anna: global growth concerns worry the fomc. global stocks rally. we look at emerging-market currencies and the pound. as we interview the canadian prime minister, we look at potential follow from the brexit. can the eu-u.k. relationship mirror u.s. and canada? tom, what a day. after that that coverage you had yesterday and emerging markets are feeling a little bit better

today. >> one of the emerging markets linked to oil is in. norway cuts their key rate. you saw the swiss national bank earlier. this is not about the bank of japan and what yellen did or did not do. help me francine, with daylight savings time. i am lost. caroline: just where moore concealer and get through it. i guess in your time, it is 7:00 a.m. >> i guess mark carney will be speaking at 8:00 a.m. francine: let's get straight to the bloomberg first world news. caroline: turkey will be present for concessions after the european union needs for the refugee crisis. turkey wants money and a cooker

pass to joining the eu. they are going to meet today in brussels to try and work out a deal. french authorities have broken up a possible terror plot in paris. four people were arrested and at least one posed an imminent threat. a counter terror rate in brussels left at least one person that. choice to fill's the supreme court vacancy goes to capitol hill today. merrick garland will speak with democratic senators. mitch mcconnell says he will not even get a hearing. some republican senators say it is fine. summer weather maybe enough to spread the zika virus. there is a 45% chance this summer that would allow the mosquitoes to sprea expand their range. anti government protests have broken out in brazil. demonstrators are angry that the

larisa named the former president to her cabinet. it is viewed as an attempt to shield her from the corruption investigation. let's do a data check here. it is not like draghi refugees days ago, but yellen has a big impact. what we really see are changes in the currency market. oil gets a lift, 39.52. rent crude is 41.41. stephen roach is talking about at punch bowl, yesterday 14.99. it is really getting down to complacency. areu.s. two-year yields stunningly lower. stephen major will be here to join us. thatine, the dollar yen,

is jaw-dropping yen strength. isncine that: jaw-dropping. the basic resources are still significant higher. this is after the fed signaled a slower path of rate increases. this means investors are a little bit less concerned. we have the boe later. this will send to the brexit debate. the swiss franc says they cannot do anything, but they believe it the ftse is overvalued. norway cut rates, signaling more easing may come due to the price of oil sinking lower. we spoke to a danish central banker yesterday. they have had negative rates longer than anyone else. he said, it makes no difference to the consumer. stephen roach disagreed with that strongly yesterday. reporter: absolutely and i am

typing to our team in the control room to get the negative rate banner up. that is the key headline. where your rate says -- where norway says they may cut rates. it was just outstanding. i don't know if you saw it, chair yellen came to a complete stop to talk about negative rates. let's look at a positive rate quickly. toove done you this chart many times. we call this the "lollipop pop" because it is childlike, like candyland or something. this is a two-year trend and what is important is we are getting back to the reversion where the market vigilantes are driving yields up reluctantly as the fed desperately desires high rates. but the swirl, is really front

and center. and again, there is that headline. could they be the sixth nation to go to negative rates? e: it seems the pressure is on, tom. i love your lucky charms chart. mark carney has the difficult job to not talk much about the brexit. this is probably one of his main concerns. is it wageine growth. this is the main concern we have in the u.s. -- that wage growth is not picking up enough. if the government little bit from early january, but not as much as the boe wants it to. i actually benchmarked it to the pound. and of course, this is a trade weighted index. the pound has been falling quite significantly. we have had some calls for the pound to drop 25% if the u.k. were to leave the eu. koch. now joined by katie

you are usually in new york, but you are here in london visiting clients. you believe the markets have been oversold. do you still believe that from what you heard from chair yellen yesterday? katie: clearly the market like turn is very much. absolutely. if you take a step back, looking at the lows, which have rally 10% -- despite that, when we world, wed the absolutely believe the fundamentals are a lot better than what many markets are suggesting, whether you look at negative rates, or whether you look at the fact that equities are negative on the year. first of all, we see fundamentals bottom-up, much better than what equity markets are suggesting. even though it will be relatively constrained, we think equity markets can grind up to single digits.

the returns will be overall constrained and so, it will be very critical. francine: what fundamentals are you looking at? ceo aret seems that reluctant to deploy their cash. i would say we are very far through that cycle from a developed market perspective. we think a lot of the cost-cutting has come. actually do see signs of the strength across many major developed economies. the u.s., for example, we certainly are aware of the news that came at yesterday from a central bank perspective, but when we look at the world bottom-up, we continue to see the consumers being white strong in the u.s. we think the fed reaction is a reaction to what is happening outside the u.s. u.s., consumers support 75% of the economy. i would say -- tom: jeff corey was on asterday talking about oil,

very wide dispersion, but nevertheless, a test and commodities. -- a test in commodities. do you fall this into a single digit world for equity investors? katie: we are actually underweight commodities across our diversified portfolios from make europe, u.s., and japanese standpoint. those of attendees include consumer banks. the commodities sector is very underweight -- energy, as well as materials. tom: katie koch with us today from goldman sachs. we will come back. lots to talk about. if you are just joining us, norway with a rate cut and is some really stern headlines out about negative rates. we are thrilled to bring you robert feldman of morgan stanley.

he will join us from tokyo. from london and new york, this is "bloomberg surveillance." ♪ francine: yesterday was fed day

and today it is boe. let's get straight to the bloomberg business flash with caroline hyde. caroline: in switzerland, the central bank is giving interest rates at a record low. it repeated a pledge to intervene in currency markets if necessary. they describe the fed as significantly overvalued. vw is in talks with the u.s. about setting up two funds to pay for those emissions tests. one fund would be administered by the epa to provide clean transportation in the u.s.

