francine: oil futures plunge as much a 6.8 are after weekend talks between the biggest reducers, and a failure. the crude stumble pushes emerging markets lower. defeated the leadership after brazil's lower half of congress votes to them each the president. i'm francine lacqua in london with tom keene and new york.

the diplomatic spat between saudi arabia and iran, and the fact that they did not find an agreement. pullback, widely expected. but you really wonder where they go from here. i do not have a handle on what the next next is for opec. tom: we know who is in charge now certainly when it comes to oil policy, the prince of saudi arabia, and we know that opec a second. nice bow tie. francine: i wore it -- tom: i wore it for the queen. francine: let's go to the bloomberg first word news. voted in the congress favor of impeaching recess. now it is up to the brazilian senate. they say it will be difficult eff to win to -- rous

the vote. the death toll is rising due to the earthquake in ecuador. at least 272 people were killed and at least 500 were injured. some coastal towns were devastated and many people were trapped in collapsed buildings. in japan, the series of earthquakes that has struck the island since thursday are the nation's worst in five years. more than 110,000 have lost their homes. beth korea kim john kuhn may might beng-un preparing a fifth nuclear bomb. another incident has underscored the growing concern about the threat by drones. a british airways jet may have

been hit by a drown but landed safely in london. global news 24 hours a day powered by 120 journalists. tom: thanks so much. i guess it was a matter of time that we heard a news item like that from british air. let's do a data check. get your monday going, futures a little soggy. yields come in two basis points. churning, oil, as francine mentioned, is down 4% earlier, now down about 3%. the vix, 14.43. the dow, 17,900. -- the two year yield, seven 33, so a little bit of a turn in the yields this morning. francine: crude oil, you have

mentioned it, so i want to focus on yen. 108.49. this is been -- this is being used by investors as a haven. i want to show you some of the 0.77 04 is what we are seeing but the canadian and australian dollars dropped as crude humbled. -- tumbled. line, addingreat to that nice quote that i saw this morning on bloomberg news. here is brent crude and i do not want to go into a lot of detail other than to say the phrase is room to move. this chart tells me nothing, and that is important. onannot go long or short

where brent crude is, it is right down the middle of two standard deviations. i need brent crude to break through about 37 before i can say i have got a trend. i do not have it yet. we are in the middle of nowhere. i think the fact that, that is a trade, right? that is kind of a range and that is probably the story when you speak to a lot of investors. they say the problem is we know what the floor is that we have not found the top of this market yet. it is quite difficult to call it now. i wanted to do something a little bit like yours and i decided to benchmark my crude oil to rubles. i did have a 200 moving average earlier, it is gone. tom: it is gorgeous. francine: it is gorgeous. you can see the point where it has been trailing off, so this

has huge implications for the currencies. i did the benchmark towards currencies because we have the one and only andrew derrick, who is with us for the hour. you,ve oil charts for benchmark on currencies, even currencies on the now falling oil. andrew: they are following oil but equally, there is an interesting feedback from currencies. stories,here is two the dynamics that happen within opec and with the other oil , and that plays out extremely well or extremely badly, no matter how you look at of oil has been a function dollar demand for 15 years. the weak dollar leads to strong oil prices, and vice versa, so i think the interesting dynamic is

dovish -- it is far more than it was in january and it became so because of the turmoil because by week oil prices. i think what we are seeing today, that probably makes the fed even more dovish, even more cautious about any kind of feed through that is going to take place to markets. clearly, you see what happened this morning, but to tom's point, we have not had a sustained tumble, we have actually stabilized. francine: what does this mean for yen? high and it17 month looks like it is not going anywhere. simon: japan is the real loser of this game. yes, the fact that they are actually a producer and importer. the lower oil price tends to be better for them, but if you also

have a fed that emerges a little more dovish, and you have more pressure on dollar-yen. tom: this came up over the weekend. we talked foreign exchange. when you look at that, the euro came up. where does mario draghi want the euro? does he want a parity euro or a 120 euro? simon: he would probably prefer parity to 120. what is interesting to me is that actually if you look over the course of the last 15 months, 114, 115 is a surprisingly strong ceiling. during the crisis last august in china, so it does feel as though we may be getting a little bit of what he wants, but i do kind of agree that it is a bit of a struggle. think of how many times we have eased policy and we are still at

113 against the dollar, despite the fact that you have had a rate hike. euro.orry about the it is difficult to think about what additional tools he can bring to bear. tom: what does it do to exports? to me, it is capital flows and convexity and short covering and all that. standpoint, where do they want the euro? they have got to have a weaker euro, right? simon: over the course of the last decade, the benchmark company when it is come to talking about the strength or weakness of the euro, has been -- the strength of the euro was killing them and you see the 120 determined time and time again, came to such a number that they started to feel more comfortable . from that perspective, it starts to get back toward 120 and it

starts to become a little bit of a problem for the exporters. it is not a big issue whether it is 110 or 115 down here, i would suggest, but when they start getting sustained europe strength. tom: simon derrick with us. our next hour on international relations and economic, richard haass will join us come a just back from brazil. it is important perspective on the backstory as we see impeachment votes this weekend. surveillance.erg ♪

francine: welcome back, i'm francine lacqua in london.

