welcome to bloomberg "." i am david westin with jonathan ferro and vonnie quinn. morgan o stand former investment officer. jonathan: 13% drop in profit, that is the discussion point. the bank of england doing nothing. the benchmark interest rates staying in 0.5%. the bank of england maintaining the benchmark interest rate without showing any mpc members making explicit cuts. there was some talk around the meeting that potentially those policymakers could shift. someone says may we should cut rates ahead of the referendum on june 3. holding rates at a record low for another meeting. no big surprise. david: any talk about the brexit? jonathan: looking through the

bank of england minutes, then we will go to mark barton for his reaction. what is standing out for you? the boe sees some signs of the eu referendum on june 23 is weighing on activity. may causeerendum softening in the first half u.k. growth. that is interesting. it will react more cautiously to data before the eu vote. that is big. also, it is considered implications on monetary policy. a brexit but may extend a period of uncertainty and have an impact on pound and asset prices. the brexit would likely push down demand in the short-term. the brexit getting a big mention in today's boe meeting. last month was the first time the bank of england as a group

mentioned the risks of the brexit. key risk. is a until it is out of the way, do not rank of a rate hike. looking at cable, barely higher at 41.63. i made the discussions, many banks have told employees don't do that. should the bank of england remain quiet? they want to remain independent, but they have to say some thing. there is a lot of noise on brexit. it is so hard. you're the governor of the bank of england, you have to say something. it is the biggest event in u.k. political history in decades. how can you draw this fine line keeping sayingor how it will affect the economy. carney doesn't need to say much.

it is already affecting investments and impacting growth. look at the latest pmi data. the growth this quarter will come down 2.4% from .6% in the last quarter. to .4% from .6% in the last quarter. it is tricky. vonnie: the british pound declining by 4/10 of a percent. earnings are out. we turned the matt miller. delta coming out a little better than expected. the dollar 30 two versus the dollar 30 which was the expectation. we see delta coming in and line with estimates. a revenue of 9.2 $5 billion, we are looking for 9.2 6 billion.

.n the premarket, they are up they are up year to date and up over the last 12 months. looking at my bloomberg terminal, i have a chart showing delta shares in red. it also shows the jet fuel contract in white. of0% incline in the price jet fuel, a huge cost for delta. it helps them do better. that is their biggest cost. delta being a bit on the bottom line. david: there's a lot of breaking news. the bank of england, delta, and we have the bank of america earnings. the early premarket trading is not moving much, maybe a slight uptick. a 13% drop in first-quarter profits. blackrock is also out. profits fell by 20%. we will get wells fargo first-quarter earnings. christina harper joins us.

, we are just going through the numbers. it seems like they did not miss by much. year-over-year, not so pretty. christine: it was a pretty solid the. the revenue was -- pretty solid beat. the revenue is lower. earnings, nota having gone through them in great detail, and looks like the revenue is lower than expected. the income adjusted is a little bit higher. read, and i think that is why the investor community is holding off. there is an increase in energy, which will get attention. , but had a drop in profit yesterday. they are having a drop, but it is not clear if it is better or worse than expected. it will depend on what they say on the call.

we'll see what they say. we have black out today. it looks like they missed. it may be quelled slightly. in the banke seed of america earnings, the increase in credit provisions is tied to u.s. energy loans. the consumer is strong. corporate credit is weak. what i continue in 2016? christine: is not clear that corporate credit in general is weak. the energy, which we have known, will be at risk. it seems like they're recognizing the risks as they build out with more provisions. in this game of their loan, it a significant or consequential issue for them. they are reserved. they do not see any real danger to their companies from this loan loss. part of being a bank is you lose money on loans sometimes.

it is not the best news. not had anhave opportunity to pour through these, but how do you see the banking sector generally? >> we have been negative for a while. think they have been overregulated and we have stripped away their ability to leveragealance sheets and do drop trading. .- prop trading they're stuck in this declining environment making loans. , and it isike banks hard to see a general robust market without finance was doing well. an alternative view, the bank that was least affected by dodd-frank come a wells fargo, is the most successful. was -- jeffries has had a lot of issues because of the leverage lending. you could almost say that the regulation that has helped

prevent some losses they may have taken on prop trades or big leverage positions. main quarteris the write-down for energy exposure, or can we expect this part of the problem to grow? christine: i'm sure they will say they think they reserved entirely. they always want to be ahead of the problem. i don't know if that is the case. we will see. i wouldn't want to say for sure. is down 7%,venue fixed income down 17%, equities trading revenue down 11%, provisions for bad loans up 30%. ugly, ugly, ugly, ugly. companies are struggling to make money. does that change? thing you talked about was the record level of corporate inventories have never been higher. that has to be liquidated.

it will be similar to the 2002 ramp-up in tech inventories that got written off. the bank losses for energy will be similar to the telecom losses in 2002. hundreds of billions of dollars written off. it is just getting started. this quarter is not the bad quarter. everyone is repositioning the llcs. it is the next time that they have to reposition the llcs and their llcs in october where i think it will start to get ugly. christine: another important is theis that it broader economic effects on states and economies that are dependent on energy. you're seeing a spillover into real estate lending and consumer lending if you are lending in a orce like the dakotas

oklahoma, which are affected by the energy economy. david: how much of this is how it is communicated? jonathan went through the numbers and said "ugly, ugly, gly." jp morgan, looking at the numbers, it is not the same significant reduction, but they communicated more effectively. christine: jamie dimon. stock in february when things were at their low and the market turned around. yesterday, he did the same. he's then we have wars profits and things are bleak, but it is not as bleak as you would believe. vonnie: that will only work once or twice. christine: the beating estimates game is something that you know for a long time -- you would think that wall street companies would be the best because they are stand -- because they understand better than anyone. vonnie: it did look uglier? christine: yes. that was a key point.

about how march and april are looking up. see deals come back here there are hardly any deals in january and february. jonathan: i am following the top live blog on bloomberg. they are breaking down the numbers terrifically. thiscond question, at point, there is a narrative. the market is holding onto it tightly. the world of slowing down. forget the headline numbers and data, but the narrative has been fueled by ugly talk for numbers in the banking sector. data doesn't look good and central banks are holding onto an emergency policy that maybe they shouldn't be. does the perception become reality for the months ahead? mark: i think it is well stated. the tough times have not started. in january,ar

february, then we had the bounce off the bottom on the 11th it everyone's cheering that we were back to even. in 2000 one, we were in even in may, that it was sell in may and go away for two years. will come into that for all the reasons that you described. vonnie: 2.8% equity seems low to me. tnks to christine harper. will be with us for the next half hour. vladimir putin is holding his annual call in show. 2 million questions were submitted on everything from syria to the russian economy. ♪

david: you are watching bloomberg "." filed forhas bankruptcy after spending 5 billion dollars in the acquisition leading up to the slump. they warned that they could seek protection. they made an $8.8 million interest payment before delaying two payments in mid-march on $1.6 billion of darling. puerto rico facing a bond payment. now some of republicans struggle to help the island deal with debt. the vote was canceled on the issue because republicans were divided. puerto rico will likely default, marking their first default on general obligation bonds. the central bank has eased its monetary stance adopting a policy last used during the global financial crisis. the move to a zero appreciation stance on the current he comes

as the asian a natural market feels the effect of the global downturn and china's weakening economy. putin is holding his annual call in show giving russians a chance to question a -- when 2 decades on your from moscow. you think that a lot of this discussion would be about the economy, oil, the ruble. how much is? the show with questions about the economy and inflation. then they talked about the foreign policy. then people were calling from faraway cities saying they did not get their salaries on time. putin was saying that he would take care of that right away. one of the first questions --

the first question was about fruit inflation. last year a woman said that she paid a certain amount of money for her food supply, now she has to pay twice as much. what is happening, why they have different numbers. bann assured her that the on certain in points after europe imposed sanctions on russia was a conscious step. canhat russian culture expand. he mentioned last year the gdp fell and manufacturing fell, but not agriculture. he said that was one of the steps. another question was about the economy. he said it is grounds for optimism. the central bank said the economy can contract as much as 1%. putin said we had some grounds for optimism.

people are not fast to believe him, because last year he promised the ruble would rebound, but it well to an all-time low in january. people are listening and thinking. there was a question about the personal life. years back and said his ex-wife is happy and he is happy. david: mark, you know a lot about russia. you, overall, think investing in russia is not a bad idea. mark: not in the sense that things are cheap. .ome are great companies we are talking about the problems with the banks you're not making money, but there are issues investing in russia. vonnie: in this case, geopolitical risks, the ruble is falling, the country is in recession. talking about

expectations. two years ago, the economy was in freefall. they did with good countries do in a desertbombs and got the economy to fall less. it is showing signs of improvement. improvement on the margin has people excited. the ruble has stabilized. it needs oil to stabilize. there are promising science. when things are sheep as they are with the cheapest stocks on the planet, you have to look around. chart 937 we have the in the chart library. is an etf. that this outflows all the way until the beginning of this month. i was thinking that i saw analysts upgrades. i looked through the notes. advising investors to switch out of mexico into russia. they raised their rating to a 25% underweight. it is not an all-out buy, but

people are getting into it. jonathan: my question to turn it around would be, they are cheap, when was the last time they were expensive? mark: it is variations of cheap. it is stupid cheap like in 2008. .nd then there is cheap-cheap we like a little bit overweight russia. of my managers from your hometown in london, prosperity, they are pounding the table on increasing russian exposure. david: coming back to what vonnie said, there is a lot of uncertainty the about geopolitical risk. they asked about the panama papers. the parliamentary elections when they are coming? his response was, it doesn't matter who votes, it matters who counts the votes.

have been poking fun of us in florida. i am just kidding. the rule of law is simple in russia. has an 85% approval rating , and has made the majority of people's lives better. there are geopolitical risks. we were talking about the plane buzzing, the u.s. destroyer. that goes to national pride. the russians want to see that they are flying their airplanes around, there ships are sailing, they are feeling strong. everything economically is about confidence. if you're confident as a country and leader, things are good. who is more confident and more effective than present? -- then putin. jonathan: thank you for joining us.

be busy today. next up, hedge funds losing their appeal for some investors, including a large new york pension fund. we have the details next. two hours and eight minutes away from the open. futures are largely negative here at bank of america just off of the lows 8/10 of 1%. ♪

♪ a few of the biggest reporting managers losses despite a rebound in global equities. fund is city pension liquidating its $1.5 billion hedge fund portfolio invest the. -- investment. maybe you can help answer that question. mark: the challenge for

hedging is that you have to do it. you take the big names, they do not hedge. .hey are long, concentrated if one stock that they are long on goes down, it will not do well. other funds that are delivered on futures will probably struggle as the market moves dramatically. funds, all the way back to when they were invented in 1954, actually did hedges. got caughtdged funds in the first part of the year with the liquidation of the saudi sovereign wealth money. and some people pushing gains into the new year. on february 11, they were caught in a short squeeze. they had 2 bad. periods. it makes me crazy that human

beings do goo -- do a couple of things really well. they wish they would have bought. the002 and in 2009 after markets fell. when will they go out of hedge funds? after the market had one of its best five years in history. we do not want to be reactive and sell what we are about to need. david: he is staying with us. coming up, the bank of japan's spoke in newda york defending his current monetary policy. we will talk about that next on bloomberg "." ♪

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even after we had big bank earnings this morning. joining us from radio is tom keene. you've a special morning must read it today. global leaders want to be efficient. sleep, small details. even mr. kuroda needs to sleep. theyhey sleep, and then can do something academically like at columbia university. david: we are going to hear about it after first word news. the new york primary is less than a week away. hillary clinton and bernie sanders return to the debate stage tonight to face off. it is a crucial opportunity for both caps. sanders is to make up the race for delegates. the former secretary of state is ahead by 10 points. brett ministration has

new regulation on offshore drilling. emergency equipment meant to limit environmental damage. people familiar with the matter this comes six years after the deepwater horizon blowout in the gulf of mexico. the golden state warriors begin the first team in lake history to win at seven straight games. the warriors eclipsed the 72 victory of the chicago bulls two decades ago. and turning back time against the utah jazz, bryant scored 60 points for the los angeles lakers. this was the finale of bryant's 20 year career. david: and now to pick up where you left off. tom: i hope he gets off the airport at jfk and said i'm back to sleep.

we heard this last night. people in here at columbia university, here he is. oda: a key challenge is that the negative interest rates has adverse affects on the profitability of the banking sector. the reason is that private banks will end up holding assets, including the current account, not have a negative in. tom: mr. garuda talking last night. something about negative rates. away is that take he is doubling down. he has no hesitation. we will get the 2%, it will be fine. tom: exactly correct, and mathematically, people do not think they have to double down. know -- nobody knows theoretically where the negative rates leak in -- click in.

stephanie: would it be better off -- tom: th is the money question of the communication, too much whether it is the trilemma of the united states or japan. abeamplitude question, mr. with the domestic public takes or mr. carney in england, they do not know if there is a negative rates. jonathan: around a third of the jcb market, that is what the jet boj currently holds. ,his seems to be the headline inflation expectations, that is what we should really judge the politics of buy. they have not risen, they are not there. needs to look at himself, the only thing that is really marked his monetary policy. what is left is fiscal stimulus, and we have a big pile of deck, can we do it?

demographics,e what they really need is immigration. that will not happen anytime soon. they also need to export technology which they were doing a good job of in africa, but then the mining sector started falling, and there was less need for a japanese into nearing firm. they are in a tough lace. -- place. the job owning would be better with less. david: so kuroda was asking about this. mark: they are plenty more to do. that only quantitative easing but also qualitative easing. i have a chart that shows the bazooka that garuda has pulled out -- kuroda has pulled out. the je beat you in white and the yen. i have inverted again to see that even as he drives the yield down into negative territory,

you can still see the yen strengthening. that is not what corona wants. wants.da happily say it works if that continues to happen? is too complex. silicic models like we show, whether in a chart or like we discuss it, this complexity went into demographics likely much like the united kingdom. these are two smaller island economies, but they are major. they have a whole different dynamic. so this is about the physical space. tom: they do not have a toolbox to use. stephanie: where is the end? the 50 bloomberg chart on what began is, i have never seen it. it is truly bipolar. there are two high death outcomes.- highdef

let's get it going out, a three sided coin. jonathan: a fifth of their exports go to one country, china , and if you want to read on asia and china, look at the luxury earnings. they are down, struggling in recent months. it is weaker than excited earnings. product had dismal earnings -- prada had dismal earnings. francine, i am going to ask you a loaded question. is the city of london questioning its future that the ceo of armory at this point? do we need designer ceo or just the design and ceo? reporter: that is some question he has been asking for quite some time.

of theu speak to a lot rivals of burberry, they want to see if it they make it work and others will follow. is he making it work? not at the moment. in japan, it has to do with the fact a lot of chinese buyers are going to japan, and burberry is trying to ramp up their presence in japan. they have fewer stores and rivals. is theginal question, ceos job on the line? it seems to be a market consensus he will have to choose whether he wants to focus on design, he was very good at it. remember, he was a designer and aaron's was the designer, burberry was doing a lot better. ceo, got a stronger creativity behind it. david: so expand out from the luxury. we have product, others that have struggled.

people rushed into china. that was an answer. to they have a plan b and china does not come back and buying luxury goods? would be a little bit more u.s. that they are taking on chinese travelers -- nuanced that they are taking on tiny travelers. the chinese traveler coming through, coming to milano, the u.s., picking up luxury goods, this is something we have seen in hong kong. thats really the one thing brings all the luxury groups together, because it could be much worse than expected, so sending them to hong kong was worse. if you break down luxury g is not even in the same category. , a lot ofpricing them too high.

you have a fashion guru coming in -- tom: i know when you have tea with the duchess of cambridge the other day -- within that is the idea of the louis vuitton of the business where you have become so big, so successful, you are not a luxury brand anymore. is burberry at risk of becoming a louis vuitton? ine: louis vuitton in its heyday, i would point to tucci. - gucci. it is a massive company, creative director, doing incredibly well. you need a product that people want. that is how you do well, in the luxury rolled. tom: with this comes down to, you bought three trunks you would not be caught dead with ouis vuitton

jonathan: we talked about the narrative and clicking to the narrative on this, but once again, you look at the numbers and it does not look good. david: reporter: and retail spending broadly does not look good. we talk about the rise of retail globally and consumer sending has been falling, falling for 2.5 years. the thing i would marvel at, none of the numbers adjust for population growth areas they are all the nominal sales rep. i don't know how we can feel like the consumer is doing well and luxury in particular. tom: but this is more important to the luxury and in the people, the idea of being the ideal, there is an overcapacity. the microeconomics of luxury are like the microeconomics of the airline business was x number of years ago.

there is lower capacity in the labor markets. in the laborty markets. in the you had the louis vuittoning like you said. it is a lack of balance around gdp and everyone piling into the 73rd percent. the math does not work. jonathan: thank you very much. '""bloomberg surveillance very own francine lacqua. thank you for joining us. a report from deutsche bank revealing systemic failures around $10 billion. [indiscernible] commercial break, that is a conversation for that one. ♪

♪ david: i am here in the hpe greenroom. we have dennis lockhart, an exclusive interview from the education symposium out of chicago on "bloomberg ." ♪ go, ie watching bloomberg am david gura. a 30% ride, the division for credit losses weight on the result. they are bumping up higher against mobile markets, rising markets and energy lows. security company backed by

laxton group backed by morgan stanley. the ipo could happen as early as the second half of the year. in the clinton fund for civil employees considering whether or not to exit is $1.5 billion hedge fund. the person talking about terminating the fund would be be be shot and company, and howard asset-management could be as over lighting performance, high speed, and riskiness of the asset class. that is the bloomberg is a splash -- business flash. jonathan: fallout from deutsche bank's mirror trading scandal in russia is expanding. they say it is systemic failure in operation, as much as $10 billion to be laundered out of the country between 2012 and 2014. we are joined with more. a complicated scoring to say the

least -- story to say the least. trade, buying stocks for rubles in russia and then selling them for stocks in london. a simple concept, not necessarily illegal. there are protocols that he to be followed for global banks to protect against money laundering . a lot of these transactions occurred, including according to sources with pigeons for its allies -- putin's closest allies. federal banks are asking questions, and deutsche bank did not do anything. so the failure went beyond moscow to include compliance and risk offices in london and the u.s.. i was a little surprised the russian central bank was one of the early ones on this. it is an easy independent of but it was the,

bank asking questions. it,rter: as i understand there was a tax investigation that was begun. some of the money being moved out was not being taxed properly. tax authorities in russia were asking questions for good reason. and it central bank got a part of that. the central bank closed the investigation, it fined deutsche bank and went on its merry way. violations are less a russian law that international law. in terms of money laundering and money movement. that is the real risk. when it comes to the various regulatory regimes, how do you allow for that, who steps up and takes action? reporter: in london, we know regulators are looking very hard at this. when deutsche bank created its own audit, when enough flags with off, and what it found, what we are reporting are, is

systemic failure. warning flags, businesses they should've stopped doing business with, they kept doing it. london is looking into it very hard. prosecutors are very concerned, and part of that is because the deutsche bank has a history of infractions that are causing consternation even among shareholders the have seen. heing to make a difference, is going to lock all of this down and settle it by the end of the year. david: it sounds like it rhymes with some of the things we have heard with coming out of the panama papers. you have back-to-back ,ransactions not avoiding taxes is this going to be an edge of a wedge with banks more generally and how they were involved with these transactions? reporter: it strikes me that one of the conflicts we are reporting on looks a bit like a shell company. we are not sure who the owners are, and that is where red flags have been allowed.

but is very much at the heart of the panama papers. the leaks it showed, shell companies can be set up around the world, you know who the beneficiaries are -- you do not know who the beneficiaries are, and now there is a movement to say that banks, you need to know your customers. i want to go to -- matt: i want to go through something we talked about. in white i have black rock, going back to the u.s. banking report today. you can see a head count rising as profit falls. a function at loss, you can use of any equity, you can see it job cuts at black 2010,we had them in 2009, 2011, 2013, but only 40% jobs are cut. if you look at bank of america, 93,600 jobs have been cut in the same time. period.

some of the banks are cutting jobs big. you talked about deutsche bank, they are one of those banks as well. this is having to watch for when you seep u.s. banks reporting this week. wells fargo is going to come out today, we will hear and focus in on job loss. david: that is very helpful for the term. him him to specifics about deutsche bank, what is next for them? reporter: we are waiting to find out what u.s. prosecutors might do and regulators around the world. deutsche bank has set out maybe a $1 billion to settle legal liabilities from the various problems. they have a number of different litigation issues to resolve including four in trading and others. we are waiting for all of that. this looks quite bad for the bank because of the past concerns. have they been employing risk officers, and if they have, why did this happen? reporter: it is like what we

have in many organizations. one silo was not talking to the other silo. bank credit has made significant changes, one person to oversee compliance around the world. that was one of their issues, something popping up in one place, that unit was dealing with it. it was the rising up to the attention of the top executives. david: it doesn't seem like john ryan has an easy job. thank you very much. always great to have you. slow income growth, weighing on u.s. consumers. we will take a look at that from the charts. ♪

♪ vonnie: welcome back to bloomberg go. jceleration and income growth explain what u.s. consumer spending is sluggish.

matt miller is here to show up the charts. back it is good to stand and see where we have been and where we are going. if you look at income growth here, black rock has spotted a trend, not hard to spend -- not hard to see if you look hard enough. it has fallen lower and lower. discharge goes back to 1969. we had a peek. 2000, 11,ed up to 2012, and we saw growth is slow again. vonnie: is this lost in translation, or do we see quite a strong bout of inflation? matt: not inflation, but it is always growth. it is always above the zero line, it is just that growth has slowed. tw935.n see the chart, g#b

you always talk about how the consumer makes up 70% of the economy, roughly, 68% as is shown by this chart. , personal consumption expenditure we are talking about also includes health care and a number of other things that do not flow through household hands, heading to medicare and stuff. down as started to come a percentage of the economy, percentage of gdp, since 2011. when we saw the most recent peak in income growth. as income growth slows, consumer spending is a smaller part of the economy. vonnie: and out john over down,an: bank of america 13%. premarket, nothing dramatic, one percent. , a tiltat wells fargo

to wall street and main street, that of the story we are looking at. the strength of the u.s. consumer in those numbers. wall street banks, a little hard in today's session. do not miss this, an important interview, dennis lockhart will be speaking to bloomberg, an exclusive interview from the engagement education symposium in chicago. that is about an hour and 34 minutes away. futures across the board, a little negative ahead of the u.s. output. ♪

earnings, bank of america dropping 13% on a trading slump in higher energy reserves. wells fargo in a few moments after gpe -- jp morgan

expectations. there is an oversupply of oil, so why are not oil rises moving up? and the president of the reserve, talking about gdp growth, top, and what it means for the fed. ♪ welcome to the second hour of "bloomberg ." numbers wells fargo were jonathan: $5 billion $19.09.-per-share, , creditlion dollars loss just over $1 billion at some point. average assets at 2.1% versus

3.1%, but earning shares are 3.9%. i will keep you where we are relative to estimates, estimates margin versus 2.9%. david: earnings-per-share is up over the estimate, about $.97, so the $1.03 last year. and that1.75%, interest margin is not doing as well as forecast either. $.99 an: eps coming at share, estimate was $.97 a share. vonnie: so up 0.9% in the market. we have the finance, putting you on the spot again. this is broadly a pretty good ticket, but of all the banks we are expecting wells fargo to do well. reporter: they are not down by the trading issue, which is been

the first quarter problem for a lot of these things. it will be interesting to see how the energy portfolio looks. banks have been lending on estimate reserves being safe collateral and they are turning out not to be. we will he what they say about that. they tend to have a better record at doing estimates than other banks, so not surprising they are doing a little better than expected. david: we will check the equity, some look it is better. vonnie: 11.7%, but they were looking for 13%. if ther: we will see market like that or not. i am reading through, because christine mentioned energy, so i ran a search or energy, and trading at the top sayingcfo, statement challenges in the industry and interest rates impacted the bottom line, the diversified business model was beneficial to

our results. they are talking about that, it is right in their sites, a big part of their focus. returntalk about their on the top dental equity, and that is better than jp morgan and bank of america, but energy is still weighing them down. vonnie: given we have seen the other banks not expected to do well, you thought wells fargo would build a way. reporter: bank of america did not, but jp morgan did. wells fargo has had industry-leading among the biggest banks, price tangible book as they are seen as outperform or of the whole group. they are the been the most valuable company in the world of the banks. they have a lot to live up to. bigd: they are a very mortgage lender. originationrtgage

is a big thing, consumer spending is a really big business for them. i do not look at commercial real estate, where they are a big player, and obviously that is what the loans portfolio. the open ahead of looking at the premarket wells fargo, it is up, but not much. 0.25%.argo up futures in the u.s. still negative, down two points in the dow, not even a point on the s&p futures. 10 year yields up to basis 8146., wti let's go over to david gura with first word news. david: ukraine's parliamentary speaker has improved the country's minister. he will take charge of the environment, stop reforms the officials wanted to quit, and hold a $17.5 billion bailout.

putin says the economy will start growing next year in russia. he is speaking at them marathon call in tv show. he uses the event to do burnish himself as a strong leader. people ask a range of suspects -- subjects from syria to ukraine. and bernie clinton sanders will return to the debate stage once again tonight to face off, being viewed as a crucial opportunity for both camps. hillary clinton is on a seven caucus losing streak, and bernie sanders needs more delegates. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. david: bloomberg's finance edit is still with us. we are also joined by jim grant, the founder and editor. what do you see more generally

across the banks at this point? >> i am seeing the continued preoccupation of the federal authority with issues of solvency, seven years after the almostost ended -- world ended. it is characteristic. the government is hanging his head backward to worry about things that are still relevant in the future. the future is about the capacity , andrn it tangible equity yet, we constantly redevelop living wills, and as daniel cirillo, the first vice president in charge of bond doors. only talk to the bankers, we talked about at grants conference yesterday, i talked with jamie dimon. or so, him about the 44 43,000 people they have on staff to comply with federal

regulations to work with compliance and controls. is 43,000 is like, that cardinals in august, the ninth game where really mattered. to a lot of people. so these big banks, working in forcontext, very tight federal regulations, bad in one way, and they also constitute a terrific injury. vonnie: when it comes to this quarter of earnings -- >> no idea. vonnie: you have no idea what the federal reserve is going to do? >> yes. vonnie: if you were a bank, how would you act in this situation? >> i asked jamie dimon, if you would interest in legal proceedings against the legal -- the government for involuntary servitude, he seemed not

interested. if you are a bank, you've got to comply. he said emphatically he was no longer going -- he is not going to fight to the united states government because they got the mb, that is for a journalist to do, and we should. banks must comply. something, have power that are all the more emphatic because the rules are not quite set. so if you don't know what the rules are, you have got to be extra nice to the people who decide. how much stock any repurchase, how much can you pay out in dividends? you do not know until you go in as a supplicant. reporter: one question i would have, there is a view investors have an regulators have it as well, maybe the simplest way for the big banks to reduce the regulatory burden is to get smaller, breakup.

>> that is one approach. i submit to the consideration of the vast bloomberg tv audience the paradigm of yesteryear in which the equity holders out of the bank were -- equity holders of the bank were responsible for this. for at a capital call bank, your bank became impaired, resolve it. they came to you for additional .apital no more. taxpayers get the capital call in the extreme case. there is only one financial institution in new york city modeled on the old way, and it was conspicuously not insolvent in 2008, and that was brown brothers. worth -- ire net dan, if youpect of were here, he would say, that is a quickly what he would say. exactly what he would say.

even if he does go along, equity holders would pay the bill rather than taxpayers. that is what he would say. >> that is the intent, but command and control hold true with banks with a mechanism of responsibility instead of individuals. over the course of decades we have moved away from individual responsibility finance and the partnership model to the model of state control. bigwe have six or eight banks that are increasingly features of the state. they are still too big a to fail, they are -- we have a system unlike countries in europe, and is high time for change. jonathan: some things you can't regulate. there are a load of banks out there issuing a lot of money, a load of money to a lot of countries to drill holes and extract oil. what we have seen in the past few days is provisions increase

and the great need for wells billion dollars, you cannot regulate that. you aut the months and years ahead who are specific question of oil, the future is going to be one of a bull market. these provisions are eye-popping , but they tell more about yesteryear's that to deny prospects -- then today's prospects. you talk about the recognition of loss and profit, texansyou give aenough money, they will droll a whole. -- drill a hole. jonathan: thank you for your time. working for bloomberg television, i am not sure if we are happy about that.

what will this mean for crude prices coming up? ♪

david: the bank of england is keeping interest rates on hold, concerns about whether written will leave the european union affects the decision. you economists permit -- few economists predict a rate increase. airline's sake fuel cost savings overcame the softer demand, with the brussels terror attacks and the week foreign currency. $1.33 for fuel in the first quarter compared with $2.93 a year earlier. the obama administration having

new regulations on offshore drilling. this costly requirements for coastal wells and the emergency equipment meant to limit environmental damage. comesell-controlled rule six years after the deepwater horizon blowout in the gulf of mexico. much thank you, the oil surplus would going to 2000 barrels a day down from 1.5 million. we have the reporter at large, great to have you at this program. you put together the news in the prospect of a freeze of output, and consensus was there, and they were starting to put a thought the crude market. to the traders believe that? >> they have seen the worst of over the last 18 months, and investors are more and more convinced the worst of this is behind them. we have seen opening interest

rates, the structure of the markets beginning to change, so in general, things are turning to the better. prices rising 40% since the lows we saw in december and january. vonnie: if you don't get an agreement, do prices drop again? >> that is a big problem. this rally, which are another sentiment. fundamentals are better. let's not forget we had the oversupply. on sunday, if we do not have good news coming from the opec and non-opec countries meeting in qatar, [indiscernible] countries going to the meeting already have agreed expectations were built up, so they really need to deliver a positive outcome. david: so what is a positive outcome? agreement, going away, we hate each other, we will never talk of again.

what is a positive outcome? >> all the countries agreed they are going to freeze their production, there is a gentleman agreement they respect the level he was the bear highest of the year, they will not increase that. -- theyome is that even keep silent. they do not say anything about the agreement, they just take note all of us have agreed to freeze production, and they move on. from the going delhomme letter, i went to readout from it, the pressing need is to stabilize the market to the interest of a healthier world economy. this seems to benefit no one. does this change the outlook for the old market? can they get together and do something? >> less than the government of ministere prime

inviting him to attend a meeting. it reveals a lot about internal thinking. the meeting will not change supply and demand outlook for the market, because it actually means countries are going to keep reducing near record levels. this is a monetary expectation of the market, and that is indicating we need to move the market into a more [indiscernible] we have already achieved talk about doha, to put according to ,he -- according to the letter the government it does not say exactly that. have a lower under the price of oil. -- a floor under the price of oil. and general greenspan of the federal reserve, that is what he used to do. that is what opec and non-opec countries are trying to do, move the market, move the oil market. david: let's suppose they do

move it, it is about 44 wti right now. they get up to 50, what will keep the u.s. shale from taking it down again? the u.s. shale producers not rushing into it is the financial pain of the very low prices. they will go into lending in these companies because memories of low prices are very risen. it will take a bit of time. also, we have so many people from the oil industry, a quarter of a million have lost employment in the oil industry. and big about texas, north dakota. -- think about texas, north dakota. the people move somewhere else, maybe working in florida or california, maybe in new york. it is taking a bit of time just ,o return and attract people talent, but the rigs back together. this is not going to be a , cycle totuation

where we go as low as $10 and race to $150. it does that mean shale production comes back immediately. we get $50 oil. vonnie: thank you very much. and we are now $41.92 right now. fed.g up, taking on the what they expect us head of the april 27 meeting. more on the conversation with jamie dimon. ♪

♪ hello to all of you, one hour, eight minutes away from the opening. futures, we will check on them, where are we? positive. little futures, a negative. rally in the banks up 1% in rat -- in europe.

burberry good. david: let's talk about the fed. janet yellen as on her best to assure the market the fed will not move very fast whatever it does. there is a zero chance it will be moved to this month. let's go through your announced went? announcement. what should they do? >> less. vonnie: as in no moves? >> they should do everything they are now doing. they pretended things they cannot know, and they undertake actions that are mainly unhelpful. i say this because the fed seems to have its principal work theressing or distorting prices. your interest rates are prices. one thing we agree on over the

course of millennia, price control has shown to be an unwise public policy. david: so would it be a move they would not make to do that? if you look at the inflation rates it is not 2.5%. no, the fed controls one interest rate only, the short-term overnight rate. other rates it influences heavily. haseems to me, the fed missed its market. it had 6, 7 years in which to orchestrate a return to something like normal interest rates, and now the atlanta fed is showing the contemporary to gdp scarcely growing. so we are confronted with the possibility of moving to restore something like a normal structure of interest rates, and the economy is currently close to contracting. it is not a position for the

fatty, but stepping back, what the fed ought to do is less -- it is on a position for stepping back, but the fed conceives doing something to create a rise in the general prices, why? that is price inflation, two point a year. jonathan: they cannot close up medications now. -- communications now. >> we have the verbal dollar, they talk and talk. yesterday, kevin walsh in london, for the fed, he was in it but not of it, a very effective critic of it now. he says apropos of listening of the noise, he says only one voice matters, that of janet yellen.

he is an intelligent man, but he is not the decider. that is janet yellen. the fed chases these data. it is data dependent. the data are not what they are reserves and did -- what they are represented to be. they are backward looking. there was a book published some decades ago by oskar morgenstern, a great economist, and it was called the economic accuracy. he was furious that people would take this at face value, the emissions of the federal reserve. jonathan: cut through the noise, listen to janet yellen. thank you very much.

jon: just want to get you up to date. wall street earnings coming in

thick and fast. bank of america down 13% on the first quarter. wells fargo down 6% in the first quarter. the theme seems to be credit provisions, they have been increasing. onm just waiting to get data initial jobless claims coming through right here, right now. rate, 0.1%. initial jobless claims fell 13,000. at actual number comes in 253,000. month, coming in 0.1%. energy month on month, the same readings. the year on year figure, slight -- coming in at

2.2%. down from a previous reading up 2.3% and just below the survey number. a slight disappointment for some of the deflation readings. vonnie: the 10 year is down at 1.78%. yield of .75%. a little bit of an increase. jon: the federal reserve is worried about a slowdown abroad. inflation pressures not rising too quickly. gives janet yellen and little bit of support. the last thing she wants is an overshoot. david: it gives her option now at a -- it gives her optionality. is heartening with the numbers yesterday. at least we are seeing

reasonably healthy inflation. jon: the flipside is with cpi running over 2% year on year. those kind of numbers, less and lined -- less in line with the mandates. how do you really justify emergency monetary policy settings? the data does not look than that at this point. david: it does not alike an emergency anymore. now, that seems normal. jon: that is an emergency in itself. [laughter] david: that's right. matt: it makes it look at the fed will not raise rates. that is what investors are planning on right now. the are buying bonds, which they would not do if they got a rate raise was coming. and the are buying the euro. vonnie: look at that. -- when we look

at futures, not a big difference in futures. it is an treasuries you are seeing the big difference. let's go to bloomberg's radio kathleen hays speaking with dennis lockhart in chicago. >> thank you. i want to give a warm welcome as our bloomberg television audience joins us on bloomberg ando for a very special timely conversation i am having with dennis lockard, president of the federal reserve bank of atlanta third we are here in chicago. students all over the world and dennis is the star of the show this morning. dennis, because the breaking news on inflation. a little light on the headline versus the forecast. cpi of 0.1%. a little bit of a pullback on the euro year-over-year.

up 2.2%.is not going in the direction the fed wants to say. dennis: my starting analysis based on the numbers you gave me that we are is still seeing inflation lag the committee's target we are still dealing with the issue of getting inflation up to something around that target. i don't think this report as dramatically changing anything. asake the report effectively, more of the same. i would have preferred to see a little more firming. .he softness in it just one more piece of evidence that we have more work to do. >> certainly, if you broaden this out to the fed's inflation gauge. a fancy way of something about

the gdp numbers. the map is different. you get the year-over-year, the official gauge of 1%. you said recently that that gave you confident seen the core rise and over the course of the year, the key number, the 1.0 percent -- 1.0%. are you getting more downhill -- are you getting more doubtful? dennis: i am taking this data to -approachhat a patient to policy makes sense. we are not getting rapidly to our target for inflation. number, of course, is going to be on a headline basis, a little bit lower than the cpi number. so, again, what i am seeing is a picture we are below target, and

we have some gap between where we are today in terms of price pressures, and where we liked to be. >> one thing that has caught a lot of attention and has become -- the product of the atlanta federal research is that now gdp -- research is a gdp tracking estimate. youris so striking about now cast for first-quarter gdp is a number over 2% in february. 1.9% a few weeks ago. you gave a speech saying you are confident that this is pointing to hitting the fed's inflation target and a modest 2.5% growth rate. reading is 0.3%. does that put her forecast in doubt? it does. starting in mid-march, we

started using our tracking estimate. we saw the numbers begin to deteriorate for the first quarter. by consumeriven consumptionsonal expenditure numbers, for example. and to some extent, investor numbers excluding oil and gas. both seemed to be softening. yes, that gives me cause. -- pause. >> ok. i want to add in the retail sales. are quick topeople thing, it is an accounting thing with gdp. drives the economy, a large portion of gdp. consumere pce, spending numbers came in weaker. that was the biggest hit to your gdp forecast. tell sales, including -- retail

sales, including auto sales down in march. are you worried about the consumer? put all of this in context. prior to, let's say, that there quarter of last year, we were seeing pretty strong consumer , consumption growth. with we went into the december meeting where we made a decision forecast would be week would continue to see that growth. more important, the consumer activity would be the strongest driver of a forecast for 2016 of somewhere between 2% to 2.5%. i was favoring a number for the higher end of that range. so, what i am concluding, is that we saw a softer consumer

growth in the third quarter, the fourth quarter, and the first quarter. indicate,a seemed to the consumer activity is slowing. what do i make of that? coming to the conclusion that we are seeing and reversion to the mean. normalseeing a return to consumer growth prior to the spurt in 2014 to the middle of 2015. it may become and away way, consumer growth is just have a returning to normal. it doesng said that, cast some doubt of the forecast i began the year with. >> just the weekend a half ago, you mentioned even with good data, looking at the april meeting. even with a good data, it may

not be mandatory to move on april, on the next rate increase. now, given what you just said, you acknowledge the first quarter gdp is reverting to the mean. move it is prudent not to at the april meeting? do not know what the committee will decide. i know there will be a range of about making a rate adjustment. i will not be advocating a move in april. >> so, you have changed your view? dennis: i have changed my view. let me explain that. >> you go right ahead. you have all the time in the world. dennis: what i said a few weeks ago prior to the numbers in mid-march coming in was that i out april should be live, a live meeting. i thought it was possible.

of course, with the assumption that we continued to see confirming evidence of our basic my bank'sin my case, basic forecast. it was possible that a move in april might make sense. i have, that view. >> dennis, are you concerned the economy falling what has been anticipated? a lot of economist on wall street have been looking for a pickup. ready to make a statement that there is a stalling out going on. we are looking at the first quarter. we are now in the second quarter. we are looking at the first quarter. the first quarter, for several years, has been an anomalous quarter. a quarter that had unusual factors influencing the annual ized gdp of the first quarter.

sometime it was weather. seasonality at work. we are getting soft numbers for the first order. i don't think that necessarily means we are stalling out. i am still holding on to a view that the trend rate of growth is a little bit more. at the lower end of the range, i was previously thinking of the higher end. -- the higher rate. >> that the new claims for unemployment recently. 252,000. there are a lot of numbers to suggest the labor market is a lot healthier. unemployment was at 4.9%. nice and low. more and more people are saying head count is great, but what about quality of jobs? what about the fact that hours

worked have been flat in the latest report? what about jobs seem to be more tilted toward part-time jobs and lower skilled jobs that don't pay as well? is that the reason that the economy is not supporting stronger gdp growth? think we are getting closer and closer to full employment. we are getting closer and closer to the fed's objective. that does not mean there is still some slack to absorb. some of the things you cited are evidence of that. coming back to the growth numbers in the first quarter, it is challenging, i think, to connect the dots of weak growth in the first quarter. robustntinuing, employment market, which we are seeing with payroll jobs over 200,000 a month.

it has been going on for the better part of the year at least. have you reconcile those two? one question on my mind at the weakt is, whether the growth is going to play through ,o a slowing labor market slowing down the progress being made in the employment world? or maybe that is always need. maybe all we need is 1% growth to continue to make progress and absorb that slack. i have not been able to reconcile those two factors that don't seem to fit together. >> wiley coyote labor market. [laughter] if the job numbers, versus the gdp -- you wonder if

the job numbers are going ?gainst the gdp that g dennis: gdp is trying to estimate a much, much larger economic phenomenon than simply employment. inave a bit more confidence the accuracy of many of the employment data. >> let's switch to the global economy because that is certainly a focus for the fed, for the market. it was one of the factors that seemed to lead to the pullback in the rate hike forecast for 2016 for cuts predicted in december. downgradedthe imf its global forecast. it has been a huge move from 3.4% to 3.2%. imfthreshold level for the forecast, the gdp number, is when you hit 3% or lower, you are in a global recession.

how important is that part of the equation for you, dennis lockhart, if you watch the economy. there are several meetings left in 2016. how does that factor in? dennis: many answer your question -- let me answer your question by emphasizing the thought process i think is important for a policy maker. you have to take external factors that is global development and understand, or try to get a sense of how they track back to our ultimate, domestic objections -- objectives. those of the stable prices and full employment. is monitor ando evaluate what is going on around the world and understand the transmission back to the domestic economy and back to the two objectives we have been mandated to achieve.

economyext of the u.s. is weak, and apparently getting somewhat weaker. i don't think we can ignore that. at the same time, i don't think the u.s. economy is highly vulnerable to external factors the way a small country might be. so, it is certainly -- the context certainly deserves to be considered, i think, in setting policy. that would argue for caution. argue for, perhaps, patients in terms of what we are seeing in the data. studieds lockhart international relations and economic and worked all over the world for citibank and then a private equities. in so many capacities. you don't just have an academic view of the globe, you have a very real view. reason why it is

important for the u.s. to grow? if ddt gets downgraded to 2% or less, it could be a global recession or lower? tennis: it is a concern if you have the view that it was the u.s. economy and the u.s. can number that was essentially going to keep the global economy .t and acceptable level the first quarter numbers we are seeing, they seem to indicate a little slowing in terms of consumer activity, is also a part of the global picture. >> inflation -- let's come back to that because it is one of the to makees for the fed another interest rate increase. inflation, speaking of the globe, has been undershooting in many places. we have had deflation in japan and within europe. how certain can you be that

inflation is going to head up to that 2% target when there is so much deflation around the world? it certainly has an influence on the price levels in the united states through the exchange rate, import prices can be suppressed by a rising dollar exchange rate. recently, we have seen the dollar depreciating, but the broader picture for the last two years has been a strengthening dollar. prices.orts pressure on it has been argued that through the dollar, you in effect, get weaker countries that have disinflation, exporting that disinflation to the united states. there is some validity in that view depending on how the dollar exchange rate actually moves. so, i think the global context also influences our inflation

objective and our ability to achieve it. or at least the timeframe in which we view it. carolyn: let's talk about the fed's reaction function and, you said not to love ago, you were saying two rate hikes this year, the possibility of three. to see to be on board for the next rate hike? dennis: i am framing my to april,related june, and thereafter on four principal criteria. first is the growth numbers and how the growth seems to be trending. most important, are we sustaining momentum in terms of growth? the second would be the employment numbers, and i would be using a threshold 200,000 payroll jobs a month is a good indicator of a continuing,

strong jobs picture, employment picture. time,d say at the same that as we move forward, if we theinue to make progress in economy, you would expect, naturally, that jobs number would decline. for the moment, i am seeing 200,000 a month is a threshold number. carolyn: ok. dennis: the third aspect would be inflation. i am paying attention to core inflation and trimmed mean to understand the underlying strength of upward price pressures. that is the third. the fourth would be inflation expectations and the direction inflation expectations apparently are going, or the explanation for break evens that seem to be declining. carolyn: is in one of the -- that is getting a lot

of attention. they came back and spoke again. at the beginning of the year, they were recovering. it the atlanta fed has so many cool indicators. 30 indicators on that dashboard. in one of your last speeches, you suggested that it ebbed a but it had a little bit of a down arrow. dennis: there has been some retracing of the deflation expectations as derived from deflation compensation and securities. i still hold to the view that what we saw earlier, which was a some extent, to was really based on liquidity and risk premium, not fundamental on anchoring of inflation expectations. in my working assumption

continues to be that inflation expectations are reasonably well anchored around our 2% target. the recent retracing is comforting. i don't necessarily think problem solved. but it is comforting. carolyn: are you in the camp that says it is acceptable and even good for inflation to overshoot its target because it has undershot- it for so long? dennis: i would liked us to sort 2%have a soft landing around and sustain something around 2%. that would be the ideal world. limitedrshoot for a periods time -- for a limited

period of time considering what benefit that could have for the economy could be an acceptable situation. thate make another point is important. the committee has reiterated its position that our attitude toward inflation is symmetric. that is to say we think the cost the economy of a shortfall to the coste equal of the economy, or similar to the cost of the economy, of an overshoot. so, we are not doing 2% as a ceiling. i think that suggests that some tolerance of overshooting 2% would be exceptional. thisyn: do you now at models- last year, the suggested we would hit the target. we had not gotten there. even said he wanted hard

evidence that we are hitting the target. it is more important to actually see inflation up to target before you hit the bid and say, time to raise that rate again? dennis: it is more of a matter of direction and tangible evidence, or real evidence that we are moving in the direction waiting to hit target. continuing to normalize interest rates, whether you are talking about employment, or talking about inflation, does not require the ultimate achievement of the objective. it is a is a don't of, you can ofecast, -- it is a question you can forecast it and in a reasonable amount of time, you will get to that objective. the direct answer to your question, is no, i don't think i have to wait for inflation to be achieved. carolyn: back to that question of waiting for that target to be

achieved. if april is off the table, do you think it is likely to get more than two rate increases, or not? dennis: the committee is making the decision straight from the data. whatever unfolds is going to be based on how the data you balls and what the data -- what the involves and what the data shows. i did not say april was off the table. i don't know what the committee will decide. i am not going to strongly advocate for a move under these circumstances. if you look at the calendar, there are enough meetings remaining this year that if the data were to suggest it is the appropriate policy to have three moves. i don't know, two moves, three

moves. they are both possible at this stage. it will depend a lot on how the economy evolves. if we see in the second quarter, a strong rebound from what appears to be a weak first quarter. then i think, i for one, would say we are back on the track that i anticipated. the first quarter could be dismissed. carolyn: if not, then what? dennis: austan and patience. -- caution and patience. janet yellen stated that very clearly. i line up with her on that way of thinking. carolyn: dennis lockard, thank you so much for joining us. back to jonathan ferro. to dennis thanks lockard. continue listening to bloomberg radio around the world and on

bloomberg.com. stations in new york, and san francisco. just wanted to recap some of the headlines from dennis lockhart. growth -- 2016 ddb gdp growth between 2% and 2.5%. he changed his views that an april move makes sense. three weeks ago, david? david: a very quick turnaround. in part, he sees consumer activity slowing down. not advocating for an april rate hike. he says that the committee still may decide to make that hike. jon: not for the global economy, but for them, the the have not gotten away from emergency policies when the data has been pretty good. david: i would say he is moved

to the dove camp. vonnie: i am not sure. david: he was very dovish. 2% to 3%. i mean, come on. david: we will be talking more to dennis lockhart. forse stay with this "bloomberg " for all of that. ♪ vonnie: fourth-quarter profit falling -- black rock missing analyst's estimates. more of a headache for deutsche bank.

money laundering. this is "bloomberg ." i'm vonnie quinn. joined by a also comanager of >> thank you, good morning. david: fixed income manager of the year in 2014. jonathan: he is never going to tell of that. opening,ead of the about 30 minutes away. let me to you were we are in the session. futures are positive 27 points on the dow, s&p 500 barely up 0.1%. in europe, the rally continues 0.6% on the frankfurt and germany. i will go through other asset nine, we have p

had euro weakness. the singapore dollar on their for good reason. it is weaker, monetary authority coming out of easing policy. they target the rate against a basket of currencies, targeting zero depreciation. that is the first time since 2008. another reference, we will not go there at this point. other crossover, david gura. the new york primary less than a week away, and hillary clinton and bernie sanders will return to the debate stage once again tonight. it is a curse opportunity by both caps, clinton trying to cap a seven state losing streak and sanders trying to make up delegates. the secretary of state is ahead by 10 points. louisiana's government issues and exhibitor order banning government this termination based on -- and executive order banning from indiscrimination

taste on actual orientation. areiams-sonoma and others asking tennessee lawmakers to reject transgender bathroom bills. an unforgettable night in the basketball association, golden state warriors begin the first team in league history to win 73 games to beat the memphis grizzlies. this is 46 points, warriors and sippers at 72, the plateau et two decades ago by the chicago bulls. game,ryant laid his final the finale of his 20 year career. power by 2400 journalists around the world, i am david gura. and so it is phenomenal, much sports. for the managing

markets. we are talking about bank of america. the iea global oil production and the brexit concerns. the reseller should talk about today. -- there is so much we can talk about today. will dropping 13%, most because of trading revenue. energy revenue earnings-per-share both as much also said of america it failed regulator requirements for the so-called living will. it does seem that prior all sf -- carl issa can do no right these days. very lower in expectations compared to jpmorgan. banks, it ise getting back to basics. thanks back in the 1950's and 1940's, and for fixed income, it is music to our years. , telegrams he is on

auto loans, consumer loans almost all time low levels. the energy loans we are focusing on is a small part of their working, 2%. i working through the quarter's earnings, i have good things from u.s. banks. david: where are the banks now? wherere stronger now, and are they going? where is the growth? regulators are not making it easy. >> from a fixed income standpoint, that is good, but not from equities. ability of banks to pay back debt and have less volatile income stream is a great environment. david: we have something on the bloomberg. matt: we put this together this morning. you see three lines, but it is a tale of two banks going on. there is bankamerica and jpmorgan, and this is credited to both. one, bank ofthat

america at 60%, and wells fargo at 1.5%. you have a group of banks traveling below or at book, and a group above, or mainly just one. what you think about the divergence? bank.gecoach is a great think of america has a lot of problems, we all know about that. that is why they trade what they are. what -- banks at trade at -- matt: they are treated like the efc then. >> yes. i am less confident but, fixed income standpoint, interns of lines, good sure. jonathan: what i would say, things between europe and the u.s., let's talk about the credit of european banks. are you as confident on them? >> no.

the u.s. went through a lot of pain earlier, we took the pain upfront and came back quicker. europe kicked the can down the road so to speak, and they have more to do. do the relative equity prices up the yields of bonds you invest? >> it becomes more credit worthy, the spread should compress. david: so should bank of america pay more money -- and how does this affect your debt? >> you not only have developed fundamental view, wells fargo being bank of america, but looking at the market pricing. bank of america had a big enough discount to wells fargo, that could be a bigger by. vonnie: and the broader sections of financial, what about ? surers and reassurers >> we are less confident over insurers on banks, it is general business.

very difficult, one of the unintended consequences of very low rate. youd: it strikes me that are in debt, playing the opposite side from equity versus regulation. regulation makes it harder to make equity cards go up, but makes more assurance bills will get paid on time. >> exactly right. vonnie: [indiscernible] david: let's go back to the number two story, iea, international energy agency. they said we are going to eliminate the oversupply of oil, get about 200,000 barrels as opposed to 1.5 million. this was the second half of the year. the global oil market is reacting. i'm curious about what is going on when it comes to banks and their reserves. puzzle bad energy debts. -- possible bad energy debts. to the energy

companies, they have reserved more than enough potential assets. i would not say it is a nonevent, but it is hugely significant. david: so does that factor in your investment. -- does not factor into your investment. >> not really. matt: i was looking at a story and found it amazing how much the iea had cut supply imbalance. now they think they'll be 200,000 barrels of supply. we are looking at five-year supply,white is the yellow is demand. this is 1.5 million barrel per day in balance. if you look at the price of crude in green, and has turned up, the market is saying that they support the iea's new plans. jonathan: what he the potential for a freeze, they have the in the market. let's go to number three, the path falling for a second day

against the dollar, inc. of england showing the -- bank of england showing the brexit would push down demand, create more uncertainty, and have more implications for sterling. credited the bank question with confidence, here is one for you. what happens to the guilt over the next few years? >> if the vote goes to exit, it is short-term negative for england, the proud, guilt, -- pound, guilt for the eurozone as well. even though the polls show 50-50 roughly, when people actually vote, they vote less emotionally, they vote more logically. that would draw comparison to the scottish independence vote, where we were actually worried about a positive vote, and it was not even close. vonnie: talk about fixed income for a start. >> 100%. vonnie: when you look at

sovereign, where are you it with the u.s.? >> with most of the negative yields, it is not terribly exciting. both of the opportunities in the credit markets either in u.s. structure product or mortgage product or u.s. corporations. the odds a recession are extremely low, and it is repetitive of outcry from ability that happening in the near future. , kick do homework well the tires, there is opportunity in u.s. credit. david: when it comes to brexitcal loans, which is a part of, do you try to hedge against it and stay away and stay with business? >> we are aware of it, take it into scenario, but we have competitive advantage predicting it is voting, probably not. -- british voting, probably not. tend to make investment decisions based on things we can analyze, company analyzed or having federal reserve policy

analyzed. jonathan: i can give you guidance on people in the bank of england rates are going to be. they will be nowhere for a while. matt: this is morgan stanley's look at how many months until we get a hike. this is the ecb, and here you see the bank of england. it is a long way up, 41 months for the bank of england, 45 months off. that is basically like saying they are never going to raise rates. do you think there is a possibility the bank of england will start to move? you are getting higher inflation. >> i hope not. i want to get back to a normal state of affairs in the near future. it is very rare, unprecedented, to have a central banks 180 degree opposite situations. you of the fed in the middle of a hike recycle and the ecb and the bank of japan still in an easing cycle, very odd indeed. we were stuck about the dots,

hard not to come back to the dots. to hikes, the market does not believe the dots . the market is priced in the u.s. less than 50% of one hike at the end of the year. this is another example value proposition. you need a strong view on what they could going to do, but what are market prices? david: you can use d.o.t. on the bloomberg. jonathan: do not do that. thank you very much, you are sticking with us. markets ahead of the open, and not next, we dig into the earnings, black rock, bank of earnings,orporate those fargo down 6.5%. digging into the banks, what they are doing premarket. ♪

♪ let's start with the labor market, a number of americans seeking unemployment benefits plunged last week. it was the lowest level since 1973. the labor department says weekly applications fell 13,000. with just 253,000. they have the in below 3000 with 58 straight weeks. -- 300,000 with 58 straight weeks. the bankers have set aside more money for loans and expenses. they are tricky keep expenses in check while increasing positive and expanding the loan portfolio. atrly pay a $15 in the union mcdonald's stores across the u.s.. this campaign says low-wage workers turn out there solidarity with fast food employees. they are targeting mcdonald's because of its ability to influence pay practices throughout the economy. that is the bloomberg business flash.

jonathan: let's check out the stocks on the market move. burberry, coming out with sales weaker than expected, predicted to be the low end of estimates. down 8% at one point, since october 2015. for the lows, -6.1%. , h&m, an ugly week. ahead if you year are listening to some of these executives. a challenging quarter for wall street, that is for sure. -- correction on my behalf, down 9.5%, over a bank of america 13%. yesterday we had a big poll the banks on the back of the jp morgan earnings. wells fargo down 1.5%, inc. --

jp morgan .5%. let's kick it off with tobacco stocks, stocks ticking higher on bullish comments from goldman sachs. , asing analyst estimates lower negative impact from the dollar, it is huge. i could rip up the script and just talk about the dollar all day, but i will not. markets,lk about the goldman seeing tailwinds including better cigarette pricing trends, and wells fargo also defending tobacco stocks. sequel has downgraded pepsi on excessive valuation, as well as taught. coca-cola is up. hold.re cut from buy to mark schwartzberg see the growth of catalyst, to justify current price levels.

most of them are the top of the 52 week range, coke ranging to coca-colahe enterprises, improving capacity and growth beyond europe. otle is in the green after jp morgan upgraded shares to overweight, you should buy them from neutral. the price target 50% of two $510 apiece from $465. man called it a meaningful brand and says they will regain consumer trust. he was down 35% over the past year. guacamoney. matt: jamie is knocking it out these, myk with

producer. one of the problems with consumers is that the dollar is too strong for tourists. david: your vegetation to go all day with it. matt: when we come back, affect income manager and runner up in 2015, western asset manager carl i'd stat shares his strategy. ♪

♪ david: you are watching bloomberg go. -- western asset manager is here with us. dennis lockhart, he was talking to kathleen hays. let's listen in. >> the context of the u.s. economy is weak and apparently getting somewhat weaker. i do not think we cannot ignore that. at the same time, i don't think the u.s. economy is highly

factors,e to external the way a small country might be. so it certainly, the context certainly deserves to be considered, i think it, in setting policy. that would argue for caution, argue for perhaps patience depending on what we are seeing in the data. david: i don't want to read too little into this. we are seeing concerns that gdp growth, it has tapered off, concerned about consumer activity has tapered off, and he said he will not be willing for a rate hike in april, which is a turnaround since april 21. how much it should be read into this? >> a dovish shifts, reaction is different than 6, 8 weeks ago. no doubt about that. but this is mr. lockhart's call.

we do not know that. the janet yellen has a target view, but if you look at the tax, you have unemployment rate, 5% going lower. their job is unemployment and stable prices, core, pce at 1.7%ish, in the third leg of their stool is financial, which has come down quite a bit to the point where financial conditions in year to date are actually better. the conditions are there for fed it tightening. i think they will be more cautious. their policy is asymmetric. -- two fedfed hikes hikes is not unreasonable. there is less of a chance of being just one. that is optimistic on ed policy. you think about the medication on central banks, governor kuroda was there

overnight. given the qqq e negative interest rates, financial rates in japan would have been even worse. that is the fact, you can argue anything with the counterfactual , but we believe it? >> the jury is out on negative rates. that yellen made it clear it is an effective guiding tool, but there was a lot of unintended consequences of negative rates, cash hoarding for example. i do nothing the u.s. is in a position where that is on the table for us. vonnie: what these central banks want to do is push us into riskier assets. that is part of the strategy. they don't want to be making the u.s. riskier or the u.s. treasuries, but that is what is happening. >> is probably why are rates

will not go as high as people think. look forhere did you new corporate data? you are seeing major amounts of debt. how do you navigate that landscape? >> the markets are very liquid, government liquidation, regulations, meaningful purchases, you need to boost the primary market. you are limited. we see great value and u.s. banks. we think they should trade more than industrials, there is great opportunity in many areas of the corporate bond market. david: to what extent of the opportunities -- the market may be overestimating the false layer happening. -- false they are having. >> if you look at a basket of u.s. treasury or high-yield bonds, unique key relative

defaults for the next 35 years, 40%, almost four companies in 10 have to go bankrupt for you to be ambivalent to either of those baskets. i would take the under on that, only 3%, they will take up a bit this year in the sector. 40% over five years seems relatively excessive. jonathan: weston acid manager. they give very much for joining us program. the opening bell is up next. we are three minutes, 45 seconds away. ahead of the open here in new york, futures positive, down 13 s&pts -- doubt 13 points, barely up a single point. ♪

♪ jonathan: this is "bloomberg ." director andnaging fixing strategy at j.p. morgan asset management. and we have editor at large eric

shafter. futures a little higher, up i-4 points on the dow -- by four points on the dow. daughtere wife and ringing the bell at nasdaq. matt: but he didn't bring any of his cars, he is selling them off. jonathan: we will get to the other asset classes, we have had a lot of earnings, only a couple of days ago, we rented a 2016 high north of 114. u.s. 10 year yields two basis points up, cpi a little below estimates, rally in treasuries to not last long, up two basis points. in commodity markets, wti 41.84,

up 0.2%. let's go back a little bit. i will show you what is going on in the markets. no changes really as far as the major averages are concerned. if you look at the imap on my terminal, you can see we have energy and industrials gaining today. financials still a bit of a loss . moving down right now, biggest loser a quarter of a percent. let's take a look into the banks areas they reported today this bank of america come out in a missed. we saw blackrock miss. wells fargo was a slight green, $.99 over $.97, but not enough to boost the shares as we had a rally in financials yesterday. let's take a look at those that were of yesterday, j.p. morgan was drawn yesterday. it is unchanged today as is citi. stanley will and j.p. morgan not

showing much. , likehough that beat wells fargo, disappointing the markets. david: as you point out, they were all of yesterday, so take two or three days look. we want to talk about black rock first. >> we can talk about black rock in the context of two things, earnings, and fund flows. black rock told us so much about the market, because it manages $4.7 trillion, and we can see what is coming on. institutional flow. me -- the >> blackrock had $36 billion it .hat flow, long-term inflows that is a little bit down from the trend, but pretty consistent with what blackrock has been putting up, as you can see the

past two years, going back to the first quarter of 2014. it is interesting given that market volatility, money loving into black rock, continuing to flow in because on occasion, money flows out. the surprising thing is that a vast majority of the flows of blackrock were fixed income, and they were in commonly well-timed because the 50 basis points over the course of the first quarter. most investors know not get that right -- do not get that right. inflows of equity, now we have an outflow in the fourth quarter, minimal incomes in fixed income. it was a big institutional outcome tied into what we call the super dollar -- jonathan: this fund flows the year, we begin and everything all-time a sickly the opposite happens. what do you make of it? blackrock capitalizes on

tremendous inflows into their etf business. what we have seen across the industry in general is investors having a preference for lower-cost solutions and therefore, blackrock is a huge beneficiary of that. we are also seeing investors some of therbing sentiment coming out of central banks, very dovish, and having a preference for saved assets and core bonds. , what would very do without etf? 70% of the net term inflows for blackrock in the first quarter were etf incomes, and that is probably consistent with what we have seen over time. >> and that makes perfect sense for some parts of the market. it is a make a lot of sense of her all of the fixed income market -- for all of the fixed income market. and high-yield, we have seen a tremendous amount of value

recently. that is probably not an area where you want to go into an instrument that is tracking in a kind of index, and you need active management. you want to sidestep areas that will be week and focus on where you think you will have the best rewards. >> particularly at a time where perhaps, we are beginning to see the turn, let's call it, and the credit cycle, happening very slowly. wells fargo is a bellwether for american credit of anything, we have a change in drops, not seeing a change in america, but it is a dramatic increase. they are building reserves, loss in oil and gas. j.p. morgan lester -- yesterday. >> banks in general have been pounded by the ultra low environment and interest rates as well as the regulation and the fact that it is hitting them hard. to the banks, there

is so much bad news price in that to the extent that we get even one fed of funding rate increase, that will list the sector in general. that is coming on the banks of -- very command is bad news right now. ,n terms of other sectors traditional income, when i look at flows that have continued to pour into sectors that are very interest rate dependent, it makes me wonder whether there is not enough of an appreciation in the risks in that sector, and whether investors are getting pulled into past performance, as you said. >> we call it fixed income tourists. jonathan: it is as if they had a good first quarter, profit up 20%, and they still -- absolutely. matt: i know bloomberg news has reported 300 job cuts are coming , but here is blackrock headcount.

david: the cost is already down. these are fighting already. matt: but you see the headcount so far not officially announced, so it has not changed, in brown, it continues to rise. you see profit in green, revenue in white. it is pretty late dramatic -- it is pretty dramatic. does this mean more cuts are coming? what is 300 employees? you can't draw conclusions from that chart alone, and the rockon is this, black has built a hedge fund, and because of that, they are at risk of more earnings volatility that they had been in the past. if they were just a plain vanilla active stock and bond manager with the etf business, you'd see revenue and earnings the more consistent than they are. the degree to which they missed this quarter is the most entirely explained by a drop in

performance speeds and alternative investment products, read hedge funds. you are going to see that, blackrock continued to expand alternatives, which it is doing to appeal to a broader set of , youtors including funds will see volatility. you need to ask the question if that is what the blackrock investor wants. you want earnings per to ability, or do you want a little bit of earnings unpredictability to be good or bad? vonnie: what are your plans trying to do? >> many of the conversations have to do with income and where to find it and the ultra low yield environment. and so you point to blackrock, there is tremendous amount of pension funds just like every other asset management out there. point tos a real pain

lower the yield environment we are in. so that is why the lows are surprising to me in terms of where they are going, because to the extent we are having conversations about fighting income, you have parts of the market that will offer you tremendous rewards for the risks you are taking, and having some contraction in the yield, if you take energy commodities out of the equation, still in the 600s in terms of shred -- spread, but most of the money going where, what can be summed up by the narrow gone -- government bond interest. what can you expect from that? global central banks arguably fully deployed. what sort of upside can you expect from that? how is not a debate about many set hikes are we going to see, are we going to see one, or three? it is how much upset you can expect with central banks nearly fully deployed and no yield. really shocking is

if, three months from now, we see further flows into fixed income with a 10 year at 175. how much of light is it? there are people who talk about going to 125, but they are very al small number. dennis lockhart saying things are slowing down, he is getting nervous. he is going more dovish than that. inre is huge opportunity high yields, because the market is way overpriced with the risk of default. on one hand, i need to get more conscious, and but on the other hand i need more risk. the conversation that needs to happen is redefining risk. on the reader front, we can debate the pace and i don't think anyone is wild about it, but do we need emergency rates at this point in the cycle? david: on facebook yesterday.

>> yesterday, you can talk about the fact they came in slightly the low expectations. we expect some inflation for the rest of the year, some growth, so this is where emergency rates are warranted. regarding high-heeled and opportunities there, market 70% default, and the conversation about needing to redefine, is it more or less risky to buy an undefined asset that can take a tremendous amount of pain in terms of an expectancy, or is it better to have assets priced for perfection? vonnie: thank you so much. large eric.t [speaking simultaneously]

>> the mexican economy is doing ok. vonnie: up next, did deutsche bank miss red flags about trading in moscow? ♪

♪ matt: here in the hpe greenroom, wells fargo chief and into officer talking about the -- financial officer talking about the bank's latest earnings. david: you are watching bloomberg go. bnp. but planning to eliminate 675 positions at the french investment bank division. planning voluntary

departures for the corporate and institutional banking unit. they are facing $1.3 billion of by 2019.st savings delta airlines first-quarter profit beat estimates. brusselsown because of terror attacks and weak foreign currencies. this a few fuel in the force quarter. -- first quarter. cost of living in the u.s. rose less than forecast in march. it was offset by higher energy costs including food and energy, the index gained the least since august. we can economic unit has kept the fed from another interest rate increase. data has keptic the fed from another interest rate increase. matt: let's kick off with chipotle in the green. they are essentially saying goodbye, they think they can see

consumers doing that having a finished passing out [speaking simultaneously] david: it is a new one. matt: for a long time, it was only getting stuff away. and then analysts were like, why is it rising? if it is free, that is not going to happen. jp morgan essay they expect -- is saying they expect revenue earnings to double to get back to levels they were in 2014. regular growth after that. in many cases, shares are up 2.5%. i will go there for lunch today. listing take a look at sun edison, which i always have trouble saying because i read it as soon desion. they had a vivid time with the boj, they have been subpoenaed to look into their being wrongdoing. sun edison found the outside

counsel, no willful misconduct and no fraud. the market loves that. they did find wrongdoing by one employee in relation to this , over 100% at0% the end of the open. david: 260 four cents. -- to $.64. matt: david gura was talking about delta, a tight myth on revenue, but we looked in the numbers and they see what they like. it is a pretty good environment for airlines. delta is gaining, american, southwest, and ual all putting up gains. david: and the nasdaq, we will look at connector stocks. reporter: we have two chip stocks on the move, seagate, after they announced the fiscal

quarter to the downside. it was amiss by 20%, growth margins expected to be less than 2.7%. the weakness came in march. this includes john roy, who cut estimates and price target and is reiterating his cell rating. ,retty strong selling pressure selling seagate technology down to recent lows. another chip, intel. this is michael mcconnell running the company will miss its first quarter midpoint in the report next tuesday after the bell. mcconnell his full year 2016 outlook, coming on week demand and a bearish cross. there could be a serious downside headed for shares of intel. jonathan: think earnings in full focus on wall street, regulatory issues, the fallout from deutsche bank mirror trading scandal.

the about systemic failures they -- they have found systemic failures. this is between 2012 and 2014. we have been digging into the internal documents. what have you found it so far? reporter: this is interesting these reports go on. what goes wrong when you have major, major issues? the russian mirror trades issue, you have possibly up to $10 billion of trade flowing out of russia, money moving out of russia, that may not have been properly vetted through money-laundering protocols. what this goes through is people in the bank, and control within the bank, that were set up to flag of these ends question ,hese -- and the question these and at many points over the course of a year, those red flags and warnings were minister by key areas in the bank.

ed by key areas in the bank. it is interesting to see what is going wrong when they are missing a major issue that is now under investigation by the department of justice as well as regulators in the u.k. and u.s. david: if you wake up and find this, what do you do? , he is theohn cryan new ceo, he joined the first day of work in july 1 of last year. basically what he has done it, he has pledged to clean up the systems and control, which is basically a failure. this is a systemic failure of the control. he has personally pledged to clean those up, their bank is undergone enormous amounts of management shakeup and shifting. they have revamped their control the regulations and thought processes. you do see a lot of activity on the bank side trying to address these issues and actively fix

them. they have the whole other issue they are trying to rapidly increase profitability. they did not have a great year last year, quite a bit of pressure from shareholders to basically get the bank moving in the direction that its peers are going. you have two interesting things that are balancing against each other, playing down risk, and also increasing profitability, which can be really difficult. vonnie: is there more compliance officers? reporter: that is definitely part of the issue, and you do see that across all of wall street. databank -- deutsche bank is not alone with these issues. we saw a few years ago the same thing happening at j.p. morgan and several other banks. is the waynd of see the address that. as they do build up what is called the back office, compliance, regulatory legal issues to stem that. it is all a culture issue on how much the business will respect

the wishes and instructions of compliance people if the business is our light, we want to do this risky trade, and they are like, no way. you have got to get to a point where the business is more compliance. david: always good for the lawyers. thank you for being here. next, final thoughts and a look ahead to what else is coming up later today. ♪

♪ about 24 minutes into the session, let's get you up to us read. , 20 points down on the dow, likewise on the s&p 500, down 0.7%. switching of the board, looking at the u.s. dollar-euro, marginally stronger euro. up oneon treasuries

inis point, inflation, rally treasuries to not last long. the big story on wall street is what is happening with bank earnings. wells fargo profits down 5.9%, bank of america profit down 13%, blackrock profit down 20%. looking at the moves so far, the group down 0.1%, wells fargo down 1.3%. the slew of bank earnings getinues, city reports, we goldman sachs on tuesday. they keep coming through. vonnie: that is for sure. other events on the calendar, the imf and world bank hold their spring meeting. this is in michigan at 10:00 eastern. and chicago's had president speaks it from :00 eastern. chief and wells fargo

financial officer will be here to talk about the bank's latest earnings. jonathan: with the week so far, plenty of data, plenty of earnings. just not good. david: not a lot of news that is good, from dennis lockhart. vonnie: the bank of america is underway [indiscernible] jonathan: there is a taste for you. that does it for "bloomberg ." thank you for joining us. tomorrow we are joined by black a woman from oppenheimer funds. ♪

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♪ betty: we are going to take you from new york to london. bank of london at a record low. potential that brexit is weighing economic growth rate: we will take a look at the terminal and deutsche bank. the lender saying it is money laundering and financial crime control. for -- hat is next the company could be barred from receiving payments for medicare. ♪ betty: