bloomberg markets on bloomberg television. caroline: from london to new york to zurich in the next hour and here is what we are watching. ubs is raising their bonuses. mark: imf managing director christine lagarde is defending the negative rate move in europe and japan. why she says the global economy would be worse out without them. caroline: the identity of street artist banks see has never been revealed but that could change. is that a good thing or a bad thing? let's get straight to the market desk now with bloomberg's julie

hyman with the latest. the day is not done yet, so you never know. i just want to mention that we got some sentiment numbers from the university of michigan with the sentiment number coming in at 90. following to 90 from 91.7 last month and that is also a five-month low. consumer confidence numbers coming from the university of michigan. it looks like as part of the survey low income americans became more concerned about prospects for the u.s. economy and higher gasoline prices. we are seeing some gains in u.s. stocks, all three markets are higher but just barely. has gained the most in the year as we saw it take into the positive yesterday. financials is the best performing group followed by

industrial and energy. financials are really showing strength. we did see some rallying in british banks that now seems to be spreading to the side of the pond. offeringmerica expansions of their share buyback program which seems to be helping their stock. on the topic of buybacks, i made this chart this morning because i was curious and prompted by kevin kelly who you will hear from a little bit later, to look at the sp y versus one that tracks s&p buybacks. what you have seen is perhaps the buyback machine has run out of steam because this etf tracking the heavily bought back company is actually trailing the s&p 500 for the past year. one more thing to mention -- oil

prices are heading higher and that has been helping energy stocks so between the energy shares and financials, we have some good gains to work -- to look at. caroline: and a bit of m&a news. julie: starwood getting an offer from anbang. could there now be a competing interest in marriott? they are saying the all caps bid is more attractive. a whiskerre literally away from the fifth week of gains of the stoxx 600. for the week, this is the five-day chart, down by .15%. the four-week gain was the best run since march last year. 11,e the run began february that was a two and a half year low for the stoxx 600, these are the best performing industry groups normalized at 100.

energy shares are up by 21%, 19%, with the best performance since february 11 are basic resources, a 35% gain and the stocks 600 fell to a two and a half year low. interesting news from strategists across europe. they are cutting their estimates for where they think the euro stoxx 600 will finish 2016. they said it is going to rise by 12% before and now they are saying 1%. blame it on the earning system. i made is this chart showing the earnings relative to the united states, euro stock 50 companies are trading on zero point -- the spread is almost the widest in a year. the relative cheapness of

european stocks made them a by and as you know, ubs raising its bonuses for the year for all of the four big invest in bank players in europe are falling. ubs is performing the best and we will have more on that woman terribly. -- momentarily. caroline: we have to get into the nitty-gritty of whether you pay out your bonus pool. let's check in on the first word news with david gura. david: north korea and another show of defiance, they fired at least one ballistic middle -- missile into the sea. the security council voted for new sanctions for an earlier weapons test. the eu and turkey are said to be close to a deal on the refugee situation. now they have to get national leaders to sign on. backtrack itso

asylum decisions in greece and send those back who do not qualify. a congressional hearing on the water contamination crisis in flint, michigan has led to multiple calls for resignation. democrats say rick snyder should step down and the gop is blaming federal regulators, saying it is who should quit for not acting quickly enough. yesterday, merrick garland met with harry reid and other democrats. orrin hatch of utah broke with party ranks and said he would consider a vote but not until november. president obama leaving for cuba and on the agenda, meeting with the president for talks of dissidents. he is also scheduled to attend a baseball game between the tampa bay rays and the cuban national team.

global news 24 hours a day powered by our 2400 journalists in over 150 news bureaus around the world. mark: it pays to work at ubs. has cut bonuses and ubs has boosted the size of its bonus by 15% after having the most profitable year since 2010. ubs is the only major european lender to boost compensation, setting aside $3.6 billion for employee bonuses. the chief executive received a 14.8 millionking dollars. jeffrey wagner he joins us now from zurich. ubs does this tell us about the healthy state that ubs finds itself in?

jeffrey: i do think so. four years ago ubs was in trouble with legal cases on every side and big problems in terms of profitability. they decided to substantially scale back, something which made -- do bankers at the time, but it seems it has paid off. the investment bank had over 30% return in equity last year and they can afford to pay more. mark: jeffrey, they really are the outlier within the european banking space. give us a sense of how their peers are doing when it comes to bonuses. jeffrey: you just said it yourself, deutsche bank and continentale, on europe are the two main competitors, cut their bonuses by 11% while ubs is up 14%. i do think that it shows that the other two were really late

to the party. they both got new ceos last year and both have been speaking tough talks to the market, saying there will be a hard time ahead. there were losses last year already and we do not know, but as they restructure their investment bank there may be more to come, promising more hard times for their bankers as well. caroline: we have seen the best lastts since 2010 for the full year, $2.5 billion pulled in from a net income perspective, and how our investors reacting to the amount being given out for the bonus pool? jeffrey: i do not know whether investors are reacting really to the news about the bonus pool. some analysts i spoke to this morning said this may be good news for the bankers and it is never good news for the investors if ubs is upping its cost.

costs are also one thing very much in focus. speak at am conference on wednesday that said, yes, they are sticking to their model but the focus on cost has to be keener in the future because like everyone else, ubs will not have an easy year. mark: pulling in talent, jeffrey, surely when you are paying bonuses of this size it gives you a competitive edge against your competitors, is that correct? jeffrey: i would think so, yes. executives have also told us similar stories that they are hoping to of course attract some talent. as i said earlier, they used to be shunned almost by bankers on the street just after their restructuring. now that they are doing so well,

ubs may be one of the places where people actually want to go. the question is whether they can because looking at deutsche bank and credit suisse, i have a feeling there will be many people looking for better +++

mark: from london and new york, i am mark barton, one half of this transatlantic english show. caroline: i am caroline hyde and this is bloomberg markets. for decades investors have followed the rule of equity invest amy adams. .- invest premiums since the fed has artificially lowered interest rates, investors have driven up valuations. us is dan maes, to cover howtor the global stimulus is affecting us. it seems like do not go for the risk premium.

nir: yes, i think that is the right take away. just by way of background, for much of the post financial crisis, interest rates have been on the floor and this has sparked a raging debate of how we should think about risk aspects -- assets. for whatnk about them we expect to get paid for non-risk assets? investors who thought of them that way have chased all manner of risk assets from stocks to high-yield bonds to emerging market bonds. and so how you see that question really drives the investment decisions you are going to make. disagree?dan, agree, how much have we seen an artificial boon to stock markets being fueled by record low interest rates, and should be -- and should we be looking at valuations and risk levels? dan: one of the things the

central banks have been trying to achieve with this pretty aggressive easy monetary policy they have had is to try to generate animal spirits and get the economy moving that way. one of the ways it manifests is in markets. what we have had the last few days is generally speaking a risk on environment that typically coincides with noises or dialingsy stance back in some instances over the case of the fed, of more hawkish record. mark: what is the best way of gauging what kind of shape-esque woody risk premiums is in -- equity risk premiums is in? think normally what you would want to do is i think look at earnings yield, say as a barometer for where equities are valued and what expected return

could be from equities, and compare to some risk free benchmark like the fed funds rate, 10 year treasury. the problem we have in this environment is that a risk-free rate does not resemble what it has resembled historically so the question is, is there equity risk premium a reliable barometer? if you look in the history, a high equity risk premium is associated with a higher -- going forward. the risk free rate has been relatively normal, 3% to 4%, but the equity risks have been low. today, wherewith you have high valuations and a low risk free rate and the question is, what does that mean? the truth is we really do not know because there is not anything in the historical

record to compare this current environment to. mark: ditch the erp as a criminal ball for predicting returns. how many central banks -- i am not going to ask you that question. is there a universal theme among all the central banks that have announced rate decisions this week? mark,he universal theme, has been concern about the global economy. this could be the year where the global economy became the local economy are many central banks. if you trace it back to a week from yesterday, where we had the ecb then on monday night we had the bank of japan holding. then we had the fed dialing back on hawkishness, swiss national bank talking about the global environment, norway concerned about the global environment. south africa raised but they are in a slightly different