tom keene in new york and of course we are looking at rozelle and delhomme -- brazil and doh a. francine: the -- caroline: c.k. hutchison has offered more than $14 billion. according this antitrust regulators will block the deal within weeks. they will can -- they're concerned the deal will mean less competition and more prices. -- hsbc wille sbc step down in two years. they have started compiling a list of internal candidates. 2011, gulliver and outgoing chairman have slashed 87,000 jobs and exited more than 80 businesses. home prices in the u.k. have hit a record. $437, more price is than 7% higher than a year ago.

many british homeowners traded up to larger properties and sold to investors who want to close deals before a tax hike on a second home. that is the bloomberg business flash. francine: dilma rousseff's pregnancy is such presidency is hanging by a thread after congress voted in favor of her impeachment. phone.ins us on the deal,eachment now a done and when can we get it over and done with and a new person in charge? john: definitely not a done deal. last night was a very significant step towards a possible impeachment of dilma rousseff but now it needs to go to the senate, and they have to approve it by a majority. -- herportant, if attorney general came on last

night after the vote and said she is going to fight this not only in congress but also in the courts. all some people optimistically say this could be done and a month, it certainly makes you wonder. francine: what happens next? willer is in charge, they need a strong justice minister because they need to give the impression with continuous corruption charges and go after the people who messed up, like those that petrobras, but also the finances. john: this is one of the big questions hanging over the impeachment process. as the politicians fight this case, brazil is facing a budget .eficit of 11% gdp by all accounts, the economy is getting worse so that whole is getting bigger. behind this political noise, there is a deep economic crisis that does not look like it will get better anytime soon.

tom: richard haass is joining us in the next hour. what we all know is that in every political dialogue there is a polarity. i have heard very little about who would replace a liberal or leftist or progressive president useff. is there somebody ready to take over if and when she is impeached? john: she is, that is the vice president. he is the man who she came out last week and said he was trying to lead a coup against her, so he is not very popular with the president. on the other hand, a prospect of a president taking over has been cheered by brazilian markets. rally anden a huge brazilian stocks over the past three or four weeks. he is a more business friendly candidate. if he does become president, are the ones too strong for any one person to overcome?

time will have to tell. tom: as you speak to our team across brazil and south america, what is the strength of the left right now in brazil? when we see the protests, a quarter of a million people in the street, who are those people? john: i spent some time with the protesters over the past few days and no matter how weak rous seem, the level of organization and passion among the workers party members, she might be on the back foot but these people are not going to give up very easily. they are convinced the opposition has launched a coup against her. that is going to pose a very serious problem for the next present. -- president. they are not going to go away quietly. francine: john fraher, thank you so much.

us.n derrick still with i got this chart made up because we had john fraher talking about how it might perform. the white circle is the first report from the magazine saying that a senator had put the president in a corruption. demonstrations against the president, it sinks of that, and this is when we think lawmakers has started to do the process of impeachment. simon: i think you can make the same arguments of the brazilian rail and the same arguments about the fact that -- the key to the chart is late january. it was up to that point when suddenly the fed, has become the central bank locally, appears to be talking and more dovish terms .

markets across the world recover and investors are on the search for yield. pushes yields down, helps the local stock market. it is astonishing how these global factors are swapping domestic political stories. well, southjust as africa were you have an astonishing performance. tom: we will have to continue this discussion. it is not going to go away with the reality for. l at four. we will continue our discussion on brazil on bloomberg radio. relations with bloomberg surveillance. good morning. ♪

and london, we have better weather in london than in new york. we had a gorgeous weekend. i am francine lacqua in sunny london. tom keene is in new york. it is time for our morning must-read. it is on brexit. george osborne writing in the times today ahead of the speech, the first time you see the chancellor weighing in on the brexit debate. he says, a question of the study the euks does leaving reduce our openness and interconnectedness?

willse if it does, that have an impact on prosperity and living standards. we are expecting him to start talking any second now, but it is the first time that george osborne the chancellor comes out with a figure that he believes if this country were to vote for brexit, every family would have to pay 4300 pounds for the years to come each year. looking at theby trade agreement between canada and the eu. is it fair to say that if this country leaves the eu, aren't going to give the u.k. a good time? simon: i have absolutely no idea . i have seen the reports and heard the comments over the weekend when they were joking about the negotiations. i think what we can do, though, is to place starlings before missing some kind of context.

look at how u.k. markets have performed, it has really been the currency that has reacted to the eu referendum story rather than equities or the fixed income market. they have to be said that yes, we see the degree of sterling kick in. in historical terms, he is not actually that great so far. i think if you look over the course of the last 25 or 30 years, the big moves on sterling, the dollar historically being in the 20% plus range. we have had nothing like that. tom: what i do not get is what you just said about the chancellor. london.47 miles from how can you equate that geography? you cannot even get hors d'oeuvres from london to brussels. francine: this is the problem, because we do not know, if you look at the agreements it would

not be a similar agreement the eu does with the u.n.. the only thing similar is what we have with canada and we do not know what renegotiations look like. you are grappling at figures that you hope what either serve your purpose best politically, but also match the most in terms of resemblance. crude is declining on hasappointing news out of do as oil production froze, or that looks increasingly unlikely. -- comingthe head of guirian. ♪y chilling

