francine: the european shakeup. japan's largest brokerage scales back its business. a deal to calm the doubts. can italy short confidence in its financial sector with a $5.7 billion fund to back its banks? and a vote in the lower house pushes brazil's president a step closer to impeachment. this is "surveillance." tom, we have plenty to talk about. that's a lot about the banks. we also need to talk about the find that goldman sachs paid,

into the end is weaker. tom: a little bit. the euro has been the dynamic that has changed. that stronger euro gets my attention. what i know this buried in the numera announcement was that it would rationalize the americas. i have no idea what that means but i wonder if those with 1000 jobs are not just in london. toncine: he didn't come out confirm a lot -- he said when until april 22. let's get to the first word. authoritieslgium, have charged two more men with offenses related to the brussels bombing. prosecutors say they were involved in renting a brussels apartment that served as a hideout for the bomber who attacked the brussels subway as well as a suspected accomplice. 16 victims died in the march 22 attack, the same day a pair of

suicide bombers killed 16 others that brussels airport. brazilian lawmakers have pushed the president a step closer to impeachment after a committee in the lower house voted for her to go in the first test of sentiment in congress. the real reached a seven-month high on speculation that she will be ousted; she denies any wrongdoing and economic corruption scandals and says impeachment would amount to a coup. the chances of a repeat election in spain are increasing, is after the anti-austerity party, led by pablo iglesias, rejected talks on a three-way governing alliance. it poured cold water on the best chart for the administration four months after an inconclusive ballot. sis refusal to join a pact i likely to be confirmed by a ballot this week. and the group of seven nations should stop hiking territorial disputes in asian waters and focus on the slumping global economy, that from china's

foreign minister in response to g-7 calls the stop land reclamation and militarization. ministers have raised concerns over tension in the east china sea and south china sea. global news, 24 hours a day, powered by our 2400 journalists and more than 150 news bureaus around the world. tom: thank you so much. let's get right to the data. equities, bonds, currencies, commodities. a risk on field two days in a row. the 10 year yield was 171. we have gone five basis points over 48 hours. your-dollar is the main story, with a stronger euro. that takes over from the yen, crude oil lifting. jeffrey curry will join us in the next hour. the dollar index is solidly below 94; that's a big deal. heavily weighted. i did this again to underscore euro-yen dynamics.

we just showed it on a previous 114-32. a you would expect to see the yen hit a 107.90, if the end was tracking the euro. it's not. the euro is stronger in the last 18 hours. francine: yeah. i think this story on yen is we heard from the finance minister saying, look, the authorities are standing ready to act if foreign exchange moves are excessive. does that mean that they are looking at a velocity that -- i want to show you retail stocks in europe. overall, we are down 0.2%. lvmh disappointed. dollar boosted influx and south korean stocks. tom: that's important. --'s go to the bloomberg we'll really feature this in the

next hour, two inflation dynamics, the latest move we have seen up. then the cleveland cpi, which is the same idea, taking out different ideas every month, not just food and oil and energy. this is that little lift up, and the clear idea of a lot of hope and prayer for more inflation. we'll be joined in the next hour. francine: some good inflation figures out of the u.k. that's also because of what we saw on easter, how it fell, and airfares going up. this is my chart. i thought this was a clever way to show the problem at mario draghi has. if you look at this, this is the pre-cash flow. the free cash flows that a lot of european companies had. it tells you the story that we have been saying, that people are sitting on cash; they just don't want to spend it. our guest host for the hour is

eric nielsen. eric, that's quite a title. thank you so much for coming in. when you look at this chart, you have inflation picking up not going anywhere. how do you get ceo's to spend? the macro environment are doing too much -- this is what happens. ceo's will sit on their cash until they have a better picture. >> rate. ceo's star to spend money and invest with makes that there is a demand for their product. the price of money, the interest rate, is important, but very marginal compared to the expectation of offshoot or demand. in the old days, you devalued your currency and it came from the export side. policy, but fiscal there is this religion that fiscal policy is not allowed. now we are just waiting for consumers to do it, and they do it slowly because of the increase in real income. it will come, and we will see a

pickup in demand. but it's still very, very slow. francine: the problem is that it pushes mario draghi to do more. it's the same in the u.s., right? it's a vicious circle. >> yeah. it is. in europe for sure. economists would say the politics are wrong. it is coming a little bit now; everybody expects eurozone fiscal, increasing by a quarter percent. the leak two weeks ago suggested that the germans are about to do more. so that is coming. tom: let's look at this chart. we're going to use it now; we show this a lot recently. this pushes against the nielsen optimism. this is a lakhdar -- slope

matters, toward regional blocs. exports.of a lack of 21,will draghi, on april how will yellen on april 27, deal with a trade to slow down that we are seeing, region to region? >> that's a very good chart. and it is one of the big conundrums in the world. global trade is going nowhere. utually it will grow by 1.2% b we had 10, 15 years where a it will go back to where it used to be on to something worse. but this leads to the issue -- you talked before about the exchange rates. because monetary policy is so stressed with a flat curve, the central banks have become so obsessed with the exchange rates, and yet, with no increases in global trade, the

elasticity -- we calculate them on the exchange rates. tom: ok. that's the smartest thing i've ever heard from eric nielsen. >> [laughter] jack lew -- they nailed this yesterday -- i love this. the secretary of treasury is lecturing lagarde to get tough on exchange rate manipulators. dr. neilson, help me. why is the secretary treasury lecturing lagarde about exchange rate mechanism? i can't believe i'm seeing it. >> it's crazy. it is. would argue that there is a very good probability that yellen's speech a couple weeks ago was not in the spirit of shanghai. i think i think what came out of shanghai was some sort of agreement to toe this competitive devaluation. i was shocked, hearing what she said.

