lot of pressure. the worst stock in europe overall, when you look at the industry, they are under such huge cost pressures. demand is going nowhere for the moment. will we see defaults? will that be in emerging markets? paras: we are not seeing the supply adjustments sufficiently. there is a talk about a reduction in that regard. there are different parts of that chain. the other thing that we've realizes currency plays an important part. the reason your previous guest was talking positively about his cash flow situation is because he's got a ruble dominated cost

base. ont is a material impact where you sit within the cost curve. , in you look at the demand think there is a likelihood there is further pain to come within the sector. tom: i would suggest fidelity invented sector funds. lincoln was president. fundsou look at sector right now, one of the best opportunities. i assume they are not in mining. if we were to look at the sectors in the medium-term, the greatest prospects of the balance, we are looking at consumer facing sectors and technology or in a vision -- innovation driven parts of the sector. those parts face-off to develop markets. tom: this is the question of the

moment. the basic idea of large capital owninationals, do i want to developed markets as you just mentioned? could i find huge opportunity in beleaguered emerging markets? and you pull the trigger on that shift? thes: you are looking at two-tier market. quality businesses within emerging markets are not trading at rock-bottom valuations today. it's the aggregates dragged down by what you would consider the less profitable areas, whether it's commodities or the financial sector. i would say there could be an argument to be made that even if you want access to emerging markets, you may be better off playing it broadly based.

that's the debate of the moment and that's what i hear in interview after interview. he is trying to figure out which central bank meeting is the most important this week. up, she made a bombshell announcement over the weekend. they shift. it's a more cautious fed will raise rates once this year. look for that later on bloomberg television. ♪

francine: tom keene is in new

york. we have central banks meeting this week. we will go through the pros and cons about monetary easing if they are doing too much. let's get on to some of our main movers. one of the biggest copper producers in the world is down 9%. we are not seeing much demand. the market is flooded. we are talking a little bit about some of the miners before. this is a russian steelmaker. he said they don't want to sell assets. they want to refinance. the situation is going to get tougher and tougher. if you produce copper, what do you have? you are slightly dependent on the rest of the market as well. you are dependent on your peers.

one of these global commodities, you are looking at the supply picture globally. have thehope that you low down on the cost curve. that gives you the best opportunity to remain -- retain capacity. that is by recent standards. francine: do we worry too much about the price of oil? we were told that the price coming down would benefit. if we don't see a rally, people will worry. rob: who produces oil in the world? it's the emerging markets. the u.s. is an exception. that's about 60% of the world. it used to be the other way around. they dragged everyone else along. we see the price go down and we

say it's great for us. he can't sell the stuff we want to sell. they're not making any money. it's best when it's neutral. tom: you are the greatest fed watcher. you have been doing it for years. we don't want to admit how many. of central banker to the world, you look at emerging markets, is janet yellen central banker to the world? fed has never really been central banker to anyone else but the united states. it's not quite. you have to take it much more global perspective. u.s. monetary policy is vitally important to the rest of the world. if they go too fast, that's game over for us. u.s., we from the should be grateful for that.

tomorrow is nothing. tom: i look at all of this. does it really fold into investment? have the central bankers messed that up too much? paras: one of the fascinating things for me is you alluded to our sort of duty as long-term investors. a lot of what's happening when you look at central-bank behavior, it's extremely short-term in nature. as an investorl to think of central bankers being more engaged with daily movements in the stock market than you are. one of the things that we are starting to think about quite deeply is the idea that even in the space of only six months time, the background picture whether it's to do with an -- inflation, they might be positioned differently to where they are today. thesefascinating to think

people who are the stewards of the stability of the financial times, they are overly swayed by long-term -- short-term signals. when you look at the action, we were worried about the fed normalizing. normalizing,starts the ecb starts normalizing, are we likely to see a shock? paras: i think it's the opposite. the economy has a wide section that is in self sustained growth. that would largely be interpreted positively. coming back to my earlier point