>> this is a sober and serious look. francine: that is her chancellor

here in the u.k., george osborne, delivering a much-anticipated speech in bristol. uk'sis to the east of the . for the first time this morning, he put a possible number on brexit. he says each family would pay 4300 pounds each year. he is talking numbers. aying, brexit would knock percentage off of the gdp. that's good to caroline. in germany, angela merkel is feeling the heat in the case of a comedian consulting turkey's president. according to a new poll, two thirds of germans surveyed things she made the wrong decision. saudi arabia will try to limit

the impact of some cuts on its citizens. prince tells bloomberg that the government will provide .ash to low income saudi's they are coming ghastly, other juicy, and water. for the first time, benjamin that yahoo! says the country will never withdraw from the: the golan heights. about 20,000 israelis know that there.- now lives a cbs survey shows donald trump 54%-21%.o cruise

news 24 hours a day, powered by 150 journalists. francine: thank you so much. that's get now to elliott, a middle east editor. we did not have the soft agreement we were hoping. was there ever a hope we would get something as soon as the oil ministers arrived? elliott: iran's no-show put a downer on things beforehand, but they went ahead with thingsg anyway -- with anyway. they were disappointed, but they had a sense that things were not quite right. they seem to to have everyone on

board, and then the discussion longer thanhours expected. they felt to reach agreement. tom: they must move forward to the next event. what is the next marginal event for saudi arabia, or for that matter, iran? i suppose it is the opec meeting on june 2. they said they would keep the channels of vacation open. they would talk among themselves, and other producers as well, to try to inch towards an agreement. unless saudi arabia's position becomes more flexible, it is hard to see how the two opposing positions can come together to make some kind of deal happen. tom: what you are so good at is

synthesizing what is going on in the moat east. what is the fiscal desperation right now? we just saw some headlines -- monday and headlines -- mun dane headlines. how desperate are they? elliott: i don't think the saudis are desperate, and they certainly would not describe themselves as such. they could boost production further, if they needed to. they don't need the money. they have other places where they can get the money from. what they are to do is restructure the economy so they are less reliant on oil prices. as a result of the oil prices, they have dipped into the reserves. much,ne: thank you so

elliott. let's talk elliott a little more with harry tchilinguiria. also with us is simon derek. we talked a lot about oil. this is a fixation which dates back 20-30 years. are we ever going to overcome this political tension to find a global oil agreement? : i think you are right. this was a nonstarter to begin with. both saudi arabia and iran are rivals, and quite entrenched in their positions before the meeting. i ran basically did not want to participate. now, producer relations are in disarray, and we cannot expect much from the next opec meeting. francine: we went into the meeting thinking we would find something in hindsight.

.hat seemed unlikely we heard from iran, and they don't want to move because they want to get there market share backu. what do we learn? harry: what did we learn from this meeting? i guess we probably had inflated expectations around what producers can accomplish. i think you have to go further 2014 back to the november opec meeting. saudi arabia wanted collective action, no exceptions. to do.e applies now, we have a market focusing on u.s. production. tom: i think it is worthwhile to take a look back. drink up the chart on oil. chart on oil.e

this is about the unit dynamics per barrel. help me with a partial differential of the barrel price , as it's full to the oil price. if saudi arabia manages market shares, what does that to two crude -- to crude? it is every producer for himself. is ane will be looking at adjustment in the market that will not come from update to give -- from a particular country, it will come from price itself. it is a result of saudi policy. the price will determine the new equilibrium. on that basis, will be her looking at is for oil prices to probably go in the low 30's, and hold is an adjustment in the market that will not there for a while. tom: i look at all of this, and

the follow on demand. i don't see demand, but with the global gdp where it is, even the demand optimists have to adjust their perspective. harry: absolutely. when we talk about global oil demand, we talk about several products. gasoline demand growth has been ,ery strong in the u.s., china and various countries, but the global picture is slowing up. haveally, demand optimists a view that this can help, but the bottom line is a supply related question, when we will get enough crowd out for the price to stabilize. cut a chart looking at crude oil. is it stuck between 130 and 155?

: you see rsi moving up. ,his is inflated anticipations say somewhere in the 40 area as far as rsi goes. that means that the downward momentum is now in place. tom: very good. derek here as well. in the next hour of international relations, richard foreignthe council of inations and komal sri-kumar the next hour. ♪

francine: i am francine lacqua. tom keene is in new york. .e just talked about doha we did not get the freeze a lot of market participants were hoping for. simon derek with us, and harry as well.iria when you look at the relation between oil and markets overall, there is a strong correlation, but it is counterintuitive. the markets are seeing oil weakness at a time when something is actually wrong in the global world. simon: that is true. i think there is a slightly larger story. if you look over the course of the last two years, i still see

drivences in part being by the shift in dynamics in monetary policy. the oil price decline started in december 2014. you start to see renewed inflations in the dollar. the broad strength of oil prices has matched the oil price weakness. yes, it wasg back, the worst term in oil markets, but there was turmoil in china as well. possibly china was more important because if you look at the biggest bike in the course of the last two years, it was on policy lastency august. people were worried about a similar thing taking place in january of this year. there,e oil price was

but china has been the thing they have worried about more than anything else. tom: tell me about indonesia, or the other indonesia is out there -- indonesias out there. i understand they are in opec nation, but they have very interesting oil dynamics. what do they want saudi arabia to do? i'm not sure what they want saudi arabia to do, but you have former opec members who withrejoined opec, as indonesia. they have rejoined, but they're not actually exporting oil. i guess their job is to get in inside, by don't think they have this way as far as policy orientations. in the end, when you look at what has been going on, h producer after dooh

relations are in disarray. it will be difficult in june for anything conclusive to come out. tom: on friday, we looked at singapore, the singapore dollar. give us an update on the emerging market tigers of asia? are the tigerish lichen jungle book, or not. simon: i will go with possibly not in the current circumstances. where we are now, there will be . little bit of caution the core story kicks back in here which is what drove the markets. what will the money go to? destined travesty, and all the other things, but it will head to emerging markets again.

