francine: the dollar headed for its steepest three-week slide in four years, but the dovish fed means rest in peace, dollar rally. the central bank is doing more. they have room to cut rates of the outlook worsens. a win for ubs, the only major european lender to pay higher compensation. the bonus pool surges. i'm francine lacqua in london, tom keene in new york. negative rights, central banks, currencies, and some of the other asset classes. tom: one of the great interviews

of the month was your conversation with ubs. did you see that big bonus coming? francine: i did. his was the only major bank in europe to go up in terms of bonuses. deutsche bank cut. tom: i would say it is the only way to retain your upper 15 percentile. good for ubs. it's a good way to start the show. francine: you're right, and we will have plenty more on what it means for competitors with michael moore. in the meantime, let's get to the first word news. caroline: good morning. another show of defiance from north korea. kim jong-un fired at least one ballistic missile in the northern baltic strip after the united nations security council in postwar sanctions. brussels, the european union may have a showdown with turkey over refugees. to fast-track

asylum decisions and sent those who don't qualify back to turkey. in another $3.4 billion, assuring that turkey would be able to join the eu. russia wants the u.s. to push syria's opposition toward mines. talks aimed at ending the five-year civil war are undergoing in geneva. say you opposition leader should be more flexible. for demonstrations in brazil against the president. they are angry that he has added a former president to her cabinet. a judge has blocked the appointment. meanwhile, congress has revised impeachment proceedings. senate republican leaders are trying to shut down talks that they might have a vote on supreme court nominee merrick garland. he met harry reid and other democrats.

republican senator orrin hatch says he would consider a vote, but not until november. global news, 24 hours a day. tom: thank you so much. francine, it was something less night to see caroline hyde react on wichita state. wichita state beat arizona in the brackets. caroline hyde through a guinness -- francine: [laughter] tom: she threw a guinness off the mirror at the bar. wichita state! it was unbelievable. let's get to the data check. for those of you worldwide, a lot of fun with our brackets here. i'm pleased to announce i am in last place. thank you. currencies, and commodities. fractionally, yields up over the last 24 hours. we feature it, and the wall

street journal does as well, with real dollar weakness at the frontline. nymex crude when i walked in the door was $40 per barrel. the braves in the control room today -- the bund and 0.48%. that is a quiet story about german negative rates, becoming more negative since draghi's central-bank meeting. francine: let's link markets to the march that this. we have had a huge week, probably the most chaotic four days in central banks, and it is the saver basketball, r ight? european stocks flat, thanksgiving to 0.4%. huge losers in the nordic banks. -- it is interesting that it is so close to $40. japanese yen is interesting. we are expecting kuroda to intervene. yale in one of

our brackets. we went with yale because of stephen roach. we want to thank him for demanding that we go with yale. that was pretty cool. over the terminal, the yen is the story. this is about that bank of japan bombshell, and what they wanted was this. they wanted a weak yen, and it didn't happen. over we go with the shock of that strong yen, before this week. and here is the new leg down of yen strength. you really wonder if that was the outcome that janet yellen wanted. james sweeney will be with us in the next hour with credit suisse. francine: tom, we are on the same page. i shared something with japan today. this is what i chose -- the japanese 10 year yield, dropping to a record below the negative deposit rates. this is the deposit rate, the

blue one, and you can see now, this is the 10 year. this is the 0% line in look at it. this is the brave new world. tom: it shows that the orthodoxy of monetary theory is out the window, to say the least. there we go. francine: a pretty big central-bank week. this he currency traders trying to figure out what the next movement should or shouldn't be. with us is morgan stanley's head of global fx strategies, on his record. -- hans redeker. no matter what kuroda tries to do, the yen is not budging. you look at euro-dollar, there has been such huge swings on the back of a dovish fed. is this rest in peace, dollar rally? >> you mentioned euro-dollar, and i have to say that they are in high-yielding environments. there we have seen the dollar weakening considerably.

euro-dollar is still in range when you look at march, we were at 105. in august it was 117. the question concerning euro-dollar is can we afford a higher euro under current circumstances? what does this do to inflation expectations? i think today's producer price is coming out of germany, and other disappointing numbers there. i think that a strong euro is not a dangerous possibility. ask where it is -- maybe it is lower, and that takes us into the japanese yen. in the case -- francine: before we get to that, do you think janet yellen was trying to move the dollar? because the rally was getting uncomfortable? >> well, the central bank is dovish. people are trying to make a igh -- did to the hg we see something similar? was it all about to break the

u.s. dollars uptrend? short-term, there is an elemental set, but you have to consider in 1985, when we did see the agreement, the fundamentals were so different to the current fundamentals. you have huge output differentials; the united state's closing the output gap. in asia, you have a wide output gap. if you try to coordinate policies in order to keep the u.s. dollar from rising, how long is this going to be in an environment where you are showing higher return? tom: hans, when i look at this, i know i can value shares go down, people lose money. when we seet money the yen go ten big figures since that meeting a couple weeks ago? who has been the loser of yen strength? >> well, first of all, you have