the other would be run by california. rose 55%.r profit the german airline is forecasting a slight increase in earnings this year. the reason is competition with its current carriers. soars.sa's profit tom: caroline, thank you so much. all you need to know is that the yen is at $1.11. that is definitely a surprise. michael mckee has been in that press conference before. regarding negative rates, yellen was very tentative. michael: the fed has been watching negative rates and they don't seem to think it is the answer for the united states. the the pressed

conference with a question on credibility. it wasn't that it was rude, but about whatpt, everybody wants to know. measure the credibility for us. came out andfed did what the markets wanted and said, we have been too optimistic about the path of growth. the markets reacted by lowering their estimates. -- you the dot chart have it up on your terminal -- this is december and the fed is up here. the market is down there. and lookoves lower what happens, the market rates lower still. trade with a higher yield. that is the norway reality. don't dofrancine, this. francine: i could, it is like scheduling, right?

tom: oh my word. it is just too much. francine: it is like magic! why are we still looking at dot plots? one of forget the dot plots and just look at what the markets expect? michael: if that were a quest to janet yellen yesterday, we might have gotten a good answer because the markets told us they are not watching the dot plots anymore. they like the idea that the fed is focused on keyword rate cuts. the fed is not saying, we are going to do two rate cuts. if thee saying economy develops as they expect, you would see the number of rate cuts in the year. obviously, the economy continues to change. even their decisions yesterday will change things because now when you look at the relative value of currencies, the fed has been wearing what is going on overseas -- what do we do? we weaken the dollar. that will not help mario draghi

and that will not help kuroda. francine: it is really our problem. has janet yellen finally become the central banker to the world? michael: the fed yesterday said, we are worried about the rest of the world. we are not worried about the united states. which raises the question for the markets, what is the reaction function? in the u.s., they are there. tom: this is critical. mike nailed it with the reaction function. i was not able to ask richard for the others yesterday about this. they are losing their degrees of freedom. everybody comes down, whether it is norway with oil, or chair yellen warning about the united states. mark carney said later today, they are losing their options, their degrees of freedom. youael: at this point,

don't know what their plan is and why they would raise rates at all. to dismissn seemed the inflation the u.s. saw yesterday. if they are not moving on inflation, what will they move on? they are looking at what is happening overseas and they could raise the value of the currency in other countries. this could help the emerging markets with a lot of debt. the weaker dollar is in less trouble, but it does not help the major economy, with which the united states does a lot of trade. francine: yes, if you are a part of the european central bank or the boj, this is a headache for you. we sign a nice rally this morning with the emerging market currencies. opportunity ong currencies in emerging markets? for willy rally be short-lived -- or will the rally be short-lived? >> this is actually quite good for yen risk assets. it is also very true of

equities. from an equity perspective, you the to be very geared into future growth opportunities that can do well in this backdrop. that should lead you to heavily avoid the index. the best evidence i can give you is 50% of our portfolio is invested outside the index. we would be zero weighed into the commodities sector. francine: katie, thank you very much. also thank you to michael mckee. coming up later today, the former minneapolis but fed president. he wrote a brilliant bloomberg news piece on inflation. ♪

francine: i am francine lacqua in london. tom is in new york. one of our exclusive interviews is with justin trudeau, the canadian prime minister. we picked up the morning "must-read" to reflect the importance of the new prime minister. michael bloomberg wrote, strong economic leadership and trudeau seems to understand it does not begin with protectionist or socialist policies that vilified scapegoats. it begins with uniting people around a hopeful and realistic vision that can be fulfilled if government works in concert with markets. tom, when we were covering the world economic forum, it was very clear that justin trudeau has a little bit of a halo.

for the moment, he is sustaining it. tom: he is on a victory lap of sorts. and of course, there is the heritage of his father, which few of us with gray hair remember. it is interesting how he distances himself from the trudeau legacy. what is most fascinating to me is most of the dutch disease of canada, where the provinces are so partitioned into what they are doing, whether it is the oil, western economy, and of course the industrial economy of ontario as well. francine: one thing's for certain. because he is young and liberal, there has been a lot more appetite to find out exactly what kind of policies he will be offering. we are of course, a lot less dependent on canada than the u.s. katie koch is still here. in london, there are pro brexit campaigns. ?ould we find outside the eu

look of the u.s. and canada. they have a great relationship. can we merirror that? katie: we don't think they will be a brexit. and as to what is economically beneficial, we think the u.k. remaining in of the eu would be beneficial to the economy. we think the trading relationship can be more meaningful. however, there will be a lot of uncertainty between now and in june. we are relatively neutral in our portfolios in the u k and we are trying to give ourselves too much exposure. francine: volatile currency that e junebe on its knees com 24. ,atie: if there was a vote it would put incredible downward pressure on the currency. we still feel very comfortable owning assets in the u.k.

we still can find some interesting growth opportunities. i would say that one of the noise kicks up and causes stress on markets, that is an interesting time for us to initiate positions that can grow. tom: let me ask you what i asked bill gross yesterday -- and i don't mean to be rude -- what does an asset management company valeant?hey own a how do you handle that goldman sachs asset management? to valeantn't speak specifically, but i am happy to expand on how we are positioned in other equity markets. i had mentioned to francine that there is an opportunity to pick up assets, despite the bad news. i want to talk about a company called just eat.

they do something maybe a little boring to people, but they deliver food. this is a company that has a secular growth opportunity because you have millennials that want to consume and consume h-enabled way. we have used this opportunity to add to the positions we think can grow in this environment. tom: katie, thank you so much. coming up later, a conversation with the prime minister of canada, justin trudeau. 1.11 at 8:00 a.m. ♪

tom: good morning, everyone. "bloomberg surveillance" after the day. we are in new york. let's look at some data right now. yen moving currency markets

front and center. yields are on with person deepening a two year yield. 1.1283 gets my attention, but what really gets my attention is yen, 1.11. interesting to see if we can get through the strength we saw at 4:00 a.m. new york time. right now is caroline hyde. caroline: for the third time in four weeks, european leaders are meeting trying to stem the flow of migrants. david cameron is expected to warn other leaders not to ignore the crisis. hundreds of thousands of migrants in north africa are waiting to cross europe. more.s. has incurred economic sanctions on north korea. the obama administration has blacklisted more than a dozen north korean agencies, officials, and companies in a response to illicit nuclear and

ballistics tests. the governor of michigan will be at a congressional hearing. according to his prepared remarks, snyder blames a failure of government at all levels including the epa. president of south africa is facing into the attack on his leadership. he has come under fire for links to a millionaire family that does business with his son. now they are saying the party should consider whether to oust him. venezuela is shutting down because of the electricity crisis. the two-day easter holiday is being extended and giving everybody three days off. they have rationed electricity and water for months. a drought splash output the hydroelectric dam.