about the multiplier effect, you might get a counterintuitive result. it might accelerate as it mobilizes. tom: i want to talk about velocity of money. i went to vonnie quinn. rob can help me. ladies and gentlemen, francine does her bracket. this is an american thing. let's go to the bloomberg terminal. you are going to cap my first choice for my packet in basketball in colleges in america. it has to be i will. iowa state. your other choice is seton -- gonzaga. zagat francine: i am going to pick

iowa state and utah. about thenows more basketball brackets. we will keep you abreast of francine's racket as we approach mark magness. -- madness. coming up, we are not going to ask about brackets. we will talk to alan ruskin about the call for a stronger dollar. ♪

francine: you are looking at live pictures from london. i want to talk mark carney. i don't want to talk mark madness -- march madness brackets. china, the bank has drafted rules for a new tax on foreign exchange transactions . this will curb currency speculation. this could undermine the role of market forces.

amazon is taking the next big step in cloud computing. they are launching a new service that will let big businesses move databases online. ony have been the leader selling to web-based computer services. two companies have a new deal. they have agreed to buy a french cognac maker. that represents a 16% premium. tom: i would not of know that. it comes in different flavors now. marnier? a grand francine: i'm a big fan. i only put grand marnier in grapes. grapes --

there's not much left. it's like the luxury sector. they've been mopping up a lot of these great brands weren't you can offer a premium in asia. there's not much left. you're going to pay a lot of money for it. tom: do you have the update on every? that was in the news a few days ago. francine: that was a rumor that was reported that someday had a shares wereer the bought. it looks like it was individual trades. it's not a takeover target that we know of. tom: very good. discussionack to the on central banks. rob has been an important watcher of central banks, particularly the u.s. central bank. i look at our exhaustion over central-bank analysis and it

comes down to the movable. chart. do the charts matter? rob: they are frankly nonsense. in for hikeses from the fed. you get those tiny marginal moves. i can't a member where it is. it's so high. we focus on the 2016 numbers. they've got to take one out at least. they should screen another one out. you are getting views from people who have a faint interest on the fed. you get some real outliers, people who are just sticking of you out there to drive the others along. i felt the best way of doing count ofthe sort of about three or four.

that's the median of the governors. this over from economics to the investment world. isn't a single digit world for you? did fidelity ring things down to a lower terminal value? paras: that's an interesting question, tom. that the world we are in today is one where if you have a successful business with a strong network of fact, in a equity, your on valuation you can attribute the business like that is significantly greater because the cost of funding remains low and will remain low into the future. this is the kind of conflict point.

in the modern world, the factors of production rather than thinking about things about essentiallyse are costless things. when we think about the company's that are the winners of the future, they are going to be demanding a different way of looking at valuation relative to what we have done historically. tom: we are to have to leave it there. thank you so much for your perspective. thank you for your briefing as we do three central banks in three days. we continue this discussion in politics. bloomberg "surveillance." ♪

tom: call it the central bank derby. the bank of japan, the fed.

carney yellin and mark anywhere near the same page echo markets are fragile this morning. you'll curves -- do yield curves signal recession? good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. i am tom keene. francine, in london, doing her basketball bracket, francine lacqua. picks for francine. francine: i feel that we can win, and then we can buy that surveillance gulfstream we have wanted for such a long time. the japan boj trying to figure out the negative impact of rates on the banks. that you win, it is everyone loses. you know going in that everyone is going to lose. we are going to win with bloomberg first witnessed this morning with vonnie quinn. we have beennt,

waiting for it since the company said it was putting off reporter gets earnings. atsee revenue coming in $2.79 billion in the fourth quarter. we want to see one of these numbers become purple to previous periods -- become comparable to previous periods. we will keep you updated. russia has started preparing for a partial withdrawal of forces in syria. that surprise move by vladimir putin puts the pressure on the syrian ally, bashar al-assad, to come up with a deal. so far there has been no sign of compromise about negotiators. more tough talk from kim jong-un. he is vowing to detonate another nuclear warhead in a short time. he says he will test launch a ballistic missile capable of carrying one. it is a sign that the new united