to think about what does a strong yen do? abenomics is the loser. we came out of the end of last year with the trading record. we had five trades in which we were recommending yen longs. the reason we were doing that is we said, well, you have a real, effective exchange rate, trading at the 45 year low, and at the same time, you have japanese investors running the highest asset position on the currency. then you need to be alert that the currency trend may change, and it did. the riskopment on situation in february has been seen as the first and i can that, but when you look at the equity markets, they are back in the green. where do you trade-dolla

dollar-yen? tom: we are thrilled to have hans redeker of morgan stanley, particularly after the busy week we have seen. right now, breaking news. caroline? caroline: executives of porsche have been acquainted in a stuttgart trial. this is an ongoing investigation in germany, where it was thought that the chief executive, the previous ceo and cfo were accused of manipulating shares all the way back in 2008. they bought out options to take control of vw. it was thought that they have manipulated the share price. prosecutors,w to who have been citing these two managers all the way from a trial since october. this dates all the way back to 2007 and 2008. they wanted 30 month prison terms, 27 months for the previous cfo, and one million

euros worth of fines. shares are already rising in premarket trading. tom: thank you so much. we'll have more on that through the european day and into the next hour. james sweeney will join us. ,e was adamant that deflation were inappropriate particularly for the united states. we review sticky inflation into new inflation of credit suisse. ♪

francine: i'm francine lacqua in london; tom keene is in new york. let's get straight to the bloomberg business flash with caroline hyde.

caroline: thank you. transcanada is expanding into the u.s. natural gas markets, buying columbia pipeline group for $10.2 billion. it gets the bulk of its revenue from gas shipping. the deal gives us access to pennsylvania and parts of new york, ohio, and west virginia. one of the world's biggest makers of auto parts may return from mexico to detroit. they want the united auto workers to agree to lower wages, according to "the wall street journal." if they agree, about 1000 jobs could move to detroit. vladimir putin is moving in on tuf claims. he has started a credit rating firm in will start publishing opinions in the second half of the year. oody's has said they will stop issuing opinions in russia. francine: possibly, my favorite story of the week.

crazy, right? just start euro ratings company. we know why they did this; this is for local issue banks. it is tricky, and that is a whole other story. let's get to negative rates. the spectrum of negative rates, of prolonged negative rates, and what the ecb can do. today, the ecb is saying it has room to cut interest rates, should the euro area's economic recovery faltered. let's get to paul gordon in frankfurt. hans redeker is here in the studio. paul, we heard from the ecb last week, since we have a dovish janet yellen, saying that they look at ri negative rates as a real possibility, a lot of banks have gone negative. does it put more pressure on the ecb? paul: that's a good question. it's difficult to say. you'll remember that last week

the ecb changed its tack. that had been using negative rates and was welcoming the weakness in the euro that was a result of that. it's moved away from the exchange rate channel as a mechanism for transmitting policy, and is focusing more on the credit channel, lead by its targeted lending program, which could pay banks to take central-bank cash and led it to the real economy. hard to get your head around. at the moment, the ecb thinks it is in a comfortable position, but that could change. francine: paul, we had a reversal of the u.s. dollar in the last five or six minutes, advancing against the euro. but the move on the dollar was definitely on the lower side, and we saw the steepest decline in four years in terms of the last three weeks. that must be heading for mario draghi. dollar goes down, euro goes up. paul: yes, although you have to remember that when he started his most aggressive easing, the

euro was trading almost one dolla$1.40. that is a big change, in the ecb has made comments in the past saying it would welcome pulls of 10% or 20%, which would help get inflation back to cold. this, be thinking about about pushing money out to the real economy as aggressively as you can. what is the polarity in frankfurt right now? we always know the bundesbank is not contentious but has an interesting relationship with mr. draghi. what are the different constituencies in frankfurt right now? paul: there is clearly some tension, no doubt about that. germany is a net savings country, and savers get hit by a zero deposit rate. some of the biggest customers in the corporate sector may have to

pay negative rates. that's where the tension comes. draghi gets a lot of bad press in germany. the bundesbank has been skeptical about whether qe will ever actually work, and we have noticed that angela merkel is not pushing forward on banking unions aggressively, because that would mean german bankers are underwriting deposits. tom: that is an important insight. hans redeker. hans, what is the most optimal euro level or mr. draghi, if he is going to go at this alone? if he doesn't get banking, if he doesn't get a fiscal reality across europe? what is his best euro level? paul: i think that may be in the short-term, the ecb can be ok with the current euro-dollar level, but when you look at the long-term outlook, i guess you need to stay bearish. you have to look into what is

the inflation outlook, and where did european inflation surprise to the downside? when you look into the growth potential of the european economy, that has come heavily down. you can estimate the growth potential between 1% and .8%. against that, you have pension funds and others which need to make 2.5%. the outcome will be that europe is going to become a major exporter of capital, and that means that the euro is going to become a funding tool going forward. you may compare that with the situation of the swiss franc in 2002-2006, and if that is right, then the euro is going to trade at parity, and next year, the euro-dollar it will continue its downside move. tom: hans redeker. paul gordon. thank you so much. we'll continue this friday look in what we saw across all of

central banking. this week, we will also take a look at something a bit ignored by us -- international relations. in our next hour, tusk university. we will speak with the admiral james sabrius on pugin and america. america.and

francine: i'm francine lacqua in london; tom keene is in new york. european shares advancing a touch, but i want to get to the morning must-read. i have a little bit of a soft

spot for this bloomberg article. they spoke with paul back macnamara. let's get straight to hans redeker. overall, what created agency purpose do you look at when looking at currencies? are they lacking too much? >> you're absolutely right. when you look back to 2007, there was a substantial credibility of writing it, -- of rating agencies. often wasidn't see that rating agencies were adjusting down to levels already predicted by the market. that, of course, has decreased

the importance in market recognition for rating agencies. itw to restore that, i think, can only be regained by trying to be ahead of the curve, which enable market is easier than a bear market. francine: if you look at russia, it is an oil story, a geopolitical story. have we seen the bottom for oil? is this the new normal? -- that u.s. oil production has come lower, but that you have iran continuing to increase production. you have a very positive market sentiment concerning oil. you have positioning accordingly. we're currently running into a major resistance. is so stretched in the oil market that we have to think about retreat in that market field. we have seen a rebound of oil,

the russian ruble against the u.s. dollar the best-performing currency in the past few weeks. when oil is going to turn around, that is the major drive for the russian ruble, and that means it is going to weaken. francine: thank you so much. we will get you the ruble chart and talk about the yen, next. about the eu crisis. european shares advancing, automakers gaining, outweighing the drop in energy. stored banks are down. no stock gains in europe this year.

tom:: a2-d move in the markets. -- call it a two day moving the markets. where it across the front page -- yen, 110.

we saw that briefly yesterday. i do want to point out that german yields are lower on wednesday and thursday and mobile.-.48 is not us -- is not a small deal. on this friday with our bloomberg first word caroline hyde,. caroline: thank you. the european union is presenting turkey with a plan aimed at controlling the flow of refugees. eu leaders have agreed to sweeten the deal, to give turkey next or $3.5 billion for refugee facilities. the eu water down assurances of the chance of turkey joining the organization, and has backed off their demand that its citizens be allowed visa free travel to europe. david cameron wants to extend the eu's campaign against people smugglers in the mediterranean. eu should send military ships into territorial waters, aimed at smugglers who keep close to shore to avoid

capture. the kremlin is unhappy with a new video posted by donald trump. the video mocks the democratic front-runner hillary clinton, saying she is too weak to deal with vladimir putin. the kremlin says the demonization of russia is a mandatory feature of the american election campaign. says a california college student who went on a stabbing rampage was inspired by the islamic state. he acted alone last november when he stabbed for people after being shot down. a congressional hearing on the flint, michigan water crisis led to multiple calls for resignation. democrats want rick snyder, who testified, to step down. republicans blame federal regulators and said the head of the epa should quit for not acting quickly enough. global news, 24 hours a day. francine: thank you so much.

let's get back to one of our top stories. it's happening in brussels. ryan chilcote is there with the very latest on how eu leaders are planning to manage the refugee crisis. the eu is basically risking a showdown with turkey over how to handle a refugee crisis. ryan: that's right. clearrks have made it that they want three things -- one is money, and it looks like they have got that agreement from the eu. they wanted additional 3 billion euros, the eu saying ok. they want vis-a-vis travel by free -- want to the south by june. travel i think they would like to do a deal, but they need to feel that they are making progress on the eu membership talks. they have been going on forever. francine: so we get a deal. is it going to be watered down or strong?

ryan: well, it is going to be water down. we already knew that. the original deal that was discussed before the last eu meeting was to take all the people that come from turkey to greece via boat and immediately deposert them. that is off the table. the idea is now that they would have an expedited asylum process if they wanted. that the turks say that will not work; you have to send a clear message to the refugees that if they take a boat over the sea, make that perilous journey, they were not going to get refugee status in europe. they have to be officially processed back in turkey before they make the journey, and they have to do it on safe ground. we'll see. that is probably going to be one of the places where they are you. francine: thank you so much. ryan chilcote in brussels. kapoor,n with me, sony hans redeker still with us. you have been watching this crisis unfold.

are we any closer to having a resolution that makes us look like a unified region? and will it help refugees? >> well, i think the answer is not really on both, partly because every single crack and wrinkle and division is going to be out there for the world to see. even if there is a deal, which i think is likely, and a water down deal as ryan was saying, the world would have seen how the sausage is made. you can't quite un-see that. divisions, and particularly the east/west division between france and germany, are so stark and so deep that we will present a rather divided picture, no matter whether we agree or not. i hope that we do agree on a deal, and i still think it is very likely. tom: as you do, you go to the heart of the matter, the

east/west division. we will talk about this in our next hour. stentify for us the east/we division. draw them out for us. it is more than just germany and france. >> absolutely. the biggest divisions come from past,untries that, in the where part of the ottoman empire. the hungarian prime minister has been particularly leading the charge, going into politically incorrect territory that nobody else in the eu would say, making it sound like a clash of andlizations between islam the christian civilization he claims the eu is based on. tom: i don't see david cameron doing the crusades version right now. it would make for a good movie, and we make jokes about this, but unfortunately is not funny. central europe always plays a critical pivot point. how does angela merkel set up