now jack lew is coming up, and later today we have the spring meeting. the americans will always get lots of influence because they can't get stock from congress. i think this is simply jack lew's selloff, to make an attempt to be relevant in the imf context. filled will be on bloomberg went today on the kickoff of those imf spring meetings. in are next hour, one of our most popular guests in demand. jeffrey curry of goldman sachs; he nails lower for longer. he reemphasizes lower for longer. bloomberg "surveillance." ♪

francine: i'm francine lacqua in london. tom keene is in new york. we are focusing on microeconomics and finance. let's get straight to the bloomberg business flash. nejra: thanks. u.k. inflation jumped to a 15 month high in march. consumer prices rose half a percent from the year ago, the fastest pace since december, 2014. an earlier easter boosted airfares and closed prices. inflation remains well below the bank of england's 2% target, by figures suggest it is picking up after almost a year. lvmh fell to a three-month low in paris after reporting lower than expected revenue growth. it declined 2% and burberry dropped as well. recent terrorist attacks are deterring travel from asia and weighing on european sales.

alibaba is looking to get growth in southeast asia. the online retail giant has agreed to buy control of indonesia e-commerce operator lazada for about $1 billion. that will pay $500 million for new shares and also purchase stocks from existing investors. picked is currently controlled by germany's -- it is currently controlled by germany's rocket internet. francine: thank you. italian banks are getting a little bit of relief; officials and finance firms have agreed to create a multibillion euro fund to raise capital in the load that loans. are managing editor for finance is in milan; michael moore is with us here on set. and eric nielsen also joins us. when you look at the italian banking system -- this was in the waiting for a long time. the fund is $5.7 billion. to me, it strikes me as quite small. will they actually have to make

it bigger to show investors that they need business? >> well, gets a little early to tell whether they will need to go bigger. certainly, the scale of the problem is large as you point out. italian banks are sitting on billions of euros of bad debt. and you have a couple banks in the next couple weeks seeking to raise north of 3 billion euros to bolster capital. 5 billion euros doesn't sound like an awful lot. but it will be in the detail -- we don't know who will be participating and with what amount. and the market over the last couple days -- that have reacted pretty positively to the rally. it took a bit of a breather today. there is a little bit of time to consider what the details are, but the scale of the problem is large. we had one guest saying that given the numbers we have in

front of us, they might need another 10 times as much. francine: this is a problem, right? the fund is 5 billion of the lows are 360 billion. what is the next step? will we have to change the legal ruse -- for example, bankruptcy proceedings, and reduce the time of debt recovery in italy? >> well, this is one of the reasons the banks have been struggling to offload their bad debt. the legal system is in forthcoming to recovery and hence there has been international interest where there has been a price gouge. renzi would lose his pledge to restructure italy's banks and would push through the legal reforms that he is working on -- they go hand-in-hand. the big test will be that

deadline looming by early may to raise 1.8 billion euros in an initial public offering and this is where we will see whether the firm can help carry this transaction through. francine: thank you so much. michael, when you look at the banks and when you look at what we heard -- a lot of the investment banks are retrenching from europe and we had a bloomberg exclusive saying that they were going to cut its equity trading in europe. michael: right. one more domino in that story. nomura thought the legal businesses as part of an effort to grow in europe ended it just never got to the scale to where it could make significant amount of profits. that has been profitable for them. you are seeing across the world banks scaling back to what they are good at, and that is what's happening here, a significant

back in europe. numeral will be focusing more on japan. tom: the operative word is rationalized. they will rationalize -- what in god's name is rationalized mean for these global banks who are d globalizing? >> [laughter] often, it just means job cuts. tom: thank you! [laughter] >> sometimes there is a reduction in capital, that the of the day, we are talking -- it's all jobs. tom: i want to go to eric nielsen. i do respect him not speaking about unicredit, or for that matter disparaging his good competitors. we're not going to put in that position. banksielsen, to global need to be in a region? that is the money question here; it has always been there. does the london bank need to have an operation in new york and vice versa? how does that work?

>> yeah. things afterhe big the crisis -- if you are a commercial bank, in the old-fashioned way, i think you do have to. in our case, and i am happy to talk about unicredit, we are europe's biggest lender to the corporate sector. we are trying to service companies in italy and germany and austria. if these companies are global, we have to the global. it's that simple. an investment bank is a little different, but for a traditional, old-fashioned bank, you have to serve your clients. tom: francine, i think this is a key observation. every task and every rationalization -- you've got to be there. we know that at bloomberg. francine: right. it depends on the business.

unicredit is a retail bank; if you are in fixed income like deutsche bank or credit suisse and losing money, you also need to act. i think it is a case-by-case basis, but point taken. michael, thank you. coming up later today, the imf chief economist will discuss the group's world economic outlook ahead of their spring meeting. much more, coming up. we talk yen, we talked brexit, and u.k. inflation. ♪

francine: guess what? it's raining in london. that's a shocker. tom, we usually have such great weather, like the tropics. i'm so surprised we don't have the sun out. unicredit's chief economist is still here. eric, we had some inflation figures. this is a chart for a pound over the last 40 minutes, but we fo rget that brexit is a huge problem for boe. whatever happens, it probably will be able to raise rates, and inflation is ticking higher. >> that's right. there are two ways of putting it. there is no central bank that likes the uncertainty we are heading into. that said, if you look at the chart and you go back, you see this big depreciation -- i think that came in handy. he was not very happy with the level -- there is a country with the huge problem, and the weaker

pound was good. that's ok for him. francine: yeah. at least a little helping hand. tom: i would weigh in with joseph ninth. this is an essay in support of the prime minister, "brexit and the balance of power." he's hugely influential in national relation and this summary is simple. he tilts after a good essay conversation towards the united kingdom staying within the european experiment. that's an important tal moment. francine: it is. but the problem is that we talk about political and we talk about the u.k. retrenching adam levine would have to weigh in more but this will come with consequences on the economy -- forget politics. >> i agree. people still underestimate how severe it could be in the extremely short term.