i am caroline hyde. tom: thank you so much. what we try to do is get you the guests with experience and depth and linkage to the coaches of society. has beenan feldman with morgan stanley, it is your 20th anniversary in two years. that is just exceptional tenure for them. he joins us this morning from tokyo. what will be the reaction dr. todman by the japanese elite janet yellen's action yesterday? lookt: i think they will at the action of the federal reserve is something determined fundamentals.ic they are certainly bring attention to what happened to the outlook for inflation in the u.s.. that is the driver of that reserve policy as an important determinant for where the yen dollar goes from here.

i am sure they will be watching very carefully, but the key thing for policymakers here is what happens to yen dollar in light of what the fed is doing. tom: what we have seen with other banks with adjustments to nominal gdp, everybody bringing inflation down and gdp down, how do you respond to statements by people that such and such country is becoming like japan? well, japan has a lot to teach the rest of the world about the good things and bad things to do t when you face an inflationary period. they got their act together very well in japan. it now has one of the best financial regulators in the world. the same can be said for abenomics. it is a response to inflation. it uses three policies in a coordinated way to address the inflation problem. this is an issue of leadership. i think the g-20 has a lot to

learn from what has happened in japan. japan has a lot to learn from what happened in japan. the key thing is abenomics is a template or what people need to do. tom: you have a template for abenomics which everyone in japan reads religiously, and one of them is about immigration. i was taken back by one of them. you had a wonderful idea where an automatic permanent resident status to foreign students who graduate from japanese universities. this change would increase the attractiveness of studying in japan and make event a more popular destination for motivated students. can they really pull off huge structural change like that? robert: i think in the case of allowing more foreign students an incentive to go to japan, that is not really very hard. japanese immigration policy has been very strict for a long time, but even as early as 1968, they said japan would welcome

highly educated highly skilled people to come to the country. they have not gotten many of those to come. that said, this is a plan that addresses an issue that is already policy. moreover, i spoke to a group at the ruling party in their headquarters a couple days ago on how to access more labor resources in japan, and the reaction to this little idea i put out was actually quite positive. even the people who are concerned or worried or hesitant broad-based immigration do see the need for this type of targeted change. the fact that a meeting like that happened at the headquarters is very significant. francine: why do we need immigration so badly? i know there is a demographic problem in japan, but that can be tide over by women. in the moment, they are not in the workforce. robert: that is actually not true. if you look at the age by age women intion rates for

japan, they are about the same as they are in the united states. that was not true 34 years ago, but it is now. the japanese participation rates are higher than they are in the u.s. the 40's are about the same. that change has already occurred. the is another issue which is women get old also. if you look at the participation rates, they have been going down straight for 60 years because of aging. for women, they have been flat overall. they are aging also but it is because we had this massive upward shift in the profile. is there more room for women to come into the labor force? yes there is. room for their talent to be used more efficiently? yes but the adjustment is already over. francine: they are playing on abenomics. this is a big push to make sure it works and this was only a

year and a half ago cr telling me it is like the u.s. and yet the government is telling us we need to get more women in the work force. robert: they want to raise the participation rate for women in xe 20-64 category by percentage points. that is enough to offset the impact of the aging and keep the labor for stable. what they are doing is absolutely right, 100% right, but it is not enough to raise the number of people in the labor force. that is the issue we have to deal with. there is a bigger issue i think which is to get people in their 60's and 70's working. i hate to call them elderly because they are not anymore. but to give more foreign workers in. the key thing is to raise the productivity of labor because it is a massive amount of underutilization here. is our chief international correspondent and our london bureau chief. we interviewed someone yesterday and said a -0.5% rate is theoretically possible for

japan. the real economy may hurt but central banks want to continue experimenting. >> absolutely. yesterday initially suggesting -- and thenould they say theoretically it is possible. the negative rate experiment has backfired a little bit. not as reactive as central banks may have hoped behind closed doors. shifted ontoay be the back burner. what you saw from the ecb last week you may see in japan. for more innovation. still the ability for central banks to be even when there existences in question. they will offset the negative rates on banks. what he has done generally with the mixing of bonds. the rest of the ecb is that we still have ammunition and we are

willing to use it. tom: i want to come back and talk about japan dovetailing there are into what other central banks are doing. how do peopleere, adapt to what the bank of japan did two meetings ago. -- ago? it seems like ramifications of that are still spilling out over the globe. robert: yes, that is true. the ramifications in japan are far from clear. we have seen one very clear thing in some of the data, which is there is an increase purchase of foreign bonds. one of the impact of the negative rates was to push people out of some domestic assets by karen bonds. that is not a good thing -- bipolar in bonds -- by foreign bonds. that is not a good thing for japanese economy. the harder part is whether lower lending rates will actually be applied to borrowers without a tightening of credit conditions.