situation. mark: thanks a lot, good to see you. caroline, i gather we have some breaking news out of the eu. caroline: we do. turkey, ryan chilcote is in brussels with more. what do we know? what is going to be offered to stem some of the migrant concerns? it would appear that the eu and turkey have finally reached a deal. it took them 10 days, two summits, and hours and hours of negotiations that we understand from two different sources the eu and turkey have clinched a deal that would share the burden of refugees and my joints -- migrants between turkey and the european union, and stop the flow of migrants into turkey from grace, and take back some

of the refugees. refugees who made their way across the sea would not be automatically sent back, they would still be able to apply for asylum, but if they lose their bid for immediate asylum they would be sent back to turkey, and the eu is agreeing to take in some refugees that do have legal basis directly from turkey. gets its additional 3 billion euros in compensation, an expedited process into its eu membership, and they can look forward to visa-free travel sinner than they were expecting it, by the end of the year. caroline: some concessions being made to turkey to gain their help. ryan is all over it for us. still ahead, much more on global central-bank moves. the editor of the gloom, doom, and boom report, why he is calling the models

central banks are using as clueless. ♪

caroline: you are watching bloomberg markets, i am caroline hyde in new york with mark barton in london. etf's are up to $3 trillion in assets, accounting for 30% of all equity trading volume. julie hyman is standing by for our weekly deep dive into the etf market. julie: i am looking at stocks on pace for their fifth consecutive week of gains. our next guest thinks pullback could be ahead. kevin kelly joins us for today's etf breakdown. volatility has fallen way down but interestingly enough, there are actually etf's to sort of play the lowball situation we have been seeing. etf's there are two large

to mitigate volatility and have performed well during those times. if we look to the september timeframe as well as earlier this year, they outperformed the market and really mitigated. and splv.ed the usmv they have shown investor settlement is going into those two etf's. one has taken in $3 billion this year alone. how are they different from the vx ask or etf's that track the vix directly? kevin: they own really defensive stocks so they have a lot of yield companies. there is financials in there as well as consumer staples, so they are meant to be defensive by nature. the difference between them is looks at correlation

to determine volatility and the other does not even look like that. the most important and interesting thing is they are actually relatively expensive to of 22rket right now, pe's and 24 trading at three times book. people are paying up for these defensive names that they do perform in volatile times. julie: we have not had volatile times more recently. we have a chart on the bloomberg showing that going into the fed and since the fed, we have seen volume come down on the nyse, we have seen the vix come down to the lowest levels this year so you would think then that these etf's you are talking about would not be performing as well. happened is if you look at year to date, they are up over 4% while the market

is flat. when the market was down, they were not down as much. if you look at at&t, verizon, they are dividend yield spurs as well and not as volatile as some of the other sectors and not overexposed to energy. they mitigate your losses. julie: are you still recommending that people get into these? : getting into minimum volatility and low volatility stocks an etf's is a great way to put cash to work. julie: kevin kelly, really appreciate it. we will be right back with more bloomberg markets. ♪ v

caroline: live from bloomberg's world headquarters in new york and london, i am caroline hyde. mark: i am mark barton and you are watching bloomberg markets. caroline: let's get a quick data

check. up 3/10 of a percent on the s&p 500, up one and a quarter percent for the week. all fueled by the fed europe. is the 3/10 of a percent auto's and the banks leading the charge. , the banks have been the laggards. but have a look at first word news, david gura is at the news desk. david: the head of the chamber of commerce says donald trump is a threat to the u.s. economy. said west and thomas donny those are shortsighted. >> if they look at the polls, a figure out a plays well, they listen to elizabeth warren who all of a sudden she is the pope in terms of what is except the ball in this religion.

and we're making a fundamental mistake. increased terrorists mean higher prices for shoppers. prosecutors in belgium say the fingerprints of the paris bomber have been found in an apartment rated by french authorities. one gunman was killed and three others were captured. he was involved in an attack last year that killed 130 people. serious ending five-year civil war are ending in geneva. washington should use its influence. in astra -- a nasa astronaut and two cosmonauts are headed to the international space station. they will spend about six months living and working aboard the $100 billion research laboratory which flies about 250 miles

above earth. global news 24 hours a day powered by our 2400 journalists in over 150 news bureaus around the world. caroline: let's get back to the global markets. we saw it rallying today and it is just inching into positive territory for the year. it joins the dow which moved into the green yesterday. markets are now nearing a bull market. christine lagarde says negative interest rates in europe and japan have been helping the global economy. >> if we had not had those negative rates, we would be in a much worse place today with inflation probably lower than where it is, with growth probably lower than where we haven't. it was a good thing to implement those negative rates.

caroline: joining us for more is patrick show its, global strategy of jpmorgan. i looked at your notes. pragmatic central-bank policy is crucial by a financial commission. is this pragmatic central-bank policy negative rates? patrik: i think we are seeing pragmatic central-bank activities. as we saw the ecb implement last week, they are not going to get too carried away with negative interest rates. they saw how bad the reaction was in japan and they clearly stepped back from that. i think this is really what explains the nervousness a little bit -- nervousness is an understatement. what has happened this year is worried that central-bank may not be pragmatic and a different where he is that markets clearly

did not like the idea of going too much into negative rates, but at the same time looking in, the u.s. was too nervous about the central being too aggressive and hiking rates. there is pragmatism there and they took that back a little bit. clearly the markets are reacting positively. caroline: will they continue to act positively? patrik: we would not get carried away here. just as much as we thought the recession fears in the first couple weeks of this year were overblown, we still think it is very unlikely that the u.s. economy goes into recession this it is pretty unlikely the global economy goes into recession this year. would make yout relatively positive on risk assets including equity. actually there has been a weakening and the trend, not recession, but things are a little weaker.

valuations are not that great so we have taken equities from an overweight to a neutral relative to bonds. just as we thought the negativity was over, we would not get carried away just now. yet the s&p is in positive territory for the year. we said at the start of the year and still probably think so, we will get something like mid single-digit returns from equities, which is not great but is not bad either. mark: there is a chart that shows eps ex mets for the next 12 months -- estimates for the next 12 months whereas we know in the last five weeks the rebound in european stocks has been fairly significant, so there is a big divergence. i see profit forecasts have turned negative now for europe for 2016. why you overweight european

equities, excluding the u.k. bid. patrik: i think excluding the u.k. bid is quite crucial. the european and dax at the moment, it is very hard to determine an opinion because the conflict between the u.k. and continental europe are so different. the u.k. is heavy in everything and i'm pretty sure we are looking for earnings to fall again this year, whereas the closer you get to the core eurozone, earnings are not looking too bad. we suspect there is some upside risk to what analysts have at the moment. it is not a fantastic absolute outlook but for what it is worth, analysts look pessimistic. ,f you look on a global level earnings expectations are the lowest they have been in decades. mark: the ftse is one of the better performing european

bosses. yes, it is down but it is pretty much flat on the year. the rebound has been led by those mining and energy stocks. does that tell us that you do not think this rebound in those sectors has legs? patrik: to be honest, we are fairly lukewarm on the outlook for commodity crisis as such. that is going to be pretty important for here and to be honest, the u.k. has a bit of a problem. we have the brexit referendum coming up and it is pretty difficult to predict how u.k. assets, perhaps other than sterling, how u.k. assets in june -- in general will react. in aerling does selloff case of a brexit, yes, you might argue that the u.k. exiting -- it likes the leaker -- weaker

currency. hows pretty hard to predict the u.k. would react. if we get through the brexit referendum and there is not a yes vote for exit, then i think u.k. entities could look a bit more interesting. they are reasonably attractively valued especially if you look at the dividend yield. caroline: they have had a volatile ride and high-yield has had a volatile ride in 2016. you are saying go to high-yield corporate credit, why? patrik: that is the one asset that looks cheap out of its space. it does not look as cheap as it did three or four weeks ago, but in an environment where we think growth is going to stay positive but not exciting, but positive, that is actually an environment where credit comes into its own so growth is strong enough for corporate balance sheets to look good or safe.

but it is not that strong that you are actually going to get excited about earnings growth. really, you are not worried about getting your capital back to much in the credit space so to us, that actually looks the better way to play positive view on the economy than outright equity at this juncture. mark: thank you for joining us, great to talk to you today. global strategist at jpmorgan. coming up, the latest on a breaking story, eu officials are said to her reached a deal with turkey on the refugee crisis. we will go live to brussels. ♪

caroline: this is bloomberg

markets, i am caroline hyde in new york with mark art and in london. it is a green day for stocks. abigail doolittle has the latest live from the nasdaq. the best stock on the nasdaq is adobe, shares are storing after they beat fiscal first-quarter results and raised the full-year forecast on strong cloud momentum. not surprisingly, lots of positive commentary including j.p. morgan sterling who says they beat right across the board. one thing that may be worth wondering, the stock did gap up and out of a trading range on all of this excitement. we are wondering whether or not that trading action is in fact sustainable. caroline: interesting if you are digging into the imap, it is showing you that energy

companies are on the downside. what are the lacquers at the nasdaq? abigail: tech is the lacquers. there does not appear to be any real news. what could be going on our investor concerns into an upcoming global cook -- google cloud program day. if they talk about the enterprise side, that could pressure microsoft and if they talk about the storage side, they could talk -- that could pressure amazon. at least relative to amazon, this could create some headline risks going forward. mark: abigail, thank you very much. we have breaking news in europe. let's see how the markets are faring, up today. not quite up for the week. it would be the fifth week.utive gain per

all four major indices are rising. let's get back to this breaking story, european leaders have reached a deal with turkey on the refugee crisis. ryan chilcote has been covering the story and joins us from brussels. give us the details. effectively, what this does for the european union is really a game changer potentially. turkey has agreed to begin accepting refugees and migrants that had already made that journey from turkey to the willean union, and the eu begin sending refugees and migrants back to turkey as early as this sunday. the on that, turkey is saying that it will also work harder to stop the flow of refugees from turkey to greece and the european union so we do not get into this problem to begin with. in exchange, turkey get some of

the things it was looking for, an additional 3 billion euros it was seeking on top of the 3 billion allocated last year as compensation for dealing with the refugee crisis. it a promise there will be more of an effort to help turkey get get the eu membership for turkey off the ground, and finally there will also be an effort to expedite visa-free travel for turks who want to get to the european union. turkey would like to see that by june and the eu says as long as you meet all the criteria, we are happy to see that. caroline: we have got to delve into whether this is going to work as an agreement with david cameron warning another crisis is about to start again. will this hold? caroline, i think one important thing to point out is that another part of this deal

is the european union agreeing refugees on a00 and the people that have been coming up to now have been coming illegally. the eu is agreeing to accept 72,000 refugees from turkey, but as you know, there are 2.7 million refugees in turkey so this is just the beginning of a resolution of the problem. as the british prime minister was pointing out, at the end of the day half of these refugees and migrants are not coming from area through turkey, a coming from places like afghanistan and northern africa, and they could just go west to libya and make the journey from their. -- from there. it is really difficult to say whether this is actually going to work yet. mark: does the summit highlight the ongoing divisions within the eu over a common refugee policy?