you could have house prices in london drop by 50% in euro terms -- you could have sterling go down 25% -- this is massive, absolutely massive. after that it would depend on what field they get. francine: thank you. tom: coming up, the conversation with the secretary of commerce. the white sox, the cubs, the future of the american economy. futures up five, down futures up 47. looking at jeff curry in the next hour, $41 west texas intermediate. ♪

tom: we welcome you on a tuesday. francine lacqua in london; i'm tom keene in new york. right now with our first word news coming years nejra cehic. nejra: thank you. peoplea, police a seven

who fled after a weekend fire that killed 160 people have surrendered to face prosecution. the blaze, sparked by an illegal fireworks display at a temple where thousands were attending a religious festival, and where the suspects were board members. some 200 others are still hospitalized. china is taking its most concrete steps to date toward assuming a direct security role in afghanistan. beijing has played $70 million in military aide and is proposing a multination security bloc. bysignals growing concerned china that peace talks between afghanistan and the talib and could fail, providing a safe haven for islamic state linked militants. a presidential showdown is coming in peru between two business friendly candidates; ae is a wall street favorite, former finance minister who spent more than 50 years championing debt control and free trade. the 77-year-old finished second

in sunday's election, with 21% of the vote. his opponent in a runoff. a u.s. judge says a jury must decide whether led zeppelin ripped off another band with an opening guitar part on "steroid heaven." ity are accused of taking from a band called spirit, which played with them in 1969. they are expected to recount the origin of the song at a trial scheduled to start in los angeles next month. global news, 24 hours a day, powered by 2400 journalists and more than 150 news bureaus around the world. tom: thanks so much. francine,. thisis a huge deal this is what's known -- francine, this is a huge deal. the judge's comment is brilliant about the four chord progression that everyone learns. it's ane's world,"

spoof and a guitar store. the beautiful thing is the right was hugely influential, not only for everybody else, but i guess for jimmy page. francine: what i don't understand -- 40 years later -- the song came out in 1967. when she let it go -- wouldn't you let it go? tom: this is really nuanced. it, but like you say, 40 years on, what is the estate can they do? it's majors way. francine: you should give us a rendition. tom: we should get back to eric nielsen. is natures way. francine: this is a hard turn for me. from "stairway to heaven" to dilma rousseff, who is set closer to impeachment, a stairway to impeachment, after a

committee voted for her ousting. nielsen.h us is eric peter, thank you for joining us. when you look at dilma rousseff, this is the big hurdle. what do we know about the timeline? investors in the market one resolution. they are fed up. are we closer and will impeachment happen? >> i would say that's unlikely. it will go to a vote around the 18th of april. it seems the opposition would need two thirds of the vote to give this a feature process going, but it doesn't seem to have the members present. typically speaking, things take longer, so i think it is probably only that ambitious to think you will get something within two months. francine: the stock market soared yesterday -- how much of the impr impeachment is preston.

-- how much of the impeachment is priced in? >> there is a little bit of that and a large part of it is markets and the fat. if i look at brazilian assets now, it is price for perfection. visit be a cat -- tom: peter, you called deceptive stabilization.i love that phrase . with the russian ruble in the collapse of oil, we all had a target of where wrubel was going. where is the brazilian real going? >> basically toward the end of this year we will start pricing and thendiments probably in 2017. by year-end you are looking at dollar-real trading at 390 and then we will see how things go -- we are overdone at current levels. tom: link in real move, their commodity move, with the kind of

financial instability that can happen -- i don't mean venezuela, a drama brazil will do, but where does brazil sit in for the worries of madame , andde, maurice ops felt the others of the imf? >> the sooner we get a resolution to this problem, the better, but the longer it goes on, the debt metrics start to look shaky -- if we are here this time next year, the real question is if the current administration -- if they leave someenough time to come to kind of conclusion and implement real austerity policies -- show madame lagarde -- there is no doubt. francine: it's not systemic -- it's quite an insular concept, so it doesn't have any systemic bridges, but it's an important message to get this resolved for emerging markets as a whole, especially latin america. >> in many ways, it is a blown

up version of the em space. we have paid from commodities and bad policies and politics and from the reversal of capital flow -- and then we have the very latest in emerging markets -- emerging markets have a fantastic couple of weeks or months and i was in new york last week when we saw investors -- he was going to leave first? when you look at brazilian need to make sure that whoever replaces de la rue is economically extremely confident. the end of the day, she is not able to manage the economy >. it is one thing to have economic confidence that it is another thing to have the political backing to put through those reforms. if you look at the protest in brazil, you are really looking at a situation where you have a country that is very much

divided and politically polarized. the politics of austerity which we all know too well, -- it will be a difficult task. tom: a lot of people that come on our transfixed by asian dx why -- the idea of an asian basket of currencies, removed from japan. give us an update on asian tiger currency. what dynamically going to have? >> again, what we are seeing is a large part of the performance a result of being repressed -- you are seeing some capital inflows consequently, but within to see aould expect weakening trend to emerge once mind, we are in living and working in a demand deficient world and no central bank in the region wants a strong currency. the japanese are very clear in that regard -- i don't think

that's the reason they are any different. the bottom line would be to see more gradual weakness. tom: how about olympic deficiency? let's bring it back to brazil -- how to the olympics play into the dynamics of brazil and particularly how did they play with brazil gdp? >> funnily enough, there is a long tradition were countries that hold the olympics tend to have fairly bad economic performance in the quarter thereafter. in this situation i would expect brazilian gdp would probably start to show sequential growth. we had athis year negative gdp of roughly 3.8%, by next year we should get an average of 0.3%. francine: thank you so much. eric nielsen stays with us. we will be talking about japan and begin later on. we will also focus on luxury. lvmh dragging luxury lower.

worse thaned figures economists expected because of a slump in asia. next, we look at the latest blow to hit the catwalk. ♪

francine: welcome back. i'm francine lacqua in london; tom keene is a new york. andre talking fashion, contrary to popular belief, tom knows more about fashion than anyone in the newsroom. shares have been sliding falling to a two-month low after they reported lower-than-expected revenue growth. we are joined from paris -- andrew, thank you for coming on. it's down 2%, they reported figures linked terrorist attacks

that meant people didn't go to europe. >> that's right. since the terror attacks in november, they are pointing to a drop in tourist spending in the region, dragged down by france in europe and that is taking a toll on luxury goods makers, adding to the problems they face. lvmh reported flat fashion levels and that is really the reason for the mess. is thatinteresting analysts at ubs are saying this might be an over performance relative to peers. find out more this afternoon when they hold a conference call. francine: what are we expecting from rivals? what are burberry going to report -- and yesterday, prada disappointed.

>> if you look at the performance of luxury stocks since yesterday, they have taken another beating. brought it is a separate case, separate all the things everybody else's suffering, the impact of tourism and the strong dollar affecting consumption in he u.s. but they have a different set of problems of their own doing. pump up the prices of its handbags and interesting products and it is now reaping retribution for that. shares are down nearly 50% in the last 12 months. tom: all the rage is to watch a movie on versailles in 1973 when fashion shifted from paris to america. where is fashion right now? my basic take us there is a glut; there is too much luxury goods. is what this earnings season is about?

too much earnings? >> i think it's a combination of there being a lot of stuff out there, there being a consumer who was just happy to buy anything with a logo and now wanting something to represent therelue of the money -- has been a greater deal of competition across other parts of the business -- everyone is had to pull their socks up in the leaders have done that before the others, lvmh in particular. now the laggards have been called out. the easy growth came from opening more stories but now there's a slowdown in asia and even asian consumers are thinking, what is this offering and doesn't represent value? tom: here's the problem -- in the morning at 4:00 a.m., four aff lock-in with these overpriced handbags ship like this. are the big news having too much competition for names like celine that most of us don't

know? >> you have got to judge the position -- you have a negative brands like product and louis vuitton, and you also have brands like -- that are growing extremely well -- they are offering a product which consumers are finding more interesting and are prepared to pay for, even if there's a premium. before, it was all about raising you have to pay much more with these junior brands and they are creating a new wave of interest to consumers who are switching away from the bigger brand. francine: bloomberg surveillance producers have great taste, and tom will get a lot of these bags. thank you. what's your take if you cross over the sector in your world? does it show you that a lot of european companies, these fashion houses and luxury houses, will struggle, and that

will hurt the economy? or does it tell you that there is demand for emerging markets that is waning? >> will, i know nothing about fashion, but i would say it's a global front. a slowdown in china is clear, and the anticorruption run in china, which makes it problematic to show off things that are expensive. things like your colleague in paris said -- i was educated by my daughter last week in new no one in her circle of friends want to be seen with gucci or product -- that's not cool anymore. francine: there you go. [laughter] tom: when i look at the idea of luxury, it speaks to inequalities in wealth, inequalities in in, and the idea

of a lot of people having a lot of money that ended in the emerging markets and china -- do you look at that is a structural and or a cyclical end where chinese and others come back? important point -- i don't think they fully understand, we had to do quite a bit of research on the impact of consumption and the behavior of people and because of the changes of income -- that is phenomenally interesting -- i don't know how it plays into the fashion world at this stage but i would imagine it's structural if i had to make a guess. tom: let's go to the bloomberg anne-marie this says -- she mentioned that this is the more modern -- an edgier sewing bag for an edgier woman.

a lot of money. coming up later, we will get out of this conversation. it's an important conversation on american education. do technology, and they will also talk to him about america's broken education system. this is bloomberg "surveillance." ♪

tom: good tuesday morning. let's get right to our first word news. francine lacqua in tom keene with nejra cehic. nejra: thanks, tom. sovereign fund china investment among thoseti are waiting big for chevron's asian geothermal assets, according to people familiar with the matter, who say the asset could fetch as much as $3 million. they are slowing the exodus of cash, and global prices plunge. baidu is seeking a $1 billion loan. the company, founded by robin lee, says it wants to make a

syndicated facility. it's providing a haven for investors fleeing risk in the state owned enterprises. three days before the sale is due, an initial public offering is overprescribed, according to people familiar with the matter. investor demand is at least five times the number of shares being issued. shares begin training the next day. that's your bloomberg business flash. tom: thank you. over the course of this financial crisis, he has provided leadership and the same discussion of optimism of the global economy and particularly optimism on the european willmic ask them -- we drive forward with optimism and maybe get to friday and the ins meeting. give me a sign of optimism for madame lagarde.

she talks about the mediocre and they will come out with the outlook today, but you have been resiliently optimistic -- see the case. >> it's a little bit harder this is and i think the ins is going to revise the global growth forecast from three and a half to three and a quarter. the important thing is that there is a trend growing quite nicely and increasingly so while the emerging markets are slowing down. thethe good news is combined e.m. for the last three or four years is probably coming to an end and we mentioned china -- i think most people are seeing the growth places growth whilea 4% e.m. combined and the same time the recovery matures and looks better.

tom: tell you the productivity dan and i -- the partial differentials between capital and labor. in the united states, corporations are winning, labor hasn't gotten their fair share -- compare and contrast that with what mr. draghi faces april 21. >> that's a tough one. i don't think we really understand what's going on the productivity. i just read those 700 pages of bob gorman which says that there is no -- i find it to be overly pessimistic. it's the end of mankind invention, so i don't buy that. withpect it has to do measuring because the economy is moving more toward services now and we don't really know how to measure. tomfrancine: do we know what is going on behind yen moves?

i have a chart -- until yesterday, yen was going ever higher, despite all we had from boj and governor kuroda. are you worried that again we are piling into -- is a haven? is it because there is a lack of structural reforms? >> i don't know what's going on, and when i talked to policymakers over the last couple weeks, it's the one thing they talked most about -- what is happening to the end. a community of a dozen of my types from around the world just a week ago, and we were guessing where it goes. it was 50-50 up or down. we have no clue. i'm in the camp who think that over time it weakens because of the underlying problems in japan. sense, dollar -- in a draghi's big problem is that everybody else seems to be more expected then he is. we have your-dollar going toward