with her own people, and particularly this polarity between hungary and the southeast and everyone else to the far west at europe? >> well, the thing is that this polarity exists within germany, too. you just saw the recent results of the election -- the alternative is the far right party, which is into u.n., and now anti-immigrant. the east/west divide, particularly where the iron curtain was. i think a number of countries, particularly the smaller countries, have felt a little bit pushed around within the eu since they became members of the european union, and this seems to be one unifying stance, where they are reasserting their status. it's an unfortunate issue. francine: when you look at it from your world point of view,

hans, this is a test for angela merkel. she gets a deal that keeps everyone satisfied, she keeps her job. if this unravels, we risk losing the european politician keeping everyone together. >> absolutely. is about leadership within germany and within europe. when you look at merkel's original position, she thought to get one billion refugees into an environment which has 500 million population, that you can manage that. thee was solidarity within european environment, and the lack of solidarity has revealed there is a lack of leadership. the big question for us is, if merkel is getting weakened by this, what does it tell us concerning the prospect of europe? we have to go further, not backward. we have to integrate, and not disintegrate. iss east/west divide

actually a sign of not integrating, just the opposite. francine: everywhere you look, you have the u.k. divide -- there are so many divisions. o the a real concern that point that all the merkel is not chancellor? what would that mean? >> i think the idea is that she is politically weak almost to the point of not being chancellor. i think that is exaggerated. there is no other. if you scout the german political landscape, there is no other candidate that comes even close, from whichever party, who might be a chancellor. they have been fatally weakened, the greens ar know where large enoughe. the fdp is only starting to come into power. the csu is localized within the various, and the only possible chreimler, is shrin

and he doesn't enjoy universal support. he will not plunge the knife. there is no possible chancellor. tom: terrific. sony kapoor. we continue with hans redeker of morgan stanley. we've been dollar focused here with the dollar weakness. "bloomberg " will move on to an overall view. rick reader will be on bloomberg "bloomberg ." ♪

francine: friday madness. francine lacqua in london; tom keene in new york. let's get straight to the

bloomberg business flash with caroline hyde. caroline: thank you. e ofchief executiv valeant pharmaceutical says he is not going broke. he apologized for the recent turmoil and assured stakeholders they would not go bankrupt. shares plunged 51% on tuesday after they cut their forecast. in germany, two former porsche executives have clear themselves of volkswagen. porsche's former ceo and cfo went on trial in october. ubs has boosted the size of its bonus pool by 15% after having its most profitable year since 2010. it was the only major european lender to boost. the chief executive received a 28% rise to $14.8 million. francine: thank you so much. let's stick with ubs. with more on that, michael moore

-- he leaves all over our financial team coverage. hans redeker is here. ubs is saying we are winning, increasing bonuses. deutsche bank cut bonuses last week. it puts ubs as one of the biggest, and only, major european lenders. is that good, or will shareholders take offense? micheal: i think they see it as a first mover advantage. ubs was earlier than some of the peers in taking the restructuring moves that they wealthving more toward management and scaling back the investment bank. that allowed them to have a better 2015. they also got some of their legal issues out of the way earlier. that was a big piece of it. and it perhaps offers another chance for a first mover

advantage. tom: i'd say the first mover advantage is to keep your tail on it. how quickly is this bonus list keeping the -- i mean, paul donovan in london -- it is outrageous what they have to compensate to keep him so he can come on the show. that is what this is about, right? michael: [laughter] it is certainly about keeping people. when you scale down the balance sheet like they have, when you reduce the amount of lending you are doing within the investment bank, you have got to have those top people remain on the deals. this is what that is about. tom: i made this chart -- come on over here, we will follow on to the banner. here is ubs. michael, the chart looks a lot like citigroup. maybe it is better than deutsche bank. what is the ubs distinction now, so they can raise bonuses to keep paul donovan versus

everybody else? their roewell, was a little bit better than peers. they cracked into the double digits . they had fewer legal issues. that was a big piece of it. as you mentioned, it is all relative. but they way down, have outperformed credit suisse. tom: on "surveillance," we go where we fear to go. francine, here is what you need to know. duke university won 62 trophies just in the last four or five years. yale have neither that in the tournament since 1962. we go to michael moore's "surveillance" expert. yellow,e team in the was supposed to win and they didn't. michael moore, as you go to

saturday, the dunkin donuts arena in providence, rhode island, while you look for in london? colleague max our abelson and i have a gentleman's wager on the game. i'm very confident in duke. tom: what's that? your first-born child? michael: [laughter] something like that. i think yale got all their magic out yesterday. francine: can the director take a picture of hans an i, not sure what is going on? >> i hope that the next time you show a video about german football, like that great night yesterday -- francine: there you go. it's the wrong sport. tom: we are fair and balanced here. i promise you we will do boring football in europe as we move on. we'll do cricket all of may. francine: all righty. tom, this is where a lot of