nations sanctions have not kept him from building a long-range nuclear missile. merkel is being pressured to reduce the flow of refugees. she needs assistance from longtime opponents. everyone else leverage at this friday's e.u. summit in brussels. it is another big tuesday for presidential hopefuls. five states are holding primaries -- ohio, florida, illinois, missouri. an average of recent polls shows governor john kasich with a three-point lead over donald trump in ohio. polls show trump with a double-digit lead over marco rubio in florida. a big loss for rubio could put an end to his campaign. clinton is expected to increase her lead in the delegate race. she is favored over bernie sanders in four of the five states. theident obama predicts

trade embargo with cuba will be lifted under his successor. the president travels to cuba next week. he said the president and congress are looking to end the embargo. castro will take part in the meeting. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am vonnie quinn. tom: thank you. the data moves. it has been quiet, but in the last number of minutes, futures -72.dow futures oil has been soggy for three days. i'm going to call it 36.20. it has our attention. on to the next screen. with dollar yen moving -- i do not have that up there -- dollar -- dialer-yen, 17 2

-- 17,229.13. 6.51 -- this is after offshore declined. i want to show you basic resources. you mention oil below $37. basic resources, the biggest move, that group down 5% in europe currently. tom: i want to introduce a chart has more to do with our politics. , we love his perspective. trump,his is the why of sanders, or corbyn or all of that. this is american real gdp. back 30 years, this is the regression of all this quarterly data. crisis of 2007-2008. we have moved from 3.7% on a

1.6% over 30wn to years. it is a different america than many of us remember, and that speaks volumes to the political ,ensions that are out there underscored by what ireland has been through and spain and others of europe as well. this glide path says so much about potential. vonnie: this is progress, right? economy gets more productive and moves on generations, we see growth slowing. butis this necessary? tom: no one politically is ready for sub 2%. this is not morning in america over here. this is an early candidate for chart of the year. the glide path over 30 years is stark, to say the least. francine? francine: i love your chart. i have tried to show you , reserves after china

tax.e looking after a the yellow line is the yuan versus the dollar. we have a little bit of a divergence. they saido citi, and if we do go ahead with this tax on transactions, this will not to for transactions. it means there will be an exit this of foreign money. tom: i want to go back to valeant, vonnie quinn doing more work on that. it is a little bit of a miss, and the stock trades down. we were 60 9.70, and now we cannot find a bid. 65.24 is the bid. vonnie: we are getting comments from michael pearson, the first time he has sold it in public -- or make comments in public -- he said the past few months are not yet behind us, and he is currently comfortable with the liquidity position. numbers, it does not

look so bad. fourth-quarter revenue, $2.8 billion. if you break it down, the adjusted earnings per share is $.17, which beats the 14 sent analyst -- the 14-sent analyst estimate. tom: let's begin our coverage as scheduled. george goncalves is at nomura. in a basement two levels down so he can work on the bond market and the secrets of the bond market, and what it means for our greater economy. if you were talking to someone who knew nothing about fixed income, what would be your key observation that janet yellen has to confront? torge: we do indeed have have a separate degree in plumbing when it comes to fixed income. both for when it comes to understanding how monetary policy impacts the economy, growth, and inflation. i think the lower gdp growth is

resonating. tom: it is the new normal for your world. are we used to that yet? george: it has taken a long time. in the last seven to 10 years, post crisis, the u.s. will get back to 4.5% on the nominal side and it will be sustainable. we have been ratcheting down our growth expectations. shows the slope of the growth has been coming down, but if you look at the weights of what really took it down, it was the last eight years of gridlock. , andis dots michael mckee will be all over this on the fed special. is living atves this world. the economists are living in this world. are you going to meet in the middle, or do you presume that the economists are going to come down to the world that you talk about?