120. -- euro-dollar going toward 120. tom: eric nielsen, thank you so much. we'll continue this discussion through the day and into the week on international economics. later this morning, the international monetary fund's maurice obsfeld, with his first major economic outlook from a down lagarde. then we move on friday; kenneth be joined adam pozen by david lipton and the deputy managing director. coming up, jeffrey curry of goldman sachs and richard clarida of pimco. stay with us. ♪

tom: oil producers and consumers adapt to a lower-for-longer

world. in this hour, jeffrey currie of goldman sachs. the president met with the chair . they consider so far american growth. in this hour, richard clarida of pimco. nomura throws in the towel on europe. "rationalize out the door." good morning. this is "bloomberg surveillance ." i am tom keene in london. francine lacqua, what does the numbers announcement mean for the city? francine: this is crucial because it is not only for the city but for the region. they are retrenching for european equities. what are they left with, this on the day when we are seeing a fund that will shore up capital in italian banks. a lot of people are saying the fund is to bank small as a moment. we nine -- we need time to make it bigger and stronger. tom: janet yellen on april 27.

right now, here is nejra cehic. nehra: in belgium, authorities have charged two were men with offenses related to the brussels bombing. prosecutors say both were involved in renting a brussels apartment. third as a hideout. attack.ms died in the the same day a pair of suicide bombers killed 16 others at brussels airport. dilma rousseff has been pushed a step closer to impeachment after a committee in the house footed for her to go. reached aian real seven-month high on news that she would be ousted. the chances of a repeat election in spain are increasing, this after the anti-austerity policy, -- the move pours

cold water on the best shot for an administration almost four months after an inconclusive ballot. it is likely to be confirmed this week. a group of seven nations should stop hiking territorial disputes in territorial waters and focusing on the economy. and one of the world's busiest shipping lanes. g7 phone ministers have raised concerns over tensions in the east, in the south china sea. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus i am nejraworld, cehic. tom? tom: quickly to the data check. risk-on,y in a row, range bound, but up we go. 114.24 one story,

euro. 1.1424 on euro. we will get to jeffrey currie and a moment. onto the second board. , 16.26. yen, 108.28, not part of the story this morning. some news on the japanese yen. finance are saying that authorities are ready to act. europe 600, on the upside. analysts say they will do better than rivals. they are now flat. i want to show you the korean won for good measure. this is rising on the back of a weak dollar. tom: the korean won. quickly, over to the bloomberg terminal.

the idea of core inflation moving up. the cleveland cpi, which is another measure of the core moving up over 2%. this is a surge of an overshoot over inflation. richard clarida will join us in the next half hour. francine, what do you have today i go francine: i will be asking richard about some of the companies. this is my chart. .his is the free cash flow this is the gray boxes. this is the capex spending from european companies. it shows you that mario draghi growth.ount on tom: widely anticipated, for the entire hour, jeffrey currie of goldman sachs. he absolutely nailed the bottom of the oil market months before publishing some form of $30 and $20 a barrel. we got a big bounce off of that.

he joins us now. let's get an update on the idea of, have we found a bottom in oil? jeff: you are finally starting to see the supply be curtailed to rebalance the market, but we are not there yet. we are arguing for a trend list market for volatility. the bring of the chart, 200-day moving average on oil. i stumbled on this. it seems like we come up and it has been a nice bounce. what are the precursors that will roll over oil again if we cannot get through that? jeff: this weekend is a big -- tom: why is it so important? jeff: the argument is that it would be a soft agreement. you look at the rhetoric. when prices are low, they become more hawkish. when prices are high, they become more rubbish. why with a reverse -- they become more dovish. , rolling they reverse

over with the u.s. emp and non-opec producers? more importantly, it is not in anybody's interest at this point, particularly versus -- particularly saudi versus iran. russia has a flea flow currency -- russia has a free-flow currency. that is why we will see a soft agreement coming out of it. francine: they agreed to freeze production and then do not follow through? if that happens, that means the price of oil goes down, right? jeff: when you look at opec and think about where is production going to be six months out, you have 500,000 barrels per day of disruptions now, and that is coming from iraq over the northern kurdish fields, from nigeria as well as venezuela. all equal, you see a reversal of those disruptions, you will get

more supply out of opec. that does not include the smaller disruptions we have from some of the non-opec players, which is being reflected in the term market with tighter structure. regardless of what comes of this meeting, you have those disruptions you can come back online. francine: the basis of this is even if we do have some kind of agreement to freeze that hold, it does not do anything to rebalance the markets, right? jeff: when we think about the market rebalancing, the largest component of that rebalancing process is coming from the u.s. emp. we expect them to be down 725,000 barrels per day this year. that is what will rebound the market. my point.back to one thing you do not want to disrupt is the process of the u.s. emp's rebalancing the market, which higher prices would do that. the key is to focus on the largest component that would add to that rebalancing. tom: what price of oil is

optimal? what is the optimum oil for the u.s., canada, and saudi arabia? jeff: that is a great question. that number is changing a lot lately. i would like to answer the question for russia. where would that optimal number be for mr.? about $115 per barrel. where do you think it is today? $10. the answer for the u.s. is $55 a barrel, down from $70 per barrel over the same time to. the key is that you are seeing key shifts in equilibrium fair values. a marginaltake it to analysis of this price for russia, this price for saudi arabia. who is the marginal actor within this strange equilibrium? jeff: right now our view is the u.s. shale player. when we have to restart

production, why are you going to restart the $55 u.s. production when you have lots of $10? there are shareholders versus sovereign nations. jeff: we could go down the list. there are lots of low-cost crude. the key there is you are really seeing a reevaluation of these numbers. the stronger dollar led to weaker currencies like the ruble and other emerging market currencies, which drives down that cost structure. francine: what is the trade range from oil? you were talking about shale producers in the u.s. as soon as the price goes up by a lot, it is easy to come back online. jeff: with the shale producer, that is the key point. fast cycle production comes on and off very quickly. when you think about the outlook going forward, the key is, can you get some of those lower cost s production on more quickly?