these stocks are headed. european stocks oscillating, stocks climbing, emerging in asia is up, crude oil holding. it's your market check, next. ♪

tom: good morning, everyone. bloomberg "surveillance." it's friday. we will get to hans redeker in a moment. francine lacqua in london; i'm tom keene in new york. i think francine, we can go right to hans. futures up three, dow futures up 20. francine: quite a lot of policymakers talking this afternoon. . this is what we are watching for the rest of the day on saturday, mark zuckerberg will join jack ma at the annual china development forum in beijing. watch out for pboc. on monday, apple will unveil its new smaller screen iphone and updated ipad in cupertino, california. this is what we are watching on german finance

minister will join his french counterpart in berlin. i believe he is also speaking to the bundestag later today. when we are watching today is negative rates. the japanese 10 year yield dropping to a record, now the low negative deposit rate. this is the chart i have been trying to show you. this is huge. you can see that in version, an inverted curve when you look at the 10 year compared to what the beard she had been. hans redeker is still with us. hans, this this worry you? the boj saying they can cut into further negative territory, kuroda saying they have to intervene, because the yen is rising the matter what he does? >> there are several factors which are playing into this negative yield outlook for japan. you mentioned yen strength. that is repatriation taking

place, and of course it is repatriation in conjunction with currency going up. you cannot invest into shares. the money goes into the bond market. at the same time, he asks bond market volatility going up. to have a combination of high bond market volatility and negative interest rates, which means that it will have higher cash levels. abeniomics,s about increasing the velocity of money. you force people into higher cash falls, because you have volatility at negative interest rates. so higher velocity is the key to take japan out of its deflationary credit blue. we are currently going to huge step back. the question is what to do. francine: why? it seems like traders -- did they misread what the boj was saying? >> i guess it was a complication issue.

we hvave no guidance on the boj. when they decided with this 5-4 vote to go into negative interest rates, there was no preparation in the market. what you did see as a result was that bank shares were in nine days' decline. the entire equity market was pushed into lower territory, and that meant for jet owners portfolio holders, including pension funds, that they have to reduce risk, and that includes foreign risk. 34% of the efforts are abroad. tom: hans, i want to get to this because we're running out of time. the rate reset is british pound sterling. you have got a brilliant paragraph this week, that it is not about brexit. when you clea please exploded to francine lacqua? how our sterling dynamics about

more than brexit? >> [laughter] compare that when you are bearish on sterling, and yoes, there is brexit in the debate going up and down, under those is the icees, this on the cake of a bearish interpretation. sterling is weak, and is likely to be week for many other reasons. i'l givl give you a few. this is a country where fiscal policy is restrictive; others give the opposite. in the case of canada, they suggested more fiscal extensions. you look into wealth management funds, their investment into the equal toard dollars is the investment they make in the united states. the united states is buying into equities and bonds in the u.k.,

buying into real estate. havingereign funds are invest,ey to which means you have a much greater impact in respect of sterling. that we are talking about double deficit environment. a current account deficit and a budget deficit. if one monetary conditions and fiscal conditions tighten, under those financial conditions, you will have sterling coming up, regardless the outcome. tom: i point out the conversation on canada, speaking to the prime minister yesterday here. very quickly, the long-term trend off the dxy blended indexes for weaker dollar. where will the dollar be on a percentage basis on your out? >> you look at the right index. dxy is waited for the euro.

you need to look at the broader u.s. index. our view is that you need to invest, currency was, in respective growth differentials and productivity differentials. that's still pretty much in favor of the u.s. the central bank and have a technical impact, but in the long haul, it is a close differential. tom: hans redeker. thank you so much. in our next hour, james sweeney on your fears of deflation. and trump and clinton doctrine. ♪

after the bank of japan,

but said in the bank of england, the dollar weakens. sticky inflation is a clear and present reality. james sweeney from credit suisse. clintonl be the 2019 doctrine? mrs. "bloomberg surveillance." i am tom keene. francine, i have a feeling foreign policy may be an issue this weekend as we go to november. doncine: at the moment, we not know where most of your candidates stand. it filters through the middle east. that filters through the refugee crisis and european economics. tom: percolating here on friday. we will do that as we look for the weekend reading. it for now, our first word news.

cam john kuhn fired at least one ballistic missile into im jong un fired at least one ballistic missile. the european union may have a showdown with turkey as the refugees. they want to send those who do not qualify back to turkey. water down early assurances on turkey joining the eu and having citizens travel to europe without visas. to push syria's opposition towards compromise. russia backs the syrian government and says it should use its influence to pressure leaders to be more flexible. more demonstrations against the

president of bridgeville. protesters are angry they have added -- angry she has added -- star cabinet. -- il's congress has republican leaders are trying to shut down talks they might hold a vote in the supreme court nominee merrick garland until after the election. euro is 113.ies, a little bit of a shift in currency in the last hour.

weaker dollar.he markets, look at the vic'x. weekend,story for the bund, lower yields for germany. francine: i want to talk about negative rates. stocks for the moment pretty much flat. automakers are advancing, energy stocks are dropping. a lot of pressure from the nordic banks. overall, in the last 10 minutes or so, we had a reversal. tom: here is the yen.