seen sincet we have ,he fed has had these dot plots what they have done is kept pushing forward expectations. they still have a long-run average above 3%. tom: this is a key point. george nails it. do you push forward your belief, or do you shift your belief? that is a key distinction. george: absolutely. they will not admit that the u.s. is growing slower. that will admit defeat. francine: what is the fomc watching? they are watching spending, housing, gdp, but how do they view negative rates in europe, and negative bonds? the external factors coming from europe and japan in terms of negative rates and what that does to the yield curve plays into the calculus of the fed.

more importantly is the dollar and how the dollar is behaving. it is interesting. you see in the last couple of days, the ecb has shifted their focus to more credit easing and not so much relying on negative rates. -- the yen weekend, so that feels counterintuitive. this morning with euro weakness, you have yen weakness. if the dollar continues to strengthen, this feels like there is an accord that has developed between the major g4 central banks not to let the dollar strengthened. francine: you could argue that, given negative rates around the world, this is tightening fed policy without them doing much. george: i think the fed not doing anything is, on a relative basis, feeling like tightening. i think if the u.s. economy is strong enough, it will try to raise rates. we are still believing by june we will see the fed raise rates another quarter. however, you need to realize

that the external factors are playing into a role of the adjustment process. the u.s. data is also critical. u.s. data was looking poor at the beginning of the year and started to turn, and we also had financial volatility. the combination of the dollar and financial volatility and the data trend will drive policy. i want to ask you about this line. it is negative yields, with japan dragging it lower. we have had a spread between the dots ever since the dots existed. one of your earlier speakers mentioned that point. thee has been skepticism of fed's intentions since day one. tom: i just put out your observation on twitter. do they move out to 2018, or do they shift lower in 2016? my third choice, vonnie, is due

they order pizza? that will be in our fed special. scarlet fu, michael mckee have let me extend my day into the afternoon. look for full fed coverage throughout the afternoon. with an at 1:00 p.m., lot of esteemed guests. look for that wednesday. ♪

francine: your dollar currently at 110.83. let's get to the bloomberg business flash with vonnie quinn. d drugmakerattled drunk ac missed estimates per

shares have fallen more than 70% since last august. the scc has been investigating its business practices. big changes on the way at avon. avon --this month, circles required capital control of that business -- servers required -- servers acquired capital control of that business. sony has control of the catalog of almost 4 million songs of .ichae there's latest bloomberg business flash. have japan, then the u.s. tomorrow. then we have the bank of england, which may be the most important meeting of all. brian fowler with bloomberg news. last time. deal

and this time is a little different, to say the least. what is the distinction from tokyo? brian: today it was a little bit of a nonevent. that is not to say it was not worth looking at. i think one of the things today was we could point out that mr. kuroda was kind of all over the place. he had a little bit of wishful thinking where he was talking about the virtuous cycle being in gear, which there is plenty of evidence to show that is actually not happening. on the other end of the spectrum, he was talking about how all options are open, everything is on the table. the bottom line is we can expect action within four months. kind of action, brian? brian: anything is possible, but most of the people we have talked to, we have surveyed 40 economists.

36 out of those 40 expect action by the end of july, an 80% of the ones who expect action say it will be negative interest rates going down to as far as -0.3 from -0.1 now. vonnie: i disagree. this is not a nonevent, -- francine: i disagree. this is not a nonevent. with every statement that goes by, we realize the japanese hopes and abenomics is just not reality and is just not working. is that right? brian: that is exactly right. the surest evidence just came out two hours ago. we are right in the middle of the annual negotiation. -- we are waiting to see if they will commit to higher wages.

the best it can do as an average base way tiger of ¥1000 per month. that is about $8.50 -- a base wage hike of ¥1000 per month. that is about $8.50. tom: terrific scope and scale. that really brings home the real economy outcomes of what we talk about every day. george goncalves giving us a lot of wisdom this morning, from nomura. boy, did that spink -- did that speak to the terminal value that we are headed to. gdp is at what the the terminal value you lay on it? george: demographics plays a huge role. automation plays a huge role. that is dampening the potential to pass on wage growth, and that is everywhere. what we have gotten so far is monetary policy has been a crutch for fiscal policy.