the base will not be lending profitably to lower quality borrowers, and that is something we are looking to see whether it happens or not. tom: we will continue with robert alan feldman of morgan stanley. simon kennedy, thank you so much for stopping by this morning. with so much going on with the norway rate cuts and what we will see later, robbie feldman on asia and the global economy. later, a conversation with the chairman. this is "bloomberg surveillance ." ♪

yesterday, was the -- i want to

show you the pound. still significantly higher, gaining 5% after we heard janet yellen saying she is concerned about global growth. european 600 stock index. they were gaining and then they were flat and now they are down 10.5%. tom: robert feldman is with us today joining us from japan. thrilled he can join us. robbie, all want to know your belief on this coordinated race to the bottom for central banks. lower nominal gdp, lower inflation, lower real growth. does it all play out as a currency adjustment? i think currencies are certainly part of the adjustment, but at the g-20 meetings in shanghai and couple weeks ago, it was very clear to

all of major policymakers were very much focused on the limits to what can be done with fiscal and monetary policy to different extents for different ones. the german finance minister said policies have reached the limits. there is a key thing for all countries to do, and that is growth policy, but there is not a lot of clear ideas of what needs to be done exactly and there's not a lot of talk about what the progress will be. in europe, we had a planet you were ago and we have not seen much result from it. we have seen a lot from abenomics. tom: you were i m.i.t. and he studied endogenous growth theries so i will go with idea of technological progress and that is that trade is well. probably a risk of diminishing global trade on a structural basis? we have theed yen abenomics and a little rebound. seent: we certainly have

the real trade figures fall off over the last few months or a couple years actually. it is a concern. haveey thing to do this is running trade agreements that are broadly supported by a lot of people. the tenure in the u.s. presidential debate right now against the transpacific partnership is very troubling. it reminds me of the terrorists 1928 that tariffs of lead to even bigger troubles of the 1940's so we need to be very careful that we keep trade expanding. another key element of that is to make sure industries are deregulated enough so that new technology can be used. electric power is a perfect example of that right now. we had the electric power industry for years and years and had a technological bias because of the way technology is. changed.y has now

are we going to see electric power industries around the world region to themselves to adjust into this new technology which will be cheaper for everybody? is that vested interest issue that is preventing trade from growing and that is the hardest one to address. francine: the you see a race to the bottom when it comes to currency? you see it is difficult how to spur growth and a lot of countries are not doing much on the fiscal side because there is monetary policy here. do they need to stop trying to influence the currency? -- their currency? robert: in japan's case, it has not been aimed at the currency although it is clearly a consequence of it. we also have to remember that , that was a was .76 clearly overvalued rate. paradox.ike a not everybody can look down at each other at the same time. not all currencies can be even

at the same time. the central banks need to understand and move with some pressure on to the fiscal instructor policy saying we cannot solve this policy with monetary policy because it has currency implications. that will not be a benefit for everybody at least. let's get to work on some of the fiscal but more important structural differences. question, and i say this with immense respect for what you and others invented at morgan stanley. a fractious constructive argument. your colleague alexander is way out front that the fed will be unable to raise rates. was the ramifications to japan, china, to all of asia if they are right? robert: i have immense respect for ellen. tom: she has been so right. robert: you know, unfortunately,

i cannot disagree. we are supposed to disagree with each other and have a good time and debate, i cannot disagree with her on this. our new forecast for u.s. inflation in 2016 his 1.2%. the fed is trying to get to 2%. now we have 1.2% in that context. it is difficult for the fed to do much if that is right. we are not seeing u.s. inflation accelerates. if that is the case, the fed cannot hike. that means a strong and or stronger than we have right now. tom: most generous to be with us in your tokyo evening. i wish we could bottle what we just heard from dr. feldman and give it to mark carney because it is amazing to see what he does. as you have been way out front on the challenges of boe alone makes it complex.

what film just said about 1.2% ishaqi. francine: it is shocking. you are right. that could really go either way, either a hike or a cut. tom: we have much more coming up of course. all of our economics coverage am a part of that is a political economy of canada. coming up later this morning, john will have a conversation with the newly minted prime minister of canada. this is "bloomberg surveillance ." ♪

day.good bank in japan it is bank of england day. we will get to that in a moment. francine waiting for the new york 8:00 a.m. announcement from governor carmi. the ceo has declined to step down. in will leave the company next month. he has been chief executive since 2008. saudi arabia will take part in a

meeting next month aimed at doing something about the oil. a meeting will involve opec and non-opec companies. saudi's in russia and oil producers put a cap on the crude output. poisedork plaza hotel is to go up for auction next month, ending two years of uncertainty. david and simon held a mortgage on the hotel and schedule a foreclosure auction for april 26 according to a person with knowledge of the matter. that is your bloomberg business flash. i did not realize donald trump owned this in new york as well. tom: it is an amazing place. they happy to your room going in the main lobby but the bar has been closed for i think pushing 10 years. caroline: not enough martinis. tom: it is like the bar in

london. it is a big deal. it has been a mess for at least a decade. when the donald trump to buy the hotel. that would solve everything. francine: i actually went to see the famous plaza hotel. there you go. the bank of england. jimmy joined by murray. when you look at bank of england today. mark carney has the weakening pound and that is continuing to go downward. there is a lack of confidence because of the referendum june 23. boe today coming out. he is stuck. jimmy: i think the bank of england is in stasis and that is driving the policy choice at the moment.

market expectations and interest rate, they are not expecting a hike until 2020. the thing to remember is that that includes the possibility of -- as soon as that shifts and we get past the event, things will look different. the economic outlook is not that great, right? economic outlook is slightly weaker than possibly than earlier in the year. there is not a lot of news. we are seeing a slight slowing, as you would expect, until the economy reaches its potential. it is back usual. francine: your central forecast is a rate hike this year. most difficult job right now, the central banker? francine: i don't think the slowdown in the global economy will be enough cutting interest prompt- enough to

cutting interest rates. the only circumstance that rates would be cut. francine: that would push the country into recession. thank you, jamie murray. that decision comes out later today. give us insight into what the board members think. the global hour, head of fixed-income research will join us. we will talk about treasuries. that is at 6:00 a.m. new york, 10:00 a.m. london. "bloomberg surveillance" continues. ♪