be nominee's'll friendly weekend. we go the other way. here is that new leg down. people i was looking for. francine: chose vons in japan. the japanese 10 year yield dropping to a record. this is a level we are seeing the white line as the 10 year yield. the negative deposit rate is the blue line. this is what governor corona -- kuroda was playing on. theazilon thebr back of -- this is on the back of the -- record. tom: james sweeney is working with the chief economist across

the platform. are we to a point where there is proof deflation is not a worry? >> i do not think global deflation is a worry. we have pressure on nominal growth locally. it really matters in some places. isre the labor market tightening, you have accelerating inflation, now 2%, 2.3%. back to our next section. what is your common theme as you write for credit suisse. >> right now, we are reacting to what the fed has done. tom: how do you take us forward to the next set of meetings?

>> this was a shift towards dovishness. it is not consistent with the data the fed has seen. the politics around the dovish fed have changed. zeitgeist change? >> possibly. maybe the fed know something about downside risk in china. shift when u.s. data has been --. it is a big deal i think. dovishe: it is a very fed we are seeing. this points back to inflation. yellen must be looking at something, that the markets may be saw ahead of that three weeks ago. >> we don't know what it is. i think it is going to be a

little while before the fed hike again. if this continues, over the next six months, you will have a little bit of concern in the market. they may need to hike more later on. then, you start to worry about a disruption to markets. -- is rising a touch today. is this the end of the rally? 5% year toar is up date. there is a lot of complicated factors on the dollar. the interest rate spreads will favor the u.s. can drive the dollar higher. currency forecast is a little more difficult than forecasting general risk area i would be

careful on that one. tom: that was a massively friday avoidance of answer. francine: we hear this a lot. it is difficult to predict currencies. we see and currencies are exacerbated because of the fear factor out there. predict whatlt to central bring -- what central banks do next. >> a lot of people are saying these central banks are out of ares, that negative rates tinkering with them secure methods which may or may not work. to me, the institutional circumstances in each banking system are different. the idea that these central banks are out of tools and

cannot drive inflation higher is very strange. money, inflation would go up. they don't want to do that. tom: he says marty, you are going to say don't fight the fed. fight the going to fed. what is the battle line to tell >> did she make actual progress on data or did in make actual progress saying she is the global central banker to the world? tom: i give my opinion, mark carney out front in this debate

over the last three or four months. we continue the discussion. the next half-hour, an important conversation. we are going to rip up the script and talk about the clintons or the trump foreign-policy doctrine. this is "bloomberg surveillance." ♪

francine: welcome back. things are moving fast. the euro was up and is now down. dollar holding. the 40 march 4 crude oil, pretty much flat.

watch out for the nordic banks. they are getting crushed today. francine: transcanada is expanding its gas. we get the bulk of the revenue from gas shipping. water the world's biggest parks may return jobs to mexico. they want the united auto workers to agree to lower wages. if they agree, about a thousand jobs will be moved to detroit. vladimir putin is moving in on the turf claimed.

they plan to stop issuing those ratings in russia. would have the branches regulated by the russian government. francine, i know you love that story. still trying to negotiate. putin does things his own way. kremlin had condemned in the past a barrage of downgrades. he said as you are being unfair, we are being unfair, we're going to do it my way. we have to look out for the rate decision. they have a huge inflation problem. they need to make sure prices do not go above 15%. estimate, no change to the key range. rates,e on negative

russia oil and the inter-linkage, let's get to credit suisse securities james sweeney. only wayuggesting the to get inflation moving is to give money to the people. effects andut side negative rates, would it not be worse if we had helicopter money? you did that, i think you would get inflation and nominal growth up quickly. you would give a lot of volatility to the economy. there would be long-term consequences. it's a policy you can use under extreme circumstances. is, you have low unemployment rates, low inflation in these countries. people are unhappy because productivity is low and maybe they are worried about there being some distribution. we don't have a major structural problem with growth in developed

markets. inflation hitting 1% rather than 2% on a historical perspective is not such a big deal. i am not sure you rip up the ofybook and start ripping notes to get inflation ago from 1% to 2%. it is risky. it would work, but we should save it for a day when the stresses are greater. francine: i think they try to 20 or 30 years ago. no matter what they do, they are into negative territory. >> japan has similar productivity growth. what is available in the world right now. they have low unemployment and low inflation. it is a world we would like to be different. it is not a reason to risk everything.

fivecy prescription of and six years ago is not appropriate today. u.s., nominal gdp is not appropriate. we need to -- disinflation fears, gray, yet, we are confused. >> we have normal inflation in the united states. they have both been rising a little bit recently. inflation is not an issue in my view. tom: here is the real gdp.