we have not had the impetus to push growth. tom: we all have our personal recollections. mine is my grandfather showing me in the 1920's when he first made a 3% coupon. living large, making 3% on a coupon. are we back to calvin coolidge, herbert hoover, and fdr? george: there are huge cycles within human civilization. tom: but in a corporate paper, are we back to 3% on a corporate coupon? george: we are. that is roughly where it is. roughly into get 3% a fixed income. it is absolutely where we are. what got us here is the question about growth and monetary policy and the lack of measures. tom: the summation of this, francine, is none of us will retire. casket is out

behind radio. because we are never going to retire. francine: as you were talking, i was thinking of that magical headline from donald trump, saying yen needs to strengthen because devaluation is something he will not stand for. coming up tomorrow, we talk to the rbs chairman. a.m. in new:00 york, 10:00 a.m. in london. i am looking to the conversation as there are more and more worries about brexit. ♪

ruble.e: we are watching tom keene is in new york. vonnie quinn has the latest on vladimir putin. vonnie: we have some live pictures of the russian president speaking from the ministry of internal affairs in moscow. russia is due to pull out of syria. that brings me to my morning must-read. it is by nobel laureate in economics robert shiller. he is writing about russia's national character. he examined the question, is it authoritarian? 1990'sa survey in the and repeated it last year. he asked both segments on a holiday when there is a great amount of flowers and prices go up. is it fair for them to raise

their prices? it was an interesting outcome to the question. another question, is it better to live in a society with strict order, than to allow so much freedom that they would bring destruction to the society? in moscow -- 67% in moscow agreed. flowers, atgo by whole foods, the choice selection you have, it is like a flower shop within the store. i wonder if that is happening in russia yet, if they have the choices we have as consumers. vonnie: in 1991 they concluded that the russian national character was not optical -- was not optimal for creating that market in russia. francine: inflation is huge. i lived in russia for almost a decade when i was growing up, and it was very different than in the 1980's. inflation is the second digit in

russia. a lot of people explain why there is such belligerence. there is a rapprochement that vladimir putin wants with pulling out, but all that good-feel effect is now being hurt by the dollar, with oil below $40. tom: more coverage across all of bloomberg worldwide, as mr. putin speaks. coming up, mr. putin will not watch the returns tonight. "with all due respect," we get the perspective of greg valliere of verizon. ohiois important day, votes, and florida in that key contest. from new york, from london, this is "bloomberg surveillance." stay with us. ♪

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main risks in our two countries right now. let's get to bloomberg first word news with vonnie quinn. vonnie: either front runner can win outright, but donald trump and hillary clinton can each take big steps forward. for republicans, ohio has become the central battleground. governor john kasich has a slight lead over trump. whole's show trump with a double-digit lead in florida. a big loss for marco rubio could put an end to his campaign. hillary clinton is expected to increase her read in their -- her lead in the race. willtaker kenny meet with president obama. it may be the last time he makes the trip. his party last majority in last month's election. he is trying to get his rivals to back him for another term. the statesey,

legislature approved putting a measure on the ballot in september 30 voters say yes, put two casinos near new york city. the parliament in myanmar has elected a close aide to be the next president. suki is -- ending decades of military rule. she is barred from being president, although she has promised to run the government anyway. in brazil, lawmakers are preparing a full impeachment process against president dilma rousseff. there are new allegations leading her party to the from petrobras. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i'm vonnie quinn. tom: thank you so much. everybody is doing the horse race. every person talks about this,