v ♪ tom: janet yellen drives the currency war. the fed drives the dollar

weaker. mark carney of the bank of england will adapt. he will adjust. it is 8:00 a.m. eastern time this morning. -- steven major on negative rates. garlanded does a meet and greet with democrats. republicans are not grading. they are not available this thursday. good morning. this is "bloomberg surveillance ." we are live from our bloomberg headquarters in new york. francine, what will you listen for today? and read inwill try between the lines when the minutes come out exactly what it means, how many people are expected to hike this year. if you look at the emerging markets, that is the story today. they are celebrating. tom: absolutely. you really heard it yesterday,

the idea of shifting from a u.s. perspective. there are other challenges out there. we will deal with that across all of surveillance today. tell her bloomberg thursday news in new york, here is caroline. caroline: pressing for concessions as the european union medes over the refugee crisis. they want turkey to stop the flow of refugees from the middle east. in return, turkey wants money, a quicker at two joining the eu and the right for turks to travel to europe without visas. french authorities say they have broken up a possible terror plot in paris. four people were arrested. the arrests came a day after a counterterrorism raid left one gunman debt. thos-- dead. president obama's choice to fill the supreme court vacancy goes to capitol hill today. garland will meet with democratic senators. mitch mcconnell says he will not even get a hearing.

republican senator say they will talk with him. summer weather may be warm enough to spread the zika virus to new york and los angeles. long-range forecasts say there is a 45% chance the summer will be warmer than usual. that would allow the mosquitoes to expand their range. antigovernment protests have broken out in brazil. demonstrators are angry the president named the former president to her cabinet. the move is seen as an attempt to shield from the corruption investigation. tom: thank you so much. the equities bonds currencies commodities focused on the litmus paper of the global system. euro 81 1309 is something. 1.14 thatut over

nothing like the 10 year yield. 14.99 equities elevated. two year crushed yesterday from -- 10and 70 basis points basis points. francine: this is what i am looking at. european stocks were higher and then flat and then back down 1%. a lot of the emerging markets celebrating the fed's dovish turn. stocks rallying, oil rallying. 10986, the swiss national bank saying swiss is overvalued but they have not done anything. they cut rates and so they can go lower further. tom: i think you are dead on with that view of swiss.

ck 15g back from a shop or 16 months ago. that's go to the bloomberg tournaments. i want to -- bloomberg terminals. i want to go through this quickly because we have a great guest. more volatility. we are really now on the mean of the trendline. out ise: what i picked the correlation or not between the wage growth in the u.k. this is in honor of mark carney. my throat is going. i am so excited about mark carney that i don't know where to go. tom: that is fine. surveillance exhaustion over the central bankathon pushing two weeks.

steven majors is the same curiosity and central-bank action. is action was to make the outlier on major houses last year for low interest rates. there is a quiet now as consensus migrates to the major outlier at the moment. where are we now with consensus? how close is consensus to your 1.50% call on the u.s. 10 year? i checked onthan the bloomberg consensus was that it was crashing lower so back in the fourth quarter in austria, the consensus for 10 year 3.3.uries was last i saw, it was newer to 2.6 to 2.6.r changed is your research note of a structural

and economic call. there is a lot of other noise now. describe that noise. steven: it has always been much more structural and it has been focused on the global inter-linkages. i think that was another key pillar to our view. more recently, the challenge to that view has come from the traditional cyclical domestically orientated data like wages. very wellsome respected out there calling for higher inflation and pointing out wages in both the u.s. and u.k. and we have to respect that. the question is is that the dominant factor? to me, the global inter-linkages and the debt overhang are the ones that really matter. if you look through this year, i think it is very difficult to see rates going up much at all in the u.s. francine: where do you find value? we know about treasuries.

japanese australian bonds also gaining. where do you make money? steven: this but i outlook, because it is both nin -- this benign outlook, because it is benign. benign places that have rates and even lower rates, the u.s. is in the process of capitulating away from previous hiking news. with a benign outlook, you have to look and that is good for credit. by a good quality companies with some spread seems to be a good trade. in your, it my favorite equities -- in europe, if my favorite equities more especially as they push more for supporting companies and the financial sector. there are opportunities. it is not clear to me you will get them from big outright duration.

in terms of yield curves, they tend to get very flat from the very front out and sit very steep in the 10 year plus. what is the linkage between treasuries and wage growth and the dollar in the u.s.? steven: if you took the u.s. as a closed economy and looked at the inflation dates, most of it has a number near 2%. on a literal interpretation or the various inflation prints, most of them have been trending up. there is a move in real wages as well. the question is will it still be there in three to six months time? probably not. if the global ones come through, as we would expect. tom: i want to ask a more philosophical question with your courageous call on lower rates. you took a lot of grief when you took the call. are central bankers working with

messiness toern that hope in a period needs a more simple economic analysis. rates are low, do something. steven: i think you are right. every couple of decades or so, there is an intuitive shift in central bank thinking. it was only 1989 by the way that new zealand's central banks started to target inflation. the fed was only targeting rates in 1994. every 20 years or so, things start changing. i am not arguing from a big bank , i would respect the fact that there are shifts going on. one of those i would say is the being recognized the low of negative rates. negative real rates just about everywhere. that is part of the deleveraging

process. that is quite controversial. i have written about this. sorry. tom: let me come back just because of time. i want to come back in a spin on this. erik schatzker with the final question at the press conference yesterday on negative rates. we will address that with steven major. somehow, that may come up on bloomberg this morning as they drive for the conversation with janet yellen with the former chairman. ♪

♪ tom: of the ramifications of economics and it comes out upon the industrial space. caterpillar out with breaking news right now and a real adjustment on revenue guidance.

let me to new to the bloomberg terminal now. what i know is the revenue shift down about 8%. i am doing that in my head, but 9.35 billion dollars down from $10.2 billion. ramificationsity for caterpillar. they get confused with john deere. john deere, green. caterpillar, yellow. i am all over john deere and caterpillar. at the end of january company this company said there would be no let up in the commodity crash and they said they will continue to cut costs. declining demand from the mining industry. when you look at how miners have performed over the last

three or four weeks, it is an ugly picture and it is impacting caterpillar and john deere. a.m.we will see at 8:00 right now, our business flash in new york. caroline: thank you. the central bank is keeping interest rates at a record level and also repeated a pledge to intervening currency markets if necessary. bankhile, norway's central cut its benchmark rates to a record low, one half of a percentage point. it is willing to ease to hold off a recession. talks with the u.s. about stepping up to pay for pollution links. they say one fund would be administered by the epa for the most green transportation in the u.s.. the other would be run by california. lufthansa posted a profit but rose 35% -- 3.5%.

a slight increase in earnings this year. lufthansa cannot believe benefit from the lowest fuel prices in more than a decade. that is the business flash. tom: thank you so much. we continue our coverage like we did yesterday during our fed special. thank you for the many comments on that. we went to the projections. >> the event has lowered its projection for growth a little bit, but they still see unemployment falling significantly at inflation rising. if you take a look at where we are now, their projections have almost been realized. it is only in the growth every other a little off so you wonder if they will raise rates. if not now, are they ever going to raise rates? tom: let's bring up the chart here. what is the single number? michael: that you go. that is it. that is the index the use. not cpi. we are already above that level.

janet yellen dismissed that as temporary noise. people are wondering how she could do that. francine: no one will ever raise rates. forget about it. steven: i wonder whether in three to six months time it will come down even further. imagine if by september we have another drop of two notches. i don't believe they will hike in a conventional way. i accept there is a chance of one more or maybe even to. but really? there is no way to get to previous levels. francine: why not just ditch the dark plot? michael: that is a good question i have asked a lot of people in the markets.they say we don't follow it because we don't believe it . the problem for the fed is the markets never understood what they were trying to do. these are 17 individual forecasts of where they think growth and inflation will be and what kind of monetary policy gives you to it. it is not a consensus and not a promise to raise rates.

they have a real disconnect with the markets. it does not seem to be working. tom: when dealing with a carl of rate haul, bloomberg economics that the response was remarkable. what did you hear? michael: she like others have got the idea whether the fed would consider using negative interest rates. they don't want to use it because they would have effects on the u.s. money markets which are bigger, brighter, and deeper than the rest of the world -- broader, and deeper than the rest of the world. tom: they are paid to study it. michael: it is not a bad thing. you are a central bank are, you have to look at all your options, but it is not really on the table. tom: steven major, what is your number one inside after what you saw with the fed? steven: the insides i have are the constraints everyone talks ie the casket straight that was just mentioned and the impact on bank earnings being

negative are kind of irrelevant. if you think where we will be in a year or so time, there'll be many parts of the world that have gone cashless so they will not be cash anyway. regarding bank earnings numbers, the impact of the rates is tiny. it is probably one of the low ranking concerns a bank would have right now. there are other challenges. i think there is much more to it. the number one inside i have is i think this is the start of a long and slow deleverage process. that is quite controversial. francine: what is that also -- i guess the carried through from janet yellen's dovish stance is if we will see devonte emerging then it can balloon until this happens. steven: exactly. you only have two or three choices when you have so much debt. one is to default like that. that is not a sensible way out of this. the easy way is to try and

inflate out of it. you have inflation, which cuts the debt in real terms over a long period of time. it seems to me the absence of those ideas or anything better is to allow the interest rates to go toward the long-term real mutual rates and let the debts run all over time. yen very quickly, we have news. currency markets on the move this morning. francine: emerging markets almost having a party this morning. michael on the news of the federal reserve. thank you. inven major will be with us a couple minutes and we will talk about deleveraging and possible default. coming up later today, the former minneapolis fed bank president. that is at 4:00 p.m. new york. european stocks down. basic resources are gaining 5%. ♪

♪ tom: markets on the move with mark carney coming up later this morning. hsbc. major with us with yen really moving. futures have reversed. no other way to put it. on to the next screen if you would. there is the yen. 1.1120. a 110 handle. that would be a big deal. i want to do this quickly.

i just did this on the commercial break. the idea of dx why, the blended index, pounding down off the yellen. now we have a new leg downpost- post-yellen. let us go to francine. bring it up. oy does heou take -- b take the president to the timeout chair. it is conceivable that the president would consider such arrangement for america. boris johnson is not exaggerating when he says that the u.s. defense its own sovereignty with hysterical vigilance. francine said that about me the other day. francine, discuss. francine: i disagree. i disagree because if you look at the u.s., this is probably

the hope of the great founders of the european union. there were hoping we would come together much like the federal states of the united states. we have this new poll. 36 pro. 28% undecided. found from these elections around europe and referendums that markets tend to stop moving quite aggressively if you get closer to the polling date. that is partly a function of the fact that the information is not fully available. we are still trying to collect the facts about the pros and cons of this. sterling moved a bit. sterling was weaker for a while. the guilty yields have been unaffected. i struggled to see any evidence in the gilt market of having any influence at all. our view is that gilt yields go down whatever because there is one very clear fact that comes through from this. it is not good for growth to

have this uncertainty. before or after, actually. therefore, gilt yields should go down, and they are. tom: steven major will be with us for much of the next half-hour. later today, john in conversation with justin trudeau of canada. trudeau making quite a splash across international relations and politics. justin trudeau maybe with the honeymoon over in conversation. see that on bloomberg 9:00 a.m. this morning. this is "bloomberg surveillance ." ♪

♪ today is boe. check out the data.

they started the day on a higher note. they are down. banks dragging the lower. basic resources on the hive from janet yellen still gaining less than they were previously. pound, 1.43. overvalued they say. caroline: thank you. for the third time in four weeks, european leaders are meeting to discuss the refugee crisis. to notmeron is expected ignore and other potential crisis. there may be hundreds of thousands of migrants in north africa waiting for calmer seas. the u.s. has imposed more economic sanctions on north korea. the obama administration has blacklisted more than a dozen north korean officials, agencies, and companies in response to what the u.s. calls you listen nuclear and ballistic

tests -- calls illicit nuclear and ballistic tests. according to prepare mark's, snyder blames a failure of government at all levels including the epa for lead in flint water. the president of south africa is facing another attack on his leadership. has come under fire for his link to a millionaire family that does business with his son. now members of his congress are considering whether to ask him. venezuela is shutting down for a week because of an electricity crisis. president is extending the two day easter holiday and giving everyone three extra days off work. but as well as rationed electricity and water for months. a drought has splashed out the hydroelectric dam of the country. i am caroline hyde. tom: thank you so much.

this is a real treat. steven major from hsbc and kit. i look at the dollar with major chinese strength bursting through. --t is there a mean it's that is through a very managed event. is this a new bout of currency war or the kinder currency adjustment? kit: this is a new part of risk being on an capitulation after last night. andave already seen the yen euro failed to strength and weaken on cuts. the dollar is under pressure. tom: when you look at the market adjustment, is it a adjustment or recalibration or covering

trades or is it adjustment to a new low growth secular reality? kit: a bit of all of them. there is a lot of dollar bullish trades being taken off, but there is an appetite for yield as well. a lot investors will be standing on the sidelines wanting to get involved in something that involves more yield than you get there or make a here. we are in a new reality. this might be the post currency war reality or certainly after the period of fed induced dollar strength for a while. it is a more complicated story with slow growth but probably not big currency. tom: exactly. and i want this to be a wide open conversation with kit, what is the state of liquidity within the market as we get these adjustments off of central bank meetings? steven: it is fair to say liquidity has been falling for a long time.

in fact, probably all of my career. it is only a recent extension of that trend. is clear that many people have been caught offsides. once again, the consensus trades were for higher yield moves in the u.s. the forwards a consensus were aligned with higher yields so you are seeing a reversal of the consensus trade. liquidity makes it even more exaggerated in the pro section. francine: i know you are raising for the guinness today. trying to exactly figure out what we heard yesterday. doing need to trust the markets a little bit more? they predicted what janet yellen said yesterday. kit: they predicted it better than the strategists did. from my kind of job description, you have to respect the markets, but you also have to see what this means. there was a lot of positioning. there was positioning for a more hawkish message. that beginning to

trust the markets now, go further because the market were right and the people in them to some degree were wrong. that will extend the trade. not underestimate the need of the global investor community for yield, for better returns, which means they will stretch some of this move into high-yielding currencies and assets in search of better return. i want to respect that for as long as it takes and drinking guinness for the same time. steven: it is quite clear the flow is coming from places like japan. you can see it in the emerging sovereign markets and credits. there have been big monthly outflows.an increase from low yielding or negative yielding parts of the world into dollars and dollar put up is clear. if you look at the basis swap, that is the yield you get after hedging for the currency risk. you cannot get a pick up if you

go far enough out on the yield current. it is quite clear to me that low flow is going to the high-yielding assets. is janet yelling entering the currency wars or is she saying we are looking at a possible recession and it will be my problem if we start to normalize soon? kit: it is janet yellen not helping anybody else in their fight in the currency wars. the message i got from janet yellen is she thinks inflation expectations are too low. until it gets higher, they are not pushing rates up. that is the message i got from her. tom: do you agree with janet yellen there is a sticky permanent inflation out there that we need to pay attention to, steven? steven: i will believe it when i it. i can expect that for a few months it will take up like it often does in the first one or

two orders of the year, but a sustained upward movement inflation, i doubt it. kit: i am with statement. i think we should be surprised by inflation but there is a lot of excess capacity in global good markets still. tom: we see it with norway this morning. francine is focused on bank of england. with a shifting daylight savings time, 8:00 a.m. here on the east coast. i would suggest the norwegian announcement today. yes, commodity induced. onet that, but these knock effects catch up with major banks at some point. francine: they do and they don't. a lot of people say they do and marcus psychologists say they do. we have a point from stephen saying you can structure them in a tier system. steven: is through notice in

the ordinary people are going to be protected at close to zero on their current accounts. the negative rate system appropriately gets tiered, you can move forward. all pointing to lower rates today. also saying the reader commodity prices have not been as significant as they could have been per household. they are more concerned about the longer-term growth outlook. i average this up and say how can rates go up? watchingfully you are bloomberg television wherever you are for st. patrick's day, but this is japanese yen in 2014. we are three standard deviations out now of the trend of yen weakness. when the you climb on board a strong yen to go the other way? yen you know, i think the is going to have periods a strength in terms of risk aversion. my problem is this will be religious for abenomics --

ruinous for abenomics. tom: yes. kit: i have feeling thoroughly only wrong side of this right now because i was very bullish of the yen two months ago and now i would like to me bullish on the yen at a better level than this. we cannot get a sustained yen, a really sustained rally until abenomics shows better signs of growth. i am inclined to trade this move but it tells you when money is a day whenthe yen on equity prices are doing ok and risk is doing well, that is an unusual set of circumstances and it tells you where we are in the cycle globally. tom: perfectly set. it is unusual to say the least. what a privilege. we will continue with mr. major. kit, thank you so much. thank you for being on at 8:00 a.m. we moved to the conversation with prime minister trudeau.

i love saying that. it takes me back a few years. with primeh -- john minister trudeau. look for that this morning. ♪

♪ tom king is in new york. i am in london. where he is addressing members of the armed forces from russia. russia has a modern well-equipped army. why this conference is important is he took the international community by surprise to a reader to go thing he will pull surpriseof the -- by

two or three days ago is he said he will pull out most of the troops from syria. is hoping all the western powers can come together on a resolution for syria. he is saying russian troops will remain in syria very well protected. warned insad was advance. this is interesting because this is a key ally for russia but he had not learned western powers. will have plenty more on that news conference. now let us get back to the bloomberg business flash with caroline hyde in new york. caroline: thank you. a chick executive of a british -- a chief executive of a company says he will step down next month.it has been criticized for glaxo's sluggish sales and a pipeline that lacks

missing medicine. saudi arabia will take part in a meeting next month aimed at doing something about the oil. will involveas opec and non-opec companies. russia introduced a caps on output. the famed plaza hotel will go on the auction block in new york. there has been set a foreclosure auction for next month. the hotel owner is faulting on the loan. it is great to see that, particularly with currencies rolling today. as francine mentioned earlier, the place of the plaza accord in the 1980's. it will be interesting to see. it has been a disaster property for i will say eight years, maybe even longer. the oak bar has been shuttered.

no other way to put it. francine: what fascinates me is the amount of owners that have been in on the plus at some point. 1988, the famed donald trump owned it to sell it to saudi arabia. it was on by israel his an india. tom: the magic of the first floor has changed since they can't go -- they condo-ized it. bring up the banner if you would. you and i need to spend time in london. we need a dorchester accord. this is the indonesian currency. here is the crisis of the 1990's for the plaza accord to my left. here is stasis. here is indonesian weakness. here is the recent bout of indonesian strength that we see off the weak u.s. dollar. francine. francine: the plaza accord is

even more expensive than the dorchester. you have been showing that currency on the back of indonesia cutting is rates 6.75%. if you think about the way the central banks have changed their in their last eight months, eight to 10 months ago, we were talking about hikes. earlier this year, the height hike had tose. -- reverse an interest rates are going lower and lower. us fromven is with hsbc. thesee are seeing of effects, they are little canaries may be in a big coal mine. we are not sure they are out there, but how do you equally e.m. dynamics with what we are seeing in developed economies with low nominal gdp? steven: the week commodity prices that many people are focusing on an unnecessarily a great thing.

there is evidence to say that they pass through two households in developing world and that is not good. it is a group hit and they have to ease policy. for us, indonesia is very interesting. it was our favorite of the e.m. markets this year. the reason they are easing is because they have to respond to the nominal gdp backdrop and accommodation of real gdp and inflation falling. they are quite sensitive to the region.is more about what is happening with china than what is happening over here in the west. quite clearly, the easing path is now taken by the smaller central banks. to me, there is much more information with what is happening in indonesia, norway, switzerland, sweden, wherever. the fed is part of the process. the fed is recognizing these global inter-linkages in their statements now. tom: that is the heart of the debate. 10ncine: it is, but again, le

months ago we were saying we will mobilize.how scary will that be ? we got into negative territory as central banks around the world cut and cut. the normalization process is being pushed away and will be much more different when it comes. steven: it was the 28th of january what effect stress tests -- when the fed stress tests were published. minorenario included the 40 basis points. a 6% treasury yield. that is the result of stress testing the system in america taking on all kinds of scenarios with the global economy, global markets, all kinds of things. i struggle with the fact that it has taken people so long to realize the fed has been analyzing thing in a different framework and only now is everyone realizing that in fact

everything is connected. tom: you see that awfully bloomberg screen there on television. eight of 13 economists, that shows you how surprising these moves are. we will move you to the bank of england announcement. justin trudeau will be with us, the prime minister of canada. tomorrow, james will join us. really looking forward. mr. putin speaking now. ♪

♪ dom: so much for a nonfe meeting. francine in london. i am tom king in new york. markets really on the move. we can do a two-hour foreign-exchange report this morning. francine, imagine. francine: we could. we won't. tom: come on. let's try it once. stronger japanese yen. indonesia, stronger. everything in the emerging markets stronger. good morning governor as you want us. .789.terling,

we have no idea what that means. i cannot afford london. francine: that may change soon. everything on the emerging markets is on a tear. coming up shortly is bloomberg . you have a great entry coming up on the program about canada. >> emerging markets on a tear. hopefully more than that. it is all about canada. john will be sitting down exclusively with canadian pm justin trudeau. gcid west is down in sitting with alan greenspan. we will be speaking about breaking down the fat and the market after that. a big day. tom: thank you so much. we continue with steven major. and your your research compilation, your estimate of

where negative rates can go for mario draghi. a simple calculation. we put his repo rate at a negative 180. assuming excess levels of current reserves would be charged at the negative rate. you go on to readjust, recalibrate your outlier call. these numbers are stunning, folks. germany, 0.2%. u.s., 1.5%. 1.0% steven: the -100 80 is not a central forecast, just a scenario. without is whistling, you have had a in switzerland, you have had -175. to up want a low point can be for the ecb. there is not a flaw.

when you look back over the year or so and several comments by mario draghi h time they have each time they have cut saying that is it. -10, -20, -30, and now we are at -40. the floor is in for a few months and then it goes again. one justin -50. the reality is these rates can keep falling. the bond yield has to reflect the central bank's policy rate. the central bank is only setting real rate euros and long-term real natural rate, which is down, not up. it is supplement. francine: and 40 seconds, you're making the analogy it is like penguin. it is either you adjust or you move to the bahamas. steven: the paper is called life below zero because we are adjusting to living with rates

below zero. if you are at eskimo living with -60 degrees, you like it, go to new york. you stay there and i just. penguins.eskimos and tom: i hope the central banks are reading your research as they chase after. what a great show this has been. bloomberg will continue with the conversation with prime minister trudeau. a.m.for that at 9:00 we will continue of course nationwide on "bloomberg surveillance" an worldwide as well on bloomberg radio plus. down futures -69. yen 1.1128. it is st. patrick's day in new york. ♪

stephanie: the fed focused on the worldwide economy as it is on domestic growth. protesters to the streets last night in brazil.

earnings are jumping, but the airline warns its problems are far from over. good global markets morning. you are watching "bloomberg ." i'm stephanie ruhle, here with jonathan ferro. it would weston is in d.c. for a special interview. we will be sitting down with alan greenspan. he was the chairman of the fed for 25 years. we will talk about what the fed did yesterday, what is said. whether central banks have it in their power to affect fundamental growth. jon: looking forward to that.