remember, quite often, investors tend to be quite lacking in any differentiation. francine: this is a problem, sometimes there are markets that are oversold. simon: absolutely. opposite side is you go back to 2007-2010 when you had continued unrest in the markets. astonishing. ,he fact is that quite often the political issues have little impact on investor flows. tom: thank you so much. simon will continue with us. discussion,block, a

news over the weekend on the limitation of choices. we will get an update. the daily mail out, alphabet out, may be left standing, a verizon bid. ♪

tom: the beautiful new york with lovely weather. high 70's, 80's today. francine lacqua talking about n in london. london getting ready for the queen's birthday. i plan to address all weekend like i am british -- plaid suit, striped tie, how about that? francine: and a hat. tom: right now, she is british, and cannot fake it. we go to caroline hyde. financial owned alipa y, controlled by alibaba founder

, is currently raising money. five years ago, amazon began to retainaming customers. now it is going into a standalone lucrative business. offering a is monthly payment option for amazon prime. verizons and leads -- leads the race for yahoo!, as a number of potential bidders dropped out. alphabet and others decided to not make offers. unit are and it's aol working on a bid. tom: i appreciate that. is a correspondent --

we could not get paul up this so early, so we are glad to go to you. it is not that verizon is still in, but everyone else is out. what happened? alex: there are very few buyers willing to take as much risk into capital. verizon is a very big player. yahoo!, including steaks the others cannot take, including alibaba, and sell them later. verizon is a credible buyer at this stage. tom: i will go with that. there is a price for everything. , andlphabet, daily mail others just say the price is not right? out ofhey are not full

the race, and does not mean they will not participate at a later stage. srancine: can marissa mayer survive this? is, ifhe likelihood verizon is the winter, they will install someone from aol. tim has a good reputation, a good track record at aol. i think tim armstrong is the new head. francine: everyone is having a look at it -- what does verizon have to gain? mobile operator,

surely they want content, but it is hard to know what kind of company they would make? alex: they want content, they want millennials. francine: two millennials read yahoo!? alex: millennials search, and read whatever application they pick up. you can have an aol search, or a yahoo! search. at the moment, yahoo! is still a credible player in the search business. let's give them some credibility for what they have. for mobile operators, having access to that is important. tom: let's go back to look at .he yahoo! price here is memories of ages ago. , down. we pull up halfway as well. it does come to leadership and

management. i look at the consolidation of yahoo!, and almost got it like aol. i don't know anyone who uses it. review by anyone wants yahoo!. i don't get it. behind microsoft and google, of course, but they still command share. yahoo! mail is still used by a lot of people. when you go to yahoo! mail, you have access to the ecosystem. it does have a little bit of value. they have not realized it. most of the value you buy, you are buying alibaba, cap who japan. how do you recognize value? marissa has not done it, but someone else will. .om: thank you so much next hour, we are

thrilled to bring your discussion on economics and international relations as well. s will join us. he has just returned from brazil. be will get a first-hand view on the overlay of the politics of impeachment. and, joining us, come all three sri-kumar.mal he has been very cautious and very right on american economic slowdown. we will quiz t him carefully. this is bloomberg surveillance. ♪

tom: expect the expected date 16 oil nations gather.

saudi arabia and iran disagree. from a-z, alphabet, and others step aside. dderzon is the head bi for yahoo!. the leftist president of brazil is impeached -- not impeached, but the vote moves forward. the recess will fight on -- process -- dilma rouseff will fight on. brazil is off the radar, but it is not. francine: we have everything in there, brazil, geopolitics, geopolitics between saudi arabia a mix of a little bit everything, and it does not feel great. tom: we will do that with ambassador haas. shannon o neil will join us

later. first, the bloomberg word news. caroline: brazil's president of dilmasoft -- tillman rouseff is on the verge of losing her seat. now, it is up to the senate. she is accused of hiding budget deficits with illegal loans from state angst. the death toll is rising due to .he earthquake in ecuador at least 250 people were killed. it was centered around 100 miles .rom the capital, quito many people were trapped in collapsed buildings. in japan, at least 42 people were killed and at least 110,000 had to flee their homes.