>> we have 4% nominal gdp growth in the past seven years. tom: is a rent and health care and all of the other things, the people that send me e-mails and notes, they are's naming when there are no inflation, they are saying james sweeney is not. is that tangible? worried about high inflation or low inflation? what we have is 2% inflation. services inflation is faster. goods are more global. tom: what is the policy prescription for yellen? to look to the future. laborve to balance the market where the unemployment rate keeps falling and falling.

i think it will keep falling. tom: they can do rate increases? >> if core inflation continues to drift up and unemployment drifts down, the market will price for a more aggressive fed sequence. tom: the conversation will continue. giving away from currencies and looking more holistically. it is "bloomberg surveillance." ♪

francine: we have a great morning must listen today. this is a former fed president. five 10 yeare inflation numbers. >> that really represented a risk credibility on the part of .he fed they either lacked the will or the tools to keep the inflation at 2% in a sustainable way.

francine: i would argue , they were still telling us three to four interest rate hikes. >> we think there will be two hikes this year. my point was that it was odd timing given just the u.s. data, , stock market is flat year to date. decent in theis u.s. economy. tom: i love how you pick the comedian from the university of rochester. let's show further monetary comedy. this is september.

september of last year. awn here is a, the act with negative dot. face wasa slap in the the president serious? >> it suggests he is using a model that is different from what other people are doing. people in thet of market who think similarly. tom: this is the leading monetary mathematician, saying we need negative rates. >> i think that is pretty strange. again, there is a difference between conditions and markets and the world versus conditions in the u.s.. labor market u.s. and say why do we need a negative rate? i look at markets and think if they jacked up rates, things could get disruptive.

francine: are central banks over sharing? we want more transparency and then we get confused by it. >> it is hard to say data dependent and you get poor and elation and reform trip to panic and that in the markets and suddenly you change your view and the trajectory. tom: you just described my house. we are over sharing communication. i get confused by it. we will continue this discussion. talk about confusion. what is our forward -- what is our foreign policy going forward? ♪

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here is caroline hyde. caroline: the european union is introducing turkey with a plan to aim the flow of refugees. the eu was watering down assurances about the chance of turkey joining the organization and it has backed off turkey's demand that its citizens be allowed visa free travel to europe. james cameron's is the eu should libya'sitary ships into territorial waters. the kremlin is unhappy with a video posted by donald trump. hillary clinton, say she is too weak to deal with vladimir putin. demonize n says the

then of russia is -- campaign. francine: breaking news out of the bank of russia, keeping the rate unchanged. most of the economists we spoke to said that would happen. this is the index based in moscow, 0.9%. again, russia is keeping rates unchanged. tom: today, we turn to american foreign policy. the policy was scathing.

test university, barely describes his service to the nation, including being at the naval war college. i am going to try to not insert my politics into it. is one of our candidates for president. i am speaking with myself because i have a good brain and i have a lot of rings. i talked to a lot of people at the appropriate time. i will tell you who those people are. as a graduate of our war college, is that a way to establish a doctrine? >> even worse than not establishing a doctrine, it would be helpful for the candidate to give them a sense of who they intend to bring along with them. tom: is donald trump can speak with himself in the polar opposite is a former secretary of state, that is maybe one area

where candidates are farthest apart. be your counsel to secretary clinton or to donald trump to extend to wait and take advantage that polarity? >> when you look at a candidate, you want temperament, someone who is calm, deliberate, sensible. you want to know who is around that person. who have they worked with in the past? to look atu want their track record into making big decisions and decide on that basis who is the best candidate for foreign policy. francine: we had donald trump, i understand, saying i console myself on foreign policy. when will he come to the u.k. and talk about brexit or make a comment on it?

>> my guess is he is not going to lead -- she is not going to leap into another nation's politics. i think our presidential candidate needs to articulate positions globally, but not insert themselves directly into the politics of another nation. i look a foreign policy in the u.s.. it has been lacking, especially in the middle east. do you think it will get much worse? >> i am pessimistic about the trajectory of events in the middle east. we have a few flickers of hope in syria. negative.l hope is we are not seeing much movement. the waves of refugees are going to pile into europe. what happens this

summer. at the moment, i am not optimistic about the talks between turkey and the european union, which are designed to stem that flow. you go to jfk in berlin and then you go to what we saw with senator obama in berlin. -- can secretary clinton go to berlin and get things done or can donald trump go to berlin and get things done in foreign policy? out reagan. mr. gorbachev, tear down this wall. when they go overseas and they make a big speech and they establish a position for the united states, secretary clinton has demonstrated that ability.

i am not here to endorse her. i am nonpartisan. not appropriate. forefront ofat the global events throughout her time as secretary of day. >> how does the next president deal with vladimir putin? he said he would sit -- he would pull out troops from syria. >> he is a shrewd tactician. most of his policies will not serve russia well. sanctions have been imposed in on the decline in oil prices.

and russian need the west. many of his policies will not work strategically. he is a clever tactician. withdrawal reflects the fact that he is having financial problems. tom: i learned my foreign policy by watching the john adams series. there is the scene where mr. adams goes to england. backs out of the room. now we have a president .ecturing the british people thatine lacqua is outraged the president is lecturing the people of the united kingdom. our president be lecturing david cameron and the united kingdom? our presidentnk should be lecturing any other head of government. let alone our special relationship.

