david: from bloomberg world headquarters in new york, good afternoon, i am david gura. former bank of england governor joins us, we will get his take on the state of the global economy. president obama becomes the first u.s. president to visit cuba since calvin coolidge. what the historic thought and relations means for business. latests holding its product event, and mailing an updated smallscreen iphone. they also discussed the fbi controversy. are two hours from the close of trading. let's go to julie hyman. julie: stocks not seeing much changed today. they have been seeing a little bit of strength and day has gone on a volume is down about 20%.

also down for the other major averages. not seeing as much activity today. if you take a look energy and materials are the 2444 groups -- are the two performing groups, financials as well. industrials and 10 are in the list as well. there is not a clear pattern in terms of what is moving. ll,rgy continues to fa even as oil prices have rebounded today. we are seeing a gain of yearly 2% in crude. we continue to have a weakness in energy stocks. interesting to virgins there. david: materials are lacking today as well? jeffries are downgrading in part because of a big rally recently.

evaluation bounce might have gone too far. in particular, reliance steel. down by 2%. analysts say momentum is likely to run out of steam. homee also seeing a pillars pullback after existing home sales numbers euros a month over month decrease of 7%. ont is putting some pressure the home builders. we have been talking a lot about apple today. that bears mentioning after the company is announcing a smaller iphone and other tweaks to its products. you can see those shares are negative, and one change that is not a lot of change. valeant is up by 8% after announcing the departure of the ceo mike pearson after also say the cfo of the company, who had

been the acting ceo during his absence would resign from the board. howard schiller, who is identified, says he will not resign from the board, i have not done any wrong. the saga continues. incredible story that first out of the heat this morning. thank you. let's check on the bloomberg first word news this afternoon. david mentioned we are waiting to hear from president obama who is in havana meeting with raul castro. the president's first stop on his first full day in cuba was revolutionary square, home to a memorial of a cuban independence hero. is the firstma u.s. president to visit in nearly 90 years. tomorrow history continues with a major speech that cuban officials say will be carried on television. before leaving for argentina the president plans to meet with cuban political dissidents.

henry clinton took several shots of donald trump today during her address at the is really it -- american israeli public affairs committee. she said israel's security is nonnegotiable. trump has suggested he was neutral in the israeli, palestinian conflict. he is taking its campaign to the nations capital today. he met with newt gingrich and congressional republicans. donald trump is looking to unify the party behind his candidacy, despite fears opposition from prominent conservatives. alabama senator jeff sessions arranged the meeting. officials made another suspect in the in paris.tacks i november attas they say he left for syria in 2013.

absalom was arrested after a four-month manhunt. there are hundreds more rugged lights people in belgium -- radicalized people in belgium. 24 day innews 24 hours a more than 100 50 news bureaus around the world. i am mark crumpton, back to you. david: thank you. a live shot of havana president barack obama and raul castro are making an address following their bilateral meeting. you can watch the full event at bloomberg. a rate hike might be coming soon. lockhart's comments come in the wake of the federal reserve's decision to hold off on raising rates because of concerns of the global economy. joining me now is the former governor of the bank of england. it is great to have you. you write in your book that we have reached the point at which monetary policy confront

diminishing returns. , when itable for us comes to monitor policy, how do you see it? >> for eight years it has been cutting rates over and again. peoples helped persuade to spend today rather in the future. we have brought forward spending from the future to the present. that has boosted our output. but as time passes, tomorrow becomes today and we have done a whole and spending -- doug a hole in spending. we are handling of a hill that is getting steeper and steeper, so we had to go faster and tester to maintain the ra of spending. david: you mentioned all that they are trying to do. i look at the bank in europe, the bank of japan, experimenting with negative traits. how effective have they been? for a while these were seen as extraordinary measures. in in can see with japan

thing thatea, the central bank is trying to do is pushed on the exchange rate. willcountries in the world say if only everybody else was gore normally, we would be fine. since they are not, we are not. not everyone can push down the exchange rate. thiscompanies have been country have been trying to do that at the expense of the u.s. dollar. now the federal reserve is concerned about the strength of the u.s. dollar. we see janet yellen on capitol hill from time to time. she is often asked about the prospect of using negative rights. she has raised the specter of the legality of them might be questioned. was this a question while you were in the likelihood? because toy time, have all that far would have been to damage the banking system and made it even less likely that it would be able to the credit to the real economy. it never got to that point.

the real issue is that the monetary policy is a bit like a painkiller. it is a sensible thing to take initially, but then you need to study carefully the true symptoms of the underlying problem and take the right actions. monetary policy is not the solution to the long problems we face. david: write about this equilibrium in the pattern of demand. if low interest rates are not a way to cure that, what is? >> i do not think there is a simple, quick fix. watched to world readily went to fixed exchange rates. we need to move away from that. we really have to take her the need to boost productivity to give people confidence in the amount of debt they inherited from the past. play a leading role in encouraging the rest of pushndustrialized world to further towards trade liberalization and services. all of these will help, but there's no quick fix. david: your book is out today. parts of it were released earlier in the telegraph in england. some of it that raised a little

bit of a stir with you coming up as an opponent of brexit. talking about the eurozone being doomed. what was the point when you came to the conclusion? when you do not think this was viable? >> let me be clear on this. position onaken a brexit, i will not to do so. that would be unfair on my successor. i have said that there are serious problems for there is no easy way out, and it was a mistake. but the euro area is quite distinct of the european union. the future of european union will undoubtedly be in my view to different country groups. days ofor not you case european union, no one in britain actually wants us to join the euro. david: tomorrow we will get new data on inflation in the u.k.. they are expected to be slightly higher figures, but not by much. what is your reaction to that, being thus far removed the

crisis? >> it is not surprising, given how weak demand is. 15% below where it would have been had we not have the crisis. there is potentially great scope at some point in the future for faster with without inflation. i do not think it is terribly surprising we see inflation as low as it is. iron is going through a time , andall prices are high everyone said it was terrible to have a high oil prices. now people are worried that they are so low. david: you have been out of the office for a few years now. has your attitude toward austerity changed? >> i do not like the word austerity. i think it is a question of fiscal policy. in some circumstances it makes sense to tighten the budget to get rid of the big budget deficit. we did so in britain in 2010. sterling had fallen by 25%.

it was the biggest depreciation in our history. to offset that it made sense to do something about the budget. no control over their exchange rate, and the school consolidation their pushes unemployment up and demand down. itself is too emotive. we need to analyze what is going on. david: hindsight is 2020. at the end of your tenure you were out getting for quantitative easing. looking back on that moment, as you way what inflation has today, and you wish there had been more of it? you wish you could go back as a little bit more, but less, i do not think it would've made a difference. and nothing monetary policy would get us out of that, that it is a bridge to a better position in the longer run. david: we will have more coming up after a short break.

this is a live shot at have a lot of. president barack obama making a n address at the bilateral meeting. you can watch the full event on bloomberg online.

david: this is bloomberg markets, i david karo. we are watching president obama and the president of cuba making address in havana. president obama is the first president to visit cuba since calvin coolidge. other headlines

breaking this hour. castro says embargo is the biggest obstacle for cuba development and calls for a naval base to come back to cuba. still with us is vernon king, the former bank of england governor and the author of the end of alchemy. inonderful, very lucid book which you chart the evolution of banking, the evolution of money as well. taking would be unrecognizable to walter badges. it looks very unrecognizable today. the startling statistic is the size of the banking sector in the u.s. and u.k. relative to gdp. how big of a threat to the financial stability is this? was. much better than it we got to a point where the size of banks was over 500% of gdp in britain, compared with less than 100% in the united states. the degree of leverage that the banks played was very fragile.

the amount of equity capital banks have was bubbled. two assets. it is a big improvement. the economy is to go further in the long run. that is not the immediate issue. the banks are safer. david: we have had dodd-frank, do you feel that it is safer than it was? >> i don't think it is safer because of the massive legislation. lawyersreated jobs for and compliance officers, but do not think it is a healthy development for the banking operating inople banking feel they have to go to a compliance officer before they can even move. you done far too far in the way of detail regulation, much of which will be enrolled into a future crisis. what we need to focus on is a simple leverage ratio to ensure that banks are less likely to become insolvent, and what i call a role for the central bank in which banks have essentially take out insurance, up front,

mandatory insurance, such that they would be eligible to receive liquidity in the crisis. recommendations, you did make them when you were -- you did not make them when you're governor of bank of england. why not? >> many of them already came in my mind because of the crisis. it was only as result of going back and reading the history and understanding how thinking had really changed since the 19th century and i came to the view the right reform was not as many american economist have been arguing,, fractional reserve liquid, where banks have assets to back the deposits, but to accept that banks can take out insurance for the central bank right up front, so that they would be able to pay off depositors in the event of a bankruptcy. david: how different is it today

to see the asset-backed tecurities marke writing? thriving? >> i worry that there is too much detail regulation piled one of top of another. is aeel the regulators parent looking out of the kitchen window and shouting to the children, i don't know what you're doing, but whatever it is, stop. that is what we do not want to banking system to do. we wanted to be a place of innovation and ideas, to benefit the customers. to do that we need to be broadly stable. think the simple measures to ensure the resilience of the banking system are infinitely more important than thousands upon thousands of pages of detailed rules. david: there are many people in the u.s. upsets the energy individuals have been held to account for what happened. you right in the book that

blaming individuals is counterproductive. but what do you say to those that say they were human beings responsible for these errors, and should be held to account? >> i would like to persuade people, if they read the book, that this was not actually the result of one or a small number of individuals making mistakes. the was a problem with system, and we inherited the system that we do not look at it deeply enough and change it. i would like to say to people, do not worry about revenge, do not get mad, get even. the right way to do this is to put the banking system in a form that we know that going to be vulnerable to the fragility we saw in the past. we can build on the experience of the crisis, make our banking system safer, and we don't need to engage in symbolic gestures like thousands of crazy minute regulations or thinking that if you individuals are the people who are to blame. if those individuals have been replaced by different individuals, the same problems

would have occurred. david: there is a growing conversation about the role of central banks today. we talked about banking different more than in the past. looking ahead, where do you see that going? be a big debate, because the extent to which central-bank mandates have expanded, often by default to deal with the crisis, and a limit to how far central banks can be allowed to do things, which ought to be the purview of congress or the executive. this is going to be a matter for debate in the future. i think this is very important to recognize that we will, as a society need to degrees of discretion about the amount of money that we can create in a crisis, or in normal times to keep inflation stable. there is no automatic solution like a gold standard, it going, or something outside of government to do this.

we face a very uncertain world, and we need to intelligently and collectively respond to it. the founding fathers designed these wonderful institutions for and theed states, same degree of intelligence needs to be applied to manage our monetary constitution. david: new proposed a radical change to the study of economics. explain what you mean by that, what you would want economics to become. >> i do not think it should be completely a radical change. there are many aspects of economics that assume that economics is like physics. there are laws of nature that govern it. economics,pects of dealing with microeconomic issues, that is probably a sensible approach. but to understand booms and slumps, it does not work. people's lives about the future of fundamental. these are not laws of nature, these are psychological beliefs which are shaped by events, people, institutions. these are the things we need to understand can also impacted.

it is a slightly more humble physical size, not as a set of mathematical equations, but understanding beliefs today. that is a true social science. david: it strikes me, thinking about ben bernanke's background, history is so important when you're in a position like the one you are in. should that be pricesmart -- price more, a sense of knowledge about history? >> absolutely. i want to be clear about this. once the crisis hit i learned far more about reading the ,inancial history of the past than i did from any number of mathematical equations or econometric models. the models they used were helpful in the past, they were helpful for pedagogical purposes. they did not help just in the nature of the courses and what we were going through debt crisis and what we were going through.

-- crisis and what we were going through. david: we appreciate you coming today. you can pick up his books now. more headlines coming out of havana where president obama is saying this is a new day for u.s., cuba relations. they are ready to pursue more commercial ties with cuba. they are willing to proceed to normalize relations with the u.s.. we could watch the full event on bloomberg online. ♪

david: welcome back to bloomberg markets. we got to the bloomberg markets desk for the latest. julie: we are looking at analyst calls today. makermaceutical has been falling with concern over pricing. bank of america merrill lynch that the pullback represents a

good buying opportunity, and it looks like some traders are taking their advice. shares are up 6%. we also saw intel pullback on analyst, wa commentary. the analysts saying that the country's first quarter numbers make an below estimates. -- may come in below estimates. david: thank you. more headlines coming out of havana where president obama is speaking. he says they will speak up for democracy in cuba. more bloomberg markets coming up after the break. ♪

david: from bloomberg world headquarters in new york, this is bloomberg markets. let's start with first word news this afternoon. mark: thank you.

president obama is making in havana following talks with cuban leader raul castro. the president is thinking pope francis for helping to led to ae talks that song of relations. mr. obama says those who traveled to cuba with them represent the largest delegation of his presidency. quoting the president, he says i have especially pleased to be joined on this trip by so many cuban-americans. this is a time of hope for the future, and we have a half-century of work to catch up on. we will bring you more details as soon as we get them. about 40 rabbis plan to boycott donald trump's speech before the public policy conference in washington today. his comments about israel has created anxiety in many who will attend the conference.

ted cruz, john kasich in, and hillary will all visit this week's event. mrs. clinton may remark earlier today. bernie sanders is skipping the event. mitt romney has recorded robo calls for ted cruz in utah. that a votethe call for john kasich is a vote for donald trump. the state's governor also announced that he is endorsing the texas senator. donald crews is leading truck and a new poll -- leading donald trump in a new poll by the salt lake tribune. says it is researching interest in the game. few details have been settled, including where the game would be played. but several teams say they are willing to go. the nfl played three games in london and will return to new in november.

i am mark crumpton, back to you. david: thank you print commodity market closing in new york. let's take a look at the biggest movers. gold has had its six incline in seven session. the largest growth this year even so, with a growth of 18%. while markets have recouped their losses after slumping to a 12 year low last month. stronger demand, and falling surplus will ease tensions. obama is to president requested from the audience. >> will you invite raul castro to the white house? and why did you not meet with fidel castro?

[speaking castro -- spanish] my father is human, he left for the united states when he was , he left foruban the united states when he was young. do you see a new and democratic direction for your country? why you have cuban political prisoners? another last question. who do you prefer, hillary clinton or donald trump? president obama: as we both

indicated, we had a great conversation about the issues of democracy and human rights. our starting port is that we have two different systems, two different systems of government, two different economies, and decades of profound differences. both bilaterally, and internationally. what i have sent to president is that we are moving forward, and not looking backwards. we do not view you as a threat to the united states, i hope that my visit here indicates the degree to which we are setting a new chapter in cuban-american relations. but as is true with countries around the world where we have normalize relations, we will continue to stand up for basic principles that we believe in.

america believes in democracy. we believe that freedom of speech and freedom of assembly and freedom of religion are not just american values that are universal values. they may not express themselves exactly in the same way in every country, they may not be enshrined in the founding documents or constitutions of every country, or protected legally the same way, but the impulse, the human impulse freedomfreedom, the that he fought for his universal -- is a universal longing. outident castro has pointed that in his view, making sure that everybody is getting a decent education or health care and basic security and all major human rights as well.

i personally would not disagree with that. it does not detract from some of these other concerns. the goal of the human rights dialogue is not for the united states to dictate to cuba how they should govern themselves, that we aresure having a frank and candid conversation around this issue. and hopefully, that we can learn from each other. it does not mean that it has to be the only issue we talk about. economics, health, scientific changes, international cooperation on issues of regional as well as global import, are also important. but this is something that we are going to stay on. and i actually welcome president

castro commenting on some of the areas where he feel where we are falling short -- where he feels we are falling short, because i think we should not be immune or afraid of criticism or discussion as well. know,s the one thing i do when i talked to cuban-americans , and you are second-generation, i think i speak not for you directly but for many that i talked to around the united states, i think there is enormous. they can be reconciliation and the bridge that president castro discussed can be built between the cuban-american community and cubans here. there are family ties and cultural ties that are so strong.

i think everyone would benefit from those ties being reestablished. one of the impediments to strengthening those ties as disagreements about human rights and democracy. to the extent that we can have a good conversation about that and actually make progress, that i will allow us to see the full flowering of a relationship that is possible. in the absence of that i think it will continue to be a very powerful year. this is not unique to the u.s. human relations. -cubas.

relations. it is something that matters. people who have an subject in to arbitration, and it is something i had to speak out on because i hear from them directly and i know what it means for the. m. [laughter] i was asking if he was directing his question to me or president obama. you talked about political prisoners. president obama: and trumpet and

hillary. [laughter] >> for you, president castro, can you say what you said about political prisoners? >> did you ask if we had political prisoners? did you ask if we had political prisoners? to know if you had cuban political prisoners, and why you don't release them. of politicala list prisoners, and i will immediately release them. give me a name or names. your this meeting is over can give me a list of political prisoners, and if we have those political prisoners, they will be released before tonight's end.

i cannot vote in the united states. [laughter] question is for raul castro. stated, andeatedly today once again that we must learn to coexist in a civilized manner with our differences. could you brought in this concept at this historical moment that we are living? and then i have a brief question for president obama. president obama could did give more space to eliminate u.s. , sokade during your mandate

another generation of cubans would not have to suffer this blockade against cuba? the first question was for me. please repeat your question because i cannot hear well. thatu have said repeatedly we must learn to coexist in a civilized manner with our differences. president obama himself has referred to that. >> we have given the first steps , and we must continue giving these steps. that we will be able to coexist peacefully in an environment of mutual

cooperation as we are doing already in many fields for the benefit of both countries, and for the benefit of other countries, as we have already done. in haiti, when the c holora, and in africa with the ebola. listening to a news conference of questions for both president obama and president castro. i want to bring in a reporter who's been following this story. it was not expected they would take questions, but they are taking hard questions about political prisoners. >> when we are seeing is president obama seems to be going out of his way to be deferential to castro, to be polite, to be gracious. itsident obama is making

clear that he is a guest in this country during this trip, and you saw that during the press conference. there will be some people back home who do not like that posture, who elect to see him come in and be a little bit more forceful. the whiteent and house are being clear that they are here to mend relations with cuba, and that is what we have been seeing him do over the last 24 hours. i expect to see him do throughout the rest of the day. david: one question was would you advise president castro to washington? ducks to that question a bit, but welcome criticism from cuba to the u.s.. he has to walk a fine line. he is in no way letting the cuban government off the hook for the human rights violations. and castro said there are many things are going to disagree on and there is no coming to an agreement on human rights and other things that he mentioned.

but this is a good faith effort by the white house who say they have been trying to move the blockades and other things for years and they are trying a new growth and seeing how it goes. david: there will be a baseball game tomorrow. a lot happening here, but a lot happening on the business and a economic side as well. the white house is trying very hard to stress that this is a big deal. but there's also opportunities for american business. meetingsre having later on with cuban entrepreneurs. they are trying to build relationships, and optically show that there can be relationships possible between these two entities, and so we will see how that goes. david: in terms of what happens in the near term, a statement tonight, a baseball game tomorrow, and the rolling stones. lifted? embargo be what is the latest outlook? at this hard to say

point. there is a lot of negotiating behind closed doors. we will have to see. david: thank you. do not miss with all due respect at 5:00 p.m. eastern time. mark halperin, and john heilemann will preview the contest. julie hyman has a book on the movers-- in check on the . julie: question, could the rolling stones have already traveled there and played there, because they are british nationals? david: good question. we will endeavor to answer it. stocks at the highs of the session, not huge gains, but extending the game that we saw a earlier. tesla is one of the stocks that is doing a little bit better today. we're seeing the rise by nearly 3%. researchsts at argus saying that the company has made some progress in investing in production shortfall.

it seems as if tesla's issue has not been demand, but making cars quickly enough to meet demand. they are addressing cost overrun. the stock is point for much stronger performance in the next quarter. shares arising today. coming out with the latest focus list, including nike on, taking lululemon off. the recent channel checks on nike indicate sales strength in north america with rational inventory levels. lululemon's first-quarter earnings according to analysts may miss consensus expectations. there is an overweight on that stock. we watching natural gas as well, after a call on that commodity, as well as on range resources. we are seeing a cut to the forecast for natural gas going to 225 by the end of the second quarter.

natural gas prices are lower today. range resources taking a hit as well. david: thank you. you can watch the full address president obama is giving on the bloomberg online site. ♪

to bloomberge back markets. apple unveiled some new products at their event today, most notably their new, smaller iphone. >> some people ask is, some people even pleaded with us, to please keep the four inch products in our lineup. today we're going to do just that and make it a whole lot better. as you may have heard we are iphonesc. the

david: people were pleading for this, how big a deal is this? >> this announcement that apple world headquarters was one infinite loop. it was not about anything being bigger, it was about everything being smaller. phones being smaller, the price of the watch being smaller, the pad of their line i smaller and at a lower price. price,g down the phone when apple has done in the past to go to lower markets and cheaper markets and cost-conscious consumers is to keep the old stuff on the market longer. they had about 30 million of the full so -- of the phones sold of their smaller devices last year. clearly a lot of demand in the marketplace. now they are coming with a much

more souped-up version with chip, fingerprint recognition, and a phone that can do a lot more. only $3099, that is a substantial decision. more a focused to get people using their services, their software, and stay on the ios platform so they can sell a lot more things down the line. david: talk about apple's push to get people using their services. has the utility of the iphone changed? the bigger models were good for watching movies. you're mentioning services. is the use of the iphone changed? cory: absolutely. i think apple things of it that way as well. the bigger screen makes things like watching movies and using it in your car for navigation more functional, but the ways that the phone can be used,

whether it is apple pay for apple music, apple thinks that that is the way for them to get more revenue in the future. because the iphone business has gotten so big, 60% of their , billions of dollars in revenue, and as the country relies on it so much more it is hard to create a new device whether it is the ipad or the apple watch, to complete with what the iphone is. they are buttressing the experience using the apple devices with music, with apple pay, with apple integration with the car as ways people are going to use the phone in the future. that is what this focus is about. getting more users and keeping them under the apple tent. news: i'm thinking of the of the ipad pro being reduced in size. it strikes me that this is a company that is the more iterative in this day and age.

it was the ipad pro, it was today. the big iphone, that was too big. we have seen this in the past, a lot of fastidious work to get the size just right. we are seeing the company walking back just a little bit. the big ipadsir, were a success, particularly the iphone 6 plus. in china especially. by this is not intended apple to be a giant release for them. they held it at the corporate headquarters rather than a big convention center. they did not try to pretend it was this big event. when you're going to have a small event, and show up like it is a moonless, why would you not talk about changes? that does makeny giant turns, and those have been hard to come by in the last few years.

prior to the ipad there was not a joint product release -- a giant white release since then. david: talking about watch bands, indicating the watch has not taken off as they wanted since we have last seen it, cory: i like to think of it as an accessory to the iphone rather than a whole separate computing platform. in that manner they have been successful. comments on amazon in the last few weeks for the fitbit blaze than they are for the watch. i do not think that the watch will ever take off as a giant platform, but as a accessory that will get more interesting. david: the big item for apple today, the attention goes back to riverside, california going back to court with the doj. what do we expect from the?

at? cory: apple left the stage with tom petty's i want back down playing. i think that shows that apple will put up a big fight in the san bernardino court, and it will not be the last of it tomorrow. david: thank you. what's more, we leave with a live shot of president obama taking questions with resident raul castro in havana, cuba after a historic bilateral meeting. you can watch the full address with president obama on the bloomberg. more markets coming up after the break. ♪ . .

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welcome to bloomberg markets. from bloomberg world headquarters in new york, good afternoon. i'm betty liu. today,are fluctuating struggling but here their highs of the session. meanwhile, the atlanta fed presidents is the rate hike me be justified . and did you see this? apple unveiling and dated smallscreen iphone along with some health products. our investors cheering the move? valeant shares rising after a shakeup at the drugmaker. bill ackman joining the board. we are about an hour away from the close of trade. stocks are close to the highs of the session but we have been this five-weeke rally here. julie hyman is back with the latest. ju