global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. tom: thank you so much. let's get to the daily check right now. to the second board, if you would, the idea here is good equities. francine? francine: oil spill down. 42.07. basically the falling crude is hitting a lot of stocks globally and commodity rich countries. the yen, ever higher. tom: john freire runs all of our worldwide and economics coverage. brasiliabrasilia -- in

looking at the impeachment process. what will happen today? what to look for from the president? john: look at what people were saying last night, she is highly likely to dig in, and even though she lost last night in the lower house vote, there was speculation she could consider her position. listening to the language of her attorney general last night, it is hard to imagine her coming out with anything but a message of defiance. tom: i look at the process. two other protesters? protesters?he are the people who were in support of the president, and changed, are they on the right, to they like donald trump? john: they come from all parts of resilient society. yesterday, in brasilia, they erected a massive barricade

where the government buildings are, on one side with the anti- protesters, dressed in brazilian yellow, soccer jerseys. on the other side of the barricade where the redshirted work your party supporters, but rouseffbedrock of supporters. ?rancine: how do you fix brazil let's say that impeachment goes through. you were saying it is not a 100% done deal. what does the next person in charge need to do? john: there are two steps. it is two years before the next presence of election. the next president, who very does -- it could still be the job is to stop the bleeding, the fiscal bleeding, the deficit, 11% of gdp, and getting worse.

if you are an investor, the hope is that when we get elections in 2018, the president will tackle the deep problems that the country has. tom: thank you so much. we will get to the american economy. right now, richard haas has just returned from brazil. what is the backstory check with you are really good at synthesizing what you observed. what is the backstory of this story? is that the front story the president of brazil just lost the impeachment vote, the s.rst of several step she is not involved in the scandal, petrobras, billions of dollars being siphoned off. personal involved in enrichment.

you have a country that is set up -- fe up. tom: cfr was outstanding on the in argentina. is there a place for bristol to go as argentina decides to take -- for brazil to go as argentina decides to take a right turn. ishard: argentina's economy down about 2%. brazil's economy is down much more, 3.8% last year. brazil has not begun to transition. as to first get through this extraordinarily messy impeachment issue. let me give you an example. in the congress, there's no threshold for political participation. there are more than two dozen parties there.

imagine governing with the coalition as to be framed with two dozen parties. you cannot get the government to work. and, you have the state owned oil company which is political corruption on steroids. francine: you called it right. at the end of the day, there is political turmoil, but it is an economic crisis. whoever follows doma rosoff -- d the rouseff needs to put country back in order. how do you do it? richard: you have to do it in phases. i don't think she's coming back, by the way. i think her era is over. the vice president will probably take over for 2.5 years, unless the legal turmoil and there's -- ensnairs him. he, and others, are not free. you have to reduce the deficit.

i think it means rolling back net.ocial safety retiring at 60 with benefits -- you ultimately cannot have that thing. you have to get a political compact again. i think you have to transfer of the -- transform the political system before you can transform the economic. francine: is mr. timmer the right person for the job? richard: he could. internalbe an transitional president, do it for 2-2.5 years. the big question is who he brings in to run the government. and he bring in the best brightest? if he announces a broad reform agenda, he could tee up brazil for its successor.

one person who might want to be a successor is lula. calllet's look at my worst ever in the investment business. .ere is dollar-real this is the success of the lula years, strong real. i completely missed the miracle that was mr. lula. here is the latest collapse. this is the backdrop of the commodity implosion on the global economy. unlike me, you have been that on about a slowdown. is the backdrop for brazil a slowdown, and for that matter, a global recession? i think the global recession and continued brazil slow down are very much in the cards. the ave a run-up in

real-dollar exchange rate coming from the expectation that dilama will be in peach. read wake up and face reality. michelle timmer, i don't think will do it. there are two problems. one is the corruption in petrobras, and the other is if the election in october 2014 was fraudulently obtained by making up economic data ahead of it. the point is to make a distinction between the two. soon, call an election then both are two leave office. as an investor, that would be the solution -- a whole new regime. richard: that will only happen if the courts declare know and void the previous presidential

election. if not, we have mr. timmer for .he next 2.5 years it will be very hard for the brazilians to get out of this situation. tom: we will move on to oil. thelieve there was a out of middle east. another theme as we look at international relations this morning. neil.on, shannon o ♪

francine: i am francine lacqua. tom keene is in new york. doha and brasilia. let's get the newsflash.

c.k. hutchinson has offered over $14 billion to telefonica. according to people familiar with the matter. european antitrust regulators will block the deal within weeks. the ceo of hsbc, stuart gulliver, will step down in two years. the bank has started complying internaling applicants, they will consider outside applicants as well. the earthquakes that struck southern japan will likely cut into toyota's profit. it could lead to $270 million dropped in profits this quarter.

that is the bloomberg business flash. francine: thank you so much. the doha talks yesterday did not lead to a freeze, like many were expecting. they produced nothing at all. let's go straight to elliott, our middle east editor. there was hope, but when you look at the clinical dynamics in the region between saudi arabia and iran, we not sure why there was hope in the first place. hopett: i suppose the predicated on the bills up to this meeting. we knew what the saudi position was the whole time. why would it come to a meeting if it was not prepared to be a little flexible? perhaps it means that the flexibility needed to reach an agreement was not there.

if we don't have an agreement now, even if it was , there isagreement really little, if no chance, that they could agree on a production freeze when they meet next. elliott: certainly it seems that the position of iran is very entrenched, saudi arabia is very entrenched. they're are completely opposite. you cannot have both positions entrenched, and have an agreement at the same time. at opec again, they can vacation lines -- communication lines are open, and the idea now is convincing everybody else that the freeze is the right way to do it. tom: thank you so much. with us, richard haas of the council of foreign relations,

and komal sri-kumar. oil is supposed to be a good theg, hasn't happened for american economy? komal: the cheapness of oil and gasoline to the u.s. retail consumer is more than outweighed by the importance of lending to the energy sector and what it does to the fossil fuel industry .hen oil prices go down finally, when you put it all together into -- and do a balance sheet, the extent to the consumer is outset. nt statistic is we are saving more. right? you are saving more if you are consumer, but compared to 10 years ago, the u.s. is not of oil, as it

used to be. we are cutting back on production now, but until recently, we were competing with saudi arabia and russia in terms of oil production. , youambassador haas thatmade part of your work we need to be stronger at home. are we stronger? richard: ultimately, we are stronger. tom: we've got to be. richard: what we see in the markets is we cannot mix results immune from the economic or financial consequences. it is why this whole argument about energy independence misses the point. we may be close to energy self is the fish -- self-sufficient, but we are not independent of the effects of the global economy. francine: what happened in doha , saudi arabia-

iran. will we ever have an agreement between the two companies? richard: there many things between saudi arabia and iran, but trust would not figure on the list. saudis are worried about market share, more than anything else. they worried that iranians, or any others, would fill that space. i think it will be difficult, especially in the world we live in. comingon't see opec together anything like its historic role. tom: we will continue this. later this morning, on bloomberg radio, he has been brilliant, looking for lower oil prices. we will recalibrate where we are with $40 per barrel. this is bloomberg surveillance. ♪

tom: good morning, everyone. bloomberg surveillance. is coverage of the queen's birthday -- no, that is another network. right now, we migrate on yahoo! this is "the wall street journal" out with a story saying bid,no one wants to

except for verizon. theave paul sweeney in airport. and but you got through airport security -- i'm glad you got through airport security. could you explain the story, no one wants this dog but for verizon. at thisople are looking and asking if the cash flows are there. i think verizon looks at it differently. they are making a big that on -- bet on wireless, wireless content. that is why they bought aol last year. they see one million active monthly users. they see a lot of content, advertising technology on the data side. i think tim armstrong thinks they can make the go with yahoo!. francine: where are the other

bidders? is it too expensive or too risky with assets? paul: we probably started with 40 bidders. it is whittling down to a small .ield the players on the margin, who thought they might be able to make a financial play, whether financial buyers themselves, or strategic players, i think they have bowed out because they are really unsure about the ongoing financial strength of this business. it is a company that has a seven-year decline. when people got to look under the hood, they were unsure they could turn it around. for verizon, for its part, thinks it is a business that can help them grow their wireless content business. tom: very quickly here, what has verizon learned in the first quarters of owning aol?

realized the key to the online video business is not just amassing a big audience, but trying to sell advertising to get that audience. that requires some advertising technology that verizon, as a telephone company, did not have. tim armstrong and aol brought that to verizon. i think they feel content they know how to sell content here. tom: thank you so much. above having people coming to us from airport terminals, waiting for their flight. york, and a beautiful washington, bloomberg surveillance. ♪

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francine: welcome back. it's "bloomberg surveillance." donkey is in new york, and we're looking at oil. let's get to the bloomberg first

word news with caroline hyde. george judgment is stepping up the campaign to stay in the european union. osborne has come out with a analysis that is leaving the eu would shrink the british economy. the damage would be permanent because lower trade and investments. in germany, chancellor angela merkel is feeling the heat over the case of a comedian accused of insulting turkey's president. poll, twoto a new thirds of the germans surveyed think she made the wrong decision. she's depending on the turkish leader to help deal with the refugee crisis. saudi arabia will try limit the impact of subsidy cuts on its citizens. the deputy prime grants tells bloomberg the government will provide cash to lowering comes out is that rely on the subsidies.

saudi arabia is responding to falling oil prices by cutting subsidies for gasoline, electricity, oil and water. donald trumpow with 50% going into the primaries. he leads republican rival ted cruz. john kasich is next to 19%. clinton -- the poll has beating sanders. clinton is a former new york senator, sanders grew up in brooklyn. i'm caroline hyde. tom: caroline, thank you. we are only doing this because i have a bag of lay's potato chips 11:00 a.m., pepsi-cola out with earnings. volume of 1%, down 2%. with a sluggish nominal gdp, maybe we will get a lift. a huge valuation on the blue-chip dividend growers, we

had some great discussions last week. particularly, "bloomberg surveillance," on the radio the value placed on these stodgy consumer companies. let's go to the value placed on a single best chart. is the real what u.s. gdp. morning in america on the left, the crisis, come back a little bit and then we have politics here in a moment. what is your confidence that we go from 1% gdp out to a better run rate the rest of this year? komal: my confidence is as low as it's been. tom: what does the consensus get wrong? komal: they always say the quantitative easing and fed action will help the economy and the economy will start accelerating. even though it hasn't happened in seven years, that is still

the mantra that used by the consensus. it doesn't work. that's a major problem. is you needue here a president, either this president with an ex-president to look at structural adjustments, tax reforms, labor market flexibility. without it, you are stuck at this level. tom: did you know there's a vote in new york that brings us over to politics with richard haas. is this your republican party? you have any clue what's going on within the republican primary? it's for theink obvious was going to happen in new york. donald trump is going to win big. whether he wins every county and gets over the 50% threshold remains to be seen. but he is going to win handily tomorrow in new york. tom: is he changing tone and moving to the center as every candidate must? not seeing that, but you are seeing more message discipline. the fact that he wasn't on any of the shows for the last couple of sundays, you're beginning to see a slightly more structured campaign.

towardsthere is a pivot more mainstream, beginning to move towards the general election, i don't know. the other big story is delegate counting and while he's going to do well in new york, you have a sense that senator cruz is picking up delegates here and there. the big question for mr. prop is whether he has in the cleveland with an absolute majority? if you doesn't, it looks very hard for him. francine: we're talking about flexible laws and changing some of the structural issues. -- howu model of trump do you model a trump win? is it dollar positive the end of the date? komal: you're talking about a possible trump election. trump election, not just a nomination in the republican party, but following dollarnovember is

positive and the yielding u.s. treasuries go down because the global drift increases as a result of that. that means exactly the same as 2011happened in august when the s&p downgraded the united states sovereign rating. i was there the week before, saying if they do downgrade, it's going to cause rates to go down rather than up. anything like that is an increase in global risk, which is more important. i think it's dollar positive and bond positive. francine: overall, the central bank is fulfilling one of its mandates, which is trying to keep things stable. all of the stimulus out there may not delivering the structural reforms that you want. but it's also putting a safety like it over political america. fed --en you look at the francine, you are in europe and london. the presence of an enormous amount of quantitative easing

and zero interest-rate's, and not negative rates means you can also post phone -- postpone. it's not going to happen unless the central banks back off and force the politicians to do it. tom: what we have seen this weekend is real discussion of the senate and house dynamics wrapped around the presidential chaos. the houses safely republican, short of a massive landslide that hillary clinton would take. the senate is much more in play, two thirds of the seat up our republican seats. the republicans are on the defensive. sriuld? something that said. central bankers have been carrying the lion's of economic weight for years. talking about flying on one engine. what happened to fiscal policy and structural reform? there is a ceiling on what we as a country or we as the world can do if we simply have monetary

policy. sri: absolutely. take a look at japan. the back of japan has come to the end of it. you needed negative interest rates have a more negative interest rate leading to again appreciation, rather than a deep recession. that could become a worldwide phenomenal -- phenomenon. gridlock is good. is that true anymore? richard: there's good gridlock in bad gridlock. the good gridlock prevents you from doing crazy things, and also from -- it also stops you from changes in direction. bad gridlock with the sequester and the trade, you can't get tpp past. the specifics, which candidate wins, what's the next win the party? i think paul ryan, the speaker of the house, could turn out to be of not the second-most consequent person --

consequential person in washington, then the first. you may be able to affect the dynamic of congressional relations. good to begin with that you did not have excessive spending. we need political coordination working with the opposition to have structural reforms. that's not going to happen with gridlock. nice to getwould be it in perspective policy and an immigration reality. francine: it's amazing when you look at u.s. politics and economics. really, this is the first time that we really realized there is a meltdown of america's middle class. in 5, 10, 15 years, what does that do to u.s. world dynamics? sri: i think you are absolutely correct. we have the first instance where the middle class is seriously affected. that is affecting the politics of united states.

you see that on the democratic and republican friends -- fronts in the form of bernie sanders and donald trump. they are standing for the value of lower and middle class investors. you said what does it do for the u.s. standing? it's used to see the u.s. going a certain way, that will be seriously affected by this change. you have more movement. you have this erecting of the wall on the southern border, all of that comes from middle-class frustration. tom: when we come back, middle-class the creation -- middle-class frustration. what we know as a political debate will continue. look for "all due respect," for political insight. they do that each night, tonight is beyond important with the new york primary tomorrow. p.m. in new york,

5:00 a.m. in hong kong. ♪

francine: tom keene is in new york, we have a great conversation coming up. let's get straight to the bloomberg business flash. here's caroline hyde from london. caroline: alibaba is financing what could be china's largest ipo valuation since 2010. alipay, alley they -- currently raising money at evaluation of $60 billion. five years ago, and was on "be streaming is a way to retain customers. now, that's going to interrupt a potentially lucrative standalone business. it's starting a business to rival netflix. prime video will cost $8.99 a

month. they are offering a monthly payment option for amazon prime. and disney may be on track for one of its best years ever in theaters. book," took in almost $104 million in north america over the weekend. topia," took in more, and they are looking forward to "captain america," civil war. you can't beat the original jungle book, the music version. francine: young kids look at the original and is not fancy enough. me will do for me, but for the young kids, this is great. it teaches you the bare necessities of life. tom: that's the point, it's made a huge impact here as it rolls out, $186 million. they are not positioning it for kids. it's positioned for an older

audience, to the point where it's almost too frightening for kids that were weaned on the "bear" necessities. i'm not going to break into song. francine: i was hoping that was going to happen. richard haass is threatening to walk off set because you are not singing. if you look at the big currency moves, the yen is the one you were focusing on. it's once again a 17 month high. sri-kumarass and / . n in red.he ye what this tells you is that since the beginning of the year we have seen a different outflow to what we been seeing in the past. the biggest winners

of that's not really working out. every time there's an enron in the market, investors -- something wrong in the market, investors get spooked. sri: there are three risk assets which are important, what is the yen, the other is the dollar, third is gold. the yen is dominating in terms of the printable risk asset, the turning point was jenny worried 29 with the back of japan moved to even more negative interest -- january 29. the dollar depreciated. it has been the other way ever since. why is that happening? i think the japanese are bringing money back into the country. and that's because of the changes in the fluctuations of increased volatility in the overall markets. haven reason is as a safe