ryan: i think so. there were almost as many disagreements as there are countries within the european union. you have countries like hungary saying they will not accept the deal, they will veto a deal and less the relocation and resettlement of these refugees, the european does taken and less , only tountries participate on a volunteer basis . hungary says, if you force us to take refugees we will veto the deal. a lot of people will say this is short oftart but falls the ambitious plans they were talking about at the last summit 10 days ago. caroline: a sad thing we see with many and eu compromise. ryan chilcote on the ground in custom -- in brussels. waves artist banksy made

with provocative street art but the identity of the artist has never been revealed. how will that impact the price of his artwork? ♪

mark: time for the bloomberg business flash, a look at some of the biggest is the stories in the news right now. ford's chief executive is getting a raise. they are boosting his compensation package by 70% to more than $17 million as ford posts record profits due to soaring suv's. a new twist in the bidding war for starwood hotels, china's anbang group has agreed to buy star word for $78 a share. star word says the bill is superior to an offer made by marriott, who has 10 days to

make a counter offer. tiffany is warning investors that earnings are going to take a hit. the luxury jewelry retailer gave the forecast that missed estimates. fourth-quarter earnings to do better than expected but sales and the holiday period fell almost 6%. caroline: the identity of banksy, the artist known for provocative art appearing on streets, walls, bridges around the world has been a closely guarded secret. using geographic profiling to point to the street artist's identity. julien's auction has sold over 50 banksy works and will put this on the auction block. down with the

auction house. >> there is a lot of mystery around banksy and he has been able to stay anonymous for so many years, so a lot of people want to know who he is but i think a lot of people do not want to know who it is. especially if you are an investor in banksy, the fear is down aftertings go his identity is known? >> describe how close his anonymity is tied with the sale. >> being a street artist, it should be enjoyed by the public. come at thedo not verification of pest control but they still have a lot of value because he posts them on his website when he does it. if concern is, i think anything, he will stop doing those works and continue on as a legitimate off -- artist.

art andentioned history i think that is what we are most familiar with. what is the market like for his artwork and how does it go to the auction block? >> a lot of the auction houses will sell a lot of his street art. some do not because they do not come at the pest-control certification. because he posts them on his website, that is how we know they are authentic. i think the values of his street art will go up. it has been well documented. he has done work in new york, london, l.a., and throughout the u.k.. i think the works will see a tremendous increase when he is found out. he still sells works at sotheby's, christie's, actual artworks that he makes himself and that is obviously how he makes a living. he has also, a lot of the street

art has gone, he is a philanthropist. we see the work he did for the boys and girls club for the fact they could sell it and stay in business to benefit the youth. he issomebody that is -- an unselfish artist, creatively genius, and like i said, i think we are going to continue to see, i think when he is found out it will be a lot of press and height but at the end of the day banksy will always be banksy. >> a piece of graffiti of his could go for low six figures. are there still bargains to be had? is this a good point to get in? >> it is, the street artists especially. the items earlier in their career will sell for the most money down the road so i think his street art is what has

tremendous value and potential to increase over time. forave sold his walls 200,000 to $400,000. $150,000 $100,000 or but in time we could see those go up to half a million to a million dollars. >> do you have a lot of people wanting to buy his work? >> a lot of celebrities. we have a lot of celebrity clients. it is something that i think los angeles and hollywood, something they have embraced, him as an artist and political figure. i think it is just going to continue. one of the things the market is going to continue for him is in asia, japan and china, as the asian market really has exploded this pop-culture market. when we sold michael jackson's thriller jacket for $1.1 million, a lot of them go over to asia and asian clients, and i

think thanks he will be one of those phenomenons -- banksy will be one of those phenomenons that continues to -- caroline: that was david gura speaking with darren julien of julien's auctions. read more at bloomberg pursuits, your destination for the finest things in life. now coming up on bloomberg farber, editorc of the boom, gloom, and doom report, we will get his thoughts on if he finds central-bank actions appropriate. ♪

caroline: it is 11:00 a.m. in the work, 3:00 p.m. in london, and 11:00 p.m. in japan. i am caroline hyde. mark barton and

you're watching bloomberg markets on bloomberg television. we are going to take you from new york to london to zero in the next hour. here is what we are watching. gloom, doom, and boom report. caroline: apple is going back to the future to prepare to unveil a smaller iphone next week. will it make a difference in the iphone sales? mark: oil prices are moving higher with stocks today. how crude prices are affecting global markets. 90 minutes into the trading day in the united states. let's go over to julie hyman for the latest. julie: we are