that, with florida and ohio. we have tried to advance the conversation. greg valliere is the chief global strategist at verizon, but that barely describes his encyclopedic history. he was in cleveland in 1924, 1936 for calvin coolidge and out plan in. this is going to be a different cleveland convention, isn't it? greg: absolutely, tom. i deny those rumors. this is going to be a fascinating night, and it is there -- and if there is a theme that emerges, it is once again a rebellion against the establishment. the establishment wanted jeb, then mitt romney, then marco rubio now they want kasich. none of these candidates are going to work because they are the establishment. in the oldened to be post office the old post office tonight that john kerry was nominated, and the shock and awe

of democratic establishment washington as senator kerry became the candidate. how does inside the beltway gop washington adapt to mr. trump or two senator cruz? greg: that is the key issue. over the next few weeks, washington is going to have to say we have to get along with this guy. paul ryan is going to have to talk more to the trunk people, to the cruz people. isone in the establishment crazy about them, but they will have to talk about issues like tax reform. if we take a step back, you think that the recent violence that we saw at trump rallies will not hinder his momentum at all tonight? greg: it might help him. it could increase his turnout. people who feel that he has been disrupted by people who want to deny the first amendment right to free expression. i am not sure -- it may hurt him on editorial pages and among

democrats, but among the republican base, i do not think this will hurt him at all. francine: would it be better if marco wins or loses florida? greg: if the establishment wants to prolong this to cleveland, they would like to see rubio win in florida tonight. i think he is to lose decisively. if there is a surprise tonight, i think cruz, just beneath the radar screen, has done pretty well campaigning in missouri, illinois. he will get quite a few delegates. while hillary will do well in florida and north carolina, in the other three states bernie sanders will do pretty well. tom: turnout has been extraordinary. everybody is writing about it. let's take a quote from someone who has been following this for decades.

tom: the establishment does not know how to deal with the modern stardom and celebrity of this moment. how will they adapt to mr. trump? i do not see it. greg: that is a crucial point. let me say this. while the intelligentsia demeans trump as a huckster, a con man, whatever, the more important issue is what he is tapping into. it is the issues. people who have had their real incomes stagnant for a decade, people who have seen jobs go to china and mexico while wall street and detroit get bailed out. these people feel forgotten. there is a racial element that is reprehensible, but on the real issue of the economy, he has tapped into something, and it transcends the fact that he is a clever tv host. it is the issues that really count. francine: a clever tv host, not

, who keepskeene telling me that 2016 is different and we have not seen anything like it. if donald trump and hillary clinton cement their positions tonight, do they get beyond the nomination, or can something happen from now until the nominations? greg: she is a pretty safe bet, barring an indictment, which has not been remotely resolved. so i think she is a pretty safe bet. you still have to say trump is the favorite. he will win by so much in florida. maybe he will barely lose in ohio, what he will get the most delegates tonight. you still have to say it's trump . if it is not trump, it is cruz. from the washington republican establishment, that is quite a choice, trump versus cruz. vonnie: what is the next catalyst for republicans? is it a third party in and taking over? and moreust say more

primaries. we get pennsylvania and new york. this probably will not be resolved until june 7 in california and new jersey, maybe not even then. by june 7, trump will be awfully close to having a majority plus one. tom: how does beltway establishment deal with the races that you mentioned earlier? i do not understand how the money people or the elected people or the lobbyists adapt to asething as emotional anybody implying racism? greg: i think people will have to tone it down. tom: do you think mr. trump will do that? can he adjust to the middle? think hedle, i do not will do that, but he does pivot, tom. we saw him trying to be a unifier. so in the next few weeks we will see trump like every politician when he becomes the presumptive

nominee, pivot to the center. that is coming. tom: does he need the establishment's money, their funds to drive a national campaign? greg: he is going to need money. there is a great debate over how liquid he really is. i think he will get it. tom: how is he going to get it? how will he go to the fat cats and shift his tone? greg: i think a lot of fat cats agree with him on the issues, and i think his strongest argument by far is a hillary clinton presidency. that will drive a lot of money, maybe reluctantly, but a lot of money will go to him because of the fear of hillary. will see you, greg, in cleveland. hopefully not with calvin coolidge. greg valliere is with horizon this morning. we shift back to economics, finance, and investment.

alan ruskin is with us from deutsche bank. george goncalves with nomura as well. this is good. we will talk to alan ruskin in the 8:00 hour. this is "bloomberg surveillance." ♪

francine: iamb francine lacqua in london. tom keene is in new york. at the to look pound-u.s. dollar currency, the cross. the risks seem to be stacking up for the pound. the pound falling for a second day. it is not the actual move, it is how quickly it drops. tomorrow we have the budget. we expect fiscal tightening, and more concern about brexit is building. we have three months until the referendum on june 3. tom: some of the calls --

some of the calls on whether pound goes, it is amazing. also calling for a weaker sterling. francine: now let's get to the bloomberg business flash with vonnie quinn. vonnie: thank you so much. in china, the central bank has drafted rules for a new tax on foreign exchange transaction. it could undermine the government's pledged to increase the role of market forces there. two well-known european liquor companies have a new deal to drink too. italy's campari has agreed to buy grand marnier. one and half of grand marnier's sales come from the united states. then he will not take over until april of 2017.

of lowing because interest rates and falling prices. that is our latest bloomberg business flash. francine? francine: we just had some figures out from valeant. this, of course, is a rather troubled company in terms of what came out earlier, saying there is further pressure on premarket trade. , atings adjusted per share 2.5%, 2.7% that we were expecting. when you look at valeant, this is a company that has gone through huge trouble. down 10% in premarket now. tom: the move is there, the adjustment is there. jumble, and what everybody wants his clarity. the number one thing they want is messaging and clarity about what the debris is right now, particularly what the plan is forward. and we see this with a

number of companies and a number of investor activists. seee look at valeant and we the decline -- i do not know if we can take a longer-term view on it, but, george goncalves, how do you see a company such as valeant? is it something that will be resolved quickly, or will we have months of this? george: i cannot really comment on valeant. there is a huge focus on transparency for all industries, and i think that is something that is critical. investors place a huge premium on that, and that is reflected in all the markets. tom: valeant is one example of this work out of troubled companies, and for that matter, i think of ibm with the huge financial engineering challenges, shifting from the cloud -- rather, from what they are doing, over to the cloud. it is all about technological progress, which means this crushing lack of productivity,

which again goes into your world, which is low rates. no one is used to that yet, are they here echo george: at the same time you would think there is a virtuous cycle that you optimize so much that you could growth on the other side. 19 30's, it was combinations and mergers, which is what the activists were about. the only solution, low nominal gdp, low terminal value, no productivity, a combination of companies. george: at the moment that is what it feels like. the reason you do all that is because you think of prosperity. you think you will extract value from whatever you are doing. do financial just engineering and try to shrink their way to growth. this is all about trying to get the lat -- to try to get the right platform. tom: explain apple computer. they do debt, they want to diversify global debt, they do it with swiss francs, i believe at -- i believe with a coupon at

3/8 of a percent. 3/8 coupon. george: you are supposed to maximize whatever is out there bank. you get a better return with better financing, you're supposed to do that as a company. losses,first-quarter $167 million. it appears the markets have aggressively snapped back, so not so great numbers. tom: from a difficult january. do you see that without giving away the nomura tools? george: if you think about overall activity from q1, people started the year with expectations that were not met. it got chopped up in january and february, and that pushed a lot of investors to the sidelines. i would argue that overall volume is really indicative across the street of slower kind

of activity, and i think people are waiting -- tom: what are they waiting on? george: the ecb was critical. what the fed does, lining up to quarter end and japan fiscal year end, once we look from april through june, people come out of the closet and -- is one opiniony who has been clear on this. are they shifting out where they hope we are going to go, or are they going to manage, as we saw with draghi, expectations down in the interest rates? that is a key distinction. george: the fed is going to try to do both. they will try to push out as far as possible without taking away the idea that they will be contained. they need the hike. they are in a tightening mode. they will keep signaling as

such. but if they push it out further and pivot lower, does that really change anything drastically this year? the markets are already priced for it. it is one uncertainty that gets out of the way, and the market is waiting for that. francine: i want to bring you back to the bank of england and mark carney and my pound chart. there is a lot of talk in the u.k. that the boe could turn from increasing rates to cutting rates very quickly because of a brexit concern. if you look at brexit concern, this also affects the fed. yellen view it? if the polls going into it make it clear that that is that it happen, i think unfortunately has a similar analogy to last year with

greece, the issue we saw where there is a lot of turmoil coming out of europe because they got nervous, and there was the hike in june, the weakness, and overseas they did not hike in september. if they havea part a volatility. tom: and of course all of this is a sequence of central bank meetings, and that does not speak to the many central bank meetings of the emerging markets as they adapt and adjust. that will be one of the themes on radio today. really looking forward to speaking with anti-austerity from hanover, new hampshire, david blanchflower, something that we all listen to, particularly those who are worried. ♪

everyone.morning, tom keene in new york, francine lacqua in london. francine is all wound up about sterling. it is weaker by a good 153. dollar strength, weakness.

-- sort of a risk-off feel across all asset classes. there is a little look at the morning post change this morning. francine? francine: coming up shortly, it is "bloomberg ," with stephanie ruhle and jonathan ferro. ellen zentner will help us specifically with what tom was just noting, this risk-off feel. we are not going to see a boost of stimulus, and the markets start to say we like that corner day did -- that coordinated central bank intervention. we are also going to be talking a former u.k. ambassador to the u.s., and there is so much to cover, whether we are talking brexit or the refugee crisis. what is happening in europe is clearly putting a damper on things there, and then in the --0 we have reg margulies,

we have greg margulies. those are the guys who brought -- biggest we will find out what they are doing now. vonnie: i am really looking forward to you grilling the ambassador. he probably will not answer, but them a question that markets want to know, stephanie ruhle on "bloomberg " in a couple of minutes. tom: we go back to something as vanilla as the yield curve. there are many yield curves, but the point to spread is central here. .2 spread isoin central here. we have rolled over big time, but no near -- nowhere near recession yet. toward an call this, let's start with why we have rolled over, even if it is not recession. when the fedally

raises short-term rates, tightens monetary conditions, the economy slows down and you eventually get a recession. the curve can be very flat. what we are seeing now is a market that is skeptical. the long-term rates have been coming down. lowglobal rates are staying , and that has kept long-term rates low. tom: so we get the 10-year here, and the two-year here. george: it is mostly the 10-year coming down. the two-year has rebounded from low levels, so the market is expecting the fed to hike. we are on a flat curve. francine: there was an interesting call this morning saying the u.s. 10-year will rise between 2% and 2.5%. we have not seen that since june of last year. do you think we'll will -- do you think it will go to that level? george: we are on track for

that, but there are serious hurdles along the way. i talked to a lot of investors and traders, and there is a little bit of fear that what we see in the risk markets is not going to last. if you do not have stock markets staying up and risk sentiment going well into q2, the rates will not go above 2%. then you get the uncertainty around all these global forces, and the u.s. economy has to perform. tom: thank you so much for coming in. we look to three days of central bank meetings. george goncalves is with nomura for it "bloomberg " next on television. we will drive forward the conversation. tomorrow on the program, sir howard davies will join us, rbs chairman. and also stephen roach of yale university. ♪ china's central-bank considering

taxing currency speculators in

an idea that it is getting a cold reception from the market. shareholdersfaces today after the company releases the delayed earnings. welcome to bloomberg . in are here with us bloomberg world headquarters in new york city. i am with jon ferro and david westin. lots to cover. john says we are going to break down the fed meeting with adam xander. amy, welcome to the program, both of you. >> the markets are not