any is special for candidate to do is comment on how it looks from the american per active and what it would entail if a certain event occurs. that is different than telling our british friends what they should do. tom: were you going to be thinking about this weekend? on youro know what is mind within the broad spectrum of international relations. about the blacks on, pandemics. i am very worried about zika. we do not have a handle on zika. it will require international cooperation, interagency cooperation and private public law operation to get ahead of this. francine: i am not outrage that

president obama comes here. i am outraged if he does not convince this country to stay within the eu. the uncertainty is killing the markets. we have more to talk about coming up. up, we speak with ian bremmer. we will also be going through the markets. ♪

caroline: a beat if you are looking at the earnings share number.

we are seeing comparative sales falling some 5%. looks like it is a beat for tiffany's. let's get on to your bloomberg business flash. in a memo to workers, they --.re the a cfo went on trial in october. ubs has boosted the size of his bonus pool by 15% after having it most profitable year since 2010. it was the only major european lender to boost --.

the ceo received a 28% raise. bloomberg business flash. news to seeood bonuses do well for our global customers. douglas is a writing machine. he has books out and they have across media. this book is so important we demand that he come on, throwing rocks at the google buzz -- the google bus. here's the way it is. 199,000 employees afford. 12,700 at facebook. 1540 employees to one at facebook. all of this that we are doing

does not translate into prosperity and jobs. >> the same dynamics you see affecting the music industry affects everyone, giving companies themselves, is almost as if they are in this big race to see which one company well become king of the whole thing. winners and losers. tom: james sweeney, with us from credit suisse. bring it over to your world, marshall mcluhan. you nailed us on page 69. the medium is the message. i would say we have gotten where mcluhan was in the 1960's. the message removed from the rest of the economy. >> on the other hand, the way i see it, digital businesses that a traditional

growth-based operating system without any knowledge of what that is. you end up with a company like twitter, which can make $500 million a quarter and be by walled a failure street because the founders did not realize they were taking too much capital and now they have to deliver returns when their revenue model actually works. >> the premise of the book is that the digital economy has gone wrong but nobody knows how to fix it. it is not any different than the industrial revolution was a hundred years ago. >> it should be different. that is my point. we are running a digital economy on a 13th century economic operating system and that is what it is not working. if we optimize the digital , we would endowth

up with much more distributed prosperity. tom: i want to go to the media. thenight, we have seen guardian, a national treasure of the united kingdom, announce 415% redundancies of some way. print is not happening for anybody. it is. how do you move those people into your new technology? nobody has a prescription. >> or maybe i do. two possibilities. one, in guaranteed minimum income. we are at the point that nixon argued we were at. abundance of stuff, but not jobs, we have to start giving people stuff. abs should not be justification for people to participate in the spoils of our economy. the other is companies look at how do we help our users, our

customers, our competitors create value, rather than extracting it. value fromng all the the marketplace, we take the poker chips off the table. this is a problem corporate america has had for 75 years. corporate profit over net value has been going down for 75 years. we get digital technology and we think that can save it -- could save us, but we use it to value from the economy and there are no more chips on the table for people to play with. francine: thank you. on monday, bloomberg tv airs apple's road ahead. ♪

tom: it is the story of the day. foreign exchange. francine lacqua will give you the forex report. on the yen.

>> markets in focus with the dow jones, what a trip. bond markets with new all-time lows for japanese bond yield. we will discuss that with rick revis. getting paid, it matters. , most profitable year since 2010. tom: our single best chart.

this is poland. poland has been one of the great successes of eastern europe. it is an grind to disinflation with a bout of deflation. .he one you're moving average >> poland is next to russia, where you are seeing a severe swamp area you are next to the eurozone, i would not say there is no inflation issue in europe. poland is in between both. -- maybe poland hasn't been aggressive enough.

tom: after you go to be rt, look at how well you are doing versus me in your ncaa bracket. are you dazzled by the single best chart? francine: they have been getting from european leaders for having an economy that is eroding democracy. we also look at the economics of poland. james, when you look at what the fed announced, janet yellen, she threw a lifeline to the markets. >> i think fed policy will help markets. it will help the global economy a little bit. it is helpful for the chinese. if you have a hawkish fed

foreign exchange reserves decline in china is likely to get there. people want to get their money china into dollars. in fed dovishness is helpful a lot of ways. the question i keep coming back to is is it helpful from the perspective of u.s. inflation the u.s. labor market? it is difficult to find that balance. francine: also, covering the imf back end october or november, the concern that when the u.s. start normalizing you will the -- it is not fixing the the shot.it is -- >> you didn't actually see emerging-market debt sharply .nderperforming

tom: in america, we do not understand some of these unique dynamics. hungry poland, what does , what to they want from mario draghi? even though it is -- they are at risk. dollar strength as well. i think easier policy and better growth from europe is what eastern europe and also some stabilization in russia.

a most interesting week. >> we will try to figure it what to do with our money. perfect timing. of eurasia group will join us on monday. francine, thank you to our london team and those in new york city. we had a most interesting week. ♪

ofstemming the tide

refugees. russian central bank holds steady on its rates. concern of inflation grows. 2016, what a start. >> we are going to sort through this. stephanie: we have a lot to get through. let's get you some first word news. jong-un's regime fired a missile into the waters off the east coast.