our view is not, which is why you see prices moving higher towards $50 a barrel, $45 and average -- $45 being the average for the fourth quarter. tom: where is the terminal value, and how is that dynamic right now? are you nudging toward a lower terminal value? jeff: right now we are towards $55 a barrel. i think it goes to the point when you look at all of these shifts and these costs of production around the world, it starts to show. tom: coming up later in the hour, richard clarida will join us with pimco, an important essay by professor clarida on wages and on inflation. we will take an inflation look for the inflationistas. onrie and clarida "bloomberg surveillance." ♪

everyone.morning, tom keene in new york, francine lacqua in london. here is nejra cehic in london. online retailnese giant alibaba has agreed to buy companyof e-commerce lazard. --will pay $500 million for of e-commerce company wala zada. u.k. inflation jumps to a 15-month high in march. consumer prices rose to the fastest space in 2014. clothing prices increased. inflation remains well below the bank of england's 2% target, but

there is a suggestion it picks up after almost a year after hovering around zero. nomura is planning to shut down its european equity operation as it cuts costs. that is according to a person familiar with the matter, who says the tokyo firm will shut their research, trade, and underwriting segments. that is your "bloomberg business flash." nehra: let's bring in -- francine: richard, great to have you on the program. when you look at nomura, how much of this is a surprise? it was not really a space they were opening or winning. richard: it is not a huge surprise because they are an organization that has been perhaps slightly lower down in the rankings in the european equity capital markets. you have to think about how those markets have been over the past few months.

the volatility has been off the scale. the markets have been awful. therefore, there have not been many big initial public offerings. volatility is not conducive to that kind of activity. a that market, when you are second-tier player, it is harder to make your profit in that environment. francine: i do not understand what they would be left with. you have credit suisse, deutsche bank, cutting the fixed business. then you have nomura cutting equities business. with their only be u.s. players left? richard: for nomura it is interesting. as japanese corporate slip to expand outside of their home markets, some of them may want to do deals in europe so you that you get with nomura. what does this say about that strategy? it is a bit unclear at this time. but every investment bank around

the world is piling into equities. there are returns to be made there. but that makes it more competitive for some of the second-tier players to stay in this region, like nomura. tom: a little bird whispered in my ear -- maybe it was jeff currie at goldman sachs, saying goldman sachs would triple the european business. i am kidding. jeff is not commenting on this. richard, the press release also talks about the americas. city?ura exiting new york richard: that is not clear at this stage. nomura has said they will close some u.s. businesses. it will also use that journalistic terms for cutting in the americas. we have yet to see how that is going to play out. richard partington, thank you so much. coming up later today, the secretary of commerce.

we will talk to her on the american economy on the spirit of business. also, penny pritzker on white sox and the cubs. "bloomberg surveillance." ♪

tom: across the bloomberg, further job cuts. i guess not a big deal that it is 70 people, but that is what we are seeing, not the drama of

5000 or 10,000 liked her to bank -- like deutsche bank. it is a big deal in london right now, isn't it? is, tom. it there is noise that other banks will relocate some of their top -- they are planning to cut staff in london. they are trying to trim costs to compensate for low trading revenue. tom: this on the back of the nomura announcement later today. to the morning must-read. he will join us on friday, kenneth rogoff. he has been a huge supporter over the years of all "surveillance." ken rogoff --

tom: this is one of the strongest essays i have seen from ken rogoff. professor currie is with us from goldman sachs, folding commodities into trade. one of the big things here is that they have to want our exports. when you have commodities flat on our backs, brazil does not want our exports, kazakhstan does not, indonesia does not. jeff: that is a big issue in new -- that is a big issue in u.s. natural gas right now. tom: is it going to happen? jeff: you have seen one cargo, and where did it go? brazil, of all places. the demand for lng is going to be much lower. the competitiveness for u.s.-built product under a

stronger environment starts to wane. tom: all the tankers off houston and singapore makes for good friday doom and gloom vision, tankers in the ocean. what is the state of tankers in the world? jeff: there is a lot of tankers in the water all over the world. if you look at the arbitrage between spot prices and forward prices on the wti curve, it is somewhere around $1.20, which is more than sufficient to arbitrage tankers standing offshore. one of the reasons we believe u.s. inventories true last week is that you have ships off the coast of houston storing oil. we estimate around 22 million barrels. there is a lot of oil on ships around the world right now. francine: we do not often talk about steel, but in the u.k. there is controversy around steel. is china fully to blame for the

price we are seeing in steel across the world? jeff: when we look at the demand for steel, we like to categorize what we call capex commodities, commodities you used to build the economy. backshere is what we call -- what we call opex commodities. we look at the emerging markers that china went through, it went through an enormous spree in which it built large amounts of infrastructure. ore,er it is steel, iron they have all gone down tremendously. we estimate the excess capacity in that market as much as 30%. the need for producers around the world will be needed to cut production around steel. cycle?re we in the capex

china is building a lot of infrastructure. you have to do with that overhang right now. arguably therall, most important question for the economy long-term is, can china absorb some of the exports where the u.s. consumer was? are they changing their system so that china consumes more of the world's goods? do you think they will do so successfully in the near-term? at commodityu look demand, particularly for the averages last year, he tells you everything you need to know. you look at gasoline demand, up around 15%. around 10%.d, up jet fuel demand, of around 15%. you look at the capex ore,dities, steel, iron down around 5%. he put that together, it tells you the transition away from a capexy toward -- from a

economy toward an opex economy is underway. tom: let me tell you about international economics in particular, as we go to the friday spring meetings of the imf. kenneth rogoff will join us from harvard university. adam posen, former member of the en atof england, dr. pos the pearson institute. and a conversation with david lipton, deputy manager of the imf, today, 2:00 p.m. this afternoon -- maurice ochs fell tfeld.rice obs "bloomberg surveillance." ♪ show me movies with explosions.

show me more like this. show me "previously watched." what's recommended for me.

x1 makes it easy to find what blows you away. call or go online and switch to x1. only with xfinity. francine: this is "bloomberg surveillance." to bloombergaight "first word news" with nejra cehic.

nehra: in india, seven people who fled after a weekend fire that killed at least 115 people have surrendered to face prosecution. the blaze was sparked by a legal fireworks where thousands were attending a religious festival and where the suspects were board members. 200 others are still hospitalized. texas senator ted cruz isn't and with hillary clinton in a matchup among married women who are likely general election voters. that is according to an online poll. against donald trump, clinton beats the new york rival 48% to 36%. since 1996, republican presidential candidates have won the married women vote, according to gallup. neighbors are squaring off against marine corps leaders who resist recruiting women for all combat jobs.