, foreigners are now buying yen, even though the deposit interest rate they get is negative. tom: what does it do to japan? sri: they kill japan exports. tom: even more so than 20 years ago. sri: that's right. it's interesting you mention the past, tom. it's interesting to the plaza accord of 1985, which was intended to strengthen the yen substantially. by early 1990, we had a surplus in the uris -- in the u.s. account. the treasury supposed be saying to the japanese, you couldn't intervene in the currency. we have the same u.s.-japan's relationship as was the case between secretary james baker and the japanese. tom: we going to have another plaza court? that formal.ing

i think the japanese have hit a wall. their trade division is getting crushed. we are pushing back on them really hard. given the domestic politics, it's going to be hard for any country to start moving their currency. tom: richard haass and sri-kumar. , is older. senior we will have a wonderful conversation in place. coming up momentarily, morgan stanley earnings. we should get them before the end of the hour. we are watching that particularly in the next seven or eight minutes. coming up, richard haass. it's "bloomberg surveillance." ♪

tom: good morning. "bloomberg surveillance," we have economic history and political history into what we do in economics and international relations. francine lacqua in london, i'm tom keene. posted --oing on here post the law. we will get to the brexit angle.

it's a precursor. here's the "new york times," with a smart article on oil. fdr,go to history, this is with abdulaziz, the founder of the saudi royalty, 4, 5, 6 generations away from the deputy crown prince right now. that's the history we want to fold in right now. we can do that with komal sri-kumar. and particularly with richard haass. the yeltsin blowup of years ago, you were a little occupied with your family. , we need up and said you. we turned the president down. richard: the detail was i son was being born. it would have been a one-way ticket. tom: in that with america with more degrees of freedom to

manipulate and move than where we are right now with 1% gdp, massive political gridlock, in the new global calculus? economically, we were better positioned. but also psychologically. the war had just come down, the united states was the world's only superpower. we hadn't seen a world where capacity had begun to get disseminated. people had begun to push back against the united states. history position in that virtually no other country has had or maybe will have again. francine: i don't know why we look at history so much. the world has changed, we are much more global. to what tom is referring is a u.s. in the glory days, where it could sort shocks. we have a blanket -- it could absorb shocks. we have a blanket of security, the world is a mess, we are all in this together. hasard: globalization gained a momentum and a degree

of significance that wasn't the case 25 years ago. it is so important to look a is happening with power. power is in more hands than it used to be. i also think decision-making is far more decentralized. the result is the united states may be first among equals, but the comparative advantages way down and the ability to translate advantages we still haven't power into influence are also down. it's a much more difficult world for us to manage, a much messier world as a result. there is no one else out there who is willing and able to join us as a partner. sri: when you compare with section 89 -- with 1989, you can go back even stronger to 1945 when the u.s. was the only economic power. germany, japan, u.k. were all hit by the second world war. it was easy to come back when the u.s. was so dominant. it was still dominant at the end of the 1980's and beginning of the 90's. the u.s. is a very small part of the world today.

it's a big hindrance. tom: the atlantic charter, five years later, there was a great essay in economics on mercantilism. is there a new mercantilism now which is an overlay for everything else the council of foreign relations does? not a supporter of mercantilism by any means, but i think increasingly, mercantilism is becoming attractive. it takes different forms. it takes the forms of erecting a the form ofes imposing tariffs, and it takes the form of currency wars, which is another form of mercantilism, which you recall when you go to the 14th and 15th centuries. d throughism was playe dynamic exchange policies. it was done in the 1930's as well. francine: richard, this is what's being done now. we're going back to mercantilism and back to erecting walls, because people look at extreme politicians, they are so

popular. the more moderate one's freak out. richard: we are seeing the reemergence of the state, the reemergence of governance, we are seeing it economically in all sorts of ways. it'sl sorts of ways, like subsidies, manipulating extreme rates. we are seeing the reemergence of the state politically. look at turkey, russia, china. we are seeing a massive crackdown. tom: here is who is not in this photo. where in the world is richard haass? we don't know where he is, but we drug out -- here is the president. a few years ago, richard haass is missing in this photo. right now, morgan stanley out with earnings, they lead with compensation expense and tangible book value. i'm going to call it $.55. a little sketchy earnings report right now. it's about the same. i'm going to call of the same

turn we have seen for many others. much more of this, coming up in the next hour. francine, what a great way to begin the coverage of the queen's birthday this week. it was just great. francine: it was great, and we have plenty coming up. not only are morgan stanley, but also began and currency -- also the yen and currency. tom: good to see you on "bloomberg surveillance." ♪

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>> no deal, crude plunges. the other day on wall street, morgan stanley with breaking earnings for the fourth quarter. more on the results from the big five and what it means for the broader picture for u.s. banks. in a president on the brink, result lower house votes to

impeach. the process moves to the senate. a warm welcome to "bloomberg go." , with david ferro westin and vonnie quinn holding down the fort. david: we miss you here, you are in your hometown. we have brazil and morgan stanley, and particularly we have dan yergin joining us to talk about oil as well as rich clarinda. onnie: get a quick check of the markets.