marine corps leaders want to keep certain infantry and combat jobs closed to women. researchers say the more they learn about the zika virus, the scarier it appears. u.s. health officials are urging more money from mosquito control , vaccine, and treatment. it is believed that the virus defects in fetal brains for women who contract the virus. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus i am that richd, a hitch. tom? tom: this is a real treat. we have jeffrey currie with us from goldman sachs, and we have been talking commodities. joining us is someone we often have on, richard clarida of pimco. what you do not know is, he is our truly leading expert on this

battle of economics that the fed should do, all wrapped around inflation. absolutely iconic on dsge, is what you have out of a chinese restaurant that gives you heartburn right here. stochastic general equilibrium. do you have a belief in it, from the 1990's, that you wrote? a way to think about key relationships in the economy, but it is not a destination. it is part of a bigger global view of macroeconomics. after the crisis, we have a better sense of the parts. tom: he is good at linking the theory andld of mathematics. that comes down to inflation. bring up the quote right now. i cannot say enough about the charts. the charts within the clarida

note. tom: what you just said there is what blanchard tried to do three years ago. are we heading to a policy that would reflate after a crisis? richard: chair yellen herself said she does not want inflation below 2%. that is the policy. that quote points out that if you do what my colleague says, target the price level, then you have to overshoot when you under shoot your chair yellen says she does not want to overshoot. i suspect we are running a policy where we may get a mild overshooting inflation in a couple of years. if this isven all-important inflation due to commodity prices, isn't that different this time around? richard: the fed tries to strip out the commodity effect by

looking at the core. that will be supportive of chair yellen getting inflation up to 2%. tom: there is a memo that goes to yellen and fisher that says ignore jeff currie's research. they do that often. jump in here, francine. francine: if you look at core today we, in the u.k. had 1.5%, probably not as bad as we were thinking a couple of months ago. ?o we need to rethink we keep saying inflation is much lower, but it is keeping -- it is going higher, and there might be a concern that if it picks up too quickly -- it might be a concern that it took too quickly if we do not start normalizing. think the core measures are moving up. core cpi in the u.s. is above 2%, and you are seeing the core measure in the u.k. move up as well. we have accommodative policy

with negative real interest in the u.s. line,ore cpi, the red 2.3%. in the cleveland cpi is set even higher. jeff currie, you have to deal with an inflation overshoot idea. does goldman sachs want to include the overshoot? jeff: the way we like to describe it is, the data is pointing to a much stronger economy in terms of looking at the labor market slack, the output gap. the way they like to describe it data ismarket suggesting three hikes this year. the fed is suggesting to the markets trying to price one. tom: where is the dynamic going to head in the next quarter, richard? richard: the expectation and the hope is that the data improves.

we had a soft q1, but the labor market is strong. we have seen the isn numbers tick up. the fed is certainly wanting to change the market's view that it is not hiking. we will probably get two. francine: should we be more open-minded about a rate hike in june from the fed? richard: oh, yes. obviously there is a lot of time between now and june and a lot of data, but in fed commentary we will get indications that the data response as i expect. june is very much in play, absolutely. francine: even if the u.s. economy is strong enough for june rate hikes, what does it tell us about rex it? -- about brexit? the global economy does weigh on the fed's decision-making process, and chair yellen is focused on that. obviously there are wildcards out there. the brexit vote will occur

around the time of that june meeting. i think it occurs right after it. curri why is richard clarida right now -- it oil migrate south, what is the impact that goldman sachs sees on global gdp? jeff: it depends on what horizon you were looking at it if you are looking at a short horizon, we find it more negative because you have an impact on. but then you have offsetting consumption factors that begin to materialize. when i think about oil in the broader macro context, the one thing i changed my thinking on -- i used to think that oil and dollars cause metals. just think about the world -- u.s. and canada -- the deuce co- -- the two are cleared. dynamicshydrocarbon

and dodge and is with central bank thinking, or can they partition it out exxon generously -- can they partition it out exilxogenously? jeff: in changes -- richard: correlations now are -- high compared to the gsdea pop quiz on differentials. francine: the winner gets dinner with tom keene. coming up later on bloomberg markets, the clarion capital management founder and president, also the cofounder of paypal. we will talk to him about tech earnings at 11:00 a.m. in new york, 4:00 p.m. in london. ♪

francine: from london and new york, i am francine lacqua with tom keene. here is nejra cehic. nehra: italian officials in financial firms have agreed to create a multibillion-dollar fund to help weaker banks raise capital. one bank executive says the bank funds may be word -- maybe with $5.7 billion, to ease pressure and put pressure on the country to help those with bad debt. the country plus finance minister says the meetings will resume in athens next week and will and to reach an agreement by april 22. age to federal reserve

chair janet yellen has broken ranks and issued a blueprint for a sweeping reform of the u.s. central bank. dartmouth college professor andrew 11 includes making the fed a fully public institution. that is your "bloomberg business flash." tom: thank you so much for doing s newsmakingvin' item there. anthony, i want to run over here and show you why our guests are different. this is richard clarida's world. we talk with him about basic stuff, what the white sox and the cubs are doing. this is an optimization function from an oxford university pdf. this is a world like -- this is the world that guys like richard clarida live in. right now we optimize over to jeff currie of goldman sachs and look at a chart that has been

around for a bit, our single best chart, on oil backed one million years, and the idea of inflation-adjusted oil, and then for rising incomes. we forget how cheap oil is because we are richer than we were in the 1970's. jeff: when we think about the 1970's and the 2000's, we like to refer to them as the investment cycle. we are just in a different phase of the exploitation phase. you spend money building a platform off the coast of brazil, and then it is up and running for the next 20 years, giving you a 30-year cycle. we are living off the investments we made during that 30-year cycle. robert gordone book is on a less cautious

america on innovation, etc. when you have the exploitation phase, does the debt lead you to the caution that professor gordon has? richard: to me it goes the opposite way. i think the low oil prices are a net benefit for the global economy. the transition was painful. the benefits have yet to kick in, but if you tell me oil is going to be in this range, that changes competitiveness, purchasing power of households. it is a net win for the global economy. you have frontloaded the cost with longer-term gains down the road. i think gordon's productivity highersm -- certainly prices are -- francine: i want to get away from the equation. it is too early in the week to look at that complicated equation. jeff, you were talking about opec and saying in doha we will probably have a soft agreement. it is unclear to me when the

markets start to rebalance. it goes to the point of why we are not focused on this as being a real driver of a rebalance in the market. if they agreed to an output-freeze, it is not really different than the numbers we had in the balance is to begin the year with. the key is not what the market is focusing on, it is the rebalancing coming out of the u.s. producers. their production guidance in the first quarter was for a decline of 725,000 barrels per day. that is enough, combined with other shortages in some of the other key non-opec producers, to bring supply below demand during the third quarter, the of inventory draw that the market is focused on, to start the rebalancing process. the focus is looking at non-opec in the u.s. in the's in particular. u.s. enp's in

particular. given that growth, what should we be by? jeff: on net, it is going to be supportive to the global economy. it probably makes the fed's job easier as well. i think it works against the risk-off pessimism we had earlier in the year when it looks like oil was in freefall. equation,ke about the but as you know, what is so critical about the equation is it mixes in a look back in time to a present tense in time to a look forward in time. when you look at jeff currie's world, is hydrocarbons adapting to a look back of slow growth, or candidate that to a better look forward, better optimism, that are nominal gdp, better global demand? richard: i think it is both, and the balance between looking back and looking forward changes.

my thinking not as a commodity expert -- when we run our models, we talk about a one-time fall in commodity prices. -- in reality, we do not get one-time falls. it changes the whole dynamic. tom: bring up the chart. this is the single best chart for jeff currie. ,his is an approximation inflation-adjusted oil for rising incomes. if you have the bloomberg terminal, you can see this. that is a secret code not to jeff currie's research, but to the chart. or do we one-off drop, get back to some level of normal in that chart? richard: history tells you you will stay at those lower levels for the 15 to 20-year time period. is a riskich we argue to the downside, that by it andm is driven

we have entered that long-term inflation phase. we do not know what we are winning, tom. you keep on teasing the viewers, saying if you know equity or the inflation, you win something. european markets are seeing a reversal. they reversed earlier. minors are gaining. , on theoods company lower side, a little bit weaker on the japanese yen. ♪

tom: good morning, everyone. "bloomberg surveillance." francine lacqua in london, and i am tom keene in new york. the euro has my attention, 1.1418. the yen not as weak as earlier, but we will take it. jack lew things we should be attention to renminbi and its global ramifications. let's bring in jon ferro with "bloomberg ." it is an interesting day.

rating cut bybia fitch. the outlook remains negative. brent crude is at 40 bucks a barrel, but the crude reality -- the outlook cut by fitch. the ratings cut by fitch, the outlook remaining negative. we will continue that story on "bloomberg ." also the italian banks, i would suggest this does little to tackle the mpl's. jon ferro, thank you so much, and thank you for that headline. francine lacqua and tom keene with jeffrey currie and richard clarida of pimco. the key for saudi arabia is diversification. tom: they have been trying to do that for 40 years.

jeff: they have talked about looking at the non-oil income, which is running around $10 billion per year, kicking it up to $100 billion. that would indicate the dependence of oil from 80% to much lower levels going forward. this reflects the need for diversification and underscores the importance of a focus on privatization of some of the key industries inside saudi arabia. francine: our editor-in-chief, ann micklethwait, had interview with the crown prince of saudi arabia, and he said they are diversifying, targeting $100 billion outside of creating a fun. from now until then, they have to continue pumping because otherwise there outlook is going to get even worse. jeff: i think it goes to the key point that the world shifted because of shale. you cannot run a cartel in the current environment with the flatness of the supply curve on the fast cycle nature of shale. that points to low-cost players

like saudi arabia need to go to capacity and grow capacity going forward. that has been the stated goal of not only saudi arabia but most of the low-cost players within the region. we would argue that growth in volume will be key, as opposed to thinking about price levels going forward. of course saudi arabia is crucial for the middle east and is crucial when you look at oil prices, but this is a radical shift for a country built on petrodollars went oil was first found in saudi arabia decades ago. is this a systemic risk if they do not do it right? is a risk,think it but it also indicates the future for a lot of sovereign wealth funds. moreofiling away towards a diversified global portfolio and perhaps more realistic expectations for income, will be a factor in global markets. and what is the geopolitics

the stance that the u.s. should take? it is an interesting relationship with saudi arabia. where do you see that going with the next president? richard: i will back off on that because i am not an expert in anything. the world in the next eight years will look a lot different then the world in the last 20 or 30 years. the constellation of forces and complexity has changed, and the next president will have his or her hands full. do you presume a dollar is reserve currency, and a weaker dollar can stabilize oil prices? jeff: when you think about the currency that the commodity has been dominated, it does not matter because it is all relative prices that drive commodity prices in the end. the denomination is not large enough to affect the currency market. i go back to the point it currencies and commodity prices

derived.enously the price of copper rose, the price of oil -- 70% of the cost of producing copper will be chilean peso, which is labor. 30% of that is going to be energy. the relative price differential matters. it has to be endogenous. tom: thank you so much. we will continue on radio. francine lacqua, thank you so much. "bloomberg ," and "bloomberg surveillance" will continue on radio. kenneth rogoff will join us tomorrow. adam posen, and the deputy managing director from the imf. ♪

jonathan: japan's largest brokerage firm is said to be exiting combined with -- 1000 jobs could be lost. a solution to tackle a problem.

raiseare helping to capital and offload bad loans and crude reality. brent climbs back to a four-month high. the outlook remains negative. a warm welcome for the first hour of "bloomberg ." david: stephanie ruhle is off today but here with us instead is not mcclendon. good to have you here. jonathan: this headline, it warns some interrogation. if you are saudi arabia, you are looking and